Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike make their predictions for 2017. They also look back on the previous year’s predictions and evaluate whether or not they were correct.
Items mentioned in this episode:
Transcript
Rob: [00:01] In this episode of Startups for the Rest of Us, Mike and I talk about our predictions for 2017. This is Startups for the Rest of Us episode 317. […] Welcome to Startups for the Rest of Us, a podcast that helps developers, designers, and entrepreneurs be awesome in building, launching, and growing software products, whether you’ve built your first product or you’re just thinking about it. I’m Rob.
Mike [00:26]: And I’m Mike.
Rob [00:27]: 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 [00:33]: Well, my wife and I rescued a cat this week. There was a cat that was coming up the driveway and our kids were looking at it. It was very friendly and it seemed, obviously, like a stray of some kind, but it got close to us and it was kind of rubbing against my son, and he was patting and he’s like, “Can we feed it?” and of course because you don’t really want to go feeding random stray cats, because they’ll never leave. But this one was like scrawny as all hell. It was probably only about four or five pounds when we found it, and it was full-grown, so it was just obviously in need of some love and care. But it was somebody’s cat. I don’t know whose it was, but we think that somebody just dropped it off. We took it to the vet and had them check it and see if there was like a chip in it, and there was nothing. Posted on Facebook groups and tried to find its owner and haven’t been able to find it, but over the course of about four days, it ate probably close to four pounds of food, which is just an ungodly amount of food for a cat that was that size. So we’ve decided in the end to keep it. So we’ve taken it to the vet, had its shots, and it’s been hanging around in the basement for the past week or so.
Rob [01:35]: Oh geez. Are you prepared for the responsibility? I guess cats are a lot less responsibility than dogs, but have you had a pet in the past?
Mike [01:42]: Well, we already have one cat, so right at the moment, that’s why this one’s in the basement. We’re keeping them separate for the time being, because our other cat is not, I’ll say, very friendly. I’m not exactly a cat person; I’m more of a dog person to begin with, but our upstairs cat is just, you know, she wants to be left alone, left to herself. She just wants to sit in a corner. She’s more a cat that’s like, “Pet me. Stop.” It just does not want to be involved in any way, shape, or form, unless it’s dinner time. So we’re keeping them away. This upstairs cat is definitely not particularly happy that there’s something in the basement, although, I don’t think she really understands what is down there, but she does not like going near the door anymore. She used to go down there all the time and now she’s won’t go near the door. So it’s probably going to be like a month or two before we can integrate them together. But we’ll see how it goes. The kids are in love with the new cat and like playing with it, and we’ve been locking one of them in a bedroom and then just letting the downstairs one come upstairs and hang out a little bit. But we’ll see how it goes.
Rob [02:42]: Sounds good. I wanted to bring up a subject we talked about last week, which was Wistia pricing plans. And when we were on the show, I’d said that Sproutvideo was cheaper. I think it has a –whatever it is – a $15 plan or a $25 plan. And I mentioned that Wistia is basically starts at $100 and I think you said that they had a $25 plan. But since then I went there – because I was talking to someone else a day or two later and we went and looked and it was like, they have a free plan that’s super limited. You get three videos. So it really is hyper-limited. And in essence, they start at 100 bucks at this point. Just to clarify.
Mike [03:18]: They used to, and it’s funny because I’m on their $25 plan. So I used to be on a $100 plan with them, and then they moved a lot of their pricing plans around and it made more sense for me just to switch down to their $25 plan. And then since then, they’ve gotten rid of that and now they only offer the $100 plan again.
Rob [03:35]: And so they start around $100 and then Sprout does have a $20, basically a $25 plan that is, again, it’s a bootstrapper plan is how I think about it, because it doesn’t have all the features that Wistia does but it is a perfectly competent platform and you can capture emails and do stuff – just not as much fancy stuff as you can with Wistia. Other thing for me is, first time ever this week going to Disney World. Actually taking the kids there as a surprise. I’m pretty excited to get down there and see what’s up. I’ve been to Disneyland a few times but I heard that it’s quite different. It’s a different scale. Have you been there? Have you been to Disney World?
Mike [04:10]: I have. I’ve been there I think twice. So we went down there with the kids both times and we took my mother-in-law once as well, just because she could help out with the kids. But it sprawls. There’s a lot to Disney World. Do you know where you’re going, or?
Rob [04:23]: Yeah. We’re staying in one of the resort hotels and then we have basically three days and we go to three different parks. So we’re not doing Epcot; we’re doing all the other three parks. The thing I’ve been really impressed with, with Disney is the level of technology that they’re using. So I’ve received basically a print on demand booklet that says, All-in family vacations, has the Incredibles on the front. You flip it over and it’s like your itinerary is all custom-printed inside, it looks really sharp. Then they send you the wrist bands and those must be NFC or something, because they say that’s your FastPass, that’s your key to your door of your hotel room. That’s your meal ticket. It’s like everything. And each of them is monogrammed. It’s etched with the name of the person. It’s really, really pretty impressive. And then I’ve been selecting FastPass stuff online in advance and I’ve been able to move that around and it’s super flexible and I’m impressed with the level of sophistication and really feeling like we’re not just going somewhere and going to spend days standing in line, but actually able to plan this thing and feel good that things are taken care of.
Mike [05:22]: When we went to Disney World, we went to a couple of the different parks. We went to Epcot and we went to the regular Magic Kingdom and there was – there was also, I think it’s Animal Kingdom?
Rob [05:31]: There’s a wildlife, yeah.
Mike [05:33]: So we went to those, but we ended up spacing it out a little bit. So we were there for about a week, I think, and we went to a different park every other day, and what we found out was that the kids were just wiped out by the end of each day. So the next day it was like a recovery day, and we would just stay at the hotel or go someplace else and not let them be as overwhelmed. And then the following day we would go to one of the parks. And we found out that that worked well. But they were younger then. So your kids are older than they were, so I think that they’ll probably be fine.
Rob [06:01]: We’ll see. I’m sure we’ll all be exhausted by the time it’s done, but we basically have three full days down there and then the two book end days are our travel days. So it’s nice to do it. And we’re actually recording a couple of weeks in advance, so this is over Thanksgiving, which is why we decided to do it now.
So let’s dive in to our predictions. In a true Startups for the Rest of Us tradition, we like to look back at the predictions we made last December. We made predictions for 2016. We each have four. We’re going to look at those, evaluate whether we think they became true, whether we think we were correct with them, and then we’ll wrap up the show with our predictions for the coming year. So you want to kick us off with your first prediction that you made last December for 2016?
Mike [06:41]: Sure. So the first one I made was that lots of churning would happen in the wearables’ category. And I had said that I didn’t think that I saw most of these going anywhere and that it’d be a few years before any of these became really big. And one of the things that I had mentioned specifically was that I didn’t think that the Apple Watch was ever going to be a big thing like the iPhone or the iPod. And I would say that this probably turned out to be true. I look at the landscape and I don’t see anything that came out where everyone was like, “Oh, I have to have that,” or, “I really want that.” And even Apple this past year came out with the Watch 2, and there wasn’t really a lot of hubbub about that from the community or from the people who were out there investing in those types of technologies. They looked at it and they said, “Yeah, that’s okay. It’s a nice incremental improvement, but the first one was not so overly impressive that it really made a big difference in my life.” I even saw some people who they said that they regretted getting it. And I think that there’s a lot of those different wearables, especially when you see things like the things coming out from Fitbit and various other companies. There’s just not a lot to them. They augment what’s going on already, but they don’t necessarily change how you live your life, or what sorts of things you do.
So again, I think that this came true or it just was status quo I’ll say more than anything else. But I think it’s going to be a while before the wearables category really starts to take off, because it’s going to be a while before people figure out what is it that the consumers really want or would really alter their lives or make them better. And I don’t think it’s really obvious what those things are. I think there’s a lot of opportunity, I just don’t think that there’s – there’s not that killer feature yet that people are like, “Oh, I absolutely have to have that.”
Rob [08:17]: My first prediction for 2016 was that single-round bootstrapping, also known as fundstrapping will become a common, viable option. And I would say that it has become more of a viable option. I’m not so sure it’s common. I had imagined more people taking this road. Although it is more viable, it is more popular, and I’m seeing more people seek this road as they hear about it, right, as we talk with the Jordan Gall or Justin McGill who have really done the fundstrapping model. Or when I had Bryce from India VC on the show a few episodes, that seemed to really resonate with people on the thought of being able to raise around, to get there faster, and to be able to basically quit your job from day one but not be beholden to VCs and not be beholden to this implied series A. I think it’s really appealing to people and it has a lot of the pluses of bootstrapping with some of the benefits of basically raising funding. And it’s a mix. So I think this is a partially accurate assessment. I think maybe I’m ahead of the game, but I do continue to believe in this model and I think it’s going to become even more popular over the next year or two, especially as a lot of the startups space and specifically the SaaS space continues to be really competitive.
Mike [09:27]: My second prediction was that we’re going to see a lot more bootstrappers in our circles concentrating less on making money and more on doing what they’re enjoying doing, and more or less living their lives in their own terms – less consumerism and less accumulating of stuff and more doing what they enjoy. And I don’t know, I think this one’s hard to gauge. I definitely wouldn’t say that this was an obviously accurate statement, but at the same time, I wouldn’t say that it was obviously proven to be false either. It’s somewhere in between, but it’s hard to measure that as well.
Rob [09:54]: I think we need to make more concrete predictions, because some of these are hard to gauge, you know?
Mike [09:59]: Yeah.
Rob [10:00]: So my second one was Twitter will become less relevant over the next year, returning to its roots, it’ll be journalists and technorati and it will be ripe for an acquisition. And this, of all the predictions I’ve made, perhaps over the past several years, this one I think was dead-on. And this was not – it’s obvious now that this is happening, but this was not on people’s radar a year ago. Twitter was still growing and people were on it and stuff. So I remember making this and thinking, “Boy, I’m kind of going out on a limb with this one.” And I’d say this is really accurate as we’ve heard lately with acquisition talks and failed acquisitions rumored, all types of stuff. So what do you think?
Mike [10:40]: I’ll admit. I thought that you were definitely going out on a limb on that one, but I’ve noticed that even I’ve stopped using Twitter nearly as much in the past 12 months as I have in the previous couple of years. So it’s interesting to see that. It’s not something I would have expected, but anecdotally from my own experience, I’ve used Twitter a heck of a lot less this past year than I have in the previous couple of years.
Rob [11:00]: And you’re not alone. You said growth is basically mostly flat-lined and the revenue is not growing as fast as people want. It’s still growing but the stock market doesn’t love the growth and then, like I said, there have been acquisition rumors that have fallen through. So I think I nailed it on this one.
Mike [11:18]: My third prediction was that there’d be fewer IPOs and more acquisitions in the tech space. And I also felt like there’d be more stagnation from the unicorn companies. And if you look at some of the classic unicorn companies like Airbnb and Dropbox, they still obviously exist and there’s nothing wrong with them – at least it doesn’t seem to be in terms of their business model – but they don’t appear to be doing anything radically different and they’re definitely not on the same growth trajectories that they used to be. It seems like they’re still growing but not nearly at the rates that they were before. And I’m not seeing anything new from them. I am seeing that they’re going through and acquiring certain technologies or other companies that will help augment their services, but there’s nothing so dramatically new there. I also haven’t seen very many tech IPOs this past year, but there have been acquisitions as well. So those acquisitions have continued to happen. Drip is an example of one of those things. You didn’t go IPO with that, but I don’t think you ever really had intended to do that either, but there was that acquisition and then there’s other companies out there that have been acquired in the past 12 months as well and it’s – I would say that this is probably more accurate than not. But again, like you said earlier, it’s hard to quantify because we haven’t really put any sort of benchmarks on these.
Rob [12:30]: My third prediction for 2016 was that public markets would continue to value companies lower than their private valuations. And what was going on at the time was that folks were raising these funding rounds from venture capitalists and the good companies were getting these really high valuations and then they would go public, and their per share price would actually be lower than their most recent round. It was like going public was a down round. And from what I’ve seen this year, it has continued to be that. I think there was a big hit. You know remember, we made these in November, December last year and there was a massive hit, especially to SaaS, to B2B and SaaS valuations last January, where I think SaaS valuations were right around seven times annual revenue and they were cut to about 3.3 within a two-week span in January. Now they’ve since recovered and they’re up in the – let’s say between four and six range, depending. But there has continued to be – I’d say this has continued to be accurate. This is something that was already playing out in 2016. I wouldn’t even venture to say what’s going to happen in 2017. It depends a lot on what the public markets do. But it’s an interesting twist in that if you looked 5 or 10 years ago, and especially even 15 years ago, during the .com boom, the public valuers were always higher than private, because that was the scale up, is that you’d raised your series A, your B, maybe a C – and then you go public and you’d get this big bump whereas people who were, you know, even as of last year, people who were in on the last round of investment were basically losing money when the IPO happened. So it was this interesting frothy market.
Mike [14:02]: So my fourth and final prediction last year was that drone technology was going to take a serious step forward based on the FAA regulations for registering drones over eight ounces. And I look at the technology itself and it feels to me like things have come a long way. Now I don’t know really whether that was driven specifically by those new regulations, but if you go look at toy magazines for example, or websites where they have drones as like a peripheral thing, not necessarily – you don’t want to go to a drone website where all they sell is drones, because obviously that’s – it influences in the wrong way. But if you look at things like, for example, a Target newsletter or a weekly flyer or something like that, you will see small drones in there that you really didn’t before, and they’ll have several different variations of them. So I do think that the technology has taken some serious steps forward – whether it’s directly influenced by those regulations, I don’t know for sure. My suspicion would be yes, but it’s hard to say definitively that that was exactly the reason. But I would say that this was relatively accurate.
Rob [15:00]: My fourth and final prediction for last year was that virtual reality would be a hit with the early adopters set in 2016. And I would say this is not accurate. I think it’s still too early. I just think we haven’t hit that. Even with early adopters, I know there’s a lot of headsets coming out and there’s AR fighting VR, and it’s a really interesting space to watch. But it still feels like early days and I definitely wouldn’t call it a hit yet. I wonder if in the next – it’s kind of hit eventually, right? So in the next 12 to 18 months I think things will go. But definitely didn’t happen as quickly as I had imagined.
Mike [15:40]: So those are our 2016 predictions. Why don’t we go into our 2017 predictions? Rob, why don’t you kick us off?
Rob [15:46]: So my first prediction for 2017 is that there will be another high-profile acquisition in the bootstrapped space. And by another, I mean, Drip being one that happened this year that is an example of our little community that started with a few bloggers and you and I talking on a mic and then getting 100 people together in a room in Vegas in 2011 has really grown, and not only in size but just in the apps we’re building and the impact we’re having both on our lives individually, on each other with all the masterminds that come out of the community that we built, as well as the apps that are coming out of it. And they’re becoming higher and higher profile, and so I’m going out on a limb and I’m saying that there’s going to be another – when I say high profile, I don’t mean a technology sale of a web app for a 3.5 times annual net. I mean another one that’s a big funded company or a larger company buying someone that we know – that we know by name in the Microconf circles, in our podcast circles, and folks who we’ve talked about in the past on the show. And I don’t know of anything that’s coming specifically or I don’t know specifically who it’ll be, but I have a few ideas and it’s just some potentials.
Mike [16:52]: Bottom line you’re saying you’re not cheating with insider information.
Rob [16:55]: Exactly. That’s what I’m trying to clarify here. This really is a prediction and not just me gossiping about rumors that I’ve heard or anything.
Mike [17:03]: Sure.
Rob [17:04]: How about you?
Mike [17:04]: Well, my prediction for 2017 is that health insurance rates are going to become a much bigger issue for self-funded companies. And I’ve heard talks quite a bit about this over the past – I don’t know, maybe three to six months I’d say – where people are starting to ask more questions from the bootstrapped community. And I think that this coming year it’s going to become a much bigger topic, just because the way the election went and there’s all these questions and uncertainty moving forward. And the reality is that if you look at the health insurance rates for a self-funded company if you’re self-funded, you’re running the business, and you’re the only employee, for example, you have very little data to go on in terms of what other people are paying for health insurance and what’s common and what’s not. So there’s all this obscurity around what should you be paying for your health insurance and what is normal? And I think that as people get more comfortable asking those types of questions, that’s going to come up – and I think it’s going to become a much bigger issue in our circles for people – not just in what it is that they’re paying but who they’re using and what’s common, what’s normal, and quite frankly – do they even need it? Are there other ways that you can go about solving this particular type of problem for yourself and for your family that may not necessarily be options for – I don’t want to say mainstream people, but for people who are W2 employed for like a large company. Are there other options that people in our circles are going to come up with that are helpful and useful in that specific situation that would not be generally applicable outside of that situation?
Rob [18:35]: And I would say this is already an issue today. So you’re saying it’s going to get worse?
Mike [18:41]: I’m saying that it’s going to get worse and it’s going to get talked about. I think that previously –I’ve seen a few talks about it here and there, and I’ve seen some conversations happening here and there, but I think that those types of conversations are going to become more mainstream in our circles, just because the sheer cost associated with paying for your own health insurance is starting to rise dramatically – and I’ve noticed this myself with my own insurance, where from one year to the next I might be paying $3-400 a month in addition to what I was paying before, which that can be easily 30-40%. And you look at that and you say, “Well, okay, what other options do I have here?” What I’ve seen is that some of the insurance companies, they’ll just jack up to your prices until they get to a point where you’ve decided that it’s no longer worth it for you to have insurance through that company, and then you’ll go to some other company. And I think what they’re doing is they’re essentially price testing on their own customers to see who’s going to tolerate those price increases and who’s not, and using the knowledge of their current customers to help them basically extract more money out of their customer base. And if a bunch of them cancel, so be it. If they don’t, well, that’s fine, they’ll get the extra money, and then they’ll kind of adjust that. But because not everybody’s health insurance renews on the same month of the year, they’re able to do that on a monthly basis – and essentially I feel like they’re price testing that month in and month out and adjusting their prices over the course of the year.
Rob [20:07]: And this is mostly a US only prediction, because a lot of the countries in the world take care of their folks and don’t let the insurance companies do what they do here. So my second prediction is that startup crowdfunding in the JOBS Act here in the states which allows non-accredited investors to invest through sites like Indiegogo, and they just launched this week – they’re crowdfunding. I’ve gone back and forth on this but I think I’m pretty confident that it’s going to fizzle out. It’s not going to have legs like Kickstarter and product crowdfunding has, where you do something and you get a product in the end. I think that people like to think about this idea of putting $100 into a bunch of different startups, and that that’s fun and exciting, and I think there’ll be buzz about it, but I don’t think it’s going to take off in any meaningful way. I think that like the good startups, and the best that are raising money are not maybe going to go to crowdfunding. That they have either the connections or they have the traction to get known angel investors and people on angel.co and institutional investors and that kind of thing, and that startup crowdfunding will probably be filled with a lot of noise. There’ll be some signal there but it’ll be people who basically can’t raise or aren’t able to raise through their network, and so it’s naturally – again, this is just my prediction – naturally going to be the lower end and the startups that are less likely to be successful.
Mike [21:29]: My second prediction is that the bar for building a SaaS is going to continue to become harder to reach. And I feel like there’s almost this tipping point that’s starting to happen, where companies are – instead of taking that approach where they go out and they do the customer development and do a lot of the upfront work that has traditionally been done to identify the market and the different channels you can use, and customer validation and all that, I feel like that is still a viable channel, but I think that people are going to start moving more towards the model of building a service around that offering first and offering more of a comprehensive, complete solution for people that’s all manual driven, driven by people on the backend, and then once they’ve figured out the market, transition into building software to kind of SaaSify the whole thing so that they can go mass market with it.
I’m starting to see this in a couple of different places, but I don’t think that it’s really become mainstream yet, but I think that this year we’re going to start to see a lot more of that because the risks associated with building a services company, I think, are dramatically lower than they are for building a SaaS where you’ve got this long development cycle upfront and then you start putting customers in it. And the funding that is required to do that type of thing is substantially more than if you were to build a services company where you’re charging people 500, 1000, 2000 dollars out of the gate, per customer – and yes, you’ve got a lot more cost behind it, but you’ve also got the ability to put in five customers, and that’s 10k in revenue – whereas if you have a SaaS offering and you put in 10 customers, you’re probably only getting like 5 or 600 dollars a month. And the revenue that is different between them is just – it’s dramatic. You can build a services based company like that very quickly, because you’ve got the revenue coming in. And well it’s very easy to make adjustments to the processes that people go through, but it’s much more difficult and much more time consuming to change a software package when you don’t have enough volume going through it to be able to justify or be able to clearly say, “Look, this particular piece,” or, “This feature needs to be changed,” or, “This feature needs to implemented.” You can change the processes much, much faster than you can change software, and I think that people are going to start to go in that direction and it’s partially due to the fact that that bar that people have as an expectation for how good a piece of software is when they first sign-on to it is so much higher now than it was two, three, five years ago.
Rob [23:50:]: So I actually think this is really already going on. This is the concept behind Brian Casel’s talk at Microconf here last year about productizing services. What are you saying that’s going to be different than what’s already gone on?
Mike [24:03]: What I’m saying is that we’re going to start to see a lot more of this type of approach, where people build – so like take for example, Brian Casel where he was talking about Audience Ops – and I think there’s a difference between just building a services-based company versus building a services-based company and then leveraging that into a SaaS product that you build as a follow-on for like the lower-end market that you’re not addressing because you don’t have the manpower and they’re not willing to pay that level. And I guess if you were going to point directly to Brian with Audience Ops, they’re coming out with the Audience Ops calendar. And that’s out on their website; you can go take a look at it, but they are moving in the direction where they have this Audience Ops process that they’re putting in place and they’ll do it for you as a service, but based on all the things that they’ve learned, they’ve said, “Okay, well, if we’re going to build a product out of this, how do we go about doing it and what needs to go into it?” They’ve already done all the customer development. They’ve learned all the different things that need to go into it, now they’re distilling it down into a software package that they can sell. That’s the model that I see coming to the forefront, where people will build the services company first and then build the product afterwards – as opposed to doing it the other way around or just going strictly on the software-only model.
Rob [25:12]: My third prediction for 2017 is that we’re going to see a correction in the US stock market and I think it’s going to be 20% or perhaps more. I’m not commenting on the broader economy. I don’t necessarily think that there’s going to be any type of recession or anything, but the stock market is averse to uncertainty, and that’s when the stock market does crazy things – goes up really fast or down really fast. And I think that if anything, our president elect, Trump, is someone who inspires uncertainty. I think some of the things that he’ll wind up doing over the coming year will probably have a negative impact on the stock market, and I also think that obviously it’s pretty obvious that interest rates are going to be coming up after historic lows and that always sends the stock market down as people come in and now put money into T-bills and other things that are going to pay higher interest rates. So I’m not one to have bearish predictions in general; I tend to like to have a positive outlook on things, but I for one I’m keeping my eye on the stock market and the economy as a whole, and thinking that we’re due for some type of correction, I think, that most people who follow the market would agree, that we’re probably pretty over-valued right now and that something needs to give there.
Mike [26:18]: My third prediction actually relates to that a little bit. And it’s not so much directly related to the stock market correction so much as it is about the uncertainty of the future. And I think that what we’re going to see, as a result of that, is that some of the more small-scale businesses or small-scale entrepreneurship is going to pick up steam, and I think related to that we’re also going to see a lot more of the small- scale entrepreneurial meet-ups around the world.
I think still Tiny Conf this past year is split out into three different locations. There’s the – there used to be just East and now there’s East and West and then there was the East, West and now there’s Europe. I think that we’re also going to start to see various meet-ups that are completely unrelated to those around the world as well. I’ve seen some start popping up over in Germany and in London, and I feel like this is the year where we’re going to start to see those types of things advertised a little bit more, and become much more common. Even two, three, four years ago, around here – like I only live an hour outside of Boston and I’m just not – I haven’t been seeing those types of things. And now I’m starting to see them. I’m starting to see them pop up even around where I live, which it’s interesting to see that because, yes, I live near Worcester which is I think it’s the second largest city in Massachusetts, but historically, there has not been a lot of activity around this particular space and I think that with the uncertainty that’s coming up, with the president elect, Trump, and all the other things, the interest rates going up, I feel like companies may very well start cutting back a little bit, and when those types of things happen, if companies start letting people go, there’s one of two things that usually happens with people that either leave their jobs – whether it’s voluntarily or not – they tend to either go back to college or they start their own business. And I feel like a lot more people are going to end up going out and starting their own businesses, because to them they’ve been working at those companies for a while, yes it’s been great but there’s starting to be a downturn and they say, “Hey, you know what? I’m a little bit too old to go back to school. I don’t want to. I’ve been down that road before. Let me go out and start my own thing, because I have the awareness or the knowledge of the different markets and confidence to go out and try my own thing.”
Rob [28:23]: As I said in the very first original micropreneur.com, reports that people could download – it was that Lead Magnet or opt-in reward – there has never been a better time in history to start a software company. And I think that’s continued. I wrote that in 2008 or 2009, and I still believe that today. My fourth and final prediction for 2017 is that the first package will be legally delivered with an unmanned drone. This will be somewhere in the world that I don’t think it’ll be in the US, due to the regulation, but I think some country in the world will not care and that a consumer package is what I mean, is someone paying for something. I know there’s already a disaster of the leaf drones where they maybe get medicine to places where the roads have been decimated by a flood or an earthquake or something, and that’s already going on. And in times of emergency, people are allowing that to happen. But I’m imagining someone either paying for something like from an Amazon or walmart.com or food – ordering food and having that delivered.
Mike [29:23]: I was just thinking tacos.
Rob [29:25]: Tacos is really good. And the reason I said legally is that there’s already been – there was a story two weeks ago in New Zealand where somebody took a drone, programmed it, and wrote and put a note on it and like a $10 bill and it flew down to this sausage store or like a butcher, I guess, butcher shop of some kind and it said, “Please, give me one pound of sausage.” And they put the change in an envelope and attached the sausage to the drone and then it flew back to the guy. And I think the cops sighted him. You’re not supposed to fly unmanned drones over people, you’re not supposed to fly them out of line of sight, and so it was there. So that’s why I’m saying the first packets actually legally delivered with an unmanned drone. And I do mean a consumer or a purchased product.
Mike [30:11]: I could definitely see this happening. I’m kind of with you. I’m not sure whether it would be inside the United States or not. My suspicion is not, but I could potentially see where they allow it in a particular test scenario or something along those lines. And so are you thinking that this would be something that is outside of a test scenario or outside of like tightly controlled circumstances?
Rob [30:32]: Yeah. I think that it’s going to be tightly controlled for the first year or two, period. I think that they’re going to basically program a drone to go do something and they’re not going to monitor it super closely, but that it’s going to be unmanned and not piloted. That it’s going to be programmed to do that.
Mike [30:48]: I don’t mean tightly controlled as in them not really paying attention to it, I mean tightly controlled as in, oh, they’ve got a government auditor on site watching the whole thing from beginning to end just to make sure that it works and nothing major goes wrong, and if it does then somebody can ask questions of that person. I mean more of a, they look at the laws that says that they can do it and then they just go do it. Does that make sense?
Rob [31:11]: Yeah, it does. I don’t know that it matters, whether there’s an auditor on site or whether – I don’t know. I think that if something’s delivered legally with an unmanned drone, whether the government is really active in that and it’s part of a pilot project, I think that fits the description of what I’m looking for. I think it’s similar. We can make another prediction about unmanned vehicles, right, about basically self-driving cars. I know they’ve – at least one state, maybe two, have kind of legalized them for test purposes, but I’m curious to see if we’ll start seeing any unmanned trucks or unmanned cars really starting to take shape here in 2017. I don’t have a prediction about it, but it’s definitely something we’re going to see unfolding here pretty soon.
Mike [31:53]: I think eventually, yes, but for the time being, I don’t know about that. I could see it being done on highways for like long haul stuff – I don’t know about inside of a city where you’ve got lots of things going on. I think that people would be a lot more hesitant about. But driving across the country a couple of thousand miles, I could definitely see stuff like that happening.
Rob [32:12]: Long haul trucking and stuff?
Mike [32:13]: Yeah.
Rob [32:14]: They’re saying that’s going to be disrupted pretty early.
Mike [32:15]: Well, if you have a question for us, you can call it in to our voicemail number at 1-888-801-9690 or you can email it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from We’re Outta Control by MoOt used under Creative Commons. Subscribe to us on iTunes by searching for Startups and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening and we’ll see you next time.
Episode 316 | Subscription Pricing Models? Challenge Accepted.
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk about overcoming challenges with subscription pricing models. They dive into how to test selling subscription based products, deciding between one-time, monthly, or annually, how to raise prices, how to lower prices, and how to avoid overpaying for support.
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 overcoming challenges with subscription pricing models. This is Startups for the Rest of Us, episode 316. Welcome to Startups for the Rest of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at building, growing, and launching 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 [00:27]: 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 [00:32]: Well, as I mentioned in last week’s show, I went up to Lake Superior to have my retreat, to do a bunch of thinking, and kind of relax. The day I went to leave Minneapolis to drive up there, I was feeling terrible. Like sore throat and all sorts of stuff, tired. So I drive up there kind of fever-dream-ish. I was in and out of conscious, but it was in a state where you don’t remember how you got there type of thing. So I got there, slept 13 hours that night. I get up in the morning and look at my throat with the mirror on my camera phone and it’s just brutal. White spots all over the place. Turns out I contracted strep throat right before my retreat.
Mike [01:12]: Well, on the bright side you probably didn’t have to talk to anybody.
Rob [01:14]: But this thing is – it was exactly that. I was like, “this is a real bummer that I’m not -” I couldn’t think well enough to actually do retreat work. I pretty much watched TV, slept, and listened to podcasts. But on the bright side, I didn’t have to be at home around everybody. Because you know, when you’re sick and you have two kids that are waking up early. You’re trying to sleep and you want to be helpful with them, but you’re kind of incapacitated. I didn’t have that guilt because I was just in this cabin overlooking Lake Superior. Kind of couldn’t think of a better place to be when you’re that sick. I was up there for three days. I was able to get some medication up there. Hour-round trip to the nearest clinic and I started feeling better by the last day. It was an eventful or uneventful retreat, depending on how you look at it.
Mike [01:55]: Kids running around when you’re sick? I know not what you’re talking about.
Rob [01:58]: Oh, man. It’s the worst. How about you? What’s been going on?
Mike [02:01]: Well, I got an email the other day from John [Salmans?], who is a attendee of MicroConf and he runs MarketTender.com. He published a list of podcasts called “The Ultimate List of Developer Podcasts.” We’ll link that up in the show notes, but there are dozens and dozens of podcasts on here that are aimed at the developer crowd. It breaks them down into different programing languages, and marketing, and front-end, back-end, all sorts of different areas. If you’re interested, definitely check that out. The other thing is that my youngest son has decided that he is going to become a professional YouTuber. So that’s a college savings win, I believe.
Rob [02:38]: Boom. That’s awesome. My son, my ten-year-old, has been talking about that for a long time. I’m like, I don’t know. I don’t want to get everything set up to do that. But I think it’s a good idea for kids to start thinking about that. That’s the future, right? I mean, I know it’s the present for a lot of adults these days, but for a kid to start tackling social media at this age, as long as you can keep them protected from stuff, is a good thing.
Mike [02:59]: As long as they’re 13 years old and can click that button without violating the law.
Rob [03:04]: Yeah. Exactly. So, hey. Circling back to that podcast list from John [Salmans?], there’s an entrepreneurial section, a category, and I just want to read a couple of the podcasts. You’ll probably recognize most of them. One is EntreProgramers, then there’s BoomStrap from Ian and Andre. Although I’m not sure if that’s still going. BootStrap with kids, with Brett and Scott. Although that’s not going anymore. And then we have TechZine, BootStrapWeb, and of course StartUpsForTheRestOfUs, and a couple others. RocketShip and a few others. So you definitely want to check that list out if you have a chance. How about today? What’s our topic for this week?
Mike [03:36]: What we’re going to be doing today is discussing subscription pricing models and some of the challenges associated with coming up with a subscription model. And how do you logistically go about testing a subscription based products? I say “subscription based products” as opposed to a SASS application because a lot of these things are applicable to any sort of subscription pricing model. So whether it’s a membership site, or a coarse that you’re running, or obviously a SASS application falls under that umbrella as well. But there’s a lot of different types of products out there that essentially fall under this umbrella. Productized service, for example, might come under this if you’re doing a recurring service for people over time, on a monthly or weekly basis. All those things kind of fall under this umbrella. So we’re going to kind of talk through some of the different challenges associated with one, just deciding what type of pricing model is appropriate, but then moving on to how do you raise and lower prices, how do you start building up the service while you have all these incoming costs and you’re not making as much money as you’re putting into it, et cetera.
Rob [04:39]: Cool. Let’s dive in.
Mike [04:40]: So the first one is how to go about testing whether you should be charging on a one-time basis or monthly or annual subscriptions. I heard the CEO of [Atlasian?] named Scott – I can’t pronounce his last name. It’s [Farakuar?] or something like that. He talked to businesses about software and he was asked this exact question. He said that if the value of a product goes up over time, then you should charge a subscription. But if it maintains the same level or the value of the products to the customer goes down over time, then charge a one-time fee. That’s actually a very interesting way of looking at it because if something is going up in value for the customer, then it’s something that they’re going to want to keep around for an extended period of time. Whereas like a training course, you buy it once. Or a book, for example. Once you’ve read it, you’ve kind of consumed that information and you’re going to move on. The impetus for you paying on a subscription basis on that is no longer there. So I think using that delineation of whether the value is going up over time or not as a determining factor in whether you charge monthly or on that subscription based one-time fee is a very interesting way to look at it.
Rob [05:43]: Yeah. Obviously there’s a lot of pluses and minuses to this. I mean, I think if you run a software company where you are actually hosting and having a different value over time, then a one-time fee is a terrible idea because you always need new customers to keep the servers on. But if it’s downloadable software, then a one-time fee most likely makes sense because people don’t want to download and host it on their own server and then pay you a recurring fee. I know there are some apps that do this, and frankly, they’re bucking the trend a little bit. Now, if you have a SASS app, then I thinking offering monthly and annual is the way to go. The test that I’ve seen people do is basically run it, test on the pricing page. See default to annual, see how many people go through and default to monthly, see how many people go through. Obviously you’re giving a slight discount. Maybe one or two months free, or 15-20%, whatever you want to give for annual, and then you do the math. Not only are you making more money, but are you getting more cash up-front or not. That’s a big deal if you’re bootstrapped.
[06:40] Now, if you’re running a membership site, it is a little bit different. Unless there’s a lot of ongoing expense, then I have seen some membership sites basically do a one-time fee that’s kind of a lifetime buy-in. Typically you want to have an asterisks there that says it’s the lifetime of the membership site, not the lifetime of the user. Right? Because the membership site may not be around for 40 more years, but the user may. So you have to walk a line there. As long as people get a bunch of value from the membership site, typically membership site lifetimes are between four and six months. These are average numbers I’ve heard based on these large swath of folks I’ve talked to in our own experience running a membership site. And so, if you give them a ton of value in that amount of time and they get their money’s worth, it doesn’t matter. The ongoing access is cool for them to have access to forms and such, but if three years down the road you do decide that they bought a lifetime access and I’m deciding to shut this down, you’re going to have very little push-back. People understand that this stuff has to change. I think that you have a question that is how do you really, logistically test this? And again, with SASS you just change it on the pricing page. With subscription sites or a membership site, I would just look at are you going to tend to want to do launches for membership sites rather than just have an open sign-up process? And you’re going to know your numbers. You’ll do one or two launches, you’ll see the numbers of one and do one or two launches the other way and see the numbers.
[07:56] I would compare and see what cash you’re getting from which one and it’ll be obvious. You will have, in this respect, if you change, you will have different cohorts on different pricing models. That’s okay. It’s a small technical challenge, but it’s not as much of a headache. Everything doesn’t have to be cut and dry with this stuff. It’s not as much of a headache as that probably sounds.
Mike [08:17]: Yeah. And I think that the interesting thing to keep in mind about what he just said there is that when you do a cohort launch like that, most of the stuff that is based around the pricing can be completely hidden. You don’t even need to have that one the website. So, as you said, you can have some people on one pricing plan and some people on another. And really, that’s kind of how you test it. A lot of the pricing information that you’re sending to people or that they’re getting is through their mailbox. It’s not going to be publicly available. It’s not going to be out there until the end of time. Now, something else to kind of keep in mind here is that when you are determining whether or not you’re going to do monthly, quarterly, or annual subscriptions, or just that one-time fee, there’s a difference between charging somebody a subscription and then allowing them to essentially finance the payments over time. So, I’ve seem emails from, for example, Rumi [Sedi?], who runs I Will Teach You To Be Rich. They have several different programs or training courses that they have offered where they will offer quarterly or monthly payments for six months.
[09:18] You’re essentially still paying the full amount for the whole course, it’s just spread out over time. It helps the person who is on the receiving end of it see it in a different light. They will look at that and say, “Well, I’m not willing to pay $1,500 for a training course,” but if they look at it and see that it’s five payments of $300 each, it’s the same amount but they look at that and say, “It’s only $300.” And they kind of mentally put a different spin on it than if it was a $1,500 up-front cost.
Rob [09:46]: Something else to think about here is can customers change pricing models after they purchase? They come on monthly so you can lower their risk and obviously have a 30-day-money-back guarantee or whatever and they’re paying you $30 or $50 a month – getting people in and having them get value and see that your site is legit. Then after one or two months, pitching them on annual is also not a bad way to go just to see how receptive people are to it. This is an approach that I’ve taken with several different apps. The thought of whether someone can change pricing models after they’ve purchased has to kind of play into the picture. I know that you don’t need to do all the selling upfront. You can wait until someone has got a lot of value. It’s kind of an up-sell, if you think about it. Someone is paying you $50 a month and you come in and say, “alright, here’s $500 for a whole year.” If you do that $500 upfront you’re going to get less conversion, right? If you do it after one or two months when you have a lot higher value, you can get a lot higher conversion rate on that.
Mike [10:40]: One of the next challenges with subscription pricing models is how do you go about raising prices? And this is a challenge I think for most subscription based services or products because you don’t really want to put the people who have gotten you to where you are in a position where they have to look at your product and say “I’m really not happy with this particular move or decision that you guys have made to raise your prices and I’m not happy about how you’re treating me. I signed on with the assumption that I was going to get this price for an extended period of time” – or potentially forever in their minds – and some of them may be extremely upset over the fact that you are now raising prices. One of the ways that you can combat this is to communicate in advance to everyone who you are raising prices for. Now, the other thing you can do is you can also grandfather those existing customers in.
[11:34] You can either do in perpetuity or you can do it in a specified time period. I’ve seen some companies where they’ll say, “We’re going to raise prices, but we’re not going to do it on you for the next two years.” So you’re going to maintain your price for the next two years, or maybe it’s six months, or twelve months, whatever you decide. Whatever makes sense for your business based on the lifetime of your customers. You can go about increasing prices for everyone else or everyone new who signs on, as long as you make sure you communicate that to the people who are currently customers. Tell them, “Look, there’s a price increase coming. It does not affect you.” I think that’s the big piece of that. You want to make sure they know that that is not going to affect them.
Rob [12:13]: Yeah, I think that’s a big deal. I’m a big fan of grandfathering. Perpetually, if you can. But obviously, if you look at the way Netflix did it, I think they grandfathered for a year or two and then it went up a dollar or two. I don’t know, it was inconsequential. At the time there was little bit of hubbub upfront, but when it actually happens there are a few people who feel threatened to cancel. You’re always going to get somebody who cancels, so don’t let one out of a thousand people scare you into not changing it. It really is an interesting idea. I’m a big fan of grandfathering. You’re not trying to piss off your existing customer base. We’ve seen this happen. Remember when Intercom was going to raise prices? They were going to double or quadruple their prices. It was a substantial change and they weren’t going to grandfather for like a year. There was a huge uproar and people were coming to Drip and saying, “if you can build this one feature, I’ll move over here.” Because they were so upset about it Intercom actually backed off on that price increase. There was such a backlash. It wasn’t one in a thousand, it was like 20%-30% of their customers that were on Twitter and railing on it. So you do want to be careful and thoughtful on it.
[13:14] Big price increases, I think are really tough even if you grandfather for a year or two if you’re going to do a substantial price increase. It’s going to have some backlash. The other thing to think about that I’ve used pretty successfully a couple of times – actually, several times – is to announce the price increase upfront, let all of your customers know, “you’re grandfathered, thanks for your support, the product keeps getting better, you’re going to keep getting it for the price you have. And if you know anyone who you think could use it, now is the time to get them in. If they start their trial before X date, which will probably be sometime in the next two weeks, as long as they start their trial before X date, then they’ll get the old pricing.” And then you tweet that, you blog post that, and you promote the heck out of that. You’ll get a big spike in trials there. You will kind of suck the air out of the month or the following month because you pull anyone who is even thinking about trying you rushing in. So you’ll have a really good month followed by a mediocre month because you’ve just front-loaded it. But it really is a nice way to get a nice bump of customers. I’ve seen it work both with Drip and with [Hittail?].
Mike [14:13] : And off this particular topic is how do you go about raising prices when your business model for the product or service is going to fundamentally change? If it was, for example, a SASS product before and you’ve come to the conclusion that you really just can’t support people either at that price point or they’re just not being successful with the product and they need a lot more hand-holding, you may need to 5X or 10X the price to make things work and make the product successful for the vast majority of your users. Sometimes this comes into effect because you went down the route of having a free version of the product and your servers just got way too overloaded and there’s so much stuff going through there it’s difficult for your back end systems to keep up. You’re not getting the conversion rate from the free users into paid users to be able to support the infrastructure for the product. In cases like that, you have a fundamental shift in what your business is even offering.
[15:12] I think those are extremely difficult situations. I’ve seen it done in a couple of different ways and I can’t think of one where they did it really well. I think part of that is just the fact that people have signed on with this expectation that you are offering X and that’s what they are there for and you say, “We can’t offer X anymore, we’re going to offer Y instead.” Quite frankly, you’re just going to piss a lot of people off at that point. I mean, you can only do so much in terms of grandfathering or pushing them off on to a different product or service. You can find other substitutes for them or help migrate data to other services that are going to be a better fit. I think the one exception to that where I have seen people do it well recently is with Basecamp where they have come out with additional versions of Basecamp. Basically what they’ve done is they’ve left everyone sitting there with that version of the product and they rewrote it from the ground up. Then they said, “If you want to move to Basecamp 3,” for example, “you can go from two to three, but you can’t go back. So once you’ve gone to version three, you can’t go back to version two. But anyone new is going to get version three. Anyone on the old version can stay there as long as they want.” They’ll continue to support it, but they won’t develop anything new. As a customer you kind of have a choice to migrate everything to the latest version. Maybe that comes with a price increase, but that’s probably one of the best ways I’ve seen it handled. Rob, what have you seen from this?
Rob [16:30]: Yeah, one example that comes to mind that you raised offline is [Indinero?] and what they had launched. It was like a $30 product and they got up to 30K MRR or something and they just couldn’t grow because it was too low of a price. They 10Xed their price and they went with a productized service which, to be honest, would be a fine move. It’s fine to get into a market and then adjust it. The mistake they made is they just stopped supporting their product and it was so buggy and they kind of left their customers out to dry. You and I both used it and we used to recommend it to people. The product just went sideways really bad. They tried to rewrite it but they just didn’t support it well. They were non-communicative. You’d get an email and support would respond two weeks later or something. They didn’t handle the actual logistics of it very well. But the idea of going up market is, I think, a good one. I think doing everything you can to help those existing $30 customers would be what you can do. You don’t want to basically tarnish the reputation of the founders of the product itself.
[17:29] If there’s a way that you can straddle both worlds and grandfather existing, that’s cool. If there’s not a way you can do that, you just have to give people enough time. Because it’s an accounting system. You have to give them six months or a year. If I recall, they gave us 60 days to move off. Which is like, no! I have stuff to move off of here and I have taxes in six months. You kind of want to think this through from a customer’s perspective. Think about how much pain you want to cause everyone and how much do you want to piss people off? Because are they going to give you a chance the next time? This world of startups is not huge and you have a reputation that you’re going to want to kind up uphold.
Mike [18:01]: With [Indinero?] I think the big problem was that they had so many free users that they just couldn’t support them. And I don’t know what the stats they actually had were, but I’m assuming it was one out of ten people were paying customers. Their systems were buggy, as you said, and slow, and there were lots of things going on. They couldn’t keep up with it. In retrospect when you look back at it, what they should have done was say, “Look, if you’re a free user you’ve got 60 days or three months or something like that to get off the system and then we’re going to shut down your account and we’re going to only focus on the people that are actually paying for it.” They did have that free version of it and we were above that. So we were a paying customer, but as you said, they didn’t give us very much time to switch. I think that’s the real issue. When you don’t give your customers enough time to react, depending on how integral the product is to the business of your customers, that’s where things can become the biggest problem.
[18:54] So let’s talk about the opposite of this. How do you go about lowering prices for a subscription model? I think that if you have a subscription based product, if at all possible, this is something you want to avoid, I think instead – Rob, I think you took this approach with Drip at one point. You were looking at the products and looking at Drip and people were saying, “I like it, but it’s not worth it to me at this price point. It’s overpriced for what I feel like I’m getting compared to some of the other things out there.” And instead of lowering the price, you actually looked at it and said, “How can I offer more value for the product instead of lowering the price?” I think that’s a perfectly legitimate and probably the best way to go in this particular situation.
Rob [19:34]: Yeah. The idea of aspirational pricing is what I call it. To realize that if you’re charging $10, $20, $30 a month for a SASS app, it is really hard to get past the 10-20K mark. You just need a lot of customers to do that. You need a really big funnel. So if you are already priced up market and you go $50, $70, $100 a month it just makes it easier to cross that threshold and to start growing at that 5-10K a month mark. Which is when it becomes interesting, in my opinion. So the thought here is lowering pricing – the problem with it is – I can’t imagine lowering pricing and not doing it for all of your existing customers because otherwise you’re screwing all of your customers. Right? If they’re paying $50 a month and new customers can get in for $30 a month, I don’t see a way that you can justify not lowering across the board everyone’s prices. The challenge with that is then you’re decimating some MRR that you spent time building up. That’s actually a move that LeadPages decided to do after they acquired us.
[20:29] Our lowest tier was $49 and Clay wanted to move towards a free plan. Our first kind of toe dip into that water was to do a $1 plan with up to 100 contacts. When we did that we looked at everyone who was under 100 contacts and they were going to be downgraded. It was like $22,000 in MRR that just disappeared overnight. That was a big choice and it was one that Clay had to make because it impacted the bottom line. Later we moved to the free plan, but it was much less of a hit because we had a bunch of people on the $1 plan. But I couldn’t imagine starting a $1 plan and not downgrading everybody. There’s really little justification for doing that. The reason LeadPages could do that is because they’re ‘a big company and they can wait out the massive support burden and all the stuff that comes with $1 or the free plan. But as a bootstrapper, I’m with you, Mike. At any cost try to avoid lowering your prices and instead think about how can I offer more value? Ask you customers. Figure out what you can do to justify the current prices that you’re charging.
Mike [21:28]: I’ve had services where I’ve been a paying customer for them and had an account and I got their website and for whatever reason I’m logged out. I take a look at the pricing page and their current pricing is lower than what I’m paying. And I contacted support at that point and said, “Hey, what’s going on over here?” And they were like, “Oh, we’re testing prices.” I’m like, “Well, that’s great and all, but I’m a paying customer here. You’re charging me three times as much as what you’re advertising here.” What I’m always told is, “If we roll this out to everybody then you can get that pricing.” I’m like, “Can I get it now? Because that’s what you’re advertising.” They said, “No.” So you kind of have to be careful about how you choose to deal with your existing customers because I think you can make them angry if they see that there is that lower price available to anyone new and you’ve been supporting them as a customer for a long time.
[22:18] I think that’s definitely something to keep in mind. The other thing that you can do is offer a credit of some kind to your existing customers. So, if somebody is paying $100 or $200 a month or something like that and you dropped the prices by $50 or $100 a month or something along those lines on the plan that they’re on, you can give them a credit and either drop it by a percentage for the next three to six months or you could just say, “We’ll give you a credit for the next two months,” until you’re back to the point where they’re paying the same amount as the new customers. I think those are two different ways of dealing with it. If you’re offering a percent off as a discount over six months, it’s less of a hit to revenue than if you were to offer them just X number of free months over a time period.
Rob [23:02]: Yeah, I like that. That’s a pretty good way to think about it and I think most customers would likely be okay with that, especially if they’re using the service already and you let them know, “I have to lower prices, this is what’s going on. We’re bootstrapped and we don’t have the cash to just decimate this. Can I give you a credit?” I think that’s a nice kind of in between. And if there is a real pushback you can decide if you want to let some folks truly downgrade versus giving them a refunds or whatever is required. I think that’s a creative way to think about doing this if you do find your back against the wall.
Mike [23:34]: The next challenge is more of a logistical one when you’re building up the product. How do you go about avoiding overpaying for supporting and building your subscription product? This goes along the lines of user subscriptions that you have to purchase in order to just host or build your product or offer it as a service to people. And the money that you’re making doesn’t match or even meet what you’re paying for those other services. Let’s say that you have a product that’s costing you $1,000 a month for hosting costs and you’re only making $500 a month for it. You’re essentially financing your service for the customers. How do you go about dealing with that aspect of building up your service?
Rob [24:15]: I think there’s a couple ways. One, there’s ways to kind of do it on the cheap. I know we talked about [Wistia?] and it’s $100 a month, but there is a service called SproutVideo which, admittedly, does not have all the features of [Wistia?] but it’s like $15 or $20 a month. So you start there. And yes, you’re going to have to migrate later. Yes, that’s going to be a pain. But if that $80 difference is something to you, then you’re just going to have to put in the time to migrate it at a later date if you later want the features. So that’s one way to kind of do it on the cheap.
Mike [24:43]: [Wistia?] changed their pricing, so it’s only like – they actually have a free plan and then they used to have a $25 plan.
Rob [24:50]: That’s interesting. Okay, so maybe [Wistia?] is not a good example, but if you’re spending $1,000 a month on hosting on a membership site, then you’re doing something crazy. My guess is you could do it cheaper. Maybe a less reliable way, but you can find a cheaper alternative. An example is when I launched the Academy. I launched it on WordPress with a WordPress plugin forum on [Dreamo?]. So literally the costs were $10 a month and I think I was embedding the videos there. I don’t know if [Wistia?] was around in 2009 when I was working on this, but I did it really on the cheap. That created some issues later on, three or four years later. Forum stuff was out of date, WordPress was in shambles. WordPress wasn’t in shambles, but the plugins and the stuff that we used was kind of a nightmare. But it did allow me to get out of the gate really inexpensively. Another way is to basically presell it. You’re not putting in all this money in upfront and with a membership site especially, you’re going to be selling based a little bit on your personal brand, a little bit on the promise of the content you have. So go create some content.
[25:50] You can host that for free on YouTube or super cheap on Vimeo. Then you can put it on your blog or put it out as emails or as pdfs. Any way it can be free. Build the list, show what you’re going to do, and then say, “I’m launching a membership site where I’m going to put out awesome stuff like this, but it’s going to be even better.” Paint a picture for them of what it’s going to be and then presell the thing. You know, essentially coming back to the Academy when I launched it, I had two weeks of the content done. I was only two weeks ahead of the people who were at the forefront. When I initially sent those emails I sold I think 100 subscriptions at $50 a month, if I recall. It was a long time ago, so don’t quote me on that. But I’m pretty sure that that was what I presold. It was $5,000 a month. So right then I knew this is what I can put into it. It obviously grew from there, but that was the basis to say, “Okay, I can pay a few hundred dollars a month for hosting or I can afford to hire a designer to do this a little better.” I think that’s another way to think about de-risking this for you. Membership websites are a little easier to do that with. Info products are a little easier than with software.
Mike [26:54]: Yeah, preselling is obviously one of the ways to go with this, but another thing to keep in mind is for the different services that you’re paying for, hosting costs and all that stuff that goes with it. Do you really need them? Or can you go with a lesser version of them? Yes, it can be a painful experience to transform them or change them over to a different system later on, but at the same time you want to [?] your bets a little bit. If you don’t have enough information to really decide how much money you should be putting into it or how many customers you’re likely to get in a certain time frame, you kind of have to [?] your bets a little bit and figure out where you’re going to put your money and how you’re going to invest in the product moving forward. Because you don’t want to be spending a ton of money upfront for three, six, nine months before you get to the point where you are past the break-even-point. That’s something else to keep in mind is that break-even is different than revenue. There’s typically a minimum number of customers that you need to make any product profitable. You need to know roughly what that is. And along with knowing what that is, you need to understand what the time frame and growth trajectory of the product is.
[27:59] If you’re only adding five customers a month at $50 a month, then you’re growing at $250 a month of MRR. But if you’re running at a $3,000 loss every month, it’s going to be a long time before you get to the point where that product is paying for itself. And you’re probably not going to be able to support that. Those are the things that you really need to keep those numbers in mind when you’re building this out and determining what services to pay for. The last thing, I think, here is that when you are trying to figure out what those services are and on what you can spend a little bit less money, you can run it by some of your early alpha customers or people that you’ve talked to or prospects about what is important to them. Use that as a basis to figure out where you should be spending the money. Because a lot of times, you’ll look at something and say, “I really want this,” but at the end of the day it might not actually matter all that much to your customers.
[28:51] As Rob said earlier, when we built the Academy, we built it on WordPress. That’s technically free and there’s obviously a lot of work that goes into building all the different modules and stuff that went into the Academy, but that’s not something that you should probably be paying a heck of a lot of money for right out of the gate. I think we made this mistake ourselves when we switched over to a different platform and we were paying $1,000 a month for it at one point. Quite frankly, it didn’t work out. We thought that it would and fortunately this was much further down the road when the revenue was there. Had we made that mistake early on from day one, I don’t know if the Academy would have ever succeeded.
Rob [29:29]: Free like a puppy, Mike. It was free like a puppy.
Mike [29:33]: Yes.
Rob [29:36]: It took some work to get us out of there.
Mike [29:38]: So the last challenge to tackle is what is the product itself doesn’t work out? What do you do with your existing customers? Do you guarantee that they’ll get this at the same price and the same service level forever? We talked a little bit already about being able to modify the price, but what we didn’t really talk about is what happens if you go out of business or you just can’t support the product anymore because it’s losing too much money. And businesses stop operations all the time. This sucks, but small business owners understand when other small business owners are having a hard time. If the finances behind a product are not working out, there’s lots of companies and apps out there that have simply shut down and ceased to operate. Now, when you’re forced in that situation you do want to go essentially the same route that we talked about earlier.
[30:26] If you’re going to raise prices or shift your business all dramatically, you have to let people know and give them ways to get their data out. You have to give them other options that they can use. If you just flip the lights off one day, people are going to be pissed and they’re going to remember that later on. Those are things that you absolutely want to avoid. But communicating with people as frequently as possible and helping them either transition to another product or service or getting them the data they need. Whether it’s raw database exports into Excel files or something along those lines, you have to make sure they have what they need in order to be able to take their business elsewhere and take their data with them.
Rob [31:04]: Yeah. Shutting a service down is tough. I think it depends on, again, whether it’s membership site versus software. This does happen and it’s something that we all deal with and it’s disappointing. But I think you’re right. The more notice you can give people and the more reason, if you can really explain to people what happened here – that you’re running out of cash or that it was never a viable business. The more time you can give them and allow them to export their data and giving them instructions on how to import it onto another comparable service. Even talking to that comparable service and letting them know, “Hey, I’m shutting down and I have 70 customers. Is there any way you can help these folks with a transition?” I think you kind of owe it to your reputation, I think you owe it to the customers who believed in you to do everything you can to help them do that. If it’s more information, I feel like allowing folks to basically download everything so they can take it with them. It is something they purchased and they can use it moving forward, but if you need to shut down a service, again, just talking to folks as a person and letting them know what’s going on with you. Is it a health issue that you’ve gone through? Is there a life change? A divorce or a death or something that is just catastrophically wrecking your ability to run a business? Or was it just not a viable and you couldn’t do it?
[32:16] That’s kind of how I would approach it. That wraps us up for the day. Again, this episode was based on a question asked by Marcus [Beale?] in FounderCafe. If you’re interested in joining close to 1,000 bootstrap startup founders around the world, go to FounderCafe.com and apply to join. 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 exerpt from Out of Control by Moot. It’s 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 315 | On Attending Conferences, Opening a Bank Account, and Project Management Tools
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk about attending conferences, opening business bank accounts, project management tools, and more listener questions.
Items mentioned in this episode:
- MicroConf
- Gelform
- Codetree
- Teamwork
- Startups For The Rest Of Us Episode.167
- Startups For The Rest Of Us Episode.277
Transcripts
Rob [00:00:00]: In this episode of “Startups for the Rest of Us,” Mike and I talk about attending conferences, opening business bank accounts, project management tools, and we answer more listener questions. This is “Startups for the Rest of Us,” episode 315.
[Theme Music]
Rob [00:00:21]: 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 [00:00:31]: And I’m Mike.
Rob [00:00:32]: – 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 [00:00:36]: Well, I recently added another MicroConf sponsor, and I don’t think we’ve talked too much about some of the previous sponsors that we’ve added. One I want to talk about this week is stagingpilot.com, and this one – the sponsor for it was from Hire Auto last year, and he sponsored – he didn’t really have a product at the time – his name’s Nathan Tyler. This year after coming to MicroConf, he validated his idea, went out there and got a bunch of paying customers. Now he’s got what seems to be a pretty viable product going with stagingpilot.com. Essentially, it’s all built around the idea of being able to automate the testing environment for a WordPress install. So, if you’ve got a series of plugins – maybe you may be running Agency or something like that – and you’re trying to build plugins and manage the WordPress infrastructure for some of your customers, it allows you to automate all of the different tests behind that, similar to like you might do unit testing, for example, to make sure that your deployments go well. This allows you to do it at scale for Word Press deployments. It’s a little different than what you would get from WP Engine, where WP Engine makes sure that the site itself works. This makes sure that the site isn’t all jacked up with all the different things, because obviously that can happen when you’re doing WordPress plugin development. I had a pretty extensive conversation with him about it, and how it fits into the audience, and I think it’s a really good fit.
Rob [00:01:52]: Awesome. And if you’re interested in becoming a MicroConf sponsor yourself as you’re listening to this, email us at sponsors@microconf.com.
Mike [00:01:59]: So, what about you? What’s going on this week?
Rob [00:02:01]: Well, last Friday – I guess I should set the stage first here. As you scale an app up, you’re going to run into certain performance issues, you’re going to have certain bottlenecks, certain pages, certain cues, certain things that just slowly grow, and they get slower and slower over time. At a certain point, you just can’t wring any more optimization out of the code and out of the hardware. So there’s a couple things that we’re looking out and we’re seeing, like, “We’re going to hit that here soon.” DRIP’s obviously still doing well, and we’re ahead of stuff in terms of performance and in terms of spam complaints and such, but there’s been this one issue that we’ve been trying to solve, and it’s always been, “Well re-write this piece. Add another index. Add more RAM to the database.” By the time you get a quarter of a terabyte of RAM in your database and it’s still not performing the way you want it to, you’ve got to take a different approach. This thing, on and off, has been plaguing for us for, like, two years, but every three to six months we’ll see a decline, and then we have to come back and revise it. So, Friday afternoon, we were getting ready to take a really big plunge and do a major lind of overhaul, something that would’ve taken a lot of developer time and would’ve probably fixed this for good, but it would’ve added a ton of complexity to the database. We’re basically like, “If we don’t think of something better by Monday, this is what we’re doing.” It was, like, Friday at three, and Derek and I were just sitting there looking through the app. I was like, “What really are the pages that don’t work?” I kept saying, “What if we just load this asynchronously?” “What if we store this in a completely different database?” “What if” – I just kept throwing what-ifs out, and we were just bouncing back and forth. Then we eventually – it was almost like magic, but we stumbled upon this approach that was a massive breakthrough. As soon as Derek’s eyes recognized it, he looked at me, and he said, “That’s how we’re going to approach it!” It was a totally different approach. What was interesting is like the hair stood up on the back of my neck, and I could feel this electricity, like “We just stumbled on something that is an absolute game changer.” It seems like we have maybe one or two of these a year, is kind of what I’ve been saying. I think of when we realized automation rules had to go in the app, or workflows, or these other things. This isn’t necessarily a new feature, although it does allow us to build some other features, but it is just a complete game changer for us. It was stoked. Then four or five hours on Saturday we just could not stop talking about it. Then we were texting about it. Yesterday, it was like, “Oh, and this could also do this.” and, “This is how it’s going to change this.” I mean those moments – those are the moments I realize this is why I do products. I love those huge breakthroughs where you launch something epic, or you figure out how to solve a really hard problem, and you just figure out a completely new way to do it. It’ll take like one to two weeks. It’s actually not that much work. We think it’ll go pretty quick, but it was quite an eventful weekend, at least in our heads.
Mike [00:04:44]: And the interesting thing about that is that your customers will probably not notice it or see it [laughs].
Rob [00:04:50]: Yeah. Well, there’re some customers who are at the edge – in terms of list size and history – with us, who are just starting to see the cusp of this, and that’s where we knew, “We need to address this now before it gets bad.” But you’re right. The vast majority of our customers will never know. They just will know that it’s lightning-fast and, I guess, that’s thanks enough.
Mike [00:05:12]: Yeah. That’s one of those things like the typical story with an IT department. Whenever things are going well, they’re like, “Why do we pay you?” When things go wrong, they say, “Why do we pay you?” [Laughs].
Rob [00:05:22]: Yeah, [laughs] totally. Exactly. Obviously, it’s been a good few days because of that, but other than that I am actually leaving to go on my annual, semiannual – I’m not even sure – retreat. Since we moved to Minneapolis I haven’t been outside of the city, really. So I’m driving four hours north. I’ve heard that Lake Superior’s really pretty sweet. A lot of people have recommended it to me, and I’m looking forward to taking a couple days away from the family and just really relaxing. I haven’t slowed down since the acquisition started, really, so it’s been since January. I haven’t even thought about what’s next, in terms of for DRIP, or me personally, or all this stuff. So, I just feel like I’m backed up on the vision process for the next several months.
Mike [00:06:05]: Very cool. So, are we talking about this week?
Rob [00:06:07]: This week we’re actually resuming the questions that Corey Moss had sent us. He’s from gelform.com, and he sent us an email with a big chunk of pretty interesting questions. In fact, when we did a call for questions 10 or 15 episodes ago, we were down to basically zero questions in our queue, and now we have a nice chunk that’ll last us a little while. So, thanks to everyone who has sent us questions. Let’s dive into this first one. Corey asks, “Do you guys still go to conferences anymore aside from MicroConf? Do you still go to Business and Software? What do you hope to get out of them? Do the two of you really need more networking?” Then he has a smiley face there. How about you? Do you go to other conferences?
Mike [00:06:43]: Not as much as I used to. I think that probably four or five years ago I probably went to more conferences than I do now. I think at this point I tend towards the smaller ones, so obviously I go to MicroConf. I haven’t been to Business and Software, I think, in two years or so even though it’s kind of right in my backyard, but the audience is, I would say, not quite the best fit for me, just because I remember one of the last times I went there I sat down and somebody next to me introduced themselves and said, “Hey, I’m so-and-so, and they talked for a minute or two. So, what do you do?”
I said, “I write software, and I bootstrap a company,” and this and that.
He was like, “I’m a venture capitalist.”
I’m just like, “Okay. We don’t have much to talk to you about,” [laughs] and that was literally the end of the conversation. We really just did not have anything in common. I’ve started to find that that’s more common in the upper-end conferences that I go to.
I also go to the Big Stone TinyConf conference, which is coming up in, I think, January or February.
Rob [00:07:37]: Which is more like a ski retreat, right, with a dozen people. Yeah.
Mike [00:07:40]: Yeah.
Rob [00:07:40]: I almost wouldn’t call that a conference, because you don’t sit down in a chair and listen to talks and such.
Mike [00:07:45]: No, no. It’s a little different. I tend more towards the smaller gatherings of people, I think, these days.
Rob [00:07:52]: Why do you think that is?
Mike [00:07:53]: Lack of time, to be honest, and part of it’s just I like the aspect of being able to get to know people as opposed to going and sitting there as an attendee in an audience where the talks may not necessarily be relevant to me. I think that’s the general feeling I have for a lot of the other conferences that are out there. Obviously, MicroConf is kind of an exception to that just because it’s aimed at people like me, but there’s not a lot of other ones out there in that particular space, so that’s probably it for me. I do enjoy the networking opportunities, and so when I do go to larger conferences that’s probably what I spend the bulk of my time on; talking to other people, learning what they’re doing, listening to what other techniques that they’re finding are working or not working, and just generally getting to know more people. I think that those relationships provide you value beyond the conference and for years to come, whereas, like a conference you go sit down – and that’s kind, I guess, a weird take on it from somebody who helps organize a conference [laughs]. But that’s a lot of where the value comes from for people who’re attending MicroConf. It’s not out of line with that. I think that it’s just a recognition of the place I’m at now is a little different. Obviously, it’s a very different story when you’re paying for a conference out of your own pocket, versus you’re being paid by your employer to go to a conference and learn stuff and bring it back to the company.
Rob [00:09:12]: Yeah, I think it’s hard when – we’ve essentially designed MicroConf to be the conference that we want to attend, right? That was the original goal in 2011, and each year that’s the question I ask myself. So, we invite the speakers that we want to hear. We make sure the right people show up, and we build the schedule around what we want to do. It’s hard – considering it is my idea conference to go to – I have found it harder and harder to go to conferences that are not exactly that. Like you said, if you go to a conference in San Francisco – I went to Jason Calacanis’ launch conference. I like Jason Calacanis and what he’s up to and what he’s doing for the community, but the conference itself just wasn’t applicable to me. I was hoping to connect and network and stuff. I knew I wouldn’t get much out of the talks from the VCs that would necessarily apply to what I was doing. It was cool, but I probably wouldn’t go back – not because it wasn’t good, but because it really wasn’t for me. It wasn’t for me, where I’m at and where I want to go. I guess all this to say I do still go to conferences, but it’s only when I speak. That pretty much tends to be my rule now, and the reason is it allows me to network with the other speakers, and that tends to be what I’m there for now. I think that’s where I get the most value personally, based on where I’m at.
[00:10:25] With that said, I, like you, went to a ton of conferences. When it was basically earlier in my career when I was trying to learn all this stuff and I needed to meet more people. What are conferences good for? They’re good for meeting a lot of people, building your network, learning from the talks. I think those are the main things and main reasons you’re going to want to go. If you find that either the talks aren’t geared towards you, or the talks aren’t at the level of advancement, or sophistication, or whatever that you’re at, you tend to have less and value over time. I still think there certainly are good conferences to be had out there; and, again, if I was earlier in my career, I would probably be going to more, because you kind of have to say yes to everything at that point until you get your feet under you.
[00:11:02] All right. Next question from Corey is, “How do you organize your bank accounts for side or lifestyle business projects? And have you tried opening an online business account recently? It’s a fiasco?” I have tried opening an online business account recently, and it is a fiasco. I’ll agree with that. But, Mike, it’s been a while since you’ve, I guess, had side projects. You have a corporation, right? That’s no longer a side project, because that has to have its own bank accounts and everything. But did you ever intermingle stuff, like do sole proprietorship and have it in the same bank account? How did you do that?
Mike [00:11:35]: No. I’m trying to think. I think when I first started out I probably had things mingled together, but that was more than 15 years ago. I kept track of what was going where, and I didn’t do that for very long, to be honest. I really moved over towards having a dedicated bank account and dedicated credit card for the business itself back in ’99 or so. It’s been a long time since I’ve done that. I do things in my books to keep things separate. So if I have expenses for a particular project, or for a particular product that I’m working on, I do try to keep some of the expenses separate so that I know what I’ve spent on it and what the return on it is. So inside my books I’ll give my bookkeeper explicit instructions about, “This particular expense,” or “this type of expense goes for this product. This one goes over here,” and try and keep the different revenue streams separate so that I can at least see what I’m getting in terms of revenue from a particular product and what I’m paying out for that product. It makes it easier to figure out, “Is this making money, or is it losing money?” If you have everything mingled together then it becomes very difficult. sS I try to keep those separate, but there are times when things are not so clear-cut. For example, I have a couple of different webservers, and they’re not dedicated. I have five, or six, or eight different sites running on one of them for example; and they run behind several of different products. What do you count that against? I don’t really count it against anything. I just kind of say, “This is kind of a blanket infrastructure cost for the business, and I’m going to pay for it regardless of whether I’m running this product over here or not.” I try to do that just so that I get a sense of where I should be spending my time, or what the profit margins are on different things. I think that that’s a generally good way to go. I’m sure that there’s better ways to handle it, but at the same time is it worth me spending the time to figure out the optimal way to do that? Chances are probably not. It’s just not a good use of my time, and at the end of the day it doesn’t matter. I’m really just looking for some guidelines, or data points, that I can look at, and that’s it. I don’t need down-to-the-dollar things, because I’m not buying and selling a lot of different apps. If I were to try and sell one of them, I’d have to go back in there, and I’d try to figure out exactly how much – what percentage of my hosting costs were attributed to this or that, and that would be a lot more difficult; but you kind of have to do that. The other question he has is, “What sort of a fiasco is it to open up an online business account?” That’s a total mess. I mean it –
Rob [00:14:03]: I think that was just a declarative statement rather than a question, yeah.
Mike [00:14:07]: Yeah.
Rob [00:14:07]: Yeah, it used to be easier. I think the Patriot Act really jacked it up here in the States. I don’t know if the rest of the world sees that as well. I have to admit I started the [Numa?] Group, which was just consulting – it was freelance projects – in 2002, and I made it an LLC I think it was 2009. I had seven years when it was just a sole proprietorship, and it was because I didn’t have a ton of liability, based on my judgment. I wasn’t doing things that I thought could get me sued. During that time, I started off, like you, using my personal bank account – like the main checking account – and realized within a few months that that was a [glooch?]. Even if it was only 1,000 or 2,000 bucks a month in side income I just wanted to have in a different place. I just then spun up another checking account under MySocial, basically, and that is pretty easy to do, actually. To open one from scratch with a new EIN, like for a new corp, is a pain in the butt. But, honestly, with Bank of America, or Chase, or one of these banks, it can be just a couple clicks. You submit the thing, and then they’ll just have it open within a day or two. To be honest, if you’re just doing small side projects and, by your judgment, you don’t think you have a lot of liability, and you’re not going to do an LLC or a corp and you’re going to do just a sole proprietorship, that’s not a bad way to go. It all depends on – say it with me, Mike – “risk tolerance”. [Laughs].
Mike [00:15:19]: [Laughs].
Rob [00:15:19]: Remember when that seemed to be every episode for a while. Haven’t had to say that in a while.
Mike [00:15:23]: Yeah.
Rob [00:15:24]: Cool. Next question is, “Do you think swag makes a difference in marketing side/lifestyle business projects?” With “swag,” I’m assuming he’s meaning, like, t-shirts and hats and – I don’t know – USB sticks with your logo on it. What do you think, Mike?
Mike [00:15:38]: I would seem to think that it depends on the type of business. I almost feel like if it’s stuff that exemplifies the things that you are doing for your customers, then it can make a difference. For example, the business credit cards from moo.com, for example? I think that those are an interesting thing that you can give away, and it does exemplify what your work is, allowing people to either order a single, custom business card, for example. Or, maybe you send it to them as an example of what it is that you can do for them and say, “If you want more of these, we can print more, and here’s what the price is for them.” or, “Here’s a link to the other stuff that we do. In terms of giving away things like t-shirts, I don’t know. It depends on what the context is. I think if you have a targeted list of people, or group of people that you’re going after that are all going to be congregating in one place, then that’s good from the marketing side of things. If you’re looking to build rapport with your customers, or just to give them a little bit more than what your competition is giving them. Let’s say that you have some accounting software, for example, and for every person who signs up and they’ve stuck around with you for three months, you send them a free t-shirt. There’s a few things that factor into that. First one is the t-shirt – you don’t want it to be something that’s extremely cheesy. It can’t be something that’s low-quality that’s just going to end up in the trash bin because, ultimately, that’s actually going to reflect worse on you than if you sent them nothing at all. But if you send them a really nice one, they’re going to remember that, and they’re probably going to mention it to their friends.
[00:17:04] I also think that you have to be careful when you do that to not plaster your logo over the top of it such that it’s so inherently obvious that it’s an advertisement for you and for your product. You have to position them such that it’s something cool for them that they’re not going to be embarrassed by. I have no shortage of t-shirts that I’ve gotten at baseball games that I’ve gone to for the kids where some local health insurance company is handing out their t-shirts, and they’re like, “Hey, here’s a free shirt,” and I’m like, “Okay, great. Now I have a new dish rag.” [Laughs]. You have to be conscious of those types of things. I think that it can work. It just depends really on what your goal is. Trying to establish that rapport with customers – especially ones who maybe talkative online – if you have a business that lends itself to being talked about online, that could be useful for the advertising. At the same time, I would probably lean much more towards giving those types of things that are inherently useful to your customers that you want them to remember you by – not because you want to give them free stuff or want free advertising out of it, but because you want to be genuinely thankful like, “Hey, I just want to say I appreciate you as a customer, and here’s something for you.”
Rob [00:18:14]: Yeah, I agree. I think it’s not super important. I think if this doesn’t excite you to print t-shirts or to get swag made, you absolutely don’t need to do it for a lifestyle business project. It depends on what we’re talking about here. When HitTail got to the point where it was doing 20 or 25 grand a month, yes, I spent, I think $700; and I got 100 t-shirts made. They said “I survived Panda and Penguin” on the front. They had the HitTail logo on the back, and Derek designed them, actually, when he was still a contractor on HitTail. I did that because it was fun, and because I wanted to have t-shirts, and I was kind of proud that for the first ever I had budget to print t-shirts, and I was going to MicroConf, so I wanted to give them away to people. It was just something I was talking about. But do I think that those ever moved the needle for me by spending that $700? Probably not. It isn’t something that I would because you think it’s going to grow the business, per se. But I think, like you said, if there’s a lot of word of mouth and you do send it to the first – someone gets their first keyword suggestion, or their first conversion, or their first whatever, I think it’s kind of a fun thing to do. Maybe that’ll get you a tweet here or there. But overall, I don’t think this is a needle mover, and so if it’s something that’s going to be a distraction and is not fun for you, I would say don’t even bother with these with smaller projects.
[00:19:22] This next question is, “Are you guys still in mastermind groups? Anything changed in the way you run them or how you participate?”
Mike [00:19:29]: I am still in a mastermind group. I’ve experimented with having more than one mastermind group, and it didn’t really work out well for my schedule. In our mastermind group, we’ve tried changing the format a couple of times a little bit. It used to be the three of us would just go for about half an hour each, and then the call would end. We’ve recently transitioned a little bit to doing more of a hot seat approach where one person gets about an hour, and each of other two people get about 15 minutes apiece, and that’s worked reasonably well. Not everybody always needs to be on the hot seat, but we do alternate it, so if one person thinks that they need it then we’ll just say, “Okay, yeah, it’s your turn. You can have that slot,” so to speak. It’s a little bit of experimentation, I guess. I don’t think that enough has significantly changed that I would say, “Yeah, this is something that really moved the needle for us, and you have to try it out.” Things are just going as-is, and I think that that’s probably pretty common for most businesses, or most mastermind groups. It’s either working out or it’s not, and there’s not going to be some major changes that you introduce that are so earth-shattering on a fairly regular basis. There will occasionally be some things you try and they work out, and then there’s just things that you try out and they don’t.
Rob [00:20:37]: If you’re interested in our take on how to structure a startup mastermind, go to episode 167, which is “How to Organize and Run a Startup Mastermind,” and then episode 277, “Five Ways to Structure Your Startup Mastermind.” We’ll link those up in the show notes as well.
[00:20:51] My answer is, yes, I am still in the remote mastermind, right? I moved from Fresno to Minneapolis four months ago, so the one with Derek and I and Phil Dirksen in Fresno, since it was in person, we just decided to put it on hiatus for now. We do still video chat with Phil. It’s probably every month or two, and so we kind of do a mastermind. It’s just a lot less frequent. Then my other one has had some type of membership and stuff in terms of people coming in and out, but it is definitely still on. I really haven’t changed anything in our approach, because what we’re doing is working. Corey’s next question is, “Both of you seem to be doubling down on products.” That’s kind of funny. That’s the whole podcast, right? Since episode 1, [it’s?] doubling down on products. We have 315 episodes of doubling down on products. “What did you think of Justin Jackson’s experiment of 100 products?” Are you familiar with that at all, Mike?
Mike [00:21:44]: Yeah, I am.
Rob [00:21:44]: Yeah. What do you think?
Mike [00:21:46]: I think Justin’s experiment with 100 products – it’s a really cool idea. I think that it’s something that, if you’re not sure what you should be doing, I would definitely advocate that you try doing something along those lines. There’s a few different, major benefits of building that many products. The first one is that you learn quickly how to get a product out the door and how to launch it and move on to the next product. It’s not to say that you should always move on from one product to the next, but you get that feeling of being able to launch, you get the process down, and you become more comfortable with it, because I think when you first launch your very first product it’s difficult. You’re very hesitant, but if you have a schedule that you have to get 100 products out there as quickly as possible, you’re going to get over those fears because you absolutely have to. You have no other choice. In doing so, you start to develop an affection for certain types of products that you develop. Over time, you’re going to be able to see that – after pushing out 25, 35, 50 different products, you’re going to start seeing which ones resonate with people and which ones don’t just based on the sales and revenue streams and things like that, and you’re going to figure out, “Where are my talents best put, and where are there places where I just don’t do as well?” I think that those things will help lead you back to what should you ultimately end up working on. I think that there’s definitely cases where there’re some people who are probably better at just launching a bunch of small products, and that’s – I don’t want to say that’s all they do, because that’s obviously a lot of work – but there’s a certain type of person who is attracted to that because it’s always something new. I think you’ve mentioned in past episodes that you get bored by the same thing after two or three years. I’m kind of the same way, because you always want something new. You’re always looking for either the next big thing or, the new, shiny object, so to speak. If you have that to such an extreme extent that launching a new product every three or four days works out well for you, then great. There’s absolutely nothing wrong with that. But that said, maybe you’re the type of person who only wants to work on a couple things, or you want to work on the same thing for several years and build it up and then maybe sell it off. Building that many products gives you a much broader view than if you only worked on one thing and that was it. It’s almost similar to somebody who’s worked as a consultant for 50 different companies. You’ve gotten to see 50 different companies; whereas if you’re building those products, you get to see 50 different products getting launched, and you get all the inside view on it.
Rob [00:24:10]: Yeah, I think if I was early in my career, I would consider something like this. I feel like 100 products is overkill, and a little bit of a – I don’t know – like a circus or something. A “sideshow” is probably a better way to say it, right? It’s like picking 100 is just this huge, almost ridiculous number. It’s going to get you a promotion, and so in that sense I think Justin did a good job, because I’m sure this raised his personal brand and such when people heard about it. But earlier in my career I would have totally thought it might be interesting to launch a product a month for 12 months, or something. I actually really dig in. I think as I’ve gone on in my career I’ve learned you have to focus on something for long enough for it to have legs. You really can’t bounce from one thing to the next, or else nothing takes hold. That’s just been my experience, and I prefer to focus on things really intently for, like you said, one, two, or three years, and figure out if they’re going to work and push them into that place. Imagine if we had launched Drip and then given it a month or two and then said, “Nope. Not growing. We’re going to bail on it.” Could’ve happened, because it wasn’t growing for the first several months, because we didn’t have product-market fit. It took six months or whatever after a grueling five-month launch. Then it took another six months to get to where we had product-market fit. Sometimes you’re pushing a boulder uphill, and I think if you’re going to do something big and impactful – and I don’t even mean “impactful” like a $100 million company. I just mean a mid-six-figure or seven-figure company. I think bouncing from one thing to the next is probably not the ideal thing, but then again, if you’re trying to learn quickly, I think that – and if you are not shipping, like you said, and you’re kind of scared of shipping, or you just haven’t gotten there – shipping a bunch of stuff will just get you over that fear. Our next question is for Mike. Corey says, “Mike, does your wife understand what you do? How about your kids?”
Mike [00:25:47]: I really don’t know [laughs]. I think, to some extent, yes – much more so than I would say that my parents understand what I do, because my parents, if you were to ask them what I do, they’d say, “Oh, he builds computers” –
Rob [00:26:00]: Right.
Mike [00:26:00]: – which –
Rob [00:26:01]: Isn’t really it [laughs]. You did that 20 years ago, right?
Mike [00:26:05]: Yeah, exactly. It’s just not quite the same thing. I think my wife probably has a much better understanding now than she probably did when we first got married, because when we first married I was still dabbling in a lot of different things and trying to figure stuff out. At this point, I’m full-time on the stuff, so I talk to her on occasion about what’s going on, or how different things are going, or what some of the different challenges are, so she gets it I would probably say much more so than our circles of friends, so to speak. Most of them, they’re probably going to say – if you asked them what I did, they’re like, “Oh, he works with computers,” but they wouldn’t necessarily really understand what it is that I do.
Rob [00:26:39]: Yeah. I think back when I was doing all the micropreneur staff and I had a whole portfolio of products, and I had all these websites – I had eight or nine things going on, and I was buying and selling, and I was upgrading and rehabbing and all this stuff – it was complicated, and most people didn’t get it. But once I had HitTail and once I had Drip I could just say, “Look, I have two sides of what I do, the personal brand side and the actual software side,” and then just to say, “I run an email marketing app” – most people get that. Actually, my ten-year-old gets it pretty well. I don’t know that he understands what I do day to day, but he has a pretty solid grasp of it, and I bet he could explain it. If someone asked my six-year-old, yeah, he knows I work on computers and I check email, which is kind of cool. Next question is, “Do you work from home or from coffee shops? Any experience with co-working spaces?”
Mike [00:27:22]: I work from home. I’ve tried working at a co-working space, but it didn’t work out for me mainly because I had to work from my laptop. I can work from my laptop, but I’m not nearly as productive as I am at home, because I’ve got a two-monitor setup. I’ve got a 30-inch monitor next to a 20-inch monitor, and although most of my environment is duplicated on the laptop, it feels too constrained and limiting for me – just because I don’t have the visibility, all the different windows and the giant monitors. It just feels different for me. If I’m sitting there writing an article or something like that, I can kind of get that type of work done, but for most other stuff where I’m alternating between different browser tabs, or working with marketing software, it just doesn’t really work for me. I’ve never really found the co-working space to be particularly helpful in that regard.
Rob [00:28:08]: Yeah, I worked from home pretty consistently for about ten years, and towards the end I was definitely feeling it. I just felt isolated and wanted to get out more, and so as Derek came onboard with HitTail and Drip and we started having co-workers locally, so to speak, even before we had an office, we used to meet at coffee shops and work. I always felt a little less productive, because I didn’t have the extra monitor, although I did use to bring an iPad. I forget what that app is called, but you can actually use it as an external monitor, which is kind of cool. Aside from that, we did do a co-working space. When it first opened, it was called “The Hashtag” in Fresno, and it was the only one for tech folks like us, and I signed up as a charter member. I didn’t work from there very much, but then that turned into the [Bitwise] office building that all of us were in in Fresno when we moved away. That was actually really cool to get a little office. It wasn’t very expensive. I could leave monitors there, so we bought extra monitors. We had desks. We had a door that locked. That was the way to go. If you can find something inexpensive enough, and close enough – it was less than 15 minutes from my house – and then that allowed us to have a dedicated space to really hammer on things, and to be able to collaborate. It was two of us in this 10 x 12 office. We eventually, I think, had four people in that office, although we had to alternate days because we couldn’t all fit in there at once. It was kind of funny, but I think co-working spaces are cool as long as – I’d really like one with an external monitor, unlike you, where I take that for granted these days.
Mike [00:29:32]: Yeah, there’s a co-working facility near me where you can essentially get a dedicated office. I think it’s around $400 a month for your own private office. I’m looking at their website now. One of them is – it’s $225 a month to get a dedicated desk, so then you could put additional monitors and stuff there, and it’s $500 a month for a private office. Either one of those options would probably work well for me, but there’s waiting lists for them. I’m just like, “Eh, well, whatever.”
Rob [00:29:59]: Yeah. We had that 10 x 12 office with the door that locked. We basically put two, and eventually three, desks in there. That was only like 250 bucks, and that’s the beauty of bootstrapping in a place that’s not expensive. Fresno is one of the cheaper areas of California, and that was a benefit, I guess. His next question is about project management. He says, “What project management style and tools do you use?”
Mike [00:30:24]: I’m not even really sure what this question means [laughs].
Rob [00:30:27]: What the style is? Yeah. Well, I’ll go first on this one. My project management style is to figure out what we’re building next. It’s very agile – with a lower-case “A” – meaning we move quickly. We don’t define – I don’t even know what we’re doing in three months, right? It’s basically a 90-day – give or take – idea of what we have, and the roadmap just exists with Code Tree, right? We’re in Code Tree. It’s just a – imagine it’s like GitHub Issues, but with a nice UI sprinkled on top. We enter things in there. We spec them out per issue, and then we basically have them in the order the developers should be working on, and they’re just working through their stuff. We don’t do sprints, where we gather them all up. When a developer gets done we all test it, and then we throw it into production. I don’t know precisely what that style might be called, but it’s definitely just a fast way to do things, because there’s not a lot of overhead. We’ll frequently go in and – if we have an idea, or if we know we need to do something – we will go in, write it on a whiteboard, everybody gets a round – “everybody” being two or three people- and then we take a photo of it and throw that in the issue. Everybody who is there knows what the sketches mean, and that’s our spec. We don’t write up – I remember writing up waterfall specs 10, 15 years ago that were these 40-, 50-page Word docs. Just insane to think about doing that these days, how long that took. Then in terms of tools, like I said, we use Code Tree, which is actually the app that Derek built on the side, and then he sold it. I interviewed him about it a few episodes ago. We used that to manage issues, and that has both a [Camp?] and Trello view, and it has a list view. The developers like the Trello view, and I, as someone who needs an overview, I like the list view of it. Then personally, for my own to-dos and stuff, I use Trello for that and then my Google calendar all the time. Good grief! I’ve so many events in there that, like, ping me at two o’clock on this day to think about this, or to go through this label in my Gmail, or to make sure to do whatever. I mean, half the things on my Google calendar are not meetings. They’re almost like reminders to me or things to be done.
Mike [00:32:23]: Yeah. Most of the development stuff that we do is all based out of FogBugz, so we keep everything in there. Then if anything needs to get done we just assign it somebody, and then we have a couple of what are called “virtual users,” where we’ll assign something to a virtual user because we don’t necessarily have somebody to work on it, or it’s just not something that is terribly important for us to work on right now. For example, inside the Blue Tick project, there’s this Blue Tick unassigned user. It’s a virtual user. If anything needs to go in the backlog, or we’re not sure what to do with it, it just gets assigned to there. Then we have a couple of other virtual users we use for certain things, but generally speaking, if it’s on our to-do list – things that are assigned to you tend to be no more than about ten or 15 items long. Then beyond that there shouldn’t be anything on your open, assigned list that isn’t something you’re actively working in the very short term. It should all be stuff like, “This has got to be done, and it’s got to be done soon,” and by “soon,” within the next two to three weeks or something like that. It’s kind of like you said. You don’t really look too much further beyond that, because the things that are there need to get done. I think if you get too many things on your task list, then things will start to get lost. They start to get pushed, and if they get pushed, there’s always going to be other stuff that surfaces up as more of a priority. Once that to-do list gets too long, you start to pay attention to it less. I think that the whole project management system is – and I don’t mean just FogBugz. I mean anything that you can possibly think of, once you get too many things on it, you start to not pay attention to them, because they’re so far down on the priority list, or there’s other stuff that always comes up. Some things will always fall through the cracks, and they’ll always end up at the bottom, and it’s almost worthless to have them there. That’s why we use our virtual users to just kind of shuffle those things off to the side so that we don’t have to worry about it.
Rob [00:34:08]: Yeah, I think you make a good point there, and that’s, I think, being disciplined about what you let in your issue tracker is a big deal. I think just, in quotes, “throwing” everything in there that any customer requests is a really bad idea. I think for customer requests you maybe can have a label in your support software. Like in Help Scout we have that. It’s says, “Feature Requests.” That’s okay. I think there’s hundreds and hundreds of them in there. But if something catches our eye as it comes in, and we think we really want to build it, we’ll throw it in unassigned. If it’s obviously a critical issue or a bug, we’re going to get to it right away, but not just polluting and overwhelming your list, and getting hundreds of things in your issue tracker. It just becomes unmanageable. I think that’s a good point you’ve raised.
Mike [00:34:44]: Yeah. The other thing that I use is I have a Teamwork account, and I use Teamwork quite a bit for any of my recurring tasks. I have a set of Marketing Monday tasks that are in there that are recurring tasks every week, and I know that those things need to get done, and as I finish them off I just go in and check them off. I also have a special project off to the side that I use for household chores, to be perfectly honest. As things need to get done, whether it’s vacuuming, or mowing the lawn – things like that – I have all of our vehicle maintenance and stuff in there, so every three to four months I have oil changes and stuff like that in there. It’s mostly for those things that you don’t think about it until it’s way past the time that you probably should’ve done it, so having those things surface to me at that time allows me to say, “Okay. Now I need to pay attention to this. This is something that I need to do,” as opposed to getting four, five, six months down the road and you’re like, “Oh, wait. Did I get the oil changed?” “Did I have the tires rotated,” stuff like that. I have a lot of regularly recurring maintenance tasks that’re in there, whether they’re business-related or non-business-related. Then I have different projects in there for some of the different things that I have going on. I also have a separate project in there specifically for my bookkeeper so that anything that I have that comes up as a – like if I have a receipt, I have a special forwarding address that I just forward it over there. Then I can just add a quick, little note that says, “This is for that.” It just cuts off additional overhead or communication emails back and forth between my bookkeeper, because I’ve already said, “This is what this is for,” and I don’t have to answer it down the road, or wait until she goes in, looks at the books and says, “Hey, what’s this WP engine thing?” or, “What’s this thing from Digital Ocean?” I don’t have to worry about it, because I’ve already given her a heads-up, “Hey this is what this is for.”
[00:36:22] I think that about wraps us up for the day. If you have a question for us, you can call it in to our voicemail number at 1.888.801.9690; or, you can email 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 314 | Management Lessons for Founders
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk about management lessons for founders. This episode is geared towards how to manage a team of people and discusses the two extremes of a highly involved micro-manager versus allowing people to work independently.
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 management lessons for founders. This is ‘Startups for the Rest of Us,’ episode 314.
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]: We’re here to share experiences to help you avoid the same mistakes we’ve made. What’s going on this week Rob?
Rob [00:30]: Things are pretty good. Getting some positive feedback about episode 311 where I interviewed Derek about what it’s like selling a $128,000 side project. Did you hear that episode yet?
Mike [00:40]: I actually have not. It’s on my list. I haven’t gone to the gym in a couple of weeks, so.
Rob [00:45]: Totally. Now everyone knows that we don’t preplan these intros. That was a genuine so, you know, you have to circle back and let me know if you liked it. But I’ve gotten several emails and I think there’s a comment on the post itself of people who just really liked the inside look of what that was like.
Mike [00:58]: I’ll read the transcript. How’s that?
Rob [01:01]: Yeah, do that. That’s how you always approach it. Cool. And the other thing is MicroConf tickets are on sale which has been kind of fun. And this year – you know, for folks who follow the podcasts – we have two MicroConfs now in Vegas. And they’re back to back in early April. And we went with a starter addition and a growth addition because what we found is that it was hard to build a conference that catered to both ends of these spectrums, right. Of someone looking for an idea, vetting an idea; trying to get to launch; trying to get to fulltime revenue. For everyone to be able to live off it.
And that’s where starter addition basically ends. It’s all the stuff that you do in the early stage. And then growth addition is for folks who are already living off of it and are looking to grow it. And it’s been pretty cool to see kind of the distribution of folks who’ve gone to growth versus starter. And to see a lot of people are going to both of them.
But there are still tickets available which was kind of the goal of doing this, right. We’ve typically sold out. By the time we launch to the public, we sell out in what, five minutes, three minutes. I mean it’s been kind of ridiculous the past few years and this gives a lot more folks the opportunity to come and learn from the speakers and, of course, the other attendees in the hallway tracks.
So, if you’re interested go to MicroConf.com and by the time this airs you’ll either be able to still signup for the list or, perhaps, even just click right through and buy a ticket.
How about you? What’s going on?
Mike [02:11]: Well, I’m planning on casting an early vote for the election tomorrow. But I hate myself already, so, I don’t know. It’s kind of a mixed bag I guess.
Rob [02:20]: You know like; can you take a shower?
Mike [02:21]: Yeah, I don’t know. I almost wish that I could vote for nobody for the next four years and just be done with it. But whatever.
Rob [02:27]: Yeah. So I actually purchased a shirt and it’s got Cthulhu on it. And it’s says ‘Cthulhu 2016, why vote for a lesser evil.’ And so I think that should be our write in.
Mike [02:37]: I think that there’s other ones that have been out there like ‘Pedro for President.’ So –
Rob [02:40]: Right. I also have another one that’s ‘Underwood Underwood 2016.’
Mike [02:43]: Yes. I like that one too.
Rob [02:46]: Cool. What else? What’s going on with BlueTick?
Mike [02:48]: Well, I’m currently mired in support tickets and bug fixes. But I also added two paying subscribers this past week. So, things are going well. It’s just a matter of kind of going through those and – the unfortunate thing is that when there are certain things that go wrong, they create more support tickets than the actual problems that are causing those things. So, sometimes there’s this cascade effect where one thing that goes wrong or needs to be fixed will create like four or five support tickets and they’re all related to the same thing. Which kind of sucks to have to go through each of those and try and figure out are they related or are they not.
But the issue we ran into was there was data that was being displayed incorrectly and come to find out we had to go back through and regenerate some of the data because it just didn’t exist at one point. So we were tracking some information and we didn’t start tracking that information until several months in. And we got to a certain point where we’re showing all these statistics and things like that. And there’s some things that are included and then there’s historical data which doesn’t exist because it wasn’t included until then. So all the numbers looked off. We had to go back through and figure out, “Okay, well, is our logic wrong? Yes, actually logic is fine but this data is actually missing.” So we had to go through and regenerate all that data.
And then when doing that, it caused some other things because we’d fixed the data and then we had to modify how it was displayed but they were out of sync. It was just kind of a nightmare. But we’re at the tail end of that at the moment. I’m onboarding somebody else new tomorrow. I don’t know.
Things are looking up. Things are going in the right direction. It’s just still a lot of work to be done.
Rob [04:12]: Yeah, there always is, isn’t there? But you made it through and you’ve added a couple of new customers, which I think is probably the important takeaway from all of that.
Mike [04:19]: Yeah. So that’s a good feeling to see that I can talk to somebody about the product and walk them through it. And, actually, one of them was sight unseen. They just said, “Yeah, this sounds like it solves my problem. I’m in.”
So, yeah, it’s going well so far, I think.
Rob [04:31]: Cool. One other thing I wanted to mention is I was interviewed on Mixergy again. I was trying to think, this might be my – I think including the time I was on – you know, he did like his 1,000th episode and there was like Seth Godin and Tim Ferriss and a handful of people. And he invited me on for that. I think including that this is my sixth time of going on Mixergy.
So it was fun to talk to Andrew. I had just seen him a week or two ago. I’d converted to then see him again and be able to do it. So, it’s about the Drip acquisition, in essence. About growing and selling Drip. So, if you want to check it out, it’s on the front page of Mixergy as of now. So it’s still freely available.
And, if you do head there, I’d appreciate – there’s like a ‘Like’ button in the upper left. I’d appreciate if you’d click that because it kind of increases my cred in the whole Mixergy ecosystem.
So what are we talking about today?
Mike [05:13]: Well, today we’re going to be talking a little bit about some management lessons for founders. And we’ve had some previous discussions about this dating back all the way to episode 68 where we talked about how to hire and manage virtual assistants. But then we’ve also talked in episode 116 about how to move a team from good to great. And then seven tips for being a better manager in episode 129. And then in episode 193, we talked about distributed team collaboration for startups.
But one thing we’ve never really discussed directly was how to generally manage teams of people. And I think there are two different extremes that you could end up falling between when you’re managing people. One of them is the highly involved micromanager who wants to be involved in all the intimate details of everything. And then there’s the other extreme where the manager doesn’t want to do any sort of management tasks, or the founder doesn’t want to do any of those management tasks and they expect everyone to work completely independently of one another. And, obviously, when you trend towards either of those two extremes, you start running into friction where either people are not doing the right things or their work is overlapping so you end up with all those inefficiencies that kind of come out among those conflicts.
And I think that one of the goals of management is really to move the business in the right direction. And, per Joel Spolsky’s advice a long time ago, he said that the job of management is to essentially get the furniture out of the way so that people can do their jobs. And I think that that’s great in theory if all you do is manage people. But I really think that that starts to fall apart when you need to switch between a work mode and manager mode because, in the early days of your business, you’re still working on a lot of things. And then there are times when you need to manage people and you need to manage either the project or the future road map or working with customers or the support team. So you need to kind of alternate between these different management tasks.
And then at the end of all that, you still need to go back and be productive on the things that you’re doing. Whether that’s coding or marketing or what-have-you. What are the other things that you are regularly working on?
So, when you get into that situation where you have to alternate, I think that it becomes very difficult to follow that mantra of just moving the furniture out of the way for people. And I think that there’s some guidance that we can kind of shed some light on for people to help make them better managers.
Rob [07:15]: Switching between maker-mode and manager-mode, which is what you were just talking about there – very, very difficult. And it’s actually not something I recommend. I’ve found that trying to be productive as a maker, as a creator, whether that’s writing code or putting out blog content, writing, talks, that kind of stuff that really takes the deep glucose – first is interacting with people, being willing and able to be interrupted so that you can keep other people going. Trying to merge those two is extremely difficult. And I’ve found that times in my life when I’ve done it – and I did it the City of Pasadena; I did it as a tech lead for a credit card company in LA; and then I did it kind of coming up into Drip. In fact, a big decision I made moving into Drip as we started and that I’ve never regretted was moving out of the maker-mode and out of the maker role, I should say. Because I didn’t write any code on Drip.
It was a tough decision for me because my identity for a long time has been caught up as a software developer, you know. That’s how I introduce myself to people. And to not write code for the past few years was an identity issue. As well as you kind of lose your technical chops. But with that said, it has been a lot easier for me just to feel calm on a day to day basis because I don’t feel like I need to produce as well as managed people.
Now something interesting is that I should probably reference back – because if you’re listening to this, you might be thinking, “Well, I never want to manage people,” right. “So this episode isn’t applicable to me.” But there was a blog post I wrote in September of 2010 and the title was ’10 things I will never have to do again.’ And I’m talking about being a Micropreneur and how I just didn’t like politics of big companies. And so now that I’m on my own and I’m never going to hire employees, I have 10 things and I said I will never again number one, read a book about leadership. Number two, worry about building a company culture. Number three, get someone’s buy in. Number four, participate in a performance review on either side of the table. And I go one to talk about other things. But it’s all implying that the beauty of being out on your own and doing stuff.
And at the time I thought that’s what I was going to do forever. And, as it turns out, that’s actually A: kind of lonely. B: kind of boring and C – you can do some big interesting things but you couldn’t do the big interesting things that I wanted to do without having people onboard.
So, that’s where I would say like at one point I thought I would never ever higher, manage, and build culture and do all that stuff. I think there’s value there. And even if you’re not going to hire employees, if you’re running a team of contractors – which, in essence, I wound up doing just a couple years after that. I think I had eight contractors working for me. All remote so I didn’t have to go into an office. And they were all hourly so I didn’t have the payroll and the W-2. But still there was – I did have to be a decent manager. And I had to learn how to do that. So that’s where this isn’t just for someone working at a big company going to manage this team of 10 fulltime employees. I think there’s a lot of lessons we can take away from this episode that apply to anyone who start a business even if you don’t plan to hire employees.
Mike [09:57]: So, I think before we even dive into the different lessons, I think the first thing to point out here is that, as you had mentioned, not everyone really wants to be a manager but people aren’t necessarily always good at it either. It’s very rare to find somebody who is just a good manager from day one. It’s essentially a learned skill. And I think that that is very important to keep in mind as you’re listening to this episode or you get into managing different people. So, you will get better at it over time but it does take practice and it can be uncomfortable when you’re first getting started.
So, let’s dive into the lessons. And the first lesson is that information is power, but having too much information can kill productivity. Really what I’m talking about here is over-communication. And I’ll be perfectly honest about this, I am brutally awful when it comes to this. My emails tend to be longwinded and I tend to try and consider or talk about different edge cases that I’ve kind of considered when I’m replying to emails. I’ve actually made this point to the people that I’ve talked to. Like, “Hey, look, if my emails are too long, just feel free to let me know that they’re getting too long and you don’t need as much information.”
And it’s important to know what your limitations are, what your shortcomings are when you’re dealing with people. You have to let them know how they can interact with you and how they can provide feedback to you; and what is okay; and what isn’t. And one of those things that I let people know is, “Hey, if my emails start to get too long or it’s inappropriate to continue that conversation in email because of that, just let me know and we’ll take it in some other mode of communication.”
But the real point of this is that you need to provide enough context about the tasks or the jobs that need to be done. But not so much detail that you’re getting in the way and your communication is getting in the way of what people are trying to accomplish.
Rob [11:35]: Yeah. I think as I’ve gotten better at this skill of managing, I’ve learned to be a lot more succinct and to try to filter in only give people the amount of information that they need because anything else is just noise. And they don’t need the whole back story of how we got here. They often don’t need nearly as much detail as you have in your head. And so I’ve found that this works both ways. In retrospect, when I was a developer reporting to managers, I remember telling them all the technical details of a decision and they really didn’t need to know that. A lot of times I should have just boiled it down to something that was just simpler to understand.
So, yeah, I think this is a really good learned skill in all walks of your life, like all aspects. Whether you’re talking to your kids, talking to your spouse, talking to a manager, talking to someone whom you’re managing. Just being able to sit and filter and to put something in terms that others understand and think about it from their perspective I think is something that all of us should focus on. I think, to be honest, the world would probably be a better place if we could all do this a little better.
Mike [12:31]: I think like that point about it does work both ways. So, when you’re talking to somebody who is higher up than you or you’re being managed by them, that filter should also be in place. That you’re distilling it down to just the important things that they need to know. And you’re right, I think that it comes down to making sure that you’re contextually aware of what sorts of things they are interested in or are important to them.
The second lesson here is when you’re managing a team, at least provide people with a high level idea of what the business objectives are, what plans you’re trying to execute. And that can really just be a simple one-page document that’s updated on a semi-regular basis that just indicates kind of what your key priorities for the business are. You need to let them know what’s important to you today and why it’s important and what the different objectives that you’re trying to reach are and kind of leave it at that. Let them interpret that information and apply it at the micro level to what it is that they’re doing. You don’t really want to be in that position of the micromanager where you are getting into their workday and saying, “Okay, when you do this task make sure you remember this. Remember that over there.”
If there are certain things that you’ve run into in the past that you know that they’re probably going to run into, then it’s appropriate to bring those things up. But you also don’t want to be overbearing or over-communicated all of the different pieces that will go into it because one: they’re going to figure it out and two: that’s what you’re paying them for.
So, you want to make sure that you are spending your time wisely and you’re not deluging them with all this irrelevant stuff that, quite frankly, may not even be relevant to the problem.
Rob [13:57]: What’s nice about giving folks a high level overview is that then if there are small decisions day-to-day, you don’t have to be the single point of contact. You don’t have to be the single bottleneck to make every little decision. The more context people have around it and the more context you build over time in their heads folks working for you can just make better decisions. You don’t want to dump it all once like we said in the first part. But over time giving folks a broader business objective rather than having people just be focused on exactly what they do day-to-day so that they understand what role it plays in the business is a good thing to do. And in the past, if you’re in person – we used to do it with a weekly lunch at the Drip office where we’d all get together and just sit around the table and share what we were up to and where we were headed. And people would share what they were working on and then I would talk about kind of where I thought we were going next. I would often lay out, “Here’s what I think the next 30 days are. Here’s what I think the next 90 days are.” And that’s about as far out as we would go.
But I think if you’re remote, this could probably be accomplished – I don’t know if it could be accomplished with IDoneThis.com, which is kind of an email thing that lets everybody know what everybody’s working on. Or if you might need a 30-minute weekly video all hands where everybody’s on there and you just chat through some stuff. You don’t want to do an hour video all hands. Like it’s just too painful and people are going to think it’s a waste of time. But being in person I think is ideal to do this. But I also think that it’s possible to still keep people apprised of what’s going on.
And you have to think, high level plans and business objectives they change frequently, especially in the early days of a startup. I mean they might change every week or two until things start to iron themselves out and you start to get a more repeatable development and marketing approach.
Mike [15:29]: One of the things that you just pointed out was kind of a key difference between an in-person team where everybody is in the same office versus a distributed team where people may very well be in different time zones when they’re trying to communicate. So typically in those two situations, you have the synchronous communication for the in-office people. And then you have asynchronous for people that are around the world. And that’s generally how the business itself operates. I would think that a video call or something that is probably going to be very constraining for those distributed or remote teams. And what you’ll probably want to tend towards is like a summary email or just a document that you can keep updated.
I think the document tends to fall apart just because it’s not in front of people. If it’s sitting in somebody’s email box they’re probably going to read it. But if it’s like Google Doc that gets updated on occasion, even if you send them a link to it, they may not necessarily read it. You really kind of need to imbed that text in someplace where it’s going to be right in front of them so they are, I’ll say, encouraged to read it as opposed to, “Oh, I got this link. I could go click on that but I’ve got all these 30 other emails in here that I’m going to go deal with at this point.”
So I think that you do have to keep in mind whether or not your team is in person or not when you’re deciding how to communicate effectively across the entire team.
The next lesson has to do more with how do you communicate with individuals on the team. And I think when you’re working with individuals you have to set those short term goals and objectives for them. Obviously, you let everybody know what the long term objectives for the business and for the company are but, with individuals, each person tends to be working on different things. And maybe you group a couple of people together when you’re putting together these short term goals. But you need to know what it is that they’re supposed to be doing and they need to know what it is that you expect them to be doing during a short term timeframe. And that could be a week, it could be two weeks, it could be four weeks. But you don’t want to go for extended periods of time without some sort of communication feedback.
So, really the matter at hand here is how you communicate with them to get information to them that they need and you know that they’re working on these certain priorities and how they return information to you to give you status updates to let them know what’s going on. I’ve had managers in the past who’ve had me send out weekly emails to them with three different sets of information. The first one is what did you accomplish this week. What is on deck for next week? And then the third set was what are any outstanding issues or upcoming issues that you can foresee happening that you may need help with or that I may need to be aware of.
And I think that that works generally pretty well. Other systems – I think you’d mentioned IDoneThis. I’ve also used Status Hero in the past for individual updates which you can use either for daily or weekly updates. It depends on how many people you have on your team and the frequency of communication that you need. If you have a lot of people who are working for you, you’d mentioned that you had eight contractors working for you. I would imagine that eight daily updates emails telling me what people are working on would just be too much. It’s just too much communication overhead so, I’d probably lean towards weekly at that point.
But you really have to dial it up or tone it down depending on what your team looks like; how many there are; people fulltime versus only working once or twice a week. All those things factor into it but really it’s a matter of establishing the communication back and forth between you and the individuals.
Rob [18:39]: Yeah and this is where I’m going to go off on my rant about remote teams versus all being at the same location. I believe that a hybrid approach is the best, to be honest. I’ve tried working with completely remote teams; I’ve tried working five days in an office. And neither one is ideal if you’re working especially with developers. I think if you’re doing marketing and sales and you need a lot of communication, customer success, that kind of stuff. I do think being in the office three, four, five days a week is perhaps kind of more conducive to moving forward. But I think as developers, designers and more of the makers who need their quiet time and the maker time, I think that a half and half approach is the best that I’ve ever experienced. And, again, I’ve done the entire gamut of completely remote, completely in the office and then these mixes. And what we’ve found with Drip when I was left to my own devices to figure out what to make work, we essentially arrived at I was in the office about two and a half days a week. The developers were in two days a week. And some the other folks with customer success were doing calls, some of them were in five days a week, four days a week. It was up to them. Really nice to all be in the office Tuesday and Thursday and we would do a lunch on one day and that was the perfect time to get this kind of stuff done to talk about short term goals and objectives and to get everybody else on the same page.
And then if we needed to talk day-to-day, there were often these little short hallway conversations that could even be five minutes of, “What are you up to today? Do you need any guidance? Do you need any help?” Boom, it’s done. So, again, this can all be accomplished with IDoneThis or with daily stand-ups via phone. I know people do all that stuff but to me it all plays second fiddle to sitting and being in a room with a person.
With that said, in terms of providing people with short term goals and objectives, I think it depends on who you’re managing here. If you’re managing developers, then it’s typically going to be features or bug fixes or here’s the next thing we’re doing. If you’re working with sales, customer success marketing, then it’s like here’s kind of a growth sprint or the next growth thing we want to talk about doing. And they’ll go off and do it. And if it’s customer success, it’s probably like we’re finding processes, how to touch base with people more often or do a better job of that.
There’s just things that you need to be thinking about as a high level. And this is where being a manager, if you are really managing all these facets of it, it can make your brain spin. It’s sitting there every day and not being able to focus on anything works for some people and it doesn’t for others.
Mike [20:46]: The third lesson is to set expectations for how people should work with you and what their expectations of you as a manager are. And you want to do this as early as you possibly can and the reason for doing it early is so that you can identify what the deficiencies in that method of working for you is so that you can get those things corrected. If you don’t correct those things early, what can happen is that you end up in a situation where you have these expectations of somebody but you haven’t really communicated them very effectively. So then you start to get resentful or angry that they’re not doing what you expect of them but you haven’t really told them what it is that you expect. So you have to establish those lines of communication very early and what those expectations are. Whether it is, “Hey, I expect that if you’re working on a daily basis you have to” – this is for developers – “you have to have at least one commit at the end of every single day.”
And if you start letting those things go, then that will not only eat away at the relationship that you have with that developer, but it will also start to undercut the credibility and the overall relationship because you can’ read their mind and they can’t read yours. So if you don’t tell them, how are they possibly going to know?
And if you don’t correct those early it will tend to create a cycle that is very detrimental later on. You can get around these things by having some weekly updates where you start discussing those things. Maybe set aside some specific time when you meet up with people during one-on-ones whether that’s a weekly basis or monthly basis or even a quarterly basis. But if issues start to arise you need to address them early.
Rob [22:19]: This is where hiring people who you think you can work with and who you think can work with you is a big deal. You can’t just hire anyone and expect their work style to match yours or their work style to match your management style or your interaction style. We were extremely slow at hiring at Drip because we were just waiting for the right people. We didn’t want to get people on who would disturb the culture even though we were small. We were two people and then we were four and then we were six and eight. But we really hired people we felt could get along. And part of that was me thinking, “Do I want to interact with this person? When they’re frustrated, how are they going to be? When I’m frustrated, how are they going to react?” And kind of weighing that in your mind.
Something that I talk with folks during the interview process is, “Look, we’re a small team and as such, we’re pretty hands off. We try to hire really smart people and we try to give them really challenging tasks because that’s what we like to do and what keeps us interested. And then we’ll kind of touch base with you now and again, but if you think that you need daily check-ins or weekly check-ins in order to keep things going and you want monthly feedback and you want this kind of stuff, that’s not really how we work. That’s just not how we set up the culture. And I’m not saying that any of those are bad things, but it’s a different culture than what we built.” And I think there’s logic to that, right. There’s a reason that we did that. It’s because Derek and I are both software developers and we know that as a maker you want to get in, you want to do your stuff, you don’t want to be reporting to someone every day about everything you’re doing. You don’t necessarily want to break your maker time and have to have conversations and meetings are often the death of your maker time. And that is what we setup.
So as a result, we set expectations, not even after someone started with us, but we set it during the interview process. And tried to suss out do we think this person can work given our working style and our management style and basically the company culture that we wanted to build. And so, you have to think about that yourself as well. Like how is it that you want to work? And this isn’t an excuse to basically delegate stuff to people and then just walk away and expect it to get done right every time because that’s not how we work either. For the first few weeks, give advice to people and help them work through it and then offer feedback. And then they’d show it to us and we didn’t expect it to be right the first time so we’d iterate on it. But then over time, people just become more and more autonomous. Good people. They learn and they become more and more autonomous in their role. And so you just don’t have to touch base with them nearly as often. I think it’s figuring out what your style is and learning over time how to find other people who can work with that style.
Mike [24:38]: One of the things that I’ve found helpful, which is kind of the next lesson, is to establish the terminology around the feedback loops that you use with people. One thing that I recently did with the developer that’s working with me is that we kind of established some key words or phrases that are helpful for me to determine whether or not the updates that I’m getting from him are things that he needs me to pay attention to or if it’s just something like, “Hey, I just wanted to let you know.” Because there, in the past, had been some tendency for an update to come through and he’s like, “Oh, you know, this is a problem and here are all the different issues with it.” And I’d look at that and, without any real context because it’s just coming through slack, is that I look at that and say, “Oh, well, he’s got a problem and I know generally how to solve that or I know what some of the work arounds are given my history with the code base.” And I can go find some of the information for him.
But there was a lot of miscommunication there just because I didn’t realize the context of that because there wasn’t really anything there. It didn’t say, “I just wanted to let you know.” It was just, “Hey, there’s a problem with this and I think that this is probably how we need to do.” So what we did was to setup a couple of different key phrases where one of them is just more of, “This is an FYI.” So, obviously, you can just put little snippets of text in there. One of them is an FYI. Another one is, “When you get a chance” which means, “Hey, take a look at this, but I don’t need you to look at it right away.” And then there’s other ones that you can use like, “Hey, I need help with this,” which is kind of a, “I need help right now and it’s blocking my progress from me doing anything else.”
And I think that just little key phrases like that can really help, especially when you have a distributed team or when you’re not in an office. If things are coming through email or chat or text, any of those situations where you don’t get that voice intonation that goes along with it, those types of things can be helpful.
In addition, you can communicate time estimates with people very, very easily but you really just need to set up what those expectations are. And, honestly, all it takes is like a five-minute conversation. “Hey, if you tell me this, include this little information so that I know how important it is or if it can wait or if I need to drop everything that I’m doing and respond to it immediately.” Those things will help you and it will help them so that that way you’re both on the same page in terms of the communication.
Rob [26:40]: Yeah, and what I’ve found over the years is certain people prefer certain communication channels. And for a lot of more introverted folks, we’ve had support people who really prefer email and even with big announcements. We’ve had Andy who’s done support for us for – I’ve working with him five or six years now. When I told him about Drip being acquired by Leadpages, I emailed him which is crazy because that’s a big deal. And I wrote him a really long email but it’s because in the past we have done a couple of video calls over the years and he just said, “Yeah, this just isn’t my thing. I’d prefer just to do text.” And he’s really good over email. He had done all the email support for Drip since day one, he’d done all the email support for HitTail, he does it for the academy. He really works well and I know his style and when he said that he’d prefer to do email even with kind of big tricky things I will put them in email. Whereas other folks really prefer to see your face, they’d prefer to hear your voice, they’d prefer to be in person. You just kind of need to learn over time what they’re going to prefer.
When I was developing and when I was consulting, I always prefer text meaning email at the time when there wasn’t much else.
Mike [27:41]: You’re dating yourself here, man.
Rob [27:42]: I am. I am. But, yeah, I didn’t mean sending me an SMS. I meant sending me an email because it wouldn’t interrupt my flow, it was a synchronous and it was something that I could sit there and think about and mull over and then respond to. Rather than you’re put on the spot with this phone call and somebody springs something on you and you don’t know how to react and then it feels awkward and stuff. I have less of that these days now that I, I don’t know, I have more experience with it. But think about each individual on your team likes to be communicated with.
Mike [28:09]: And the last lesson on our list of ‘Management Lessons for Founders’ is to dedicate time to management. As you said early on in this episode, alternating back and forth between that maker-mode and management-mode is extremely difficult. It’s hard to do just outright but in addition it kills your productivity for anything that you’re trying to build or make. And all those interruptions, even if they’re just little things, even if it’s just a question of, “Hey, how do you think I should approach this?” If those things can be pushed to certain days of the week or certain blocks of time, then it will help you out tremendously in terms of your productivity. And the time that you dedicate to managing people does not need to be every day. You can intentionally revisit those management tasks maybe once every couple days or once a week depending on how big your team is and how much communication needs to be had between you and individuals. You can schedule that. And as long as people know that there is that dedicated time for you to communicate with them, they will put those things aside or they at least have the capability to. And you can redirect them if those communications start to come up in the middle of the day. And you have those scheduled calls or communications where you can level set those expectations. You can tell them, “Hey, this could have waited until such-and-such time. Or if this comes up in the future just do this instead.” What that does is it puts you in a position of being able to perform those management tasks without interfering with what they’re doing.
Rob [29:30]: Well, I think once a week is a good rhythm to at least be thinking about it and then you’re going to have to do stuff every day is the bottom line. It depends on your situation. If you’re doing this on the side and everybody’s remote, then maybe it doesn’t need to be once a day. But if you do have folks in an office you can be actively thinking on your drive in, “Who’s doing what? Does anybody need any help? Do I need to check in with people?” That was always kind of a mental thing for me on the drive in and then on the drive home to make a note, “All right, I’ve got to check with so-and-so tomorrow.” But then really, like I said, get maybe that weekly lunch in or the weekly – even if it’s a three-minute, five-minute check-in with people saying, “How are things going? Do you need anything? Everything going well?”
I, again, don’t like the 30-minute formalized or the one hour formalized conversations where you’re trying to figure out what’s going on them and feel like you just have to sit in a meeting. But to take a few minutes and even just ask a question, “How are things going?”, and it might take two or three minutes and you’ll hear some short things and you don’t feel like you have to sit in a conference room together. I always liked that approach.
And, again, I don’t know if that would scale to a huge team. You know, if you had 100 people at a company does that approach work? I don’t know. But I never really had the goal of doing that. And I think folks listening to this podcast, you’re probably thinking more about having a small, remote team perhaps one in an office. And I do think that this is a really good way to go about it.
And that brings up the point of like we often have only seen teams managed at large scale because a lot of us have worked for larger companies. Don’t think you have to do it that way when you only have four people because you don’t. You can have a different approach that’s perhaps more authentic to yourself and more authentic to the people around you because you can do things that don’t scale at this small stage. And you can just handle things as they come up rather than having a lot of formal processes. Then once you get bigger, you probably do need to switch that up and perhaps follow some of the more standard marketing wisdom that you might read in the books or read in the MBA programs because those are often talking about much larger organizations.
That’s our episode for today. If you have a question for us, call our voicemail 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. We’ll see you next time.
Episode 313 | The Viability of SaaS, Cutting-edge Technologies, and More Listener Questions
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike answer a number of listener questions including if SaaS is still viable for microprenuers, latest technology they are excited about, and some book recommendations.
Items mentioned in this episode:
Transcript
Rob [00:00:00]: In this episode of “Startups for the Rest of Us,” Mike and I discuss whether SaaS is still viable for micropreneurs, what books we’re reading now, and what solopreneurship looks like in 2016. Plus, we answer more listener questions. This is “Startups for the Rest of Us,” episode 313.
[Theme music]
Rob [00:00:17]: 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 [00:00:33]: And I’m Mike.
Rob [00:00:34]: – 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 [00:00:38]: Well, this past week I spent quite a bit of time probably alternating between two, different things. First one was having a lot of MicroConf sponsorship-related calls with people, because people have been reaching out and asking how to get in touch, and how to go about sponsoring MicroConf. I’ve been having a bunch of those calls. I won’t say it chews up a ton of time, but because they tend to be sporadically scheduled I have to be careful about how I allocate the rest of my time. The other thing I’ve done is scheduled a few, different calls with some of the people I’ve been working with on Blue Tick to hammer out how to integrate it into their sales funnels for Asana and Streak and a couple of other apps that they’re using. It’s been some interesting calls there. I’ve got some overlapping feature requests that we’ve got to go through and implement. They were on the roadmap anyway. All I’ve basically done is move them up a little bit, but so far things seem to be going pretty well. How ‘bout you?
Rob [00:01:25]: Yeah, speaking of MicroConf, if you’re out there and you feel like getting your company, or product, or whatever, in front of several hundred bootstrapped startups founders would be interesting, drop Mike a line. You can email him at questions@startupsfortherestofus.com, and we’ll get to you, or Mike@micropreneur.com. In terms of MicroConf, yeah, tickets are now on sale for Founder Café members – which is our online membership community – as to previous attendees. I think by the time this episode goes live, we will be emailing the early bird list either that day or the next day. So, if you are interested in heading to Vegas in early April, we’re having, as we said, the growth edition, the starter edition, depending on your stage. Head over there. It looks like we’re going to sell out pretty quick again this year. Is that your take on it as well?
Mike [00:02:10]: Yeah. It’s interesting the number of tickets that we’ve sold just so far. It exceeds what we’ve done in the past, which is to be expected just since we have more tickets available. It’s nice to see that things haven’t really been impacted by splitting things out into two, different conferences. Things still seem to be moving along at a pretty good clip, and it’s a matter, I think, for most people of determining where they should attend – just because there is the starter edition and growth edition. I’ve heard some people have not really concerns, but they say it’s a little bit of disappointment. They’re like, “Oh! I’m not going to see everybody that I saw last year.” because some of them are going to one edition or the other, and they’re going to be at the opposite one.
Rob [00:02:44]: Sure, but this allows us to have – what – probably around 400 people across the two conferences without having any conference be more than about 200, 220 people. I think it’s a good compromise.
Mike [00:02:56]: Yeah, definitely.
Rob [00:02:57]: And if you miss out on tickets this year, and you’re interested in getting an early jump on tickets when it’s much calmer, foundercafe.com, as I mentioned earlier, is Mike and my online community for bootstrapped startup founders. It is a paid community, and folks who are members of Founder Café get basically first crack at MicroConf tickets, both in Europe and in Las Vegas. So, if you’re interested, we do screen and approve incoming requests for new members. We don’t just let anyone in. You have to have some type of business launch, and have some type of traction in order to get in, but we’d love to see you inside Founder Café, if that’s of interest. Last thing for me, I’m preparing for my retreat, and my goal is to take two retreats a year – do one in January, one right around June or July – but with the chaos of the Leadpages acquisition, and the move, I never did my midyear one. So I’ve been encouraged by everyone around me. You know how someone hands you deodorant and toothpaste you take that as a hint, like, “Yeah, you smell?” Well, three different people in different walks of my life basically told me, “You really need to go on a retreat!” [Laughs] So, that was the indicator of like, “Oh. Am I being that much of a jerk?” “Do I look that stressed out?” So, I took that as an omen and booked something. I’m going up to the waters of Lake Superior for the first time ever.
Mike [00:04:12]: Very cool. I used to live right next to Lake Ontario, and very close to Lake Erie. I’ve never been that far up into the Great Lakes region, though. I have been to Minneapolis and seen the Great Lakes from there, but it’s a little different than actually going out there.
Rob [00:04:24]: For sure, yeah. I have not been north of Minneapolis at all, so it’ll be a fun, little drive for me. This week we have a bunch of questions. I really liked these questions. We have one from John Ndege, and then we had an email filled with questions from Corey Moss at gelform.com, and both are long-time listeners of the show. We’ve met both of them in person at different MicroConfs, and so we just wanted to take 20, 30 minutes to run through these. Some of these range from things about us and what we’ve been up to. Other things are more of our take on what solopreneurship looks like in 2016, 2017, that kind of stuff. The first question is from John Ndege, and his question is, “Is SaaS still viable for micropreneurs?” – meaning folks who want a lifestyle business, who want to probably stay solo, and keep a small business that can fund their life. You have thoughts on that?
Mike [00:05:13]: I think the interesting thing about this question is that people are starting to look around and see that the landscape of SaaS businesses is starting to become more crowded. If you look at the landscape today compared to five years ago – or even, honestly, two years ago – things are a lot more crowded now, and the low-hanging fruit is more or less gone. There’re certainly opportunities out there for people to come in with a new SaaS product and aim it at a particular niche and be able to be successful with it, but I think that the problem people are probably starting to run into now is that they look around and most of the ideas that have for a new SaaS product have already been done. There’s a little bit of angst, or concern, about coming out with a new product that does something that another product does, and I think that this is a very common hang-up among developers, where they basically want to invent something new. They don’t want to reinvent the wheel. They don’t want to do something that’s already been done, and that to them is a hurdle that they need to address in some way, shape, or form, either with themselves or with their customers. Because one, you don’t want to build something that there’s already a lot of very competitive products out there that already do that exact, same thing. For example, it’d be very difficult to come out with a new Basecamp, for example, or a new version of Teamwork, or a new project management application. It’s because those markets are very crowded. The analogy there that most people, I think, would take is they transfer that onto all other SaaS products and say, “Oh, there’s already something that does this.”, when the reality is the question you should be asking is, “Can I get in front of those people, and can I deliver something?” I think the other side of this is also that people’s expectations of what a successful SaaS product needs to achieve on day one are substantially higher than they were five or ten years ago. If you look at the new apps that’re coming out, they look very, very polished when they hit the market, and when you first discover them. It’s not often that you get to see the makings of a new SaaS as it’s being built, or as it’s in the very, very early stages, because you just are not in that target market most of the time. I think that those are the two things that factor into this. I do think that there’s still a lot of opportunities here, and I still think that people can come out with a new SaaS and make it work – especially in the micropreneur space – but I also think that you have to be very calculated about the things that you do and the choices that you make in terms of the competition and the market that you’re going after, and the marketing channels that you use. There’re still a lot of marketing channels out there that developers tend to shy away from, that they don’t necessarily need to shy away from, because there’s a lot of opportunities there. Some of those opportunities are a direct result of the fact that other developers and entrepreneurs are not in those because they’re uncomfortable with it.
Rob [00:07:51]: I think that’s a really good take on it. I agree with you, it’s more competitive than it was five years ago. The best time to get started was ten years ago, the second-best time was nine years ago, and the third-best time is today. I’ve been saying this for years about SaaS and micropreneurship and software and all this stuff. Info products have done the same thing. There is so much money to be made, and as audiences have grown bigger and bigger, everyone wants to do it – thinks they can – so there’s a big rush of competition. I absolutely think SaaS is still viable for micropreneurs, and I’m seeing people still execute on it, and launching three months ago and getting decent traction; launching six months ago, getting decent traction. I see the landscape shifting, but I don’t see that ending anytime soon. Even looking several years out, it’s still, in my opinion, going to be a viable business. You may have to niche down more. You may have more competition. There’s a bunch of stuff – it’s different, but I still see people executing and just making it happen. So I have no qualms about saying that it’s still legit. Our next question comes from Corey Moss at gelform.com, and he says, “What specifically have you guys gotten out of the podcast? What are some stories of connections made? And would you recommend it as a marketing channel?”
Mike [00:09:01]: Three different questions buried in there. I’ll try and answer them individually. What have I specifically gotten out of the podcast? I would say that it gives me something to talk about when I meet entrepreneurs. Sometimes they’ve heard of the podcast. Sometimes they’re listeners. It makes getting a conversation started with people a lot easier, especially when they’ve heard of the podcast, or if they’re a regular listener. You can jumpstart into various aspects of things, because there’s already that relationship there, even though that relationship, I think, is mostly one-way when it comes to podcasting, because you’re talking, but you’re not necessarily getting that interactivity with the people on the other side. There is that feeling of familiarity with them to you to be able to talk about different things and discuss things about their business. I really like that aspect of it. It’s really nice to just go someplace and say, “I have a podcast.” or find out that somebody else has a podcast, and you just start talking about podcasting, and about what your format is, and how you do things, and how you prepare, and those kinds of things. I think that those are the basics of what I’ve gotten out of it. Stories of connections? There’s any number of things that have come out of this podcast, MicroConf being one of them, the Micropreneur Academy being another one – although I guess the Micropreneur Academy came a little bit first. Still, there’s all those connections that you can make. I’ve talked to hundreds and hundreds of people that I probably would never have met otherwise, because they just don’t live near me. You don’t get the sense of familiarity, or the ease of being able to just walk up to somebody and talk to them without having that connection of some kind. I think a podcast does help to establish that. Both of the guys in my Mastermind group have come to MicroConf. They both listened to Startups for the Rest of Us in the past. So those are the types of things I’ve gotten out of it; Mastermind group members, MicroConf, relationships. Then, I think the last question here was, “Would you recommend it is a marketing channel?” I think this is very subtly nuanced, because I think it’s very easy to say, “Yes, it’s a good marketing channel.” but I also think that there is a lot of nuance there as to the type of person who can make it work, and whether or not you have a format that is appealing to people, whether you have topics available, and quite frankly, whether the podcast is just interesting to people or not. There’s a lot of things that factor into it. You might just not enjoy talking into a microphone every week. You might not enjoy it very much. You can do what we did. I forget how many episodes we recorded. It was eight or ten before we even released one of them, but that’s one way to test it. Do you even enjoy it? Now, in terms of whether it works as a marketing channel, I can’t answer that for every business. For us, with the Micropreneur Academy, it has worked really well; and, obviously, that translated into MicroConf, which is doing extremely well. I don’t know how well it would work for other types of businesses. I think that it does give you the social awareness, in your circles, for the people who are listening to it, but whether it is an effective marketing channel for everything? My suspicion would be, “No, it’s not for everyone, or for all types of businesses.”, but I think that there’re certain ones where it can work, and it can work really well.
Rob [00:11:54]: Yeah, and from my perspective, what I’ve gotten out of the podcast – it’s similar to you. Before the podcast, I had the blog, I had written my book, and I definitely had a small personal brand in the bootstrapped software space. The thing was there was a realization at one point where I surveyed my email list, and I sent them – I don’t even remember what the questions were, but it was kind of trying to find out what they wanted me to write about, and it was how much did they enjoy the blog and this kind of stuff – and a bunch of them said – and I put this both through the RSS feed on the blog – the email – and a bunch of folks replied with comments like, “Yeah, I think I like your blog, but it’s hard to remember what you write and what everyone else writes, because I just see it all” – “I click through to 20 articles from Hacker News, or I see it all in my RSS reader, and I forget who wrote and who said what.” It occurred to me that as much content as we’re all producing and writing, trying to make these impacts on people, that it really was getting lost in the noise.” Even though you want to have a unique voice – or even if you do have a unique voice – your stuff just gets blended in with all the other information that someone consumes in a day. So the realization hit me that two ways to stand out were, number one, to be audio, right? To have a podcast where someone listens to you. It’s a serial. It’s a show that comes out every week, people follow the trials and the tribulations, and if you go all the way back to the first episodes you’ll hear you and I talking about random stuff. Then you’ll hear us talking about selling apps, and buying apps, and launching Drip, and you just follow this story. It can happen with a blog, it’s just a lot more rare, I think. The other thing I realized is that – in terms of content and people engaging – writing a book is the other thing. That’s the other thing where someone will sit there, they’ll read that book, and they’ll spend several hours digging into it, and then they’ll be impacted, and they’ll remember that you wrote it. That was kind of a big wakeup for me. So, I think specifically, what I’ve gotten out of the podcast is it has made my thoughts and my voice, and the stuff that I want to get out there into the bootstrap community – I think it’s given me a mechanism to do that in a way that people remember, “Oh, Rob.” or, “Rob and Mike said this.”, right? As opposed to us saying stuff, but then it just gets lost because nobody remembers you said it, in essence. Beyond that, Micropreneur Academy – which, as you said, I think, was before the podcast – but MicroConf I don’t think would have – it may have happened, but it wouldn’t’ve been nearly as successful as quickly as it was without the podcast. And it’s a fun thing to do. The reason I like it is we show up here for 45 minutes, and then we walk away, and the show shows up every week. I used to spend six to eight hours per post on the really good blogposts. Sometimes I’d crank one out – including all the edits and everything before I hit “publish” – might be four hours. That’s a tremendous leveraging of my time. That’s why I like podcasting. In terms of stories of connections we’ve made, I could go on and on. So much of growing MicroConf, growing Drip, finding speakers for MicroConf, buying apps, selling apps – almost anything I’ve done – has been easier because of the podcast, and because of the connections that we make. Even if they’re one-sided connections, right? You get 10,000, 15,000 people listening to a podcast. I may not know them, but if I reach out to invite them to speak at MicroConf, I don’t have to explain what MicroConf is. They often will say, “Oh, yeah. I’ve heard your show,” or, “I listen to your show.” It makes it so much easier that they know that you’re legitimate, so, in essence, it’s not a cold outreach.
[00:15:21] “Would you recommend it as a marketing channel?” Similar to you, it really depends on what you’re marketing. As a SaaS marketing channel, probably not. I know it can work; we had talked about doing a Drip podcast at one point – but it’s just such a slow burn, and the time it takes to build an audience is really, really long. I think if you’re trying to market software that doesn’t surround a personal brand, I would say this is like high-hanging fruit. There’re tons of things that are more low-hanging than starting a podcast, with all the overhead of doing it. There’s a lot of things to think about. I’ve started two podcasts now, and Sheri has done a separate one as well on parenting. So there’s three podcasts that I’ve been heavily involved with getting set up technically, and every time it just takes a bunch of time.I think that if you’re going for a personal brand, selling information products, if your unique voice needs to be there in order for something to be sold, then yes, I think over the course of years it’s worth doing a podcast. But be in it for the long haul. You’re not going to release ten episodes and have any type of audience. We were around for a year before we had – I don’t know, I don’t remember the exact numbers – but it just wasn’t that many people. It’s really this long snowball that you’re basically pushing up a hill. Our next question is for you, Mike. It says, “How did Mike’s book do in the end? What did you get out of the process, and would you write another?”
Mike [00:16:30]: I’ll be honest. I have not paid very much attention to it since probably a couple of months after the launch. So during the initial launch – I think if you’re on my email sequence there are emails that go out that actually tell you all the different stats, and show you all the numbers and everything – but that’s all from the launch. I think with the launch itself I did probably around 250 to 300 sales, or something like that, and it was around probably $20,000 or so. The odd thing about that is because the book itself – there was a physical book that went with it – that $20,000 was profit. It was not total income for it. The book itself cost me around $5 for each one just to print it, and then anywhere from about $4 to $18 to ship it. I factored those into the profit margin as well. That’s how it did out of the gate, and then it still sells copies every month. I just haven’t really kept track and gone back to look to see what it does. In terms of what I got out of the process, I understand, I think, a lot more about what would go into writing book. That probably doesn’t necessarily directly help me, in terms of most of the things that I’ve worked on. I have thought about writing a book that would go along with Blue Tick, for example, and it’s given me ideas on how to structure that, and what needs to go into it. I’ve looked at amazon.com, for example, as a marketing channel for that book. Those are the types of things where I would say it’s helped me. Would I write another? The answer to that is “Maybe, but I’m not absolutely sure on that.” As I said, I’ve had the idea to write one for Blue Tick just about sending out emails and being consistent about the outreach, and what sorts of things you should look for, what you shouldn’t, what you should say, and what you should avoid saying. Those are the types of things, I think, that would go into that, but I’ve also been reading a lot of science fiction and fantasy books lately, and I remember as a kid one of the things I wanted to do was be a writer. It’s kind of made me think about the possibility of branching off at some point in the future and doing that as a side project, or a side hobby, or something like that – just writing either science fiction or fantasy books, or something along those lines. It’s been burning in the back of my mind, but I haven’t moved on it yet, just because I’ve got so many other things going on, and it’s just not that important to me right now.
Rob [00:18:35]: Very cool. The next question is for me. It says, “Rob, would you, could you write another book?” Then [chuckles] he put in parenthesis, “That may sound more cynical, but I mean it, too.” It’s kind of funny: “Could I write another book?” Yeah, the answer is, “Absolutely.” I kind of talk about this every year, don’t I? I like to say, “Oh, I’m” –
Mike [00:18:49]: You do. I think that’s a yearly, annual goal for you. Or, at least, you revisit it every year, and you make a conscious decision to not go back and write –
Rob [00:18:58]: Exactly. Yeah, so the answer is, yes, I have hopes to one day do this again. I don’t particularly enjoy the process of writing. It’s pretty painful. I think for most people it is. It’s hard to do, but I think that I absolutely could write another book. I think that I definitely plan to write another book. I would love to go back – I don’t know if I’m going to go back and revise “Start Small, Stay Small.” That’s been the big decision process: “Do I revise this?” “Do I have more to say on that topic?” “Do I want to write another one with a different focus?” I think the bottom line is, yeah. As soon as I have time -things are in place where I can do that – I would guess that that’ll be something that I will add to one of my annual goals. Next question is, “What solopreneur bootstrapper books are worth reading now?” This is, actually, a tough one for me. I know of a few books, but I’m not in the –- in the early days when you’re really thirsty and you’re just trying to drink all the information you can on this topic, you read all the books, and you have a pretty good survey of what’s out there. I actually don’t these days, because I’m not actively seeking them, because I don’t necessarily need to learn these aspects of it. I continuously find myself recommending Ryan Battles’ “SaaS Marketing Essentials.” When I started reading through that book it was similar to an outline of a book that I was hoping to write someday. It’s just kind of step-by-step, “Here’s how to think about SaaS.” “Here’s how to get it launched.” I really like that book. Solid. I recommend it pretty frequently. I also like Justin Jackson’s “Marketing for Developers.” I think it’s just a solid way – especially, I think, even if you’re not a developer, this still applies. It’s really teaching you how to get software out there and into people’s hands. It reminds me a lot of stuff that, if you look back at my writings between maybe 2006-2007 and 2010 or ’11, a lot of it was – it’s similar type of stuff. It’s like trying to break – it’s saying the same thing over and over – trying to break developers out of the thing: “Don’t go in the basement and build it first. Start marketing. Talk to customers first…” It’s the same stuff, but it needs to just be constantly said, to be honest, because new crops of developers come up, and nothing lasts forever. So those are the two books that most come to mind.
Mike [00:21:02]: Yeah. I think when you start to – depending on how you phrase this particular question – the answers could be different, because both of the books that you just mentioned, they are from solopreneurs, or bootstrappers, but I wouldn’t necessarily consider them to be about being a solopreneur or bootstrapper. If I were to look at the landscape out there, there’s not very many that fit in that mold. Your book “Start Small, Stay Small” is one of them. My book, “The Single Founder Handbook,” is another. But when you start looking around beyond that – that specifically talks about solopreneurship or bootstrapping a company -there’s really – I don’t see a whole lot out there. Now, the two books that you mentioned, when I look at those I look at them specifically as a form of “How do I do X?” or “How do I solve a particular problem?” which would be – if you’re looking at Justin Jackson’s book – if you’re a developer, how do you go about marketing; or, if you have a SaaS application, how do you go about building that. I don’t put them in the same vein as the way this question is phrased. I think that there’s a difference between those two things. Is it by a solopreneur or a bootstrapper, about that particular topic, or is it by them about a very particular nice thing? Another one that comes to mind that also fits in that is “Email Marketing Demystified” from Matthew Paulson, who has come to MicroConf for several years, knows quite a bit about email marketing. He’s been on this podcast before talking about how they send, some crazy number – like 10 million emails a month or something like that – which is probably higher than that at this point. Those are the types of topics that I think that are probably relevant, and I think once you get past the basics you’re probably looking for very point solution-specific books that solve a particular problem for you.
Rob [00:22:36]: Yeah, I think that’s a good point. I think implicit in my answer is that, if you’re going to be a solopreneur bootstrapper, I think you should learn how to market, which is why I recommend Justin’s book. I think you’re probably eventually get to SaaS. Maybe that’s not your first thing, but I think you’re going to want to take some stuff away from that – you know, Ryan Battle’s book to do it. But you’re right. They’re not specifically about solopreneurship and bootstrapping. Corey’s next question is, “What new tech has you excited, both personally and as an entrepreneur?” For me, I think these are very different questions – which is kind of cool, there’s the personal side and the entrepreneurship side. As a founder and especially as a solo bootstrapper, I don’t think you want to be excited about new tech. That’s the danger. That’s the Silicon Valley thing. If you want to go build software for drones, or you want to build wearables, you should go raise funding, because if you don’t, you’re very likely going to get creamed. If you’re bootstrapping from your garage you want to look at things that’re a lot more boring. Those are the ways to cut your teeth. It’s not to jump in the middle of the pile where everybody has $10 million, $100 million valuations, when it’s two people in a garage and it’s just going to be red water, and 100 companies are going to launch, and two are going to succeed. If you want something that has a decent chance of success the tech that would excite me is things like: building a web app in Ruby on Rails – a SaaS app that helps B-to-B folks, that’s priced at $20, $30, $40 a month and up – or building something in Python over Djenga. These are boring, old things, but that’s how you do it. It’s going simple. Once you get to the point where you have experience, and maybe you have the income coming in – 20 grand a month from your SaaS app. Then you can go do what you want, right? Because you’re basically going to be able to fund your R amp;D. You have some credibility, and you have chops, and maybe you do want to go raise money at that point. But I feel like taking care of that first is something that I’d recommend. So, entrepreneur side for me? That’s the tech that I think people listening to this should be focused on. Now, with that said, for me, personally, I’m really into crypto currency. I like Bitcoin. I like the promise of it. I think there’s a lot of potential in that. I think it’s way overhyped for a number of dumb reasons. That would probably be a whole episode we could talk about, but I am teaching myself about Bitcoin. It’s something that’s new, and it’s changed something. It reminds me – when I was eight years old, I got an Apple 2E sitting on my desk, and I thought to myself, “I’ve never seen anything like this. I wonder how long these things ‘ll be around.” Then the Internet came up. I got into college in ’93, and I get this email address they handed me, and I’m like, “What is this thing? It’s my initials ‘@ucdavis.’ “What in the world is this? I wonder how long this thing ‘ll be around.” And here we are. The Internet and everything keeps piling up on itself, and it’s like these things that we have all been alive as they launched – few of us saw the potential in them. When I look at Bitcoin I think that it’s going to be around for a really long time, and I think we’re at the advent of something that is going to – I don’t want to say, “It’s going to be big!”, but it really does feel like we’re in the early days of things like that. I also think wearables are interesting. I don’t own any of them myself, but I’m excited, long term, about the potential of those. I like [quad?]-copters and drones. I have a little plastic one we play around with the kids, but I’m not excited about those like I am in terms of learning about them and getting in and doing all the stuff like I am with Bitcoin. I guess the other thing I’ll throw out is 3D printing. I have a little consumer-grade 3D printer that I got on Kickstarter. I’m pretty stoked about that, but I’m more stoked about it for my kids. We do it together, and I want them to understand how to design, and how to print the things out, and how to build them. I think for them, long-term, that could be their programming. When I was eight I learned how to code, and it has changed my life. I think for them, one of these things that we do is going to latch onto one of them, and one of them is going to say, “I love 3D printing. This is the thing I’m going to do.” I think your long-term career prospects, if you do that now and get into it, are really big. Anyways, I just threw out a bunch of stuff. You have opinions as well, Mike?
Mike [00:26:21]: I don’t think my opinions are too far off from yours. I think that there’s definitely a difference between being excited about a piece of technology for personal reasons versus entrepreneurship. There’s nothing really out there that I can see that I would want to latch onto as an entrepreneur. The one – I don’t even really want to call this an exception, because I still think that it would be very difficult – but building small devices, or products, out of microcontrollers and things like that. You could use Raspberry Pie, for example, as a prototype tool, and then go out and build other small devices, or have them shrunk down, or get the manufacturing process so that you can get them cheaper than having to buy an off-the-shelf Raspberry Pie to run whatever it is that you’re building. That said, on a personal front, I’d say that a lot of the things that go around home automation, I think, are interesting. I don’t know how really excited I am about them, so I guess things like being able to measure or monitor all the different things that are going on in your house, whether it’s temperatures, or air currents, or, “Are the lights on? Are you using a lot of power when it seems like there’s nobody in the room?” Those types of things they’re not really terribly interesting, though, I don’t think – at least not from a personal standpoint. It’d be nice to have that information, but it doesn’t really help you. It doesn’t significantly change your life. I think it’s interesting, and I like the idea of working with those little pieces of electronics. I would find a hard time, I think, building a business around it. You could certainly do Kickstarter campaigns and things like that, but I think it’d be tough just because of the cost of manufacturing, which was why I went into software rather than hardware. Beyond that, I have a drone as well. I think that those are pretty interesting, but that’s more because I like playing with them with the kids than anything else, except when I run it into the TV [chuckles]. There’s not a lot out there that, I think, interests me, or really excites me. There’s certainly a lot of possibilities around VR, but VR has been talked about for the past 20 years. I went to college with somebody who made a VR headset for the original Mechwarrior game, and that was back in the mid-‘90s, and VR still really hasn’t taken off. It’s not to say that it won’t, but I don’t see TRON-like features two years in our future. I think there’s obviously potential for those things, but it’s not stuff that I’m looking around saying, “I really want to get into that,” or, “I’m really excited to see that.” because, as you said, it’s so hard to see what the future looks like for some of those things.
Rob [00:28:38]: Corey sent us some additional questions that are really good, and we’re going to cover them in a future episode. But for today I think we’re wrapped up.
Mike [00:28:45]: If you have a question for us you can call it into our voicemail number at 1-888.801.9690, or, you can 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 on 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 312 | 9 Ways to Introduce New Ideas into Your Business
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk about different ways to introduce new ideas into your business. These are ways to broaden your horizons as a business owner and learn how other people may be solving the same problem you are but doing so in different ways.
Items mentioned in this episode:
Transcript
Mike [00:00:00]: In this episode of “Startups for the Rest of Us,” Rob and I are going to be talking about nine ways to introduce new ideas into your business. This is “Startups for the Rest of Us,” episode 312.
[Theme music]
Mike [00:00:16]: 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 [00:00:25]: And I have a mouthful of food.
Mike [00:00:27]: – (laughs) And we’re here to share our experiences to help you avoid the same mistakes we’ve made. How are you doing this week, Rob?
Rob [00:00:32]: Well, I’m a little behind on launch, so I’m eating in here while I’m muted. Sorry about the ole mouthful-of-food thing. Things are going well. Went to Coverted yesterday, which is Leadpages’ conference, for the last two days, and so kind of getting over the extrovert hangover. I love going to conferences. I love meeting people, and I did a short talk about Drip and stuff along with Clay. It was good fun to meet folks, but then the next day just got to settle down into work-from-home day, which was really nice, so I can just be in my little cave listening to music and crank through some emails.
Mike [00:01:04]: Very cool. Yeah, I was wondering how Converted went. I saw a bunch of comments on Twitter, and there were some discussions in some forums that I’m part. People were talking about it a little bit. It was interesting. It seemed like it was a good conference to go to.
Rob [00:01:15]: What I enjoy these days is meeting new people. I was able to connect with Andrew Warner, who I already knew, because he spoke at MicroConf a few years back, and we’ve talked when I go on [?] and stuff; but I haven’t seen him in person in five years, maybe, so it was really cool. He threw a little – it was a whiskey tasting, in essence, but it was just a little party at his place. I was able to go up there. Derek and Anna were with me and Sheri, of course. It was good to connect with him. I’d never met Derek Halperin in person. I met Pat Flynn in person. These are all people that I’ve corresponded with in one way or another over the years, and it’s just kind of cool to meet them face to face. I also got to meet – I’d never met Ezra Firestone, who’s really big in the e-commerce space, but super cool guy, really interesting, and we had some good conversations. That’s what I really enjoy, is hearing the inside of people’s businesses, hearing what they’re up to and just connecting with them. It was fun. It was a good conference.
Mike [00:02:00]: Awesome. I’m just getting over being sick. I’ve been sick for a couple of weeks now. My wife got sick earlier this year, and she ended up with some – I don’t know if it was a bacterial infection, or virus, or whatever. Anyway, the doctors said that it was resistant to pretty much everything. It will go away on its own in eight to ten weeks, so I was deathly afraid that I was going to end up with the same thing. Fortunately, it seems to have mostly gone away at this point, so I’m very happy and thankful that that’s not going to be an ongoing issue for the next couple of months.
Rob [00:02:28]: Yeah, but even being sick for two weeks is a big bummer. Did it negatively impact your productivity?
Mike [00:02:33]: Oh, yeah. I couldn’t sleep at night. My sinuses were all congested, and it was just terrible. I was tossing and turning all night, not getting very much sleep, so my productivity nose-dived to pretty close to zero, but there’s not much you can really do about it either.
Rob [00:02:47]: You know, it seems like you get sick quite a bit. Do you feel like you get sick more than most people?
Mike [00:02:52]: I don’t think so. At least I hadn’t really thought about it. I didn’t feel like I got sick very often. It seems like when the kids go back to school, or if they have a break and then they go to school – I was talking about this with my Mastermind group earlier this week – it almost feels like the kids go to school, and they have all these viruses that they’re carrying with them, and they trade them around like Pokémon cards that nobody wants. Then they take them home and give them to their parents (laughs).
Rob [00:03:16]: Yeah, we had a pediatrician who used to tell us that the big spike in sickness is the week or two after school starts, and that’s exactly the reason. All the germs you’ve been carrying with you that your family’s gotten used to gets put back together, and then it just spreads like wildfire until everybody gets immune to it again.
Mike [00:03:30]: Yep. Other than that – on Blue Tick, I actually did make some progress on it. I onboarded a new customer into Blue Tick and restarted some discussions with some people that I’ve onboarded that had dropped off the radar a little bit to help understand why they’d stopped using it. Interestingly enough, there were a couple of cases where they said, “It’d be really nice if you could do this.” I was like, “Coincidentally, we can do that.” They’re like, “Oh, really? Let’s talk. Let’s schedule a meeting, and let’s set that up.” It was just interesting that there was a little bit of disconnect in some cases where the app can already do certain things, and they didn’t realize it, so just jumpstarting those conversations again and then working with them directly to help them set up that automation so that it’s integrated more into their systems. I added another paying customer this morning, actually, so –
Rob [00:04:16]: Wahoo!
Mike [00:04:17]: Yeah, things are, I think, moving in the right direction; but it’s still too early to tell for sure, I guess.
Rob [00:04:21]: But it’s forward progress, and this is like we talked about on our update episode a couple episodes ago. It’s really focusing hard on how do I get that next person to use it. If you are talking to five people and three of them have reasons they don’t want to use it, or objections, it’s figuring out, “Did I just talk to the wrong people, or do they need something that I need to build in order to get them to use it?” So, I think that’s good news. Onboarding a new customer and then adding another paying customer, I think, is pretty good progress for the week.
Mike [00:04:48]: Yeah.
Rob [00:04:49]: Yeah, on the Drip side, we actually launched a free plan last week. We had our $1 plan that had been running since Leadpages acquired us. We made the decision in tandem with Clay and those guys to just make it free at this point, so it’s free up to 100 subscribers. The hard part about free with email, and the reason that Mail Chimp has been one of the only providers able to make it work, is that you can really run into a spam issue, because people can send a lot of spam through you, and you don’t want that to happen because you have these sending IPs that need to stay solvent, so to speak. With the $1 plan, we definitely saw a lot of new spammers coming in. We were writing code constantly to get out ahead of it. Not to overemphasize it, but it’s kind of a machine learning algorithm, a little bit of AI, really focused, just looking at patterns. We can get out ahead of people sending now. We don’t have to wait for them to send to figure out, or to have some signals, that this person is likely going to send poor-quality email. It’s pretty fascinating looking at the data, and we’re digging more into that, but it allows us to launch that free plan. Of course, it takes resources, right? It takes that financial backing, and that’s what Leadpages has. They $37 million in venture capital they raised allows us to – we have six, full-time support people now. Can you imagine? We had one the entire time that we were bootstrapped. Then in the past 90 days, added, trained, onboarded; and we’re now fully staffed with five additional support people. It’s crazy. I couldn’t imagine having the bandwidth or the money to do that, so that’s the luxury of that side of the coin.
Mike [00:06:18]: Yeah, I can imagine the issues with the spammers. It becomes an arms race at some point. You have to deal with it and have to be out in front of it, but at the same time – it’s partially protecting yourself, but in essence you’re also protecting all of the other customers that you have. So, you can’t just let it go for a little while.
Rob [00:06:35]: That’s right. The good news is once we got big enough where we were sending tens of millions of emails, it matters a lot less. If someone gets in and sends 5,000 emails and 1,000 of them bounce, that’s a 20 percent bounce rate. It’s crazy. That is not good at all if you’re sending on your own IP. But when you’re sending 40, 50, 60 million emails, 1,000 bounces actually isn’t that big a deal. Since we’re able to catch people really quickly and stay out ahead of it – it felt good to figure out the signals, because before you experience it, it’s like, “How are we going to figure this out, and how are we going to find this?” But it became, like you said, a little bit of a game of cat-and-mouse, and it was a fun whiteboarding session with Derek and I to plot out all the things and then say, “How can we look at these quickly in real time without completely hammering the database?” You have to have all that in mind. You can’t just run queries every five minutes across everybody’s accounts. You have to figure out a way to do it pretty intelligently. So, that’s where we are. We’re definitely out ahead of it right now, but we notice that about every six months we have to upgrade our database. About every six months, we have a bunch of performance and scaling stuff to do, and about every six months we have to get out ahead of people trying to send spam, whether intentionally or unintentionally. Those six-month things are staggered, luckily. It doesn’t all happen at once, but it definitely is – we essentially have full-time people now working in all of those areas. Where before it was like all developers are building features to push the product forward, now we actually have one developer who all he’s doing is performance and scaling, and one guy who’s purely focused on just anti-spam stuff. These are the good problems to have. It’s the part of success that shows that you’re growing. You become a target as you get more prominent.
Mike [00:08:09]: Yeah, I had to add another server to my infrastructure a couple of weeks ago, so I know. Those issues are just a pain in the neck.
Rob [00:08:17]: Totally.
Mike [00:08:17]: Why don’t we dive into today’s episode? We’re going to be talking about different ways to introduce new ideas into your business. This applies to two different situations. The first one is if you are a full-time entrepreneur. You’ve been working on your own things. You’re self-employed. You’ve been doing that for a while. One of the challenges that you’ll run into is that you have a certain way of doing things, and it’s probably not obvious to you that there are other companies out there that are solving the same problems you are, and they’re going about them in different ways. So, the question is: Which of those ways should you be doing it? Are there other ways that you can bring in new processes, or new efficiencies, into the business, and do things better than you were before? And without having visibility into those companies, it’s really difficult to do that. The other side is if you are an employee of a company and you want to learn about how other people are doing things, you want to improve stuff in the current business that you’re working in, how do you go about doing that? How do you learn what other people are doing? Unless you change jobs, the answer is that it’s probably pretty difficult to do that. We’re going to talk about how to address that problem from both angles, whether you’re the business owner trying to bring in new ideas, or you are an existing employee in a company and you’re just simply trying to bring in new ideas, new ways of doing things either to solve existing problems that are just [cloogey?] and people have just dealt with it for a long time, or there’re things that are just completely blatantly done incorrectly because nobody’s really had the ability to stand up and say, “Hey, they’re doing this over here, and that’s a better way to do it.”
Rob [00:09:45]: Cool. So, let’s dive in.
Mike [00:09:46]: The first one is, I would say, probably the old standby that everyone goes to. The first one is books. I remember Lars Lofgren at MicroConf last year saying that he goes out, and he just – he’s a voracious reader, and he will download essentially a new business book every single week from Amazon and just tear through it. I think that that’s a fascinating way to go about learning and aggregating as much information as you can about how other businesses operate and how they’re doing things. I think it tends much more towards the business side of books, so it’s not really about the technical mechanics of how to do something. It’s how different companies are structured, what sorts of marketing efforts they do. The basic idea there is that you can pull a lot of good information from books, and you don’t necessarily have to read the entire thing. That’s one of the key pieces, I think, that factors into being able to get through 50 books in a year. It’s hard to sit down and read for a couple of hours every day. You can do it. It’s certainly possible, but I don’t think that most people have the time for that. If you can go through those books, read through the table of contents, start skimming specific chapters that are about things that you’ve never learned before, or that you’re aware of but not necessarily have a good knowledge of. That will broaden your base of understanding of a particular topic. From there, then you can go out and seek other information that’ll help you drill into specific areas that you find either helpful, or insightful, or just things that you want to learn more about.
Rob [00:11:09]: Yeah. What I find is when I’m stuck – and it may be stuck on a particular problem, or it may be just stuck wondering, “What’s next here? What’s next for the business? What’s next for me?” – I find that I go through these periods of just massive consumption of blogs, podcasts, books, other things we’ll talk about today. Then other times I’m listening to a lot fewer of them, but at different turning points I will listen to, through Audible, two books a week, like full-on business books. Like you said, I skip around a bit, because certain chapters are about things that either I know I don’t need, or are not going to be helpful. But I love the way that it gets me thinking along certain lines, and it kind of breaks me out of my typical patterns. I also take a lot of – I won’t say a lot of notes – but I take action notes like I’ve always talked about, where I think, “What action could this cause me to have in the future?” I don’t like taking just general summary notes of books, because I find that even if I refer back to them it doesn’t get me back in the headspace of what the book was saying. So, I try at the time to really take either direct quotes that I can use in my writing, or podcasting, or conferencesm or, I take direct actions like, “We need to think about doing this for Drip,” or, “Think about doing this for MicroConf.” or something like that. Gosh, I will read a lot, a lot of books. I actually think in the past – I talked about I’m getting more back into investing a little more lately. I think I’ve read maybe ten investing books in the past six weeks, and again, “read” meaning through Audible. It’s that kind of voracious consumption that I like.
The thing that I don’t like about books, as much as I do like listening to them, is a lot of stuff – especially if you’re looking at marketing approaches – if it’s kind of a tip/trick/tactic thing, once it’s in a book it tends to be pretty old. Even if it’s six to 12 months old, these things start to age, and they don’t necessarily work as well. If it’s in a book that gets popular, like the book about – you remember the one from I think it was the guy who ran sales for Sales Force. It was “Predictable Revenue”. He had this whole tactic of how to do the cold emails and all that stuff, and that just blew up. Everybody’s doing it now. It’s becoming less and less effective. There are still ways to make it effective, but it really has – it’s not as effective as when you first read it. Whereas if that had been a blogpost or a podcast, so many fewer people consume those. It actually makes it a better thing in the long term, if that makes sense. I take books for high-level stuff, but super-tactical stuff I tend, perhaps, to look more to podcasts.
Mike [00:13:18]: Yeah. Kind of a little side note that I wanted to just briefly mention here was that this is more about broadening your horizons and making sure that you’re, at the very least, peripherally aware of a lot of other things that are going on, or at least some of the things that are going on in other companies and, as you said, getting you out of those patterns that you’re probably used to operating in. This is very different than the just-in-time learning that you’ve talked about previously, where you have a particular problem and you consume as much information as you feel like you need to to get to the point where you’re about 60 to 80 percent of the way educated about it. Then you go start implementing things to learn that last pieces that really need to be taught on the job, so to speak. There’s a difference between broadening your horizons and that just-in-time learning.
[00:14:04] The second way to introduce new ideas into your business is to take a training course. There’s lots of training courses out there. There’s various sites, like udemy.com and coursera.org, udacity.com, skillshare.com. All these places are good resources to go out and learn about different topics that you’re interested. Sometimes it could just be you want to learn a new programming language because you’ve heard about it, and you’re interested in seeing what that has to offer, versus what you’re currently doing. It doesn’t mean you have to use it, but it is nice to be at least peripherally aware of what those things have to offer, and whether or not people with that type of background might be hirable in your environment. Is it going to be an easy transition for them? You can talk to different people about whether or not that would be an easy transition for somebody to make, from let’s say PHP to Ruby, for example. But going through it yourself also gives you a broader context, based on your own experience, how difficult should that be. Getting advice from somebody: “Oh, yeah, it shouldn’t be that difficult to make the switch.” that’s true for them, but it’s not necessarily true for everyone, and it doesn’t give you a complete picture of what it actually takes.
Rob [00:15:11]: Our third way to introduce new ideas into your business is, of course, through blogs and podcasts. I think this depends on the way you like to consume things. Some people prefer to read and skim, in which case blogs are for you. If you’re like me, you’re an audio generator and an audio consumer, so podcasts are going to be the way to go. What I like about podcasts is you can really niche down, and that’s hard to do with things like books and magazines because they need these bigger audiences. When I read business books, when I read – the last time I read “Inc.” magazine and whatever, the other entrepreneur magazine and stuff, the advice is just too general, because they’re looking at the entrepreneurs who’re trying to get started with stuff. That’s just not that interesting to me anymore. It isn’t helpful because the stuff is too general, it’s too beginner. With blogs and podcasts you can look around and you see the community of people that we’re hanging out with day to day. We go to MicroConf. We hang in on the same forums and that kind of stuff, and you can listen to their podcasts. Even folks who are not as far along as you are can often have really good ideas, and you can hear it just by them talking about their business. If you’re doing 50k MRR and there’s someone who’s at 5k or 10k, oftentimes they will have insights that can help you as well. I’m a big fan. We’ve had several episodes where we’ve gone through our top 20 or 30 podcasts, so if you’re interested in that you can look back through our archives to find out who we listen to on an ongoing basis.
Mike [00:16:32]: The fourth way to find new ideas or processes is to hire a contractor or a consultant. I feel like there’s a mild differentiation between these two that I can’t quite put into words. I feel like with contractors you’re generally hiring them for a particular skill set to achieve a specific job, but it almost feels like with consultants you’re asking them to solve a problem, and you don’t give them as many constraints. You don’t say, “It’s got to be done in this particular programming language,” for example, or, “It’s got to be done using these tools.” You essentially say, “Here’s the problem. Please help me find a solution to it.” Regardless of the differentiation between them, I think that there is a lot of value to be had by bringing somebody who works in various businesses into yours to help you achieve certain objectives. Part of the reason for that is that if they’re a contractor or a consultant, they have generally worked for a lot of different companies. It’s interesting. When you look across the spectrum at different consultants who have worked at a lot of different companies, they’ve seen a lot of things that you just simply wouldn’t have before, and it’s because they’ve been in so many different environments, they’ve solved so many different problems, and they’ve seen the same types of things over and over. Whether those are mistakes or how things are done well, they’re able to provide that information to you and give you some context about where you stand in relation to other businesses, and how they’re solving their problems versus how you’re solving them.
Rob [00:17:53]: Our fifth way to introduce new ideas into your business is to mentor someone, or be an adviser. I know that even way back in the day – let’s think 2008, 2009 – my blog was already up for three or four years, and people would write in for advice. That would, even not doing ongoing mentoring, would help me think through problems in a way that maybe I wouldn’t have thought through before. That was helpful. Then as things progressed and we had the podcast and MicroConf, all of that has helped me look at new ideas. People will bring stuff like, “Hey, I’m trying this new ad channel.” It’s like, “What? I didn’t even know that existed.” This was someone who supposedly I’m mentoring, where actually they’re giving me ideas. Then even more recently, I would say, as an advisor and beginning angel investor, I have really enjoyed the ability to look deep into these SaaS businesses that are coming up. These are essentially bootstrapped, that raised just a tiny bit of funding to help them get to the next level. I’m able to see all the numbers and what they’re doing and how they’re operating and how they’re executing and how the growth is. I can really get a lot of value out of that. Anyway, all that to say I think that this idea of mentoring someone in order to introduce yourself to new ideas is really one that I’m seeing take hold in my own experience.
Mike [00:18:58]: The sixth way is to do some consulting work on the side on your own. I think that you can do this regardless of whether you own your own business or not, because there’s always people out there who will place some value on the things that you know, and the background and experience that you have. Obviously, it’s going to be difficult to go out and do consulting in an area where you have no experience. That’s probably just not going to happen. But, at the same time, you can take the skills and experience that you have and try to take those into different environments, and try to solve similar challenges that other people are facing using their tools and their environment and the skills that you know and morph their environment. I think that as you start doing that type of thing more and more, you see different environments. You start seeing the different ways that people are doing things, and you get more of a sense of why they’re doing it that way. I think that that’s also very important. That sort of thing can also help you identify different business opportunities as well. When you’re doing consulting, because you see so many different things, you know that the same types of problems tend to come up over and over. If you’re working in one particular company, you don’t see them. You see your own problems, but you don’t necessarily see that there’s 30 other companies that are also having those same challenges. So, it can help you identify different business opportunities, but it can also open your eyes as to different ways of doing things as well.
Rob [00:20:015]: Our seventy way to introduce new ideas is to attend a conference with your peers. This would be something like I just talked about, like going to Converted, going to MicroConf, going to Business Of Software; figuring out where folks who are maybe a little bit behind you, a little bit ahead of you, are going. Go to the conference and meet people. What I’ve found is, even as my business has progressed, I’m still able to find people at different conferences. Even though there may be a lot of beginners at a certain conference, you can still find that if you can mingle with the speakers, or you can mingle with the folks who have businesses that are further along, you can get exposed to a lot of new ideas, new tactics, and jostle you out of your own thought process. An example – even at MicroConf Barcelona, I was talking to some folks, and they brought up the topic of investing, which is something that … It was right after the Drip acquisition, so I started noodling on this, like what to do with some new-found cash on hand. They brought it up, and I was like, “Whoa! I didn’t even know you guys cared about that, or thought about that at all.” Suddenly, they were throwing out ideas that they had, and ways that they were investing and ways of hedging things. It was just a cool experience to hear from these guys. In addition, they also talked about some marketing tactics, and some different competitors that were coming up in different spaces that were all relevant for stuff we were doing with Drip. It was something that would never happen in an online context. It wouldn’t happen on a forum. We probably wouldn’t’ve covered it via email, but sitting there having drinks for a couple of hours, just hanging around with interesting people doing interesting things and new ideas on a number of fronts, they’re just going to come out of that.
Mike [00:21:41]: The next way to introduce new ideas is to undergo a joint venture, or partnership, on a very specific project. I think that there’s a lot of different opportunities for this that people aren’t necessarily taking advantage of, because when people think “joint venture” or “partnership,” they tend to be thinking- – I guess with joint ventures, it’s probably not an extended thing. With partnerships, the mental image that comes to mind for people is, “This is going to be a very long-term thing that we’re going to be doing potentially for several years, so I want to be very careful about getting in and working on this with somebody else.” But there’s much shorter things that you can do that fall into that vein, such as writing an e-book, for example, or developing a training course, that do not necessarily require a lot of ongoing effort to maintain that particular product, but you can put those together and work with somebody else – whether it’s something that they came up with the idea, or you came up with the idea – or you find somebody that you just want to work with, and identify one, small thing that you want to do with them, and go through that. You can launch it, get it out there, and then you can move on and go back to your own business, or back to your full-time job, whichever you prefer. You will get the experience that goes along with that. One example that comes to mind that I’ve seen lately is the Big Snow Tiny Conf that I’ve gone to for the past couple of years up in Vermont has started expanding. Now it’s called Big Snow Tiny Conf East. Then they have one that’s in the west that’s run by Dave Rodenbaugh. Putting together a mini conference or mini meet-up for people is something that’s probably pretty new to Dave. I also know that Craig Hewitt is doing one over in Switzerland, or France, or something like that.
Rob [00:23:18]: France.
Mike [00:23:19]: Yeah, it’s in the Alps. Regardless, that’s kind of a new thing. You get to learn not just about working with these other people, but you also get to learn a new set of business skills that you otherwise wouldn’t be exposed to. I think that those are very neat ways to learn about new stuff that you could potentially bring into your business. Obviously, running a in-person group can be applicable to most businesses. Obviously, not all of them, but there are ways to leverage that in a lot of different businesses.
Rob [00:23:48]: Yeah. I think in terms of joint venturing, early on with Drip we did some joint venture webinars with different marketing teams, and we were blown away by the way some of them operated, just in how much of a machine they were in terms of processes and how well-executed. We just saw professionals doing it, basically. That experience alone showed us, “We need to up our game. We need to get better at just having refined processes and really going after what’s working and doubling down on that.” I think any type of JV, if you’re working with someone who’s sharp, you’re going to pick things up from them.
Mike [00:24:18]: The last one is to do some self-study and then blog about the experience. Obviously, self-study can take on a variety of different forms, but typically you want to have some sort of an endpoint or a goal in mind. Whether that’s to actually launch a product, or to build a training course, or even just to put together a case study – writing a book, for example, is something I talked to somebody about recently, and they just grilled me about all the different things to go into it, what comes with physical books versus digital books, how do you get the ISBN numbers, what goes into the layout and design for the book cover, and how the spine factors into it based on the number of pages, and all these little things that you wouldn’t necessarily think of, but they all go into that process. If you have to put that together and then present it to other people – whether it’s a blog, or a case study, or something along those lines – then you’re essentially teaching them. You have to understand the topic well enough in order to be able to teach it. If you can’t do that, then obviously there’s gaps in your knowledge, and those are going to show through. When you’re going through that process of putting together the teaching or training materials that go along with it after the fact, you’re going to be able to fill in those gaps, because if you look at that as a standalone work, the training side of it, you’re going to see that those gaps exist. You’re going to have to go back, and you’re going to have to learn those pieces so that you can educate other people. This really applies to anything. Teaching is one of those things that you have to understand a process or a product in order to be able to teach it to somebody else. One, it’s clear that you don’t understand it if you’re trying to teach it and you don’t. The second thing is that, by default, when you try to teach somebody something you understand it a little bit better because you have to present it in such a way that it’s easy for somebody else to pick up. So, teaching does help your own understanding of it as well.
Rob [00:26:04]: To recap, our nine ways to introduce new ideas into your business are through: books, training courses, blogs and podcasts, hiring a contractor or consultant, mentoring someone else, doing consulting work on the side, attending a conference with your peers, joint ventures and partnerships and self-study.
If you have a question for us, call into 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 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 311 | What It’s Like Selling a $128k Side Project (With Guest Derrick Reimer)
Show Notes
In this episode of Startups For The Rest Of Us, Rob interviews Derrick Reimer about the selling of his product Codetree. They discuss everything from the inception of the idea, to gaining traction, to launching, and finally the negotiation and sale.
Items mentioned in this episode:
Transcript
Rob [00:00]: In this episode of ‘Startups for the Rest of Us,’ I talk with Derrick Reimer about what it’s like selling a $128,000 side project. This is ‘Startups for the Rest of Us’, episode 311.
Welcome to ‘Startups for the Rest of Us’, the podcast that helps developers, designers and entrepreneurs be awesome at building, launching and growing software products whether you’ve built your first product, or you’re just thinking about it.
I’m Rob.
Derrick [00:28]: And I’m Derrick.
Rob [00:31]: 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?
Derrick [00:35]: Well, I’m getting geared up for a real winter to come for the first time in my life.
Rob [00:40]: Indeed. It’s been getting chilly the last couple of weeks, huh?
Derrick [00:42]: Yeah. We had our first drop below freezing last night, I think. For those who don’t know, I recently relocated, along with you, from Fresno, California out to Minneapolis, Minnesota. I’m a born and raised California native, so this is all a new experience for me.
Rob [00:56]: Well, I guess the highs have been in the 50’s, which isn’t bad, but when I’ve been getting to work in the morning it’s like 44 with wind. And realizing that it’s going to be 50, 60 degrees cooler than that here in a few months is a little chilling. But it’s been like, “Boy, I’ve got to get the big coat out of the closet.”
Derrick [01:12]: Yeah. My wife and I went out and bought jackets that can actually keep you warm in this type of climate, because we’re used to just our California jackets. Right now we’ve basically reached California winter status and it’s only October.
Rob [01:23]: Yes. That’s right. It’s really October. Cool. We’re here to talk today about your recent sale of Codetree. To give folks a little bit of background, you’re Derrick Reimer, cofounder of Drip. You were CTO to my CEO, nd we were acquired three months ago by Leadpages, everyone knows. But during the time that we were building Drip I have always had my little side projects, podcasts, and conferences, and I had HitTail going, and you went and built Codetree.com which is lightweight project management that lays over GitHub Issues. This actually came out of a need that we had internally, right? Managing multiple developers and prioritizing?
Derrick [02:02]: Yeah. We were using FogBugz before we switched to using GitHub Issues, and we were just starting to see the product wasn’t totally actively maintained and it wasn’t meeting all of our needs. So I really wanted to start using GitHub Issues. We were already using GitHub in a lot of our processes, so looked at that idea of using GitHub Issues, and it was not quite there. It was about 80% there what we needed. It seemed like there was an opportunity to just build a little layer on top, something that would give us the ability to prioritize things, and maybe view things in a little bit more compact manner. And so I looked into what it would take to do that, and then the light bulb went off in my head and I thought, “You know, I wonder if other people are using GitHub Issues in this way, and need to do a little bit more project management type of stuff with it?” So it was right around 4th of July, just about a year and a half ago, when I threw up a landing page for it. I just threw it together in a weekend, and started tweeting about it, ran a little bit of Twitter ads to push it out to basically the people on Twitter who are following GitHub, so I could target them pretty easily, and immediately started getting a bunch of interest, which kind of set me off on the track of building it.
Rob [03:09]: And were there a lot of competitors doing similar things at the time, or were you the one of the early ones?
Derrick [03:13]: There were a few. There have been more that have popped up in the last year and a half for sure. I did take a look at them, and they all were kind of lacking exactly what we were looking for. I had a little bit different vision for how it would work. Most of them were kind of locking you into a Trello-style task board view. It wasn’t quite exactly what we were looking for.
Rob [03:35]: Right. That’s what I liked about Codetree. We – just to give folks full disclosure – this is still what we use – even though you don’t own it anymore – we use it as it runs all of Drip’s [basically?] engineering prioritization. So all of our issues, bugs, new features go into Codetree, and we assign them out to all the folks who are working on them. We have our DBA in there. I’m in there for some kind of project management level stuff, and decision making stuff, obviously not pushing code. But one of the coolest parts of it — well there were a couple of cool parts. One is that you can do prioritization, which I think at the time you couldn’t do in GitHub. And the other thing was the fact that I can look at a table-based view per developer. So the Home screen for me is just each developer with a table of the first 15 issues that are assigned to them in priority order. But the developers themselves can just switch to basically a task-based view, I think you call it – task list view – and it’s like Trello. And so you can just work in that view. That was like the ray of sunshine. It just made tons of sense to do that.
Derrick [04:30]: Right. So it was very specific use case around GitHub Issues, and so it was something that I felt like was pretty safe from GitHub building themselves. I felt like this was a good alternative use case that that would be, hopefully, pretty resilient against GitHub kind of clobbering what I was trying to do.
Rob [04:48]: Right. I mean we had conversations all during this, because you and I were in a Mastermind with Phil, and we would meet every couple weeks. We were talking through like you need to be agile enough to stay ahead of them. It could potentially be an acquisition target later on, which is good. They very well may clobber you, but you have to think about innovating and doing things that they aren’t doing.
Derrick [05:06]: Right.
Rob [05:07]: And, you know, when you initially launched it, if I recall – I mean this was before you had an ownership stake in Drip, and you were essentially an employee of the Numa Group, which is what owned Drip at the time. And you were looking to grow this into like a full time gig.
Derrick [05:24]: Yeah. I definitely had the itch at that point to have equity in something, and to be using my skill set that I had built up over the last few years building products and then working alongside you on HitTail and Drip. I was really looking to leverage that into something that I could have ownership in. So I saw Codetree as a good stepping stone. You know, you talk about your stair stepping approach, and I felt like it is SaaS – which is a little bit more complex than something like a Word Press plugin or a one-time sale product – but I also felt like it was small enough in scope that it was manageable for my first crack at a SaaS app.
Rob [05:57]: Yeah, for sure. And this kind of was part of the reason we started having conversations about that, because it occurred to me like, “Wow! Derrick’s really valuable to Drip.” And you, obviously, had ownership and kind of a love for both of these products, right? You kind of had the desire to do them both, I think. And you were doing them both for quite some time. And I think you had dropped down to three quarter time with Drip at one point. And that’s when you and I really started talking about, “What does the future look like? Where are we 6 to 12 months?” And that really led to the conversation of, “All right. Let’s talk about cofounder status. Let’s talk about ownership.” And you communicated well. You were like, “I need to feel ownership in something. Like I’m the founder, I’m an entrepreneur. Can’t keep doing this stuff forever and working for somebody else.”
Derrick [06:37]: Yeah. There were like two conversations that stand out in my mind. There was a conversation we had right around the time when I was starting to build Codetree. And you approached me and were like, “All right. So, where are we heading?” Basically, “Is my long-term with Drip, or is my long-term with Codetree?” And at that point you were looking for a commitment, like which way is it going to go. And it was a tough decision at the time, and I ultimately decided to continue development on Codetree and forego setting that aside in favor of an equity stake in Drip. And then I think it was maybe seven, eight months later when Codetree had launched, and it was just starting to gain traction when we had a second conversation that ultimately led to me kind of doubling down my time on Drip and letting Codetree remain a side project.
Rob [07:19]: Yeah. I mean speaking of that launch, let’s give folks a context of how long did you spend developing it? How big was the list by the time you launched? How did you do the launch? Did you just email everybody? What was the early traction? We can talk numbers if you want, loose MRR, or if you don’t feel comfortable, that’s cool too.
Derrick [07:35]: I broke ground on – at least launching a landing page – in July. And –
Rob [07:41]: Yes. You started marketing before you started coding.
Derrick [07:43]: I did, yeah.
Rob [07:44]: I love it.
Derrick [07:45]: It was the first time I had done that. I had tried building other projects before, and I, of course, spent months building the product before anyone had even heard about it. So, I was determined not to make that mistake again. So, I put up a landing page, got the early traction. I started running Twitter ads and I felt like I could target the GitHub audience specifically. I felt like that was a good medium, and a lot of developers are on Twitter. I managed to find some things that converted well. I was gathering maybe 20 to 50 email addresses a day of just people clicking a button saying, “Yes, I’m interested in this product when it launches.” I had basically a one-page landing page set up that kind of described the problem it was solving. It had a headline something like, “You love GitHub Issues, but you hate project management, and here’s how Codetree can help you do your project management in the GitHub flavor.” basically. So that seemed to resonate really well with a lot of developers. I would say I didn’t have as many conversations up front as I probably should have had, but I took the signal of people clicking this button at least signaled their interest enough for, hopefully, a few people to be willing to pay for it once it launched. So with that bit of traction I started development probably a few weeks after I launched the first landing page. It really was a nights and weekends project for me. I was fulltime on Drip. It took me a good six months before I was able to launch an early access. I had a list of maybe about 20 people who I had more direct conversations with later on in the process, and I think I just gathered those based off of sending out an email to the mailing list that I had gathered through the process of running Twitter ads. By the time I launched early access I probably had maybe 1,500 people on that list; so a good chunk of people to start trying to get for my early access program. The response was good, but it was a good learning phase, as is most early access programs for SaaS apps. I learned a lot about what things people wanted built, and I kind of had to come to the decision of: Was I going to spend a bunch more time building full laundry list of features that people wanted, or was I going to launch what I had? And you, me and Phil sat around Mastermind meetings talking about strategy about this, like ‘Should I just get it out there, or should I try to build more features?’ Ultimately there were a few 11th hour features that made it in. Like I built a rough version of the task board, I believe, right before launch, but a lot of the things I just saved for post-launch. So it launched in January. First landing page in July, launch in January.
Rob [10:12]: Very cool. Do you remember what the conversion rate was to trial? And did you ask for credit card up front? I don’t recall.
Derrick [10:19]: Yeah, so no credit card upfront. I felt like developers especially would have a big aversion to that. And the conversion rate, that’s a good question. I’m pretty sure I got hundreds of trials after the launch, and I had a 14-day trial, so of course, there was the waiting game of waiting to see how many of those would actually convert. I believe at the end of my first month I had maybe between $400 and $500 a month in MRR, which felt like a big win at the time.
Rob [10:44]: Yeah. That was a nice little jump, kind of from a standing start, right, because you weren’t working from a network you had, you weren’t working from an audience. You just kind of proposed an idea, landing page, and built enough of a list to hit that. And that, if I recall, covered your expenses at the time. I think you were on Heroku and stuff, and maybe you made just a trivial amount of money.
Derrick [11:03]: Yeah.
Rob [11:03]: That’s cool. And then, it was a side project but you were investing time into a little bit of marketing and a lot of feature-building for the next, what was it, like four to six months before we really had the conversation about Drip, and you kind of shifted focus and really put it on? It wasn’t autopilot so much. You were still fixing bugs, and I remember you released some tiny little features stuff over the next six months after that maybe. But how long was that initial kind of investment after launch, and then we can take it from there.
Derrick [11:31]: Yeah, so I definitely spent a lot of time – nights and weekends – building out functionality in those months’ post-launch. I was trying to keep momentum going, and also trying to address all of the feedback that I had gotten from early access and from the initial wave of interest. So I think my wife could attest to that time was pretty crazy. We were still super aggressive on building out Drip, and so my days were filled with a lot of high intensity work, and then nights and weekends I was spending a lot of time building out features and probably not focusing much on marketing at that point. I was really just trying to keep the momentum going from the initial wave after the launch, and I remember, I think it was in March, I actually took a work retreat where I knew there were some features that I needed to bang out but I wasn’t going to necessarily have time to do them split up into small chunks. I really wanted to get some long stretches of time to get stuff done. So, I think I stole away to the central coast for a few days and just worked around the clock trying to hammer out some of those features. So I definitely tried to get creative during that time to get some big things done.
Rob [12:33]: Cool. And then at a certain point, obviously, you know, we had this conversation, and then you kind of made that transition. It was doing a few thousand dollars a month at that point. Is that right?
Derrick [12:41]: Yeah. I think it might have been around $2,000 a month at that point.
Rob [12:44]: Cool. And then at a certain point late last year — it was funny. I think I had gone on a retreat, or something, and I had written in my notebook – it was a bunch of stuff for me. And then I thought, “You know what, I wonder if Derrick should think about – he has enough revenue history, and I wonder if he’s still kind of committed to Codetree long-term, or if he should think about maybe selling it? And I wonder what he could get for it.” It was kind of just this thought process, and I think at the next Mastermind meeting you brought it up. And you said, “I’ve been thinking about selling Code -.” It was just funny that it had like both hit us at the same time. It was either late 2015, or maybe early 2016?
Derrick [13:17]: Yeah. I think you’re right. Something like that.
Rob [13:20]: Cool. What was the process for you? What made you – the thought process? You know, why did you decide to sell it?
Derrick [13:26]: You know, I was feeling like the product had a lot of potential still, and I felt like I just — especially with my decision to double down on Drip, I didn’t feel like I had the time to commit to it. The product was relatively bug free, and there was a happy base of users using it. I was growing by a handful of customers each month, so MRR was slowly ticking up. But there was still kind of an ever-mounting list of kind of larger, high level features and directions that I could take the product to really provide a lot more value to the customers. And I just didn’t have the bandwidth to tackle those larger things. I knew that in the hands of someone else it could definitely reach a much higher potential then where I was taking it. Also, I felt like ‘This can’t last forever.’ This market is competitive enough, and there’s enough innovation happening with project management in general, that Codetree can’t maintain its growth and its revenue in an auto-piloted state. So really, if I am going to sell it, probably the right time was then before the product started to decline.
Rob [14:29]: Yeah, and if I recall I said I would kind of check – I think I even checked anonymously. Didn’t I say, “Hey, I’ll talk to Tom Smale at FE and just check, “Hey, hypothetically I have this friend who has an app doing this much per month, and this much history, and what do you think he could get for it?” And he kind of asked some more questions and threw some multiples around, and I think you were like, “Yeah, I think this is worth investigating.” And so I made an intro between the two of you guys. What came next?
Derrick [14:55]: Yeah, you introduced me to Thomas, and we talked back and forth a little bit. I provided some more numbers, and he came back and said, “You know, I think this is a really strong app. There’s a lot of people looking for SaaS apps in this price range. There’s a lot of people wanting a first app to buy, and many of their best ones are in the $500,000 and up range which are just kind of out of the range for a lot of beginning folks. Then on the lower end there’s like the types of products you see on Flippa, that are maybe $30,000 to $50,000, and not great code base and all the other problems that come with that.” So, he made me believe that Codetree really kind of sits in that sweet spot, and he felt like we would be able to sell it quickly and be able to get an all-cash buyer. So all these things sounded really attractive to me. At that time, we were already knee deep in negotiation with Leadpages and, I believe, we were starting to near letter of intent and due diligence phase with that. So really, all these things were compounding at once, and that made it especially attractive to me the prospect of getting this sale done in a relatively short period of time.
Rob [15:59]: Yeah, if I recall you and I sold Drip; you sold Codetree; you sold your house; I sold my house. Did you sell a car or anything during that time?
Derrick [16:09]: I didn’t, but, yeah, it was really like a period of mass liquidation.
Rob [16:13]: Yeah, it was such an interesting and chaotic time. But there was a feeling of energy. I remember us kind of talking about it, of like, “Man, it’s good to kind of get some of the fruits of your labor.” You know, or like to be able to take some money off the table. And also to feel – I know that it had bothered you for a while that Codetree was there, and you knew it was solid, and you knew it could grow, and you felt like — It’s just a shame. I felt the same thing with HitTail. It was like, “Somebody should be growing this, and it’s just sitting there.” And so I knew it was going to be a relief for you when it finally closed.
Derrick [16:41]: Right.
Rob [16:41]: And so, it’s due diligence, but it’s essentially like all the requirements gathering and all the numbers, right? The FE has a really intense process there where they ask you a lot of questions about MRR, and where the traffic comes from, and growth opportunities and all that. How was that? How long did it take?
Derrick [16:56]: I had been warned ahead of time. I think at MicroConf earlier that year, Patrick McKenzie had talked about his experience selling Bingo Card Creator. You had the experience of selling HitTail. And so, I knew that it was going to be an intense process, but I feel like you’re never prepared for that; for just the amount of in-depth questions that need to be answered. So preparing income statements, and deep in-depth discussion about what marketing has been done, and how much has been invested in all the different areas to grow the business, and on and on and on. It probably took a solid two weeks of time just in my off-hours compiling together information and pulling data out of Stripe and all the different places.
Rob [17:34]: Cool. And then the sale happened pretty quickly, is that right? If I recall, you had several offers or at least several highly interested parties pretty early on.
Derrick [17:42]: FE likes to do like an early access circulation of a new prospectus. So they emailed their insiders group and tried to drum up interest that way. I think there were maybe three interested parties who came forth during that period before it even went to the broader audience. And, ultimately, the buyers who bought Codetree came through in that early phase.
Rob [18:05]: Right. And for folks interested in hearing more about this – especially from the other side – the buyers did a really good job of putting together a series of three blog posts. The third one culminated in this extremely long, very highly informative article about all the terms of the deal, and negotiation, and all that stuff. That’s really why you and I are able to come on here and talk about it, and why in the intro, or in the title of this there is going to be a price. Otherwise you wouldn’t have done that. But they wrote a blog post called ‘What It’s Like Buying a $128,000 Side Project.’ And we’ll, of course, link this up in the show notes. During the negotiation, once you had all the docs in there and then you started getting offers, was that stressful for you? Or was it — you know, compared to the Drip sale, I know that they are different orders of magnitude in terms of stress – but were you stressed or concerned or, I don’t know, did you feel out of control at all with the Codetree sale?
Derrick [18:53]: I think I would have felt that way if I were handling it on my own. I think having David from FE International, my broker who happened to also work with us on the Drip sale, was really pivotal for me in just keeping a level head. He bore the brunt of circulating this to perspective buyers, and vetting incoming buyers, and handling all of the follow up. We would have discussions and he would say, “Okay, this is what they’re offering. What do we want to say? Are you okay with this?” And I could just give him back an answer like, “No, I’m not okay with that.” Then he would handle the whole process of thinking through the best way to craft a response to the buyer that would not totally tick them off, or turn them away, or whatever. So just not having to deal with those finer points of the negotiation really eased my mind. It was in that first weekend – right after David had circulated the prospectus to the FE insiders – when I got initial interest from the ultimate buyers of Codetree. We had a call with them, and that was a little bit stressful to jump on a call with potential buyers. You want to make sure you don’t say something wrong, or something that’s going to hurt your negotiating position. So I definitely felt on guard with the first one, but David did a good job of kind of mediating the conversation and making sure that he jumped in any time there was a question that maybe was not something that we were willing to disclose at that time. So shortly after talking to them on a call an offer came through. That was a really exciting – just to get the first offer was a really exciting thing. We can talk about numbers, talk about what we’re going to ask for it, but actually getting a cash offer was pretty exhilarating. But the cash offer was for $103,000. So it was way lower than what I was asking at the time. And so, that stuck in my head where I was – there was a lot of emotions around it. One, I was exhilarated, but I was also mildly offended maybe that I would receive such a low ball offer. I remember thinking I had to decide at that point, was I willing to take less than what I was asking or was I willing to sit it out and wait for the right buyer to come along? And fortunately, David was there. I think I also talked to you about it. And everyone said, “Look, you don’t need to concede at all at this point. Just wait.” And that turned out being the right decision. But I think not being a savvy trained negotiator myself, it’s hard to think of like, “I’m going to just completely walk away from $103,000.”
Rob [21:14]: Right. Yeah. It’s definitely shocking the first time you see that and think, “Wow! That’s going to be wired to me in a few weeks if this all goes through.” But I totally remember you were in such a good negotiating position because the app looked gorgeous, it was solid, it was well built. You had your reputation of quality from Drip. I don’t want to say “overshadowing”, but kind of that Codetree benefited from, because Drip is just a really respected product, easy to use, and looks good. There was just so much going for it that Codetree was, in my mind, a premium product and a nice – it was a low priced product in the sense of we see a lot of SaaS apps that come through and they’re $800,000 or whatever. And it’s like, “Really?”, you either have to have a lot of cash or take out a big loan to do it. But to find an app of this quality in let’s say the low six-figure range, it’s pretty uncommon. And so, my gut was that, yeah, you were going to get a full price or close to that offer.
Derrick [22:07]: Yeah. It was fascinating to read the third part of the blog post series that the Codetree buyers put out, where they kind of go in detail about negotiation from their side. And they kind of outline, “At this point in the deal, here was our negotiating position, and here was the seller’s.” And kind of talk about how I think as a seller I was probably in the better position on this deal. So it’s really fascinating to see their thought process and how it aligned with what I was thinking at the time.
Rob [22:31]: Yeah. There is just a dearth of solid SaaS apps for sale, period. And especially at this price range. And I have several friends who have been trying to acquire things along this line for 12 to 18 months, and it’s just not happening. It’s definitely a seller’s market today, in terms of if you have a decent quality SaaS app you can get a good multiple for it. Cool. And so, you guys went through negotiations, you eventually settle on the price – as we said it was $128,000 – and after closing, did you get the bank wire right away? The same day that it closed?
Derrick [23:04]: No, so okay. If you’re ever selling a SaaS app don’t chose non-wire transfer methods.
Rob [23:13]: You went with the three day ACH -?
Derrick [23:15]: I went with the ACH. And so that was, yeah.
Rob [23:18]: But why did you go with the ACH, Derrick? Tell everyone.
Derrick [23:21]: Because there was a $20 fee for the wire transfer.
Rob [23:23]: There was a $20 fee! That killed me. I loved it.
Derrick [23:27]: When I made the decision, this was like weeks before it was ever going to close, I’m like, “You know, yeah I’ll save $20,” but totally not worth it.
Rob [23:35]: And then you got there and it closes. And there is some stress, or some anxiety, through it, and you get there and you’re like, “Finally, it closed today. Such great news.” And you’re like, “I cannot wait to see that wire in my bank account.” That is the true culmination, and the big dopamine rush, when you see it, and you had to wait three days for it. That’s terrible. I was like, “Oh, no!” And I think I was like, “Can you change that? I’ll throw the $20 in.” You’re like, “I totally want to do it.”
Derrick [24:00]: I tried. I tried.
Rob [24:01]: But it was too late, because it was Escrow.com or something, is that right?
Derrick [24:03]: Yeah.
Rob [24:04]: It was already locked in. So that was funny.
Derrick [24:05]: Yeah.
Rob [24:06]: And so, if I recall the next week you showed up in a Tesla, right? Is that what you did with all the money?
Derrick [24:14]: Oh man. I wish. No, I stuck it in a high yield savings account.
Rob [24:17]: Very good. Nice play, sir. Well, yeah, I think we’ve pretty much covered it. Is there anything else that you feel like you maybe left out of the story?
Derrick [24:24]: No, I think that covers it pretty well. I think probably my take-aways from this – if someone out there in the audience is looking to sell their product – one of the biggest things is don’t underestimate the amount of effort that due diligence is. And there’s things you can do to make your life easier, like keeping everything separated. I had a dedicated bank account for Codetree. I had a dedicated Stripe account for Codetree. All my other different SaaS things that helped power Codetree were all siloed in their own accounts, and that made the handoff a lot easier. It made it a lot easier to narrow down the exact costs that were involved, and where revenue was coming from. And I could produce a bank statement without having to filter out other non-relevant transactions. And so that made my life a lot easier. But there was still weirdness with like, when a Stripe charge comes in on one month do you count it in the month when it happened or do you count it in the month where the cash hit the bank? And you’ll see in the write-ups from the buyers that one of their big issues during due diligence was this supposed discrepancy in revenue reporting. So, some of these little things that don’t seem big in the grand scheme can potentially hold up the deal.
Rob [25:29]: Yeah, you were really well organized. And that’s kind of your nature and I think it helped make this a less stressful process. When I sold HitTail, which was November – it was almost a year ago now – it was so enmeshed with other things because the Numa Group had all these products at one point, that it was much more of a headache for me. Even to just suss out the numbers- the expenses mostly – because they were all comingled with things on the same credit card, and then the transfer over it was actually in the AWS account that Drip was in at the time. It wound up being a big mess during the actual transfer process. But yeah, I think that’s a really good piece of advice for folks who are listening.
Derrick [26:05]: Yeah.
Rob [26:06]: Sounds good. Well if folks want to keep up with you online where would they do that?
Derrick [26:10]: You can keep up with me on Twitter. I’m @DerrickReimer. And I also have my website at scalingsaas.com where I blog occasionally and publish other content.
Rob [26:19]: Sounds great. And you’ve been cohosting the Giant Robots podcast for a few weeks, right? I think you’re on maybe a hiatus right now?
Derrick [26:25]: Yeah. So, yeah, Giant Robots is in its third iteration, and Ben is bringing on cohosts to cycle in and out. And so, I’ve had an eight-episode stint there and it’s been a great time. We kind of delve into the behind the scenes of building out SaaS apps, so we talk a bit about behind the scenes of Drip, and also some technical things too.
Rob [26:44]: Sounds cool. So if you’re listening and you want to hear more from Derrick you could actually check out certainly Giant Robots, the last eight episodes. I’ve listened to them all. They’re very, very good. And there is more about Drip and other stuff in there, too. And then, actually episode 274 of ‘Startups for the Rest of Us,’ you came on and we talked about how to mentally and technically prepare for your launch, and we talked through the launch of workflows that happened earlier this year.
Derrick [27:03]: Yeah, it was a good one.
Rob [27:04]: Sounds great, man. Well, thanks for coming on the show.
Derrick [27:07]: Cool. Thanks for having me.
Rob [27:08]: 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. It’s 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 310 | Indie.vc and a More Realistic Approach to Funding
Show Notes
In this episode of Startups For The Rest Of Us, Rob interviews Bryce Roberts of Indie.vc about their unique approach to funding startups and their terms. Rob shares his opinions on raising funding and angel investments.
Items mentioned in this episode:
- Indie.vc
- Current terms in Github
- Bryce’s Medium post on his learnings and adjustments to their approach
- Ycombinator thread about Indie.vc
Transcript
Rob [00:00:00]: In this week’s episode of “Startups for the Rest of Us,” I interview Bryce Roberts from Indie.vc. This is “Startups for the Rest of Us,” episode 310.
Rob [00:00:18]: 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, and I’ve given Mike the week off this week. I have a very special guest joining me on the show today. His name is Bryce Roberts, from Indie.vc. If you haven’t heard about Indie.vc, they’re taking a really interesting approach to funding companies, and it’s much more around this “fundstrapping” approach that I’ve talked about before. If you recall, fundstrapping, which – Colin from Customer.iO is the first person I ever heard use that term. The idea is to raise a single round of funding to get to profitability, or to help you grow faster, but not to have this implicit series A that you need to raise, as Bryce says during our interview. To be honest, I’ve never been anti-funding. I’ve always been anti people thinking the only way to grow a software business is through funding and then to raise that funding and have it require you to sacrifice your lifestyle, to relocate somewhere, to need to commit to growing a $100 million company with 200 people on the payroll, just all this stuff that never made sense. I always wondered why can’t you just raise a couple hundred thousand dollars to get to that seven-figure revenue mark faster, or get their more efficiently, and then just pay investors back like a normal business does; like when you start a carwash, or a restaurant, or a drycleaner, and you borrow money. You’re not looking for an IPO.
[00:01:33] That’s the approach that I’ve started to take with my angel investments. Last three, I think, have been into companies that I believe will all be seven- or eight-figure SaaS companies; and they’re not planning to raise a round from institutional investors, ever. That’s the premise. They needed some cash to get to growth and to go beyond that. Indie.vc is doing a similar thing. We talked in detail about their exact terms. Of course, they have their terms published on GitHub, which is super cool, because you can look through the docs that I think you’d sign if you were to take money from them. Just a fascinating conversation here with Bryce, who’s really going against the grain of traditional venture capital. I think it’s a good interview. I hope you enjoy it. Thanks so much for joining me today on the show, Bryce.
Bryce [00:02:15]: You bet. Super happy to be here.
Rob [00:02:17]: As I said in the interim, folks just heard you run Indie.vc. I first heard about Indie.vc probably close to two years ago, and it was on Hacker News. There was a big discussion of – at the time, you had a long-form letter at Indie.vc – that’s your URL – and it was basically explaining this new premise, or a new investing ideology. It was about not having to have this $100 million or billion-dollar exit to make money, but that you wanted to fund businesses that could achieve profitability and didn’t need to be a unicorn in order to be profitable for investors. This was really groundbreaking, and at the time, I think it was anonymous. Is that right, the way you published it?
Bryce [00:02:59]: It was anonymous unless you clicked the one – there were two links on that original letter. One of them was to sign up for a slack channel that we’d set up to answer questions. If you clicked on that, it would go to my inbox, so you would see that I was at OATV. Otherwise, there was no messaging, or branding, or anything else like that on it. So, yeah, that created a stir in that Hacker News thread as well.
Rob [00:03:21]: What was your thought process behind doing that anonymously?
Bryce [00:03:24]: Thought process was, just as we laid out in the original letter, that it was an experiment. So, if for any reason that just was a failure, we didn’t get anyone interested in it, no one wanted to apply, that we could have it set up completely separate from OATV. If it didn’t work out, we’d just take the site down, and we’d move on and go back to our day jobs. Wanted a little bit of that abstraction, but also I think it’s a little bit a part of our brand and marketing anyway, which is not intentional. It just is – it feels like you ought to have to do a little bit of work to get to know us and to get to know what we’re trying to do. I think it creates a little bit of scarcity, a little bit of intrigue and that, as a result, it drew people a little more closely in.
Rob [00:04:15]: I remember feeling when I read the letter, because if I recall, it was in Courier font and stuff. It gave me the hacker ethos. It made me feel like the DIY ethic of, “This is really cool. It’s grassroots.” It was just a neat feeling. You’ve mentioned OATV a couple times. For folks who aren’t familiar with that, could you let them know what that is?
Bryce [00:04:32]: To be clear, the DIY is really important to us, that kind of really raw, bare bones. Everything you saw in that first iteration and most of what you see now is still – that’s just me writing, posting. That’s something that’s important to us and always has been. In terms of OATV, OATV is a venture fund that I helped co-found back in 2005 with two partners. One is my partner Mark Jacobsen, and the other is someone who’s pretty well known in technology, my partner Tim O’Reilly. “OATV” stands for “O’Reilly AlphaTech Ventures.” It was a seed fund that Tim and I and Mark started in 2005, when seed investing really didn’t have a name. It wasn’t necessarily a category yet; but we were probably one of the first, I would say, handful – maybe five – institutionalized seed funds that got going back then.
Rob [00:05:27]: Very cool. Could you talk people through the premise? I guess you had the experiment that went out a couple years ago in terms of the letter and vetting people. I know you started with a cohort approach, and I think you’re no longer doing that. I think you had a fixed amount you invested up front, and now you’re more flexible, based on the business. Could you tell people about where you’re at today, just so they have an idea of what is Indie.vc? How is it different than just a traditional venture fund in terms of from the entrepreneur’s perspective?
Bryce [00:05:55]: The history is 2005, we set up a seed fund to introduce a new kind of optionality for entrepreneurs, not necessarily just bridge between seed and VC, but actually create some options for folks looking to run cash efficiently. As you can appreciate, part of the whole premise and the whole opportunity around seed was that the cost for getting these businesses online, up and going was dropping significantly. So, whether it was open-source software, hosted infrastructure – you name it – all of those things were starting to drive costs down and making it more accessible to entrepreneurs, which is kind of conventional wisdom right now, but back then it was just some wild, wild thinking.
[00:06:35] So, part of what Indie.vc was a response to was ten years into running OATV, it had become clear that some of those options that we had hoped seed investing would introduce to folks had kind of fallen by the wayside. Those options, as we saw them, were you could take a small amount of seed funding and then go raise from traditional VCs. That was one option. The other two we thought were just as important for founders were you could raise a little bit of money, make a tremendous amount of progress, and without having to raise more money, without having to take on more of that dilution and oversight from VCs. You could sell relatively early for a smaller acquisition, say, sub-$100 million type of acquisition; and it would still be a meaningful return – likely a life-changing outcome for the founder, but a meaningful return to a small fund, which is what we got started with.
[00:07:29] The third was, given how little capital these types of businesses take to get going, and given how strong and just wide the potential for profit margins are, given how efficient these things are, there ought to be a path where you just raise a little bit of money and then you just run that business as long as you want to, based on your profits and revenue. So, ten years into OATV and this whole seed investing experiment, we were looking back and just saying, “Okay. Part of that promise we’ve delivered on,” and that was filling the gap between angel investors and VCs, but those two other options seemed to have fallen by the wayside as fundraising has become the business model for so many of these companies that are getting started right now. When we started, a seed round was 250k, $500,000. A seed round now can be up to $5 million, whether you include their pre-seed or their post-seed, or their A2, or whatever these things are, right? Fundraising was intended to be a pain reliever, but the way we’ve looked at it is that it’s now become this gateway drug to this larger, unicorn culture that’s been built up around startups. So, Indie.vc in some ways is a response to that to try to capture some of that optionality again.
[00:08:46] I think part of your question was how we get our returns. As you can appreciate, we are still a venture fund. We raise a pool of capital. We put that to work. Our investors expect a return on that investment, and I think the one dimension that was pretty unique to Indie.vc-style investing is that not only can we make a return in the event that a company goes public, or gets bought in an acquisition; we can also make a return if founder decides they want to run that business indefinitely and profitably. We can take our return out in something that we call “distribution.” So, if a founder wants to keep running that business, wants to be paying themselves, really reaping the benefits of running a large, profitable, growing business, we just take our return out in cash as that business continues to grow. That’s kind of – plain vanilla as that sounds, that was at the time, and continues to be, a fairly radical concept, given that the venture-funded model suggests that any dollar you take in you’re reinvesting in growth. The idea that founders would be taking money out to put into their own pockets seems to run counter to so much of what’s already happening in that venture-funded world.
Rob [00:10:04]: Yeah, for sure, and that’s what I liked initially about the Indie.vc model and what you’re still doing today. In a second, I’ll run through your terms, which are published on GitHub. You have the exact terms that you give everyone. I was having a number of conversations right as I started doing a couple angel investments a few years back, and my interest has never been in the unicorns. I would much rather have a smaller business that has a much, much higher chance of success. Typically, right now it’s going to be B-to-B SaaS, because that’s what I know. I want to be able to put a small amount of money to work. You know, “small amount”: 5, 10, 20, 25 grand – whatever gets money in – and not have to swing for the fences and not have to swing for an acquisition. I kept looking for models to do this, and the only one that I stumbled upon was the way that carwashes and brick-and-mortars are funded. Then when I saw that you guys were doing this, my head exploded, like, “Yes! Someone is trying to apply this to startups and software companies.” We know that, if they’re smaller, they can just throw off a ton of cash, you know?
Bryce [00:11:05]: Yeah. It’s interesting, because despite the original letter that was posted – it was actually posted January 1, 2015. That’s when that Indie.vc site went live, but the buildup to that was really probably five or six years of conversations. I remember having a conversation with a friend of mine who’d invested in a couple of restaurants, and I was wrestling with a lot of these ideas and asked how they structured that. Given a local restaurant isn’t likely to IPO, and it’s not likely to be their ambition to IPO or even get bought, I was asking how they structured their return. In having that conversation and a bunch subsequently with other types of businesses, I thought, “Man! The margins in a restaurant business are just so paper-thin, in general. Why couldn’t we be trying this with tech businesses?” where your margins are oftentimes 60, 70, 80 – I’ve even seen 90, 95 percent in the investments that we’ve been looking at.
[00:12:02] It feels like a real opportunity to pursue that model for returns; and, yet, it just runs so counter to the business model of VC investing at this time, that very, very few people would really consider executing that, at least at a fund level, like you said. There are some people who are trying to find those for angel investments, but from a fund level, it hasn’t been necessarily as attractive or as accepted, just because the model hasn’t been proven out just yet.
Rob [00:12:35]: Right. As listeners know, my startup Drip was acquired a few months ago by Lead Pages; and we had hit a point a few months before that where we were really having internal conversations about the possibility of raising a small round, because our growth was being hampered or dampened by the lack of cash. It was the first business I’d ever run where that was the case. All the other ones, I always had ample cash to grow them, because they were smaller businesses. But we were really talking about that, and there was no chance I was going to go down the traditional VC route. It just was not – I never saw Drip – even though it had the market potential to be large, it wasn’t in my interest to be the CEO of some –
Bryce [00:13:12]: Why is that? Why didn’t you think the venture path was the path for you?
Rob [00:13:16]: Because I honestly value my lifestyle a little too much. I didn’t want to have to relocate. I didn’t want – I have my wife and kids, and we have a pretty good life. I didn’t want to feel the constant pressure of, “Get to $1 million.” “You should be hiring more.” “Hire, hire, hire.” My friends who’ve raised VC, that seems to be the thing: you need to get head count up. The idea of running even a 30 – well, 30 was reasonable, but when I started thinking about a 50-person team, it was just not appealing. I think that – I know you don’t necessarily lose control with your first round, but I looked down the line and thought, “Boy, you raise a series A and then a B. If that’s the path, then eventually are you still running your company?” Have you pushed into the center of the table and said, “I need to get to $100 million, or I go bust”?
Bryce [00:14:06]: Well, it’s interesting, because that’s actually a conversation I had recently with a good friend of mine who we spun up our seed funds at roughly the same time. We were talking about this model, and he was expressing frustration around what he termed the “implicit A,” right? Even at a seed round – like you said, you want to believe that that first round of funding really isn’t going to alter your course all that much, but the reality is there’s an implicit A as soon as you take that seed round these days. Most of the advice and most of the effort and most of the incentives around that seed round of funding end up pushing you towards another round of funding and another round of funding. So, as harmless as it may feel like it is, it’s really become, like I said, this implicit A at the tail end of any round of funding; and that’s something we wanted to be a counter to. We wanted to, hopefully, present a different set of options for a founder.
[00:15:02] And it’s something we’re seeing now. That same situation you found yourself in at Drip, we’re finding there’s a large number of companies who have grown. They could really unlock a lot of value in their business with an extra $250k, or $500k, or whatever it is. There’s a couple of hires they can’t make out of cash flow; or, there’s a new line of business they can’t fund out of cash flow; or, there’s a new product that’s additive to what they’re already doing that they want, but they can’t fund it out of cash flow. It’s within that group of founders we really found a lot of resonance and, for us, a lot of potential investment opportunities. I think what we can offer to them is – it’s funny. We just had one of our quarterly retreats in Chicago this last weekend, and one of the founders who’s a part of the Indie.vc group of companies said something along the lines of, “This is just enough VC b.s.” It’s like we haven’t bought all of it, but there’s still a level of accountability. You still have a partner in the business that isn’t with you day to day. There’s still a much broader network for folks who maybe aren’t in the Bay Area that we can provide to them, that they can access.
[00:16:10] That’s really what we’re trying to provide: just enough of that VC oversight without necessarily the levers that so many VCs have, which are voting rights. They become shareholders, but they become shareholders of a preferred class of stock. There’s a lot of layers of control that you give up and also optionality that you take off the table when you go that route. Hopefully, what we’ve tried to do in structuring the terms of Indie.vc is address those in a hard-coded way, where everybody’s playing all their cards face-up so that we can offer to an entrepreneur a certain level of service and a certain level of capital, and they can play their cards up in terms of what it is they’re trying to build. As your audience my appreciate, when you go out to pitch that round of funding to investors, even – you’d mentioned you really value your lifestyle. You mentioned that you may not be the right CEO to be running a 50+ person team. If you walk into an office of an investor and make that presentation, you can’t honestly tell them that, right? You have to tell them about how this is going to become a multi-hundreds-of-millions-of-dollars business.
[00:17:24] We think that’s a real opportunity for us, and we think that the more founders are empowered to build the business they’re best suited to build, and that we can support in doing that, we think that those returns for us will still be every bit as compelling as the returns we’d be seeing in the traditional seed investments that we’ve been making.
Rob [00:17:43]: Yeah, that makes sense. That’s the key, is something you just touched on, which is there’re a lot of businesses that are really great businesses that I think raise funding and get run into the ground because they would be great 5, 10, 15, $20 million ARR businesses, but highly profitable; and they just go for the $100 million thing, and then they implode because they just can’t get there for whatever reason.
Bryce [00:18:05]: There was a fascinating post written – I think it was last week – by a VC, saying, “Here’s how you end up in a bad position with your board.” The scenario he gave was a founder who’d raised two or three rounds of funding. Their business was doing about $5 million a month. The founder couldn’t raise any more money. The founder couldn’t sell the business. Now they’re locked horns with their VCs. I think most people who aren’t in that unicorn echo chamber would say, “Wow. If I had the opportunity to run a $5 million-a-month software business? Sign me up for that!” right? But it’s that type of misalignment with the kinds of companies some founders are best suited to build and the things that oftentimes – I think the other disconnect, too, is just timelines, right? There may be a timeline in which that entrepreneur, if given that opportunity, could grow from $5 million a month and become that massive outcome, but not on the timeline that a VC really needs it to happen in, which is typically five years. So, they would much rather see that founder crash and burn and sell that business for parts, because for every month or quarter that goes by that they have to sit on that board and that business is consuming its time, it’s time that’s taken away from the potential unicorns that are already in their portfolio – if that makes sense.
Rob [00:19:23]: It does, yeah. I want to switch it up just a little bit here and dig deeper into the specifics of how you guys work. I’m on GitHub right now, and I’m going to link your website. You have a [medium?] post, and you have the GitHub repo, where you have all your docs. My understanding is that you invest typically between $100,000 and $500,000 into each startup, and you don’t actually take equity in the business up front. It’s only upon an acquisition that that would happen. Then the repayment – and this is where you’re based more on cash flow than on exit or liquidity [event?]. The repayment is 80 percent of distributions until you’re paid back two times your investment. Then it flips to – what does it flip to after that? Does it flip 20-80?
Bryce [00:20:08]: Yeah, 20-80. That’s right.
Rob [00:20:10]: Okay, perfect. So, that’s 80-20 to your fund until you get 2X back. Then it goes 20-80 to your fund versus the founders, and that’s up until 5X your investment. Then it stops. Is that correct?
Bryce [00:20:22]: That’s correct.
Rob [00:20:23]: Okay. So, the idea is if someone – there’s a bunch of Hacker News threads if folks search it, but there’s a conversation where you actually address specifically – someone says, “What if a founder comes on, and then they just raise their salary up to a bazillion dollars or whatever instead of taking out dividends?” Because it’s when the dividends are distributed when the 80-20 stuff kicks in. You have clauses that help with that, right? They can only raise their salary up to a certain amount, or by a certain percentage, based on from when you guys invest.
Bryce [00:20:47]: That’s right. There’s a bunch of different models that people have tried out around how to trigger these types of distributions. Several of those have been – they’ll tie it to profitability. They’ll tie it to revenue. There’s a whole industry that’s forming now around revenue-based financing, where they immediately start to take a percentage of the revenue that comes in every month, and they get paid back up to a certain return as well. What we tried to do was tie it to incentives, right? So, as you mentioned, when we make an investment, we aren’t a shareholder in your business. It’s structured essentially as a loan with no maturity date, so there isn’t an interest accruing, and there isn’t a date at which that note will be called back. The unique element to the one we’ve structured, as you touch on, our repayment is really tied to the incentives of the founder. If the founder wants to start taking a significant amount of cash out of the business, we share in that. We tie it to total compensation. If a founder’s total comp – let’s say it’s $100,000 when we make the investment. We allow them to continue, we want them to continue to grow and to pay themselves and be able to reap the rewards of growing their business. So, we say up to 150 percent of that initial baseline that we set, that’s yours. Once you start to pay yourself above and beyond that, that’s what we consider a distribution. That’s when the splitting, the 80-20 and then flipping to 20-80 occurs, is once they’ve decided that maybe they do want more of a cash-flow lifestyle business. We are fully in line or aligned with them around them being able to grow and run that kind of business. We just want to be able to share as that cash flow starts coming out of the business.
[00:22:26] In the case where we do become a shareholder, there’s really only two scenarios where that happens. One, the founder decides to raise a more traditional round of VC funding. If someone is running the business profitably for years, but they decide to end up going and raising an additional – bringing on VCs to really scale up because they now see their outsized opportunity, we just convert in as part of that round at a pre agreed-upon percentage of whatever that is. Then if they sell anywhere in there, we convert into common shares and go through as part of that acquisition.
Rob [00:23:00]: Very cool. There’s a comment on Hacker News from someone who is obviously an Indie.vc portfolio company, and he says – there’s a whole discussion of it, but he says, “This is why I enjoyed being part of Indie.vc: zero emphasis on pitching or raising the next round, no demo day. All the focus was on growing a real business.”
Bryce [00:23:19]: It’s like I said. We just did a meet-up in Chicago this last week. What we’re doing now is – we did our first cohort last year, where we invested $100,000 into eight companies, and each quarter we would get together with those eight companies and not work on their pitches, but actually work on their business. We would bring in subject matter experts for things that they were wanting to build expertise around. At the end of that year, we said, “We can continue to do this or not.” It was unanimous within the group that they’d like to continue to have these meet-ups, so this was our first opportunity to start folding in new members, new investments that we’d been making since the beginning of the year. The response from a lot of the new folks was really positive. They were really taken back by what it meant to just focus on revenue and growth and profitability.
[00:24:09] One comment I remember from the weekend was someone lead off their answer to a question by saying, “Back when I used to think raising money was cool, I did X,” right? At its most basic, part of what we wanted to really see is this idea that you become who you hang around, right? So, you have a group of companies now who all are focused on fundraising, and you plug into that group, guess what you’re going to start focusing on? You’re going to start focusing on fundraising. You’re going to start solving your problems with going and raising another round. What we’re seeing now within the group – and, knock on wood, a year and-a-half in, all of those eight companies are all still in business. Some of those have gone from standing starts to profitable. We’re seeing that there’s real value in having a group of like-minded founders who want to build their company in the same way that you’re trying to build yours, so that’s support in that network. So, we think that’s a pretty – it seems subtle, but as the Hacker News commenter mentioned, it’s actually a pretty powerful undertone to create within a group. In fact, we’ve now done five of these, and I can count on one hand the number of times we’ve ever even talked about investor presentations, or talking to VCs.
Rob [00:25:21]: That’s super cool. It does become an amazing sight now when I go to – I grew up in the Bay Area. I grew up in the East Bay, so the Silicon Valley culture was very much part of me, growing up. But when I go back now – I haven’t lived there for 20 years, almost. When I go back now, when I go to a conference or whatever, I’m struck by just the one-track mind. Everyone is just talking about the pitching and talking about the raising and talking about raising money. I keep thinking, “People are focusing on building slide decks rather than building businesses.” That’s kind of been my quote.
Bryce [00:25:54]: No, exactly. Like I said, fundraising is the business model of this new, unicorn-obsessed, startup cohort. I think there’s a real opportunity for us. We have some investments in the Bay Area, but I tried living in the Bay Area, and I know live in Salt Lake City, Utah. We aren’t geographically focused. We don’t just invest in the Bay Area. We don’t make people move to the Bay Area to be a part of what it is we’re doing. I think a line that really resonated in that original piece that I wrote at Indy.vc was, “Bloom where you’re planted.” We try to embody that both in the support we provide for our companies, but like I mentioned, we did our last retreat in Chicago. We try to expose our companies – one, visit the companies in their local markets and support them there – we have a couple companies that are in Chicago – but also give exposure to people who aren’t from Chicago to the way local founders, [the] local start-up community there works so they can see that it’s different from their home states, but it’s also different from how the Valley works as well.
Rob [00:26:55]: Yeah, yeah. I like the idea from your perspective as someone running a fund that you then have diversification across geographies, right? All of your eggs are not in the Bay Area basket and all not pulling from the same talent pool and all not getting in the same group thing. I think there’s advantage to the diversity you have there.
Bryce [00:27:13]: It’s been great, and it was fun because one of the folks who came to a dinner we hosted while we were in Chicago tweeted out after they’d left – this is a person who’d done the VC-funded startup thing. They’re a pretty well-known name in the startup community, and they’re just totally burned out after their last venture-fueled startup experience. They tweeted out after the dinner how energized they were, that it was so refreshing to be around these kinds of founders who’re actually building real businesses and how that reinvigorated them to be thinking and working towards their next company. I think there really is something to that. I think there’s a group of people who really want to have an impact, who want to build something that doesn’t necessarily rely on getting permission from an investor to be able to have it exist and have it to impact people in the world in a meaningful way. So, I love that that person at the dinner picked up on the energy, and we hope that there’s a lot more of that energy we can help unlock through Indie.vc.
Rob [00:28:13]: Sounds great. Well, thanks again, Bryce, for coming on the show. I really want to be mindful of your time today. If folks want to learn more about Indie.vc, they can obviously go to www.indie.vc. If folks want to keep up with you, is it maybe Twitter? What’s the best place?
Bryce [00:28:28]: Yeah, indie.vc is the best place. It’s kind of a jumping-off point, and you’ll also see a unicorn that’s burning, and so you might enjoy seeing that. For me, I’m @Bryce on Twitter. You can add-reply me. We also have a Twitter account that’s pretty active for Indie.vc @Indievc – one word – on Twitter. I’m not great at email, but if you want to email me, I will definitely see it. If it’s interesting, there’s a high likelihood I will reply to it. I’m just Bryce, B-R-Y-C-E, @OATV.com.
Rob [00:29:01]: Sounds great. Thanks again for coming on the show.
Bryce [00:29:03]: Thank you, Rob.
Rob [00:29:04]: 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. It’s used under Creative Commons. Subscribe to us on iTunes by searching for “startups” and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening, and we’ll see you next time.
Episode 309 | Updates on Bluetick.io & Drip
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike give some updates on Bluetick and Drip. Mike gives some details of overcoming technical challenges and how he plans to shift his focus to a marketing. Rob talks about some of the changes to Drip since the acquisition as well as ways his role has changed.
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 giving updates on Bluetick and Drip. This is ‘Startups for the Rest of Us’ episode 309.
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 experiences to help you avoid the same mistakes we’ve made. What’s the word this week Rob?
Rob [00:30]: Well, yes, more than this week. I think we’re talking about stuff that’s been going on for the past few months, right? Because we haven’t done and updates episode in a long time. We used to try to do these once a month or so and then there were certain extents of time where so much was going on that I couldn’t talk about. And I think stuff slowed down for you for a while. And I think it’s really time to get back here and get back at it and give folks an update.
And it would be nice to do these a little more often. I don’t know if we’ll do them monthly. But I always find it fun and interesting to talk about what we’re doing. And the feedback that I’ve heard in general is that folks really like to hear more about what we’re up to.
Mike [01:02]: Cool. So let’s dive right in.
Rob [01:04]: Yes. So for me, you know, I look back. It’s been just over three months since Drip was acquired. For those who haven’t been listening I had a startup called Drip. I co-founded it. It’s email software and it was acquired by Leadpages back in July. And so now I work for Leadpages. I’ve moved with my family to Minneapolis. And it has been quite an adventure.
I think the hardest part of the transition was definitely — well, aside from the acquisition itself — it was very stressful. Once that was done, the hardest part has been the move and the impact it’s had on the family. Moves are always stressful and I think that it’s a bummer when you move and your kids are all disjointed and don’t know what to do. And they’re homesick and then they go to school and they don’t have any friends and then — It’s a transition to a new place.
We’ve tried to fill it with adventure and make it exciting. And now that we have been in Minneapolis just over two months and everybody’s over it. And now it feels like home. And nobody talks about how they liked the Fresno house more or about how rough school is because they’re having fun. So that was a big transition and I feel like we’re past it. It feels really good to be past it and I don’t think I want to move any time soon again.
You’ve done some moves in your time, huh?
Mike [02:09]: I haven’t moved for at least 10 years. And there are good reasons why.
Rob [02:13]: Yes, because you remember how hard it was. We hired movers. Everything was paid for and so, we hired people to pack and move us and unload us. We didn’t do any of the hard work. The unpacking sucks, of course. But even then it was so much time to do all the logistics and then your stuff gets here and then the unpacking is just days and days of chaos. Yes, it’s stressful. It reminded me how stressful this actually is. But it’s good to be past it.
And on the flip side, the work transition to Leadpages has been way, way easier. I don’t want to say it’s been a breeze because that would probably be glossing over some things. But in general, it’s been a very good transition for me and, I think, for the team. I talk to everybody. I try to keep tabs on even our remote folks and it’s kind of business as usual. But we have a lot more money to do things. We just have more resources so it’s like business as usual but better, I think, is kind of how I’ve been talking about it.
There are obviously things I had to give up that weren’t – you know it wasn’t the easiest to give up all of the marketing, essentially. And I can be as involved as I want but, frankly, I don’t have time given the focus on the product and the hiring of engineers and stuff that I’m doing now.
But that was a tough choice because I’ve always marketed my own products and Leadpages is just so good at it in my opinion. And from the outside and now that I’m inside, they’re one of the best SaaS top of the funnel marketers in the world. It’s just an amazing machine that they’ve built. So it makes total sense that they would do this when they have a team of 20 or 30 people, why would I want to slow them down and be a bottleneck, essentially.
But giving up the marketing website was a tough choice. Not even a choice. I knew it had to happen. It was inevitability. It was just when it was going to happen. Then, of course, they cranked on it and rolled out nice new gorgeous marketing site. It’s at Drip.co. If you go there you’ll see it. And they have videos and they have all types of cool stuff that just would have taken me months and/or years and a bunch of contractors and way more money than I had to produce. And then they spit it out after it was three or four weeks that this whole website was up. So it’s pretty cool.
Mike [04:08]: What was the reason behind the domain name transition? It used to be GetDrip.com and now it’s Drip.co.
Rob [04:13]: Yes, it was to get away from people calling the app GetDrip. People on podcasts and all the time, “Hey, how’s your app GetDrip doing?” Well it’s not called GetDrip, it’s called Drip. And so for a long time I wanted, obviously Drip.com, which I think there was a squatter on it and he wanted six figures. And that wasn’t going to happen. But, yes, Leadpages was able to get Drip.co on the secondary market. And it probably – at the price, I don’t know I would have put the money towards it bootstrapped, but it made total sense to do it given the resources they have. So, that was the idea. It’s a four letter domain – six letters including the extension – so it’s nice and short, memorable. And it’s just nice to not be called GetDrip anymore.
Mike [04:51]: Back when you could actually get four letter domains.
Rob [04:54]: Yes, I know.
Mike [04:55]: It’s a thing of the past.
Rob [04:55]: I know. Well, Clay sought it out and bought it on the secondary market.
Mike [04:58]: Very cool. Couple of quick personal updates. My brother’s getting married this weekend so the whole family is leaving tomorrow morning so we’re recording on a Thursday.
Rob [05:05]: Wait. You have a brother?
Mike [05:07]: Yes. You didn’t know that?
Rob [05:08]: How long have you and I known each other?
Mike [05:10]: I don’t know. Like 10 years.
Rob [05:11]: 10 or 11 years. You have a brother? Do you have any – how many brothers do you have?
Mike [05:13]: He’s technically a half-brother. He’s 16 years younger than me so yes.
Rob [05:17]: Got it. Okay. You just don’t ever talk about him.
Mike [05:20]: I almost never see him, you know.
Rob [05:21]: Do you have a sister too?
Mike [05:22]: I do.
Rob [05:23]: You are kidding me. What?
Mike [05:24]: I have a sister.
Rob [05:26]: I just figured you were an only child. You never talk about your siblings. Do you know I have siblings? I talk about them, right, every now and then?
Mike [05:33]: I do know that you have them, I don’t know how many. I think you have a brother but I don’t think you have a sister.
Rob [05:37]: Yes, I do. I’m the youngest of four kids.
Mike [05:39]: Oh, I didn’t know that.
Rob [05:40]: With a sister and two brothers. Dude, how many siblings do you have?
Mike [05:43]: Well, it’s complicated.
Rob [05:46]: Two of mine are half as well, to be honest. I have two siblings and then one full.
Mike [05:51]: Yes, my parents, they got divorced when I was much younger and then they both remarried. And on one side I’ve got a stepsister and three stepbrothers and then there’s also a half-brother there. And then on the other side I’ve got, I think five or six … I think five stepsiblings in some way, shape or form. I think that there’s two boys and three girls. I don’t ever talk to them because I’m just never around.
Rob [06:15]: Right.
Mike [06:15]: But, yes, it’s kind of crazy. So there’s like 10.
Rob [06:18]: Got it. Alright. So you’re going to a wedding.
Mike [06:20]: Yes, so we’re going to a wedding this weekend. We’re leaving tomorrow morning. It’ll be Friday morning. The wedding is on Saturday. We come back on Sunday and then next weeks’ Columbus Day.
And then the other thing is I have to go off on a little bit of a rant here. It’s about Amazon and big data. I went on Amazon and I’m very particular when it comes to notebooks. And I’m sure people have their quirks about that sort of thing. But there’s a very specific type of engineering paper that I like for my notepads. So I went on Amazon and I bought one and next thing I know they’re trying to cram calculus and physics books down my throat. I’m like, dear God, please make it stop.
Rob [06:56]: Yes, that’s brutal.
Mike [06:57]: It’s just the entire line of recommendations from Amazon was nothing but college textbooks and I’m just like, no, I don’t want a $300 calculus book.
Rob [07:06]: It’s such a bummer. Yes. I wish there was a button you could click to be like dismiss these. Because that happens to me. My kids get on and shop. Or Sherry will get on and buy psychology books and it’s like, stop recommending that stuff to me.
Mike [07:16]: Yes. And it even happens if you borrow stuff from Amazon’s library. They’ll say, “Oh, well, you downloaded this thing about Barney the dinosaur. You might be interested in this too.” I’m like please stop.
Rob [07:26]: Yes, no doubt.
Mike [07:28]: But aside from that – and I’ve been talking about this for a while – but I finally finished migrating all the backend mailbox data inside of Bluetick. So everything’s over on a completely new storage mechanism. It’s not even a different storage system. It’s just everything is all indexed now and stored in a different way than it was before which makes it easier to get at the data and then make sure that everything’s synchronized. And I’ve got manual indexes that are built around a bunch of stuff so that I can – given any email address, for example, I can very quickly show you exactly who has emailed you from that email address or all the emails that you’ve sent to that email address. Which you can do inside of Gmail or most email clients. But it’s a lot more difficult when you’re trying to synchronize those things yourself. And the other thing that I’m able to do is I’m actually able to tie multiple email addresses to a single person. So that’s an interesting side effect of doing all this myself is that I can create those additional tie-ins that would probably be very difficult to do outside of something like Gmail or Outlook.
So then I can show you all the different communications that you’ve had with somebody. And the idea down the road is to be able to take that stuff and present it inside of the application so that you can see all of the activity related to somebody regardless of what email address was used to send to them or receive from them. So if you have a team, you’ll be able to see all the emails that have been received by your team from that person. And then you’ll be able to mark things as like, “Hey, this particular email was a private one. I don’t want that shared with the whole team.” And you can set preferences around that stuff.
The other thing it allows us to do is download the contents of those messages and display those as well. So, it’s kind of a first step down that path. It’s all looking good. Several million emails later and a huge WTF moment in the mill where I found that somebody had an email that was 65,000 characters long in the subject line.
Rob [09:14]: Wow. Okay. So, you’re truncating, right? You’re going to truncate it to 56 –
Mike [09:18]: Oh, yes, we’re going to truncate it back but I was not expecting it to go above – I was like maybe I could see somebody putting a few hundred characters in there. But the application just choked on it and it took me the longest time to figure it out. And it’s just like, “Oh. Whoops.” I mean that’s a no-brainer decision to truncate that but that’s what the spec says that there’s rules against it.
Rob [09:40]: Yes. It broke something. I was actually talking with a group of people a couple weeks ago and they started asking me about Bluetick and about the progress you’re making and about the technical issues that you’ve been mired in for the past 30 days, 60 days. And they were asking, “What’s going on with Bluetick? Is Mike going to launch? Is this another AuditShark?” They started peppering me with the questions and I was like, “I don’t know.” People don’t realize you and I don’t talk often. This is our conversation every week, right? We maybe talk about MicroConf but we don’t dig into each other’s apps and progress and that kind of stuff.
So, I think this is an interesting thing to dig into here because if I were to recount what I’ve seen over the past – so it’s October – so, if I thought back about the last six months since MicroConf, I feel like you’ve been working on a bunch of technical stuff, mired in technical detail. And I know you’ve worked with some early access folks and most of them came through, as far as I know, and they’re using the app. But it does feel like it’s been really slow going.
Mike [10:34]: Yes, it has. I don’t discount those thoughts. I’ve had kind of the same thoughts and reservations myself about the fact that certain things are just taking an extraordinary amount of time. And some of it’s the volume of data that I run into. So you do a migration and you’re targeting two million email messages and then it was like a million and a half through it where something went wrong. And I’m like, okay, now I have to figure out not only where exactly did this happen because it’s not always easy to pinpoint that stuff either. And doing a partial migration is a little bit challenging. So, the volume of some of those things is – just in terms of the prototyping. Because I’ve had to go through a lot of issues with trying to figure out how long is it going to take to query this particular thing. And you don’t think about those things when there’s only a 100 or 1000 items. But when you’ve got 150,000, 250,000 of them it makes a big difference about whether it takes a half second to query it or three minutes. Then sometimes it does take a long time. And one of the things I’ve found out is mail servers will time out on you if you don’t issue a command within a second, for example. And it’s like that’s not really going to work if all this stuff on the back end doesn’t respond a lot faster.
It sucks to be mired in those technical details but, at the same time, I feel like a lot of them are kind of past me at this point. So I’m really starting to shift my focus from the engineering side of things into marketing. Which I’m thankful for because it means that I don’t have to deal with a lot of those [?]. I think they’ll still come up but I don’t feel like the rest of the stuff that’s going on or that needs to be done is so critical that I have to not move forward with the app and I have to pay attention to it. I think that they’re little things. They’re little tweaks and little changes here and there as opposed to like, this needs to be fundamentally redesigned in order to make this work. Does that make sense?
Rob [12:22]: It does. It does. Given the conversations we’ve had over the past five years on this podcast about you building AuditShark and then now about Bluetick, you do have a tendency to get stuck in technical stuff. And to spend more time than probably is good for you before you get more people using it. And I’m wondering how can it be different this time?
Mike [12:47]: I think part of it is just making sure that people are using the app. I think early on I made the mistake of trying to go in the opposite direction, where I hired several developers to come on and help build the app and while they were building the app I basically was very hands off. I haven’t really talked about this before but I hired three developers back in January. They built the app, got it to launch or at least got it to the point where it was minimally usable. And then we ran into various UX issues with the front end of the app. Then there was a bunch of stuff that needed to be redesigned on the back end.
As I started digging into it – as I said I tried to do the opposite of what I did with AuditShark. I’m like I won’t touch any of the technical stuff. But then once we got to the point where I started putting it in front of people, we were like this needs to be changed mainly because it just doesn’t do what the customer needed it to do. And we went in to make some of those changes and the structure of many of the things was just fundamentally flawed. So, for example, permissions were all screwed up, the API was a total mess. A lot of the stuff that connected the back end to the front end, the interfacing was terrible. It made it very difficult to make changes. And there was a lot of heavy dependencies between those things.
So if you changed one thing it was very easy to break a bunch of other things. And because we tried to move quickly, we didn’t write very many unit tests. We still don’t have nearly as many tests as I would like which makes it painful and it makes me very hesitant to push that deploy button because I know that don’t exactly have a great strategy for rolling things back if something goes wrong. I’m working with a lot of production data and if something goes wrong I need to be able to have time to fix it and be reasonably confident that I’m not going to just destroy a whole bunch of data that I’m going to have to go back and somehow try to rebuild.
Rob [14:30]: The lack of unit tests, that’s brutal. I mean that’s like a classic mistake people still continue to make. But now you’re kind of hamstrung by it, right, because you -?
Mike [14:40]: Yes.
Rob [14:41]: It’s not good. We see this happen with certain software companies that aren’t built by software developers. They’re heavy marketers and they outsource the development and then they find out six to 12 months in, they’re like, “Oh, we have no unit tests and our code base is terrible. And, although we have customers, we can’t build new features.” Your velocity just completely comes to a halt.
Mike [15:01]: Right.
Rob [15:02]: And it sounds like you hit that already.
Mike [15:04]: I did. Yes. And, like I said, part of it was because the app was not designed with the levels of scale that need to be taken into account when you’re dealing with mailboxes. Like I said, it’s a fundamentally different story when you’re dealing with the expectation there’s going to be 100 items in here. Also, let me give you a very specific example. When you first connect your mailbox to the application, there’s a back end process that goes in and it looks at your emails and says let me find people that you may have emailed within the last X time period. I’m going to show you when the first contact that you ever made with them was; when the last contact was; who made it in each direction. That way you can very quickly and easily go in there and, once you’ve hooked up your mailbox, it will show you a list. You can just sort it and say who have I sent an email to in the last three months that never replied to me; or only replied once or twice; or I’m still waiting for a reply. Those are things that you can query in there. At very low volumes that works fine but when you scale it up and there’s people who have 1000’s and 1000’s of contacts, people that they’ve either sent emails to or received emails from and you go from 100 to 10,000 and suddenly lots of things break. And it’s not like it’s an isolated incident either. Several people have this problem.
So, going back and trying to re-engineer those things so that they actually work has been just very difficult. And, you’re right. I ran into these things much earlier than I anticipated. And the point I was getting at before – as I said, I haven’t really talked about this – I hired the three developers I would say shortly after I got it to the point where I was minimally usable. I ended up letting one of them go because I looked at the stuff he was doing and, as I said, I tried to stay hands-off, I tried to stay out of it. And then I go back and look at it. I left him in charge and I said, “You’re responsible for this.” And then I go back and look at it and it’s just way off base. It was very clear in retrospect this guy probably didn’t know really what he was doing. And I left him in charge of huge pieces of the infrastructure.
Then over the next couple of months, one of my other developers, he was very good at a lot of the front end stuff. But he ended up getting married and moving out of the country and, basically, wasn’t able to do any more work for me. And then then third one, there was a lot of micromanagement that was involved. So, I went from three developers to zero. And now I’m back up to one and it’s more of a senior developer. He’s very good, I’m very pleased with the work so far. He’s been able to get in there and be productive. But that’s only happened within the last month or so. And his time, at the moment, is very limited. I’m trying to transition things over but it’s been a long hard road for the past three or four months.
Rob [17:42]: So you had three hiring mistakes then?
Mike [17:44]: One of them was definitely not a mistake. The other one, she probably would have worked out had I been able to spend more time but I didn’t have the time to sit there and give direction. So, basically, I had to be very specific about everything almost to the point of micromanaging. It wasn’t a good fit ultimately. So, two out of three I would say. The third one, like I said, his life circumstances changed so there’s really not much you can foresee about that.
Rob [18:08]: Yes. It’s a lot of setbacks though. That’s a lot of things to happen in a short period of time.
Mike [18:15]: Yes. But I am very conscious of the fact that I don’t want this to turn into another AuditShark story because that’s certainly not the direction I want to go. At the moment what I’m trying to do is I’m trying to transition myself out of doing more of the coding work and more over into the marketing side of things. Next up for me is to, essentially, start looking at getting the sign up page in place and carving out some more of the onboarding emails. Potentially looking at an onboarding wizard because I think that there’s got to be something there to help onboard people into the app. But whether that’s a combination of videos or tutorials or individually onboarding people with onboarding sessions – I’m okay with that too. It’s a matter of getting people to the point that they’re able to be productive with the app as soon as possible.
Rob [18:55]: Yes. And that’s a big deal. I think you need to start building some momentum here because it feels like you’ve been stalled for a while. And just looking at that shortest line between you and getting more customers using it, that’s what I’d be looking to do right now. I don’t have necessarily advice just because I don’t know all of what needs to be done; what has been done; what your path is. But I think if there’s one piece of advice I could offer it’s figure out how to get more people using it and paying you for it as quickly as possible and then do that. And that may be building a website and that may not be. Maybe just continuing to manually onboard people for the foreseeable future.
Mike [19:33]: Yes, I agree with that. It’s an interesting thought experiment, I think, to consider do I even need to rebuild the website because right now it’s just a one-page site. It really does not do anything. There’s nothing that you can do aside from signup for the email list. And then from there I have an email course that I send people. It’s about 5000 words or so over the course of five emails. And that does pretty well at getting people to take that next step. But it’s also heavily slanted more towards this is a beta, contact to us if you’re interested. It’s not so much a push-the-product and let people know what it can do for them. It’s more of a showing them how to do things as opposed to here’s how the product can really help make things better for you. And part of that is just a result of the fact that when it was written, it was written before the product was launched or even available. So, I’ve got to go back and rework a lot of that – not a lot of the copy, but at least some of the calls to action in the emails.
Rob [20:28]: One thing you could think about – and again, I don’t know your road map, your plan or anything. But just hearing where you’re at and what you’re doing, one thing you could consider is either during that email course or instead of the email course, actually, on the one page just swap that out with a ‘Request a Demo’ button. And the ‘Request a Demo’ could lead directly to your Calendly page where people can just book themselves with a demo, it could lead to a Google form that asks for more information first and then you get back in touch. And the Google form – or type form or whatever – might be better because then you can get more info from them. And you can tell how much they might be paying you. Because I’m assuming your pricing tiers up based on seats or something like that. So, you can ask how many seats they expect; what they expect the product to do. That could be really interesting and it would be super fast.
Then if you just improved that single-page marketing site and didn’t really build everything out, that could save you some time and get you to the point of where you’re just driving people. Because I still think at this point, having automatic signup – no-touch signup – I don’t know that you’re there yet. I don’t know quite where the product is, but my guess is you still have more to build and you still need to figure out exactly what to build next in order to get it to the point where you could just send 100s of new trials, so to speak, through the frontal and actually have them stick. And, so, I feel like doing demos and driving more in-person conversations, that’s probably what I would lean towards at this point.
Mike [21:47]: That’s probably true. I kind of put it in my head these are the things that are on the list of things to do and I naturally surfaced like the website really needs some love and care. So I naturally surfaced that to the front of my brain. But I think you’re right. It’s probably not really, necessarily, the best place to be spending my time right now.
Rob [22:04]: Yes. You take your one-page landing page. It’s a Bluetick.io – by the way, for the listeners out there – and maybe improve the copy a bit just rewrite it based on what you know now. And not even rewrite the whole thing. Just add some bits here and there and then have a big ‘Request a Demo’ button and just gate it for now. And people who are interested in a demo, then at least you can have a conversation with them. You could see what kind of volume you’re getting. And you can have conversations with them both because it’s easier to sell things that way and you’ll be able to figure out how best to explain it. You can split test your message really quick. And then you can start taking notes on what your message is and then use that for when you revamp the page.
And then they’ll also just give you a ton of feedback about someone who comes in and is like, “Oh, there’s another tool I use and it does exactly this.” Or, “If you added this one feature I would use it.” Those conversations are just so valuable in this early stage.
Mike [22:47]: Yes, I agree. I had a demo that I did last Friday, I think, and I took notes before the demo and then I made it a point to take notes right afterwards about specifically what the objections that they had were. And wrote those down so that I could come up with answers that were significantly better than what I had so that I had something that was already written, already concrete as opposed to trying to think something up off the top of my head. I’ve done that before and it works really well when you consciously do it. But it’s very easy to just kind of overlook that.
The other thing I did was I had a VA go out and capture all of the marketing messages from, I think it was a list of about 30 different competitors that I put together. So, I’ve got all their primary calls to action and primary marketing headlines that they’re using. And then all the secondary headlines and then if they had any sort of bulleted lists about topics or pieces of information that they were trying to convey on some of the different pages, I had her capture those as well. And then I also had her build a feature comparison breakdown, which is more for me than for general consumption, but it will help give me an idea of when I get the question about, “I see competitor XYZ does this. How does Bluetick do that? Or how does Bluetick relate to competitor XYZ? What do you do better and what do you do worse?” I’ve been asked that question before and I haven’t been able to answer it for specific competitors. So, I got that information so that I could help answer those questions better.
Rob [24:10]: Whenever anyone says, “Can you compare Drip to XYZ competitor?” I always say, “Yes, we’re better.” People don’t find it very funny. For some reason those questions, they kind of infuriate me because it’s like we in particular have I think it’s like 400 or more email marketing apps. So people just name some app of the top of their head that no one’s ever heard of except for this person. There’s like 10 users. And it’s like I don’t know how we’re different. Major competitors we would say we’re easier to use, we’re easier to get onboarded with, we’re less expensive, we’re more powerful than most of our competitors. But to actually do a feature by feature comparison is really kind of a bit of work there.
Mike [24:41]: It wasn’t so much that I wanted to be able to provide a matrix to somebody but I really wanted to know what specific areas of the space that they operated in. So, are they more geared towards cold outbound emails; or are they more about sales funnel flow; or are they more about a CRM package? There’s very different ways to look at the sales process and different pieces of it that different competitors do better or worse.
For example, if somebody asks, “What’s the difference between this and Highrise?” I’m like well, “Highrise is a CRM. It’s not a mechanism for actually doing anything.” I hate to gloss over some of the difficulties or all the engineering behind something like Highrise but, at the end of the day, a CRM is basically a database. It’s a database of contacts and it doesn’t usually do anything for you, whereas with Bluetick, it’s more about automating a process of moving somebody from one step of your sales funnel to the next and making that visible to everybody. Now you can argue that, OK, that’s a CRM, that’s exactly what that does. But most CRMs don’t necessarily have built in functionality that does a lot more than that. They don’t do a lot of that automation right inside the app. They rely on a lot of external processes, external API’s, webhooks, that kind of stuff. And Bluetick has some of that stuff built right into it.
Rob [25:58]: I think this still points to you probably needing to find out exactly how to describe Bluetick. And before you were saying it was sales automation software and I actually like that. But now I’m realizing it may need to even be more specific and it’s like sales email automation software. Or email based sales automation software. Something like that because that’s really what it does, right? You could say sales automation and someone might think, “Is it going to do cold calls for me?” That could mean a lot of things but you’re really specifically focusing on using email to move people through a funnel. And so I think still seeking that description is something that you should probably do in the next few weeks and months.
Mike [26:31]: Yes and no. The email piece of it is like the v1. It’s just like the version one piece of it. So, I’ve had conversations with people about automating text messages, for example. They get a list of customers that they’ve done business with and they have high volume; and they want to be able to turn around and send text messages to their customers; and hook it up through Twilio, for example, so that they can have those replies go directly into Bluetick. Well, that’s kind of like a secondary – I don’t want to say secondary action – but it’s an additional mechanism for interacting with the customer. You could have email; you could have phone call in theory. That could initially just be like you plug something in and write down what you talked about but I think that Close.io actually goes an extra step beyond that and even records the calls and allows you to make calls through Close.io.
Rob [27:18]: Right.
Mike [27:19]: I’m not saying I want to do that but –
Rob: [27:21]: Yes, but I think you’re getting ahead of yourself.
Mike [27:22]: Oh, I agree.
Rob [27:22]: I think if you called yourself email sales automation at this point and then later on you drop it – You think about Drip we were like epic autoresponders early on. And it was all about the promise of raising conversion rates with the email capture widget. Then it was like now we’re automation software, email automation. And then it’s like now we’re marketing automation. We evolved over time. So don’t feel like because you call it email sales automation and I’m not saying that’s the term to use but if you picked on that had the word email in it you could change that later when you add SMS.
Mike [27:49]: Yes.
Rob [27:49]: You adding SMS, I’m guessing, is six months out so that gives you plenty of time. And maybe more, maybe six to 12 months. I think there’s still a lot of progress to be made with just the email front.
Mike [27:58]: Yes. There’s a boat load of stuff that could be done. It’s more a matter of prioritizing it. And I had a brief discussion with my developer this morning and we were talking about even just like a data import. And we kind of scaled it really far back in terms of what the initial plans were because it was just like we could do everything that we want to do but it’s probably going to take at least a month and it’s really just not worth the time investment at this point. So, we scaled it back. It will probably take a couple of days to do it instead of a month which obviously frees up time to do a lot of other things. But now that the, I’ll say that the bulk of the cleanup work is done, and I really do feel that way. A lot of the technical debt that we assumed early on to get something out the door as quick as possible, a lot of that stuff has gone away at this point and it’s a lot easier to make changes now. And there’s more documentation; everything’s more standardized; the code itself has not got three different standards that the code is adhering to. It’s just a lot more manageable. So hopefully at this point we can move considerably faster than we were before.
Rob [28:59]: Some other things from my side as I was reflecting on the past three months after the acquisition. I talked about a few of these things but a lot has gone on in terms of Drip. We launched a $1 plan, we doubled our affiliate commissions, which is nice to do, up to 30% recurring. We’ve hired three engineers which has been extremely time consuming. I forget how much time it is to start from nothing and to write a job description and to post it, take the incoming clients. The nice part is Leadpages has a recruiter and so she actually goes out and emails people prospects, essentially, which I was doing in the old days. It’s just some much stuff that I used to do that I’m able to hand off to other people. But even then all the interviews. You have the phone interviews and then the in-person interviews and then the decision and then the salary negotiation and just all that stuff. Even though I’m not handling all of it, it still does require a lot of time and energy.
Hired three engineers which has been mostly the bulk of my job, bulk of my time in a week doing that. And then I’m hiring one more new employee here in the next couple weeks. Interviewing people right now. I hope to slow down hiring. I don’t really expect to keep growing at this pace. I’m a big believer in small teams and being super efficient and scrappy and agile. And I think that growing the team too large too quickly is really a mistake that some startups make. And then you see them slow down because if it gets bigger you have to involve process and then the process slows down. I just don’t think that that’s the place we want to go to. Doesn’t sound like a fun way to go to grow the team that quickly. So hoping to slow that down and give myself some time to look at other stuff.
Mike [30:34]: Well, I think that as you grow the team people need to become comfortable – not just with each other but with the things that they’re working on and how they work together. And if you grow too quickly – I saw this at Pedestal Software to some extent because we grew from I think I was the fourth engineer that was hired and within probably a year we were up to 10 or 15 or something like that. And when you have that many people added to a team that quickly, it’s difficult to – get on the same schedule is not quite the right way to phrase it, but get in the same mental mode of working together. Get on the same page in terms of how you’re doing stuff. You know what I mean?
Rob [31:12]: Yes, totally. There’s just an adjustment period when you’re working with a new group of people on a new app.
Mike [31:17]: Yes, that’s it. It’s that adjustment period. It’s hard to do that and scale it up very quickly without having things go sideways very quickly as well.
Rob [31:26]: Yes. And so, other transitional stuff that’s happened that’s been really nice. I’ve been able to basically hand over support. Leadpages has, I don’t even know, 20 people or something. 25 people on their support team and we had one. And so to have trials go up as high as they did as quickly they did, which is where the bulk of support’s going to come, we just never would have been able to hire that quickly. And certainly didn’t have the budget to do it. I’ve handed over the reins of that to their very capable team at HR. Obviously all HR stuff. There was no reason for me to be managing payroll and employee onboarding and insurance plans and just all that stuff. So that was good to hand over to them. Legal, affiliate management.
Mike [32:03]: All the crappy parts of running a business.
Rob [32:04]: Isn’t it funny? Yes. Everything I’m naming is like we are product people. We want to build product and there’s all this other stuff that you have to do to have a company. And it’s really nice when there’s someone else there to do it. So my job has actually been filled with less as Anders called it in his question. You said the crap work. And for me this is crap work for me personally because of how I’m wired and because of my focus and what I’m good at. But it’s actually someone else’s sphere of genius. You know what I’m saying? The HR person, it’s her sphere of genius so she should be doing it. And the legal and the affiliate management, this is what they do fulltime. And so me having it as one of 50 things that I’m managing it’s just not going to be done anywhere near as well.
To be honest, I feel right now we’re getting to the point where we’re starting to ship pretty quickly again. The first 30 to 60 days after the acquisition was like, oh man, we need to add servers; we need to scale; some things are starting to get slow. We had people come in trying to send spam. There’s just all this stuff you’re fighting. And then we got enough code written that we’re out well ahead of that now. And that’s given us a chance to really get back in and dig into features.
And so, we’ve shipped some pretty cool things in the past couple weeks. And there’s some fun changes I won’t talk about yet but that are going to be coming here in the next month or two.
Mike [33:21]: Awesome. Well, I think we’re kind of running out of time here. But I guess to wrap things up a little bit, one of the things you’d asked me earlier was how to make sure that things are moving forward in the way that they need to; and how I’m going to move the app ahead; and put more people into; and actually scale up the customer side of things as opposed to digging in, as you said, and focusing too much on things that are not going to be as important. Or just simply aren’t as important. And I think for that, for me it’s really a matter of putting together some goals. And I think that early on, when I was first doing the customer development for it, I had some very concrete goals and I was highly focused on making sure that I was achieving a certain number of calls per week and having conversations and converting people into the preorders. And I think I need to get back to that. I think I need to pick maybe one or two different KPIs that I’m going to go after and use those as benchmarks moving forward for at least the next month or two. I don’t know off the top of my head what they are. I have some ideas but I think I may need to sit down and first thing is determine exactly what those are and then track those moving forward.
Rob [34:24]: Yes, totally. That sounds like a good thing. I feel like your number one focus right now should be getting more people on and getting them to pay you. And figuring out if there are sticking points between them paying you, what those are. Getting them hammered out moving as quickly as possible.
For me, to wrap up, over the next few weeks I’m going to be going to the Converted conference which is the one Leadpages puts on. I think I’ll have some stage time. I don’t think I’m doing my own talk there but talking about Drip and some other stuff. I’ve been spending a lot of time recruiting speakers for the two MicroConfs we’re putting on in six months. Which is a bit of an effort.
And then on more of a personal note. It’s a trip, I’ve been getting back more into investing. I kind of put that on the back burner a decade ago as I dove headlong into entrepreneurship, but it’s always been an interest of mine since I was a kid. I bought my first share of stock when I was like 14 or 15. I had to do it through my dad’s account because, obviously, you have to be 18 or something to do it. Read a lot of books when I was younger and I thought that was a way to make money. And as I learned it’s like investing is a way to grow money slowly and stay ahead of inflation but almost no one gets rich or makes their millions purely from investing starting with nothing. There’s like two exceptions in the history of mankind or something. But now that I have a little bit of a nest egg from the Drip acquisition, it just makes a lot more sense to be more deliberate about it because with a larger sum of money, it’s like just knowing more and doing 1% or 2% more per year, being a little more deliberate about it, it really is worth a substantial sum. And so that’s actually been a lot of fun. I’ve been listening to audiobooks. Actually, maybe at some point we could do a whole episode on it because that’s what I’m doing what my spare time is really thinking and looking about that and educating myself again and updating my skillset there. So, I have a lot of thoughts on the topic.
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Episode 308 | Work-work Balance, Living A Process-Based Life, and More Listener Questions
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike discuss work-work balance, living a processed based life, angel investing, and answer more listener questions. Mike also gives an in depth update on his progress with BlueTick, and Rob helps define angel investing and shares some ways to make a possible return on your investment.
Items mentioned in this episode:
Transcript
Rob [00:00]: In this episode of Startups for the Rest of Us, Mike and I discuss work/work balance, living a process-based life, [angel?] investing, and more listener questions. This is Startups for the Rest of Us, episode #308. [THEME MUSIC] 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 [00:28]: And I’m Mike.
Rob [00:29]: And we’re here to share our experiences to help you avoid the same mistakes that we made. Wait a minute, was that the right thing? I wasn’t reading it.
Mike [00:36]: I don’t know. You tell me. I wasn’t listening [laughter].
Rob [00:38]: Yeah, I think – what is going on this week, sir?
Mike [00:42]: Well, I started rolling out the latest updates at Blue Tick, and this is kind of a massive release that I’ve been working on for a while now. But the core functionality of it is that it allows the application to download the actual contents of mail messages from somebody’s mailbox. The difficult thing behind it was actually that, depending on which type of mail server you use, there could be a lot of duplication in the mail messages that are behind it. So whenever you move a message from one folder to another on a mail server, it doesn’t move references around. It actually copies all of the data as well. So I basically had to run through this process of downloading the messages, and trying to find out if they’re unique or not, and storing them. It was kind of a mess. I don’t think I’ve ever written so much test code in my life for one specific function. Or for one feature, to be honest. Because there’s just so much involved in it.
Rob [01:35]: Yeah, it sounds like it. Why is this important for Blue Tick to have as a feature?
Mike [01:39]: People have been asking me to basically be able to surface just the content of the emails inside of the application, because they want to be able to log in, and when they’re sending emails through Blue Tick, they want to be able to see the replies, and what previous messages have been sent to the person. The only way to get that is to download them from their mailbox. So it makes it difficult to be able to surface that. I can show pretty easily the emails that I have sent, because I keep copies of those, but I don’t have any other way to show them emails that have been sent prior to them signing up for Blue Tick, unless I go into their mailbox and download them.
Rob [02:15]: Alright.
Mike [02:16]: So it basically provides them with a better history of all the different conversations. It gets more important in a team situation, because if you have multiple people who are on a team and User One sends an email to Sally, and then User Two sends a different email to Sally, you’ll be able to see those things in aggregate, so you can see what the team communication is with a particular person as opposed to just your own personal communication with that person.
Rob [02:39]: True. The bummer is that you had to build it yourself from scratch. I have to imagine that there’s not as much – well I guess with .net there isn’t as much open source stuff out there to do this. I know that when we tried to do stuff like this – we haven’t done this exact task, but when we have done stuff like this, like parsing RSS feeds, or just stuff that’s semi-standard but it’s a little [cloogy?]. There’s bits of [Ruby Jam?] written to do that and that we were able to use. Were there no components out there that did take care of this?
Mike [03:07]: Well, there’s components out there that allow you to interact with a mail server and download the stuff, but there’s nothing that says “Okay here’s this back-end storage system, and it’s a very generic thing, we’re just going to treat it like a database or something like that.” And you can wire up those pieces, but there’s nothing out there that directly translates a copy of the contents of a mail server into some generic back-end storage system. Because the back-end storage footwork can be pretty much anything. It can be a database, it can be a [nosequel?], it can be a file system. It can be a variety of different things. And all of the components that I used to get the messages are all of the shelf, but the back-end storage of it – depending on how you index things and how you want to surface the data, and what specific pieces you want to actually store, those are the pieces that I had to build. Anywhere where there’s questions about how do you search it, or index it, or anything like that? Those are the things that I had to also build. And then making sure that there’s tools in place that we can verify, “Okay, yes. We got this message, and we were able to get the contents. We built all the [indices?] and everything else.” And later on, my message might get deleted. So if a message gets deleted, then all that stuff needs to be updated. And then we had to build tools to make sure that everything got deleted. There’s no orphan data laying around, etcetera. It gets ugly very, very fast.
Rob [04:27]: This does not sound like fun at all.
Mike [04:29]: It is not. It was not.
Rob [04:32]: So, on my side, I wanted to call out a forthcoming e-book from MicroConf’s very own Kristoff Englehardt. And his e-book is SassEmailMarketing.Net and he’s obviously writing it for Sass Companies. He’s teaching about email marketing. And he did a video interview with me today. I’m assuming that he’ll include it as a bonus or something like that. So if you’re interested in that topic, SassEmailMarketing.Net, on another note, did you notice that our last two episodes went live almost two weeks late?
Mike [05:01]: That’s not technically true. [Crosstalk] They were out there.
Rob [05:06]: Right. That’s true. That is technically true. I got on Downcast, which is what I use on my iPhone a couple weeks ago on a Tuesday, and the episode didn’t come out. I thought, “that’s weird.” So I went to the website and, sure enough, it was live on the website. Well, I was thinking that maybe iTunes and Downcast got out of sync. Because Downcast – I think it must scrape iTunes or something like that. It wasn’t showing up. So it was several days later and you and I finally dug into Feed Burner, which is something we’ve used to for subscriber counts. Feed Burner got acquired by Google four or five years ago and they have just let it languish. So sure enough, something in there just snapped. Nobody cares, or was willing to fix it. I posted to their forums, I tried to email them, but there’s no help email address at all, support bounced, support@ bounced back to me. So I posted on their forums and it was like crickets. So we had to go nuclear on it and just switch everything over to a bare WordPress feed. The redirect is going, so hopefully everyone who is hearing this episode, it came up properly in your pod-catcher. But if someone is experiencing issues, feel free to get in contact and we’ll see if there’s any edge-cases that we’ve missed.
Mike [06:16]: Well, the problem is that if they’re hearing this episode then, obviously, they’re past the issue.
Rob [06:21]: Perhaps.
Mike [06:22]: [laughter] So it almost doesn’t matter.
Rob [06:22]: Although, a bunch of people were saying that they didn’t notice because they listened to the episodes on the website. Can you believe that?
Mike [06:28]: Oh, that’s interesting.
Rob [06:29]: I know. I would never have thought to do that. It just doesn’t – I mean, they’re on the website but it’s more for posterity, right? I guess the main consumption driver is really a pod-catcher. And I think 80% maybe of our downloads – because that was the cool thing. Feed Burner would tell you what percentage came from iTunes versus the Google downloads. It just had all these different divisions of your downloads. It was like 10-20% web and everything else was podcast apps. And of that, I think it was 80% or 90% iTunes. It was a huge consumption. Although, wait. That’s not true because Google had at least – they had the Android thing and it was like 20-some%. Anyways, I don’t remember the exact numbers, but it was nice to know. And we’re basically not going to have any of that data now. I mean, we do still use Blueberry I think it’s called. It gives us download data per episode, but the metrics in there are not very good. I guess we’ll just continue to fly blind.
Mike [07:20]: Yeah, that’s one of the downsides for podcasts in general. The statistics behind them that allow you to see kind of what’s going on, and what your listenership levels are. It’s atrocious. I’ve looked around a little bit, and talked to Craig Hewitt a little bit about it – he’s from Podcast Motor. And they’ve looked into potentially developing a product around providing statistics. I don’t know if they ever went anywhere with that, but the problem is that in order to get anywhere with those statistics you really need to kind of know – or at least be hooked into whatever the application or the platform is that the people are playing the podcast through. Because there’s a difference between a download and a play. You know, it could be thousands – it’s just like RSS feeds. There could be thousands of hits to the RSS feed, but is anyone actually reading it? And you really just don’t have any good way of knowing. That’s a very hard problem to solve, I think.
Rob [08:09]: Yeah, that’s kind of left out. I mean, since podcasting was bolted on RSS, and RSS by itself doesn’t have any type of analytics built into it, right? It just simply passes you a URL of a file. In this case, typically an MP3 file. And so what you’re saying is that when someone hits your RSS feed and then goes and downloads the MP3 file, your web server has no idea where that came from. It doesn’t know that it came from iTunes, it doesn’t know that it came from a pod-catcher or if it was played on the web and was just accessing it. So the cat’s out of the bag on that one and there’s not really much we can do to put it back in. But I guess that’s just the state of things. We can deal with it.
Mike [08:46]: The other funny part about this is that Feed Burner has kind of been on autopilot for Google since I think 2011 or 2012. So here it is like four years later and we finally decided to switch off of it.
Rob [08:57]: I know. Well, you know if things aren’t broken, you’re not going to spend the time and risk losing subscribers and risk potentially breaking anything. Any time I mess with this stuff I always feel like DNS propagation. You know that it’s probably going to work, but you’re not really 100% sure until it does. And there’s really nothing you can do to test it. You just have to do it. You just have to click the button and hope that everything redirects. And if it doesn’t and things start breaking it can kind of suck. So we have some listener questions that we’re going to run through today. I think that this cleans out – I don’t think we have any more listener questions in the queue, which kind of makes me feel good. We’ve had some of these listener questions in here since 2014. I’m sorry about that. It also makes me feel a little bad because people aren’t asking us questions. I feel like we should get these conferences filled again. So if you have a question for us that you’d like us to answer on the air, please send your questions to StartupsForTheRestOfUs.Com. So our first couple of questions are from Anders. Anders Peterson, who comes to many MicroConfs, you’ve heard us mention him on here before, said “One question I have is, do you have anyone in your life that continually asks you the hard business questions? Those questions you don’t want to hear but probably need to. If you do, how do you find those people?”
Mike [10:03]: I would say that I probably use my mastermind group for this kind of thing. When I have questions or problems I will bring them to them. But I also feel like in a mastermind group you have to be a little bit cognizant that over time you become good friends with people, so it can more difficult for them to essentially challenge you on the things that you’re doing, and really put your feet to the fire and say, “Look, you’re going in the wrong direction here. You haven’t made progress on this in a very long time, what’s going on?” They tend to be more intimately involved in the things that you’re doing, so they’re not as objective. That’s not to say there’s no value in having made a mastermind group, because I think there’s a ton of value. But I also think that because they are much closer to the situation – obviously you’re that kind of first tier where you’re very close to it and it can be very difficult for you to see the forest through the trees, so to speak. In addition to that, your mastermind group tends to be people who are also only one step removed. And then if you have a business coach or something like that, they’reprobably a little more removed from that, or even if you have just people that you meet at a meet-up or entrepreneurs that you meet a conference. Those people are even another step removed. I think as you get further removed, it’s probably easier to be more objective about things. And the conversation you’ll have, you’ll probably focus in on a few key issues versus the people who you are very familiar with who you’ve been talking about, they won’t necessarily question come of the assumptions because they’ve been there with you while you were making some of the decisions about those assumptions.
Rob [11:28]: I think for me it’s the same story. The mastermind people are going to be the people you feel comfortable enough with, or they feel comfortable enough with you to be willing to do this. Because if you don’t know someone very well and they ask you those hard questions, it kind of pisses you off. It’s like, “Who are you to ask me those questions?” But if you know that someone has your best interest at hand and they’re not trolling you on Twitter with a hard business question, but they’re actually asking it to help you maybe face up to some shortcomings or to face up to a decision you’re having or to call out bad decisions that you’re making or thoughts that aren’t valid. I think that’s helpful. So it has to be someone that you have a good relationship with. That you trust that they have your best interest at hand and that they’re not going to be a jerk and always ask the hard questions. Because if that’s all someone does, it’s going to get irritating to. You have to have a relationship beyond that. So I would say, yes, mastermind group. The other one is my wife. Sherri may not be inside the business and be able to ask the detailed business questions, but she does ask, as she’s hearing me talk about the same thing over and over over the course of a month or two months, she says “How are you going to fix that one? Why aren’t you fixing it? What can you do?” And starts prodding in there. And of course we have the relationship where we’re able to do that. The question of how you find those people, we’ve talked about finding folks for a mastermind. You’ve got to build those relationships slowly, build them over time, meet them at MicroConf, that kind of stuff. This is a good question. I think more people need to think about this topic. Who is it that is asking these hard questions, who has your best interest at mind and who knows enough about your business to know that it’s the right question to ask you? Thanks for sending that question along, Anders. Anders had a couple questions, actually. He said, “I’d like to hear more about how you handle work/work balance. I’ve talked a little bit with Rob last MicroConf Europe about how much time he spends on fun work and how much time he spends on crap work. What do you do to notice when the balance is off and how do you rectify it?”
Mike [13:19]: I like the phrase “work/work.”
Rob [13:22]: Work/work balance is cool.
Mike [13:23]: Yeah.
Rob [13:23]: I really like that idea of – it’s basically saying that not everything you do is going to be awesome every day, or fun every day. It’s like fun work versus crap work balance. Work/work balance is a clever way to say that.
Mike [13:34]: Yeah, but I can also see it coming from a large enterprise 500 company where they’re like, “Oh, there’s work that you do for us that you do here, at your desk, and then there’s work that you do at home while you’re not at your desk for us.” I guess for this type of thing I would say that if you look at the things that you’re doing and you’re finding yourself easily distracted from them and procrastinating them, then those are things that you probably need to figure out how to address. Is it something that you just need to power through? Is it a short term thing? Or is it something that you need to basically give to somebody else because it’s frustrating to you, you don’t understand it, or you don’t have the experience and expertise in order to do it? And I think that just being cognizant of what those things are and how you’re feeling about the work that you’re doing is important. It’s one thing to just say, “be more aware of it.” I don’t think that that’s the answer because it’s very difficult to become aware of it if you’re not already setting aside time to review those things. What I find is helpful is setting aside specific times at either the end of the day or the end of each week, depending on what you think the appropriate cycle is, to review what you’ve been doing and where you’ve been spending your time, and try and figure out if that’s the best use of your time. So it depends on what type of iteration cycle that you’re interested in achieving. If you’re trying to avoid those things where you’re stuck doing the same thing for several days on end, you might want to do a daily review. Even if it’s just five minutes set aside, a scheduled time, put a reminder in your calendar or do some journaling or something like that. If you’re okay with longer time periods where it might be a couple of days or a week or two, then you can space it out and say, “I’m going to do a review once a week, Friday at 3:00 P.M. or 4:00 or something like that.” When your week is especially winding down, put something in your calendar that says, “Let me come back and review what I’ve done over the past week.” So again, it depends on what that iteration cycle is, but the really important piece is making sure you set aside time to consciously review that as opposed to letting it be something that creeps in and then is a problem for days, weeks, or months on end and then suddenly you realize, “I need to do something about this.”
Rob [15:44]: I think that’s a really nice way to attack it – is to just review daily or weekly. Personally, I notice because I start losing motivation and I start not liking my job. I mean, that’s what it is. I’m the co-founder of the company and when I stop liking my job for weeks on end I realize I’m doing too much crap work and I need to figure out what it is. Then I start keeping notes at work. What did I do today that sucked? And I’ll do it as I’m going through. I don’t do it reflectively. I’ll realize as I’m sitting here in my inbox for five hours, okay, I need to figure that out. I mentioned this in several year-end reviews that I need to do less emails. That was something that was always there. Legal and administrative stuff and H.R. – there was a bunch of things that I was noticing would creep up as we were growing DRIP. So it’s work that had to get done, but it was work that I didn’t enjoy. Typically I’ll pick up on it because I’ll notice that I’m not enjoying stuff and then instantly the way I try to rectify it is I’ll identify, make a list, and then I’ll say, “Who can I hire to do this instead?” Like a specialist who is really good with administrative or really good with H.R. Because most of the things that you consider crap work is a job for someone else and it’s a thing that they enjoy. It’s just about finding the right person to do that for you.
Mike [16:56]: One thing that you mentioned in there that I think is probably not inherently obvious to everyone is that when you’re building your own business and you’re running it, you’d think that it would be like “this is going to be great, I have a job that I love because I built this job in order for me to enjoy it.” But the reality is that there are going to be aspects of running a business that you don’t enjoy. I think it’s just important to keep that in mind. Not everything about the business is going to be something that you enjoy. There are some thing you’ll just have to power through and there are other things where you’re going to want find someone else to do them.
Rob [17:26]: And then Anders’ last question was, “Have you ever noticed how most ‘normal’ people” – and actually, I like that phrase, “normals versus technologists” is a phrase that I’ve heard, but he says, “Have you ever noticed how most ‘normal’ people live an event based life? When I when the lotto, then I will become happy. When I get a new car, then I will be happy. Whereas it feels like most successful entrepreneurs live a process based life. I work on my business because it makes me happy, and because long term it will pay off. What is your take on this and where are you?”
Mike [17:53]: I would have to agree with that general assessment that a lot of people do live their lives that way, and they are always working towards these goals, but and they don’t always enjoy the process. They’re looking specifically for achieving that goal, but they don’t really look at anything beyond that. And they will make any number of sacrifices during that process thinking that the “I have arrived” fallacy that you kind of mentioned here on the podcast here before – the question is “what’s next?” What do you do from there? And if you don’t have an answer to that, it becomes very difficult to go on to the next thing, regardless of whether or not you were successful with the previous one or not. So you really have to think of a lot longer term than that. I don’t think that probably matters so much for people who are non-entrepreneurs because they have a 9-5 job, they go into work every day, and at the end of the day they go home and work on their hobbies and spend time with their families and it doesn’t matter. Because no matter what happens, they still have to go back to work the next day. That’s probably less of a problem for those types of people than it is for entrepreneurs in that situation where you could have a life-altering event – which is much more likely to happen, such as selling your business or selling your product, than win the lottery.
Rob [19:03]: Yeah. By its very nature, entrepreneurship is a constant state of forgoing present gains for potential future rewards, right? Your present day gains are things like you go out to Happy Hour, you could hang out and watch a movie, you could spend time with your family. There’s a ton of things you could do that are fun, but instead of that tonight you’re going to spend three or four hours writing code, building your business, doing some marketing. And over the weekend you’re not going to go out of town and go to the beach, you’re going to spend it writing sales copy and thinking through your pricing. That kind of stuff. That’s pretty much a perpetual state of affairs as far as I’m concerned as an entrepreneur. I think, Anders, you’ve made some generalizations here that I think are fairly accurate. I think that people who are drawn to entrepreneurship, they have to know they’re investing for something better in the future. So I do think there is that mix of – I think you can have the arrival fallacy as an entrepreneur because you can say, “Once I quit my job, then I’ll be happy. Once I sell my app, then I’ll be happy.” It’s easy to slip into that, but I do think the healthier and the long term entrepreneurs who make this more of a sustainable lifestyle realize that at a certain point you just have to be in it for the process. You have to find something in it that gives you the dopamine rush, right? And for some people that’s – Derek and I have talked about this – for some people it’s shipping a feature. It’s pushing a feature into production. And that’s the rush you need. And so you’ve got to find that and make that more of a part of your day. For other people it’s doing launches. Then figuring out what you’re going to do. An e-book launch, every other month for marketing? Could I do a video launch? Even if you have a Sass app, if what you really want to do is launch little products, because that’s where you get the rush from, then figure out how to do that. If you really love building a high-performing team, and working with them to solve problems, then figure out how to do that. That’s what it is, I think. Becoming happy and fulfilled by engineering a business rather than going for the end result. The end result – I mean, we talked about this with the Bill Walsh episode, right? Where he basically says to put your best effort in, be the best you can, and the score will take care of itself. That’s how I view this. It’s like the more you can make sure you’re happy and you’re keeping those around you happy, and making this a sustainable lifestyle, I think that good things will come of it eventually. Our next question comes from Kevin from Viper.io and he said, “I just wanted to jump in on a question. I love the show. I’ve been listening religiously and it’s overtaken all of my other podcasts. I have a question for you and hopefully you’ll have a chance to answer it. Rob, you say you do [angel?] investing in these fun startups. How do you make a return on those? I know some investors take a percentage of profits every month or something like that. Is that the structure you work with? Or are you banking on an exit? Have you made a return yet on any of those investments?” The fun strapping is where someone is basically trying to raise a small round. It’s typically between 50k and maybe 200,000/300,000 and it’s to get to profitability. So they’re not looking to raise a series A, B, and a C, they’re really just kind of raising a small round to grow quicker but to get to profitability. Last question is, “Have you made a return on any of these investments?” And the answer is no. I wouldn’t have. My first [angel?] investment was maybe three or four years ago. That was WP Engine and it’s now worth a bazillion dollars. I think their most recent round is public info. The most recent round was over a year ago and I think that they were valued at 120 million. So, certainly, my investments on paper are worth substantially more than when I first invested. That would be the business that’s the furthest along and there’s been no liquidity event or anything like that. Another part of his question is how am I going to make a return on these? Some of the investments are in big startups like WP Engine that are either going to get acquired or they’re going to IPO. I mean, there’s going to be a big liquidity event, as they call it. A chunk of mine – and it’s kind of what I’m focused on now because it just fits more with who I am and the business I believe have a reasonable evaluations are the ones that are going to be profitable businesses. These are not these moon-shot businesses. They’re businesses like Jordan [?]’s Hook and Justin McGill’s Lead Fuse and [?] from Matt and Joel – I’m an [angel?] investors in each of those. These are businesses that, I believe, they all absolutely have the potential to get to seven figures and maybe even eight figures in revenue. They’re going to be businesses that just spit out cash. They’re Sass businesses. And so gross profit on Sass apps can be something between 50% and 80%, and net profit can be between 20% and 70% depending on how you’re running it and how fast you’re growing all this stuff. So there’s a lot of money – a lot of cash – that can come out of these. So the deal typically is structured – and this is the same kind of deal that you’ll see at Indie.VC – is the money goes in and as long as the money is used to take care of the business, nobody takes money out. But as soon as dividends come out, a certain percentage goes to the investors. Some of the deals say that once the investors are paid back 3X, then things revert to a smaller amount that goes back to the investors. Sometimes investors get completely paid off, and are paid out at 5X. I think that’s how Indie.VC works. If they’re paid 5X then they’re own zero of the company anymore. And it’s only if the company were acquired before then that .VC would get it. I think that’s how it works. Don’t quote me on that. But that’s the idea. And each is a little different. I don’t want to speak specifically about the investments because the payment works private. The idea is, yes, while it used for the business nobody is making money. The founders are taking a salary, but there’s no dividends coming out to anyone. And then once they start taking that, a certain percentage which is negotiable – and it’s a different setup on each deal. Sometimes it’s based on how much you actually own. If you own 1% of the company, you get 1% of the dividends. In the others the investors are favored more upfront until they get paid back their initial investment, 1-2X. And then it flips. That’s the basic structure.
Mike [24:33]: I like the Indie.VC model, and I don’t know whether they pioneered that or if they’re responsible for pushing that, or if they were the first or whatever, but I like that idea better than the .VC model just because it’s more in favor of the entrepreneurs who are building it. I don’t think that you need this massive exit in order for it to be work it. I don’t know what your feeling or take on this is, but in many cases it’s not necessarily because you want to have this giant payout, but you want to see somebody be successful. You don’t want it to be a go-big-or-go-home, you want it to be something that somebody can grow into a viable and profitable business.
Rob [25:11]: That’s right. And those are the kind of businesses that I believe in anyway. Those are the businesses that I want to see succeed and that’s why I’ve started doing this model. And Indie.VC, I have seen their investor deck for people who become LP’s in their fund, the people that actually give money to .VC to invest. And they’re doing well with it. There’s definitely returns to be had in this fashion. This is also all modeled after brick-and-mortar businesses. If you want to start a restaurant or a car wash and you went to investors, a typical structure for that is investors do put up the money and you take a salary as you run it. Then as profits are generated and there are dividends, more goes to the investor. It’s often 80/20, 80% goes to the investors until they’re paid back either 1 or 2x, and then 20% goes out to the founders. It flips at a certain point. Sometimes there’s a maximum payout. Again, with Indie.VC 3x or 5x is I think where it maxes out. Where with brick-and-mortars, I’m not sure if it ever maxes out or how that goes. I think it’s more about a business that generates revenue, not this liquidity event. Right? In that sense, it’s funny – an app like Drip who’s long term play is become a profitable business has almost more in common than a dry cleaner or a car wash in terms of the business model, than it does with Facebook or Twitter where they really need to get massive or they’re just going to self-destruct. Our last question of the day comes from Jordie [Coski?] from TapFun.com. He says, “Hey guys, I’m a big fan of the show. I’m wondering how you would structure a salary for a lead developer on a Sass app. Would you build in any kind of performance structure related to revenue and revenue growth of the service?”
Mike [26:49]: I think that when you’re looking at this type of question, there’s two different ways that you can view it, or two different perspectives you can have. The first one is what role does that developer actually have in the development of the product? Are they a W2 employee? Or are they an external, third-party contractor? I think that depending on the answer to that, it’s going to heavily impact how you treat that person in terms of the compensation. So, for a W2 employee, obviously, you’re going to give them a salary. And this is really where the questions come in about giving them additional compensation or performance structure. If they’re an external contractor or third party that you just hired off of UpWork or LinkedIn or something like that, chances are really good that there’s not going to be any performance bonuses or anything like that. You’ve kind of negotiated whatever the contract rate is with them, and that’s what you pay them. It doesn’t really matter what their performance is, that’s what you’re going to pay them. If they’re a W2 employee, chances are this is where those questions will come in. And I think that in the case of developers, the vast majority of developers, there’s not going to be any performance bonuses, because it’s going to be very difficult to map the things that they bring to the table to the growth of the products. It’s very easy to write tens of thousands of lines of code that don’t really contribute to the bottom line in any measurable way. It’s very difficult to map those lines of code back to the performance of the product. You can write tens of thousands of lines of code that have zero to do with the product’s growth. That’s really what sales reps are for, that’s what the compensation record is for, compensation reps, people like that, that’s what they do. It’s to help them promote the product and incentivize them to grow the product. And they will do anything they can in order to do that. But with the developer, those mappings are much more nebulous. It’s very difficult to derive the impact on the product based on what it is that they do. So those are probably my general thoughts on it, in terms of offering equity or a stock plan or anything like that. Those things are all really negotiable. It kind of depends on what your relationship is with the developer and what the company culture is and how much money the app is making. You could do profit sharing or revenue sharing, those types of things. There’s lots of different way to go, but it’s also very situationally dependent. And I don’t think these are things you have to look at or really need to consider on day one when someone comes in. If you have a team or five or ten people, then maybe it’s something to think about. But for your first develop or two, I wouldn’t worry about it at all.
Rob [29:16]: Yeah, I agree. I mean, you have to think about A, motivation, and B, what’s kind of the standard and why has that arisen? And the standard is not to give anybody but sales people a cut of profits. I mean, that’s typically the thing. Even people in marketing, as a rule at startups, they’re not getting a percentage. You know, they may get a bonus at some point or they may get stock options, but they don’t get a cut of the profits. Because you need those profits to grow. Especially at a small Sass app, you really want that money. I think something like stock options, which is really good for retention, because they invest in it over the years, I think that’s cool. Because then everyone feels like they have ownership. Also think about motivation. Are developers motivated by money? I mean, some, yeah, maybe. But developers are much more motivated by having really cool problems to solve, and working in an environment that’s fun, and being able to ship a lot of code quickly. There’s certain things that are just more valuable than a few thousand dollar bonuses that they’re going to receive each quarter or each year. So that’s not something I’ve seen done, and it’s not something I would particularly recommend. Giving people bonuses at some time during the year, or doing profit sharing, or setting up some plan later on down the line I think totally makes sense. You want to take care of your people. If your business is making money, you should share it with them. And giving people stock ownership is cool, there’s lot of different options. But up front, having that be part of the deal, I think is really tough. You could easily give away more than you need to or want to because you just don’t know what the business is going to look like. Get farther down the road, get this thing live, and when things start happening then make that call.
Mike [30:41]: As you mentioned kind of early on in that answer, it also depends on what their motivations are. So, just thinking about giving them equity, some people might not care about equity at all. So you have to understand what their motivations are for that kind of thing. It might not impact their productivity in any way, shape, or form, and you just gave away part of the company. You have to keep those things in mind as well. I think those things take time and it’s not something you will want to necessarily decide on day one. So I think that about wraps us up for the day. If you have a question for us, 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 Out of Control,” by MoOt used under creative commons. Subscribe to us in iTunes by searching startups and selecting StartupsForTheRestOfUs.com for a full transcript of each episode. Thanks for listening and we’ll see you next time.
