In the fourth episode of TinySeed Tales Season 3, Rob Walling checks back in with Tony Chan of CloudForecast.
Tony shares that they’ve doubled their MRR in the last couple of months, and it feels like he has unlocked a cheat code.
Topics we cover:
- 2:02 – What’s changed since the last episode?
- 3:14 – Winning a huge enterprise deal that nearly doubled their MRR
- 5:21 – Deploying capital
- 12:31 – A key mindset shift that Tony had to make
- 13:33 – Tony’s experience at a recent TinySeed retreat
- 18:10 – Tony reflects on some low points
- 19:35 – What is he looking forward to?
Links from the Show:
If you have questions about starting or scaling a software business that you’d like for us to cover, please submit your question for an upcoming episode. We’d love to hear from you
Welcome back to this week’s episode of TinySeed Tales, season three, episode four, in which CloudForecast doubles their MRR and Tony uses the phrase, “It feels like we cheated.” It’s a really good episode. You’re going to want to stick around for it. Quick reminder that applications for our next TinySeed batches are currently open until September 25th, just a few days after this podcast airs. Head to tinyseed.com/apply if you’re interested, and let’s dive into this episode of TinySeed Tales.
It felt like we cheated to be honest. I’m trying to change my thinking a bit that Hey, everything and all the effort that we put in has led up to this and it’s not cheating. We did get lucky, but the work that we’ve done the last three years has culminated to be able to close that deal.
Welcome back to TinySeed Tales, a series where I follow a founder through their struggles, victories, and failures as they build their startup. I’m your host, Rob Walling. I’m a serial entrepreneur and co-founder of TinySeed, the first startup accelerator designed for bootstrapers. We’re back with Tony Chan of CloudForecast, the cost management tool for Amazon Web Services. It’s been about a month since our last conversation, and there are big changes afoot.
So Tony, listeners may not realize the way we do these episodes. Sometimes it’s a month, sometimes it’s three months between them. And I record voiceovers, we send it off to a producer, and then we get it back a few weeks later. And usually, what’s happened with the past three seasons is, I listen to it, the founders listen to it, give me the thumbs up, because you have final cut. But what was interesting with the last episode, because I sent you episode three just a few days ago, five days ago, and you listened through it and you sent me an email and you say, “Wow, how much has changed since then. Great episode. I hope people can relate to the highs and lows, the struggles, and it feels like pushing a boulder up a hill sometimes. That was just a few weeks. LOL.” And then in all caps, “GET ME OFF THIS ROLLER COASTER.”
So what has changed that made you say that? Because the last one was you were down, things were not growing. They were just going along in a way that you were not super happy with. So what caused you to send that email to me?
Yeah, absolutely. Last time we chatted, I had mentioned things were a bit slow and felt like we were floundering a bit. We weren’t getting new opportunities. It seemed like it was just string of bad luck. But since the last time we chatted, we closed a really big enterprise opportunity that essentially doubled our MRR to 35K. So that represents 50% of revenue. It did take us a bit of effort to close that out, but that was a huge change, and it’s a huge inflection point in our growth and our company.
Absolutely. That almost never happens. It’s so rare.
It literally looks like a hockey stick when I map it out. I’ve never seen that before, but that is a huge change, and I think that was the reason why I wrote that email. Because it’s two months where personally I felt like crap. I was by myself a little bit. Things were not going away. And then all of a sudden, we had a string of good luck and be able to close this deal and have that conversation and just put all our efforts into that opportunity and closed it.
And in the last episode, we talked about celebrating how you had crossed 200K ARR back in August. And I was thinking to myself, yeah, so now you’re looking forward to 250, and then you have a little celebration at three, a little celebration at four, and you just blew by all those, because you guys are over 400.
It felt like we cheated to be honest. I’m trying to changed my thinking a bit that hey, everything and all the effort that we put in has led up to this and it’s not cheating. We did get lucky, but the work that we’ve done the last three years has culminated to be able to close that deal. So yeah, it’s definitely a huge inflection point for us and we’re just so happy to be able to see that growth, and the hard work that we put in has led to that.
There’s an old saying that luck is when preparation meets opportunity. The only reason this deal went through is that Tony and his team built a product that people actually want and developed the skills to market it. I love that Tony has the perspective to give himself a well deserved pat on the back. But I also understand his initial instinct to be humble and even cautious. When it comes to B2B sales, closing a deal can take three or four months or longer. This one came together at whirlwind speed and carries new implications for the business.
With more money comes more problems. How can we use that money wisely? How can we spend that and generate the most ROI? It’s just crazy to think that at 420K, we have really high gross margins at close to 90%. I’m almost making what I did working at my previous job if I decided not to reinvest back in company. So I think that is also a huge relief. Obviously, we’re not going to do that. We want to reinvest in the company. So it comes with whole set of problems that accelerates a lot of things, whereas I feel like a lot of companies can step growth into that. Whereas for us, it’s a one shot deal where it’s just a huge step versus where we’re at before.
And now your thinking has to shift to, okay, we have all this money, so now we have this big margin in essence, how do we spend this to grow the company? Is that something that’s on your mind right now?
So it’s funny that you ask that because there’s also a sense of fear that I have on that side. When you first start out building your company, you have a sense of fear of, okay, maybe this won’t work out. I think we’re past that, but it becomes a different sense of fear. It’s like, all right, we are planning and we’re trying to be very strategic about it and ask people questions, but there’s still that uncertainty. It’s kind of ironic, but we’re close to a half a million dollar business, but what happens if we spend a whole year investing that money and the ROI that we had hoped for doesn’t materialize?
So there is definitely that burden that I’m carrying and thinking through. But yeah, we are strategically trying to plan through 2022 and how to budget things, not something that we’ve been really good at and how to plan for things on the growth and marketing side, but also on the product side as well. So there’s definitely a lot of moving parts and literally any typical bootstrap company, they get maybe two or three years to plan all that because it’s a lot of incremental step growth. Whereas for us, we’re condensing that in 60 days. So it’s not a lot of time to think through this and just making sure we spend the money the right way.
Can you give us any insights into what you’re thinking in terms of hires or marketing or how you can invest it?
So on the product engineering side, it does make sense for us to maybe hire an engineer more on the senior side to help Francois a little bit, to help us move faster on product. That’s something that we’ve always been really good at. So that is a very easy input output type of scenario.
I think the tricky part at the moment is the growth and marketing side, and it feels very overwhelming. And there are just so many moving parts and just so many different ways we can execute and how we’ve always executed previously, it’s like, oh, we come up with a thought and idea and we just do it. But with this type of money that we’re getting, we need to be strategic about it and we need to plan for it. And I feel like that’s something not a lot of bootstrap founders are really good at sometimes. We just fly by the edge of our seat and just execute and do it.
But when talking to a bunch of advisors and mentors, a lot of them say, “It sounds like you need to plan. You need to be really strategic about it.” That’s the main thing that the advice converged on is, “Hey, you need to be strategic and plan out the year and be able to hire contractors, the agencies in this area as well.” It is a lot of money, but it’s not enough to say, “Hey, let’s hire a full marketing team and build out growth person, a head of marketing, a content strategist.” So that’s where we’re at at the moment is just figure out who to plug in and where to plug people in for next year and what our budget looks like.
I think a mistake that a lot of folks make is thinking that, okay, we have this money and we do need to invest in marketing, and so I’m going to try to find that unicorn marketer that can do everything, that can do strategy and then do several tactics and is an expert at all these. And there is Corey Haynes and there is Asia Aragio, and there’s a handful of other folks we know, but realistically, that’s just not likely to happen. And so I think that’s what you’re finding yourself with is in a perfect world, it’s like, cool, I’m going to hire a developer and then I’m going to hire a marketer. But it’s like, well, are you hiring a strategist who’s going to try new things and have high level knowledge of a bunch of stuff, and then they’re going to essentially delegate the tasks to freelancers or to someone else? Because finding someone to do all of that is obviously pretty hard.
Yeah. I think that was the main conclusion we came up with while chatting with people is that unicorn does not exist. So we are working with Asia at the Man Maven. She’ll be a really good resource for us to help us think through what this marketing is and helping us set up a foundational piece. Essentially, she’s coming in, doing customer interviews and helping us set a really good foundation for us for the year and how to plan out the year. She’s acting essentially like a CMO or a VP of marketing for us on the initial setup chat and a project that she’s working on. So we’re very excited for that, because in the past, it’s always been Francois and I just making things up as we go or just taking tidbits from what our customers tell us. Whereas it feels great to have someone who can help us plan for that and have probably seen millions of similar scenarios and be able to just set a really strong foundation for us.
The other area too that makes sense for us based on just our data point is just doubling down on content and SEO. I think you mentioned it’s easy to get overwhelmed by all the channels and where to focus on, but chatting with Ruben, Corey, you and the convergence of advice was it seems like content SEO is an area that should be the primary driver in the area that you should double down on. So helps us keeps our focus on what channels. We talked about outbound, but when we look back in 2021, we blew 25 grand and it didn’t materialize and doesn’t mean we are going to ignore that channel, but it seems like we just need to amp up where we a hundred percent know where things are working and figure out that process as well and where to hire contractors and agencies in that area.
The last time we spoke, Tony had already been thinking about hiring a couple extra people to deploy the extra capital they were sitting on. Now with all this additional MRR, they have even more dry powder to take some bigger risks.
I think there is a level of somewhat confidence. We plugged in our new growth numbers and we’re like, “Oh, we’re completely fine.”
Default to live plus plus, right?
Right. The previous mentality is we were counting everything that we were spending. We’re very mindful of where we’re spending our services and the apps we buy or doing business meals and so on. But now that’s almost a rounding error. We don’t have that burden or stress to think about that. Now we can set our focus on what really drives our expenses, which are who we hire. When we looking at the numbers and the balance sheet income statement, that is the primary driver of where our money’s coming in and out.
So I think there’s a weight that’s been lifted from us. We don’t have to worry about paying ourselves next month or we have the money. We were always relatively fine. I think as a bootstrap founder, you’re definitely more hyper aware of that. But with the newfound MRR, it’s definitely less about that, but more of okay, how can we execute? How can we plan? How can we amp this up a little bit more and just continue to grow and build upon the money that we’ve gotten as well?
So I think we’re trying to shift to that mentality a bit. It’s still a bit hard, but that’s something that I’m just trying to remind myself. It’s okay to spend 10 bucks to make your life easier with this one software. It’s more so who do we hire? And that’s the big driving point of growth for us.
I’m glad you called that out because it’s an adjustment a lot of founders have to make if they have gone from being really cash strapped, really bootstrapped and either raise funding or grow a business to the point where they’re in your position. Whether it’s 400K ARR, four million or 40 million, at a certain point you hit it and you realize, oh, okay, I have to change my thinking and I can’t be so frugal all the time. It will actually be detrimental to the business.
It comes back to what areas is the best spent for Francois and I? Time right now is the most important part. So that area might not be code up on, but my time is probably going to be spent on making sure the engine of what we do and produce with content and SEO and driving more opportunities there, that is where my time is best spent at the next six months. So that is probably the mindset shift that we have on our side.
So switching gears a bit, this conversation took place right after Tony and I got back from a TinySeed retreat in Scottsdale, Arizona. We have founders around the world so bringing them together physically is an opportunity to elevate the mentorship that makes this program special. Plus, our founders can actually get in some R and R between focused conversations on hiring, onboarding, marketing, churn, and everything else a SAS founder worries about. I wanted to ask Tony about his experience at the retreat.
I’m curious, my impression is that you are an extrovert and you get a lot out of being around other motivated, ambitious people, but I’m curious to hear in your words, what did you come away, whether it’s tactical things or whether it’s just a broader sense of inspiration or whatever, what did you come away with from that retreat?
Yeah, that retreat was great. So that retreat was with the spring and fall batch in Scottsdale, and I think just being around fellow ambitious bootstrap founders, a lot of them are going through the same struggles as you are, have dealt with the same problems, can understand the context and the issues that you’re going through and be able to have empathy and relate to that. And just be able to chat about work and life and just be able to connect with people that are similar to you, there’s just no better feeling than that.
And I, honestly, and Francois as well, we felt energized leaving that retreat, because not only we got to chat about our business, but we got to meet a lot of really cool people, and it really motivates you to just keep pressing forward. And there was a good amount of diverse activities where we chat about things on a tactical level, like where should we focus? That advice we also got was to focus on SEO content. But we also had a lot of time where we went go-karting, we did the hot tub thing and be able to talk about non-work items and talk about life things as well with other founders. And I thought that was really cool. And I really enjoyed that.
And I’m bummed that we only have one retreat left in Minneapolis, but that was a great retreat. And I really enjoyed it. And I’m glad Francois was able to go, because I haven’t seen him in a while actually. And he just came back from his wife having a baby. So it was good to connect with him, and he felt energized as well because he hasn’t been to one of these retreats. So that was his first one. So he had no idea what to expect.
It was one of the best retreats we’ve hosted, partly due to a lot of factors. It’s like the founders who showed up like yourself really came to focus and hang out. And yeah, I like that you called out being energized because that’s how I felt leaving it as well. I think the feeling of other founders understanding you and having a shorthand, I summarize that as belonging. You feel like people really understand… When I say MRL TV and ARPU and KAK in any other room, no one has any idea what I’m talking about. People don’t really understand what we do and that’s okay.
But when you get in a room, whether it’s 35 founders at a TinySeed retreat, whether it’s 275 founders at a Microcom Growth event, when you get in a room with that many people who you know you can just have an interesting conversation with about something that you really care about, it is inspiring. And it’s very rare that we’re able to do that.
I think what helped too, and it might have been just the luck of the draw is I felt like a lot of the founders were in relatively same growth stages. There might have been that have hit a million and plus, but I think the fact that all the batches were in 2021 and are relatively in the same growth stage, definitely helped facilitate a lot of the conversations, because the memory of whatever you’re going through or the advice where it’s fresh. We know the tactical things of how to approach whatever the problem you’re dealing with or have seen those items, because you are relatively in the same growth stage.
So I think that was very, very helpful and kudos to TinySeed, be able to pick founders, I wouldn’t say similar, but it was a good diverse group of people, and no one had egos. Everyone had a lot of humility. Everyone was willing to share. No one was like, “Hey, look at me. Look what I’m doing, blah, blah, blah.” Everyone was very, very helpful and willing to give back. I think that was the big thing, willing to share their experiences. So I think that was a very refreshing part of it.
So we’ve talked about good things, exciting wins and such. Do you have any low points since we last spoke? Any big losses you want to bring up?
Nothing in particular. It is a little slow. We’re a few days away from the holidays and the New Year’s. So we do have a lot of warm and code opportunities that we have in the pipeline, but they’re just on hold, and it just sucks not being able to do something about it because a lot of our customers are out of office. So yeah, I think that’s the biggest setback is not being able to make continual progression on just closing more of those opportunities that we’re getting. And honestly, we probably have to wait until mid-January and February.
So yeah, we grew and we doubled our MRR, but not being able to progress that further, that’s also a weakness that I have. Just wanted to keep pushing forward and such, but I can’t do much about it at the moment since a lot of people are out of the office.
I wouldn’t call that a weakness either. That’s just founder drive. That’s an adaptive quality that we all get as entrepreneurs.
Yeah. It sucks. Yeah, we should celebrate and all that stuff, but there’s that part where I just don’t want to settle. And it just sucks waiting two weeks till people come back. If I could, I’d knock on people’s doors, but they’ll probably freak out a bit. But things are just at a holding pattern at the moment and things will be slow the next two or three weeks.
So assuming we chat again in six or eight weeks, what are you most looking forward to?
I am looking forward to seeing everything that we’ve planned for 2022 at the moment, and starting putting those things in motion and spending money. In four to six weeks, we should have Asia up and running. We should be starting interviews and such. So I’m really looking forward to seeing how all that works out. And we should start the process of hiring another engineer. So that will bring us to four full-time hires and a bunch of contractors.
So I think just getting started and just being out of this holding pattern is something I’m really looking forward to because I’m already itching to get back to work and be able to do things and be able to connect with customers and trying to progress the business more.
I see why Tony is so eager to get back to work after the holidays. The team has new talent incoming and it feels like the only direction from here is up. Stick with us to find out how CloudForecast fares in the new year. We’ll also be formally introduced to Tony’s co-founder, Francois. That’s next time on TinySeed Tales.
In the third episode of season 3 of TinySeed Tales, Rob Walling checks in with Tony Chan of CloudForecast to see how he is faring since his co-founder is now on paternity leave.
During this time, Tony shares a big win along with dealing with some hiring and growth setbacks.
Topics we cover:
- 1:24 – How the business is doing while Francois is on paternity leave
- 2:36 – Tony’s perspective on being a solo founder for the past 6 weeks
- 5:04 – Managing your own founder psychology
- 7:49 – How Tony is dealing with an unexpected sales slump
- 16:16 – Did Tony end up hiring a full-time SDR?
- 21:04 – Dealing with setbacks
- 22:41 – What Tony is looking forward to in the next couple of months
Links from the Show:
- Tony Chan (@toeknee123) I Twitter
- TinySeed Applications are now open
- Episode 613 | Hacking Your Founder Psychology
If you have questions about starting or scaling a software business that you’d like for us to cover, please submit your question for an upcoming episode. We’d love to hear from you.
Welcome back to Startups For the Rest of Us, this is season 3, episode 3 of TinySeed Tales where Tony’s co-founder goes on paternity leave. It’s a really good episode. As a reminder, applications for our next batch of TinySeed founders both in Europe, Middle East and Africa, and the Americas, are now open. Head to TinySeed.com/apply if you’re interested. Applications are open for the next, almost two weeks until September 25th. And with that, let’s dive into this episode of TinySeed Tales.
I get to wake up and have the freedom to set my own day. I get to help people, I get to record this podcast, that is stuff that is really important and I just had to remind myself of that.
Welcome back to TinySeed Tales, a series where I follow a founder through their struggles, victories, and failures as they build their startup. I’m your host Rob Walling. I’m a serial entrepreneur and co-founder of TinySeed, the first startup accelerator designed for Bootstrapers. The last time I spoke to Tony, his co-founder Francois, was about to go on paternity leave and he had just started working with a new full-time engineer named Katia. Katia showed up with a more expansive skill set than Tony and Francois had realized and she started contributing to the team very quickly. That was about three months ago. Let’s catch up and see how things have gone in Francois’ absence.
With Katia has been going really well. I mean, even with Francois being gone, we had a good plan for her and what she needs to do and what she needs to execute on. We felt that we needed to give her something tangible and it gives her opportunity to learn about the app as well. So she’s actually working on a redesign of our full front end to just make everything look a little bit more polished and professional. And that’s something that we’ve been talking about doing, but we just haven’t had the time. So I think during our last episode, I mentioned Francois I was going to go on maternity leave and Elliot was finally born on September 25th, but it gave Katia an opportunity and a good project to work on. So she’s been working on just updating some dependencies, building tests in the app. So when we do kind of implement tailwind and implement design and implement things, there’s a lot of dependencies and updating to Ruby versions, it’ll be really good project for her, especially for her to kind of dive into each paged app and really learn the app. So it’s been really good. She’s been a big contributor to the team and she brings a lot of great ideas and brings a lot of good diversity in terms of her ideas that she have. So it’s been really great to have her on the team.
So how is it being a single founder for six weeks, five weeks?
I don’t know how other people do it. It was tough because we did have a relatively tough stretch in terms of MR growth. I mean we did finally break 200k ARR.
Thank you. And that was literally after we chatted in the month of August. So things were looking pretty up. And that was a combination of, we talked about expansion revenue, we have our largest customer, and I estimated 30 to 40% increase and I went, “Yolo, let’s just double their cost,” because they’re forecasted and they’re like, “Sure, whatever.” And we doubled their subscription, which was really great and they’re finding value out of it and they’ve enjoy working with us. And then we also closed the new enterprise customer. So August was looking up, and things were looking up for us August and September, October and so on. And we were getting opportunities, but some of those things just didn’t materialize while Francois was gone. And I shared with my mastermind group, I felt like it wasn’t more of the execution that was kind of bogging me down, but a lot of it was mental and just kind of fighting my own mental state in terms of, “Okay, things are not going well, don’t really have anyone talk to about it, kind of figure it out.” So it’s like it’s a battle with myself rather than what I’m actually executing on. And you alluded to it, you were kind of wondering how it was going to test my metal a bit, and it definitely did.
So that’s the piece of it that was the hardest was not having someone to talk about it with?
Yeah, I talked about it with my mastermind group here and there, but sometimes you just want someone who is there to just be like, “Everything will be okay.” And it’s not a personal, you’re not doing a bad job, and you just want someone to tell you that the circumstances that you’re dealing with or what you’re dealing with is flat, it’s not you, or it’s not how you’re doing things, but maybe it’s a string of bad luck or there’s a lot of factors. So I think having Francois back, and the first week back we talked a little bit more about that and he’s like, “It’s okay, we’ll figure it out and let’s plan how 2022 will look like.” So it was really refreshing to have him back this week for sure.
I always say that more than 50% of being an entrepreneur is managing your own psychology and the psychological side of it is such a huge barrier and it can weigh you down, as you said, whether there are wins or losses, if you keep yourself on point and you keep your head up and it doesn’t bog you down, you keep pushing forward. But whether with wins or losses, I’ve had amazing months of growth but mentally have been down and that tarnishes everything. It puts a taint on everything.
That rollercoaster was wild. August was massive for us with those two things and then we out of nowhere got tons of opportunities, but then for whatever reason, for different various reasons, a lot of that it materialized, which bled through September and October. But yeah, I think you’re right, managing that psychology. And there’s a few things that kind of got me through it. You actually had a podcast episode on Startup the Rest of Us and you talked about showing up, putting in effort and there was one quote that you said that I’ve been just trying to remind myself. It’s like, “Think about it not in weeks or months, but in years.” It’s really easy to just focus on your day to day and week to week and month to month and things you got to do. But the success comes in years and putting in the effort into work and controlling that psychology through the years and just kind of grinding it out and such.
And the other thing that I’ve been trying to be more mindful of is, why did I start doing this? Why did I start doing CloudForecast? And a lot of the freedom I get, and being to meet cool people and being able to help others. I think going back to that and just reminding myself of that was really helpful because we are helping people, and the medium just happens to be CloudForecast. So switching my mindset from, “I have to do this, this is such a bog,”, “But I get to do this,” So more of having gratitude. I get to wake up and have the freedom to set my own day. I get to help people, I get to record this podcast, that is stuff that is really important. And I just had to remind myself of that.
If I had told Tony five years ago that he was going to be running a company with a really good friend making north of $200,000 in annual revenue and growing, he would’ve pinched himself. But that’s the dream that a lot of startup founders find themselves living. And yet we too often lose sight of this gratitude Tony’s talking about. It’s easy to get bogged down worrying about the future, but it really does help to look back and recognize how far you’ve come.
It sounds like a couple of the wins that have been over the past couple months, you crossed 200,000 ARR back in August, Francois’ back, you survived, you made it through his five weeks off. You had expansion revenue that was driving growth during the summer. And you had said that new opportunities were slim during that time, but the expansion revenue was driving the growth. Has that continued? I guess you just mentioned that that one renewal was a big piece of it.
We had one renewal and then we had also one very big, I would say that would probably be one of our larger enterprise customers. So that was solid for us and kind of given us that. So in terms of net new, it’s been a lot of small things. We still are having opportunities come in the door, meaning enterprise opportunities and conversations and free trials, but we haven’t been able to close. And I think that’s something we have to review and think about. There’s three patterns I’m seeing, there’s been an increase in non-response after sign up. So after sign up we reach out and say, “Hey, what are some problems you’re looking solve?” And some of these opportunities look relatively big just based on an eye test and looking at their website and such. Some of them, they might have started a free trial, but they either like, “Hey, this is not a good timing, please reach back.” Or they just stopped responding to us after their free trial ended.
So there was that. And then we have also a bunch of warm opportunities, enterprise opportunities specifically, that are just not progressing as fast as we like. We typically like to see a 60 day close, meaning they start a free trial 30 days and then once it’s good to go, it’s 30 days worth of service agreement, discussions, negotiations and such. And some of them have been just dragging a little bit longer than we’d like or they’re like, “Hey, we’re not ready to start yet.” So those are the three things that we’re seeing with our net new opportunities and that’s kind of been bleeding into August, September at the moment.
And is there anything to be done about that? Is it just them dragging their feet on their side? Is it that the onboarding and setup is complicated and could be streamlined? What’s going on there?
Yeah, I think Francois and I, we started talking about this, and this is not a new problem. I think it has to do with the topic or what we’re solving, which is AWS cost. The few feedback that we got is like, AWS cost is not ever a day 0 priority. Meaning if something goes up really bad, or that’s not a technical responsibility where they’re like, “Okay, this is high high on a priority list.” Unless there’s a reason for it, then it becomes a priority. So sometimes people can drag their feet because it’s maybe fourth or fifth of their priority. And that’s like, I think you’ve talked about it, where it’s more of a vitamin product. Where it’s not something that people need right now or they have a huge dependency on it, we take their cost reporting and just summarize it in a better way so they can understand their bill a little better. So I think that’s where Francois and I want to discuss, how can we make it more of a sense of urgency with our product? Or they can see the magic moment a lot sooner or if there’s features we can implement to make it a day 0. I don’t know what the answers are, but I think part of it has to do with what we’re solving with our engineering customers that we work with.
Do you feel like, given that this has been happening since inception of you guys starting to sell this, if you look ahead two years, four years, whatever it is, do you think that will get better or do you think that this needs to just be solved by having so much in the pipeline that something is always closing or is it that the product can’t evolve or will evolve or you’ll eventually have the offerings to where people aren’t kind of pushing it off?
You just brought up a good point, was the product evolving into different areas. And we’ve alluded to this in past episodes where, what are some ways we can go beyond with this AWS cost monitoring and management because that’s our bread and butter and that’s what we work with, then it seems like… It kind of puts us in a corner. So I wonder, right now we’re working what we call Barometer, which is our Kubernetes cost management product and it’s in beta. So that kind of helps us diversify other features in terms of, maybe there are other areas where we can help our users that might cost a lot of money, help them manage their costs a little bit better there. And our customers saying, Datadog is another one, Snowflake, Databricks and so on. So I think having a more diverse tool will help us solve a lot of that problem because maybe AWS cost management’s not a priority for them, but there could be other areas that we can offer where it might be a priority. So I think there’s that, there’s the pipeline as well. So I think there’s a lot of angles that we can think about and attack that.
Yeah, I remember with the last startup I did before starting TinySeed and switching full-time focus to MicroConf and TinySeed, we were a good enough solution. We were slightly better than the competition for a while. It was like you could be on MailChimp and you got most of what you needed and then switching to Drip was better, but it wasn’t that much better. And so a lot of people put it off until we hit that magic combination. And this is always what developers and product people want, they want to build the feature that just causes it to up into the right and exponential growth and it saves everything. And usually that’s a pipe dream. It’s this never ending, “I need to ship the next feature in order to keep growing, which isn’t great because you can always be selling in marketing, but we eventually did, we launched automations and suddenly we were a lot better. And then when we launched the visual workflows where people kind of drag and drop stuff, that really doubled our growth again.
So weren’t a vitamin, our tool itself was an aspirin because people had a desperate need for it. But moving to us from their current tool was kind of a vitamin. They didn’t need to do it until they looked and saw it, “Oh my gosh, I want that.” And so I could see that happening, whether it’s a barometer, I think you called it, or some other combination of features. These are things that you land on over time. And this is why I think product market fit is a continuum. It’s not one or zero, it’s one to a hundred. And at this point you have a certain amount of product market fit. But as that ratchets up, people look at it and say, “I need that.” And when you get above whatever number, we can say 50 or 60 or 70, suddenly it’s like, people are just coming to you because it’s such a desperate need.
That’s very incremental. And it kind of goes back to your quote, “Don’t think about it weeks or months, but in years. I think one thing that we got going for us with Barometer is it’s been very strong feedback from our users. Even unsolicited feedback where they brought up this problem without us even talking to them about it. They brought it up and it was a pattern that we saw and we’re like, “We need to do it.” We’ve been working on this since probably March or April this year, and we got five beta customers using it right now. And hopefully by early Q1 next year we can start charging. So more expansion revenue and that would open and unlock more net new customers. Where instead of they’re like, “Hey, we have some questions about our Kubernetes clusters in terms of where cost is going there and how costs are allocated.” We have that now and instead of just doing AWS, we’ll have that and then we’ll think of other ideas as mentioned to kind of go beyond that. So yeah, it’s very incremental. That’s why thinking about it years is so important now that we’re talking through it.
With the Promise of Barometer and other new features in development at CloudForecast, I can imagine things going really well for Tony and Francois in a few months, but that won’t make their previous 60 days of disappointment any easier. Startup founders are always wrestling with both uncertainty about the future and impatience. Those emotions come with the territory.
So another topic that we discussed on our last episode, or last time we spoke, was that you had realized that your 10 hour a week SDR wasn’t enough, so you were going to go hire full time and you were interviewing folks at that point. And we had then talked about how funding, having the TinySeed money, had given you the option to hire a full-time SDR. Because if you didn’t have that, you couldn’t really afford to do it. So how did that turn out?
Yeah, I mean kind of related to the L’s that I’ve been taking since Francois has been a way, oh man, it’s not only the revenue part, but the part-time SDR did not work out for us. I mean in terms of money, it was not that significant, but there was a lot of time wasted to that. I think not only the 10 hour a week didn’t work out, meaning there was a lot of blockers because he was very limited time, still required investment on my time to make sure he set up and he can focus on the right things. But he ended up getting a really lucrative job with a tech startup and he’s like, “Hey, I’m going to focus on that.” And he actually ended the engagement pretty early. I think literally when I talked to you, he started, he did it about for a month and a half and then he’s like, “Hey, I’m going to be transparent with you. I need to focus on this.”
So that was time wasted, which kind of sucked, but I learned a lot too in terms of how SDRs and sale organization run but did not work out. And then we were also discussing, or in the middle of talking with a full-time SDR, that did not work out either. Once again, time wasted as well. And that was, I actually think that was a bullet dodged. So our interview process with that, it was pretty extensive, but I thought it was pretty reasonable. I had the person interview with a friend of mine who manages SDRs full-time at a different company. So he interviewed him, the person, and then as we got into more of the practical execution, how you do things and just trying to understand the nitty gritty, it seemed to me and with my friend that this person exaggerated their experience a little bit.
So it was a gut punch, but we dodged a bullet there because once we started digging into, “What can you actually execute on for us?” There was a lot of hand waving comments and statements that did not sit well with us. And there was a lot of pressure. I mean, the person’s a salesperson, so they were putting a lot of pressure on us trying to like, “Hey, if you don’t hire me by blah, blah, blah, I’m just going to move on.” And that did not sit well with us as well. So just a bunch of circumstances with that, that did not work out. So I think for Francois…
And then right after that, Francois went on paternity leave, so we couldn’t progress as fast as we like, or kind of move on, but it gave us time to kind of think about, “How should we actually think about this role? Is it a SDR? Because what we really need is someone to help us handle growth or marketing, or…” We’re trying to figure out what that means right now and take some of that off my plate, trying to list things of, “Okay, here are the things that I’m not really good at. Here are the things that we probably should hire for and have someone execute it better than what I can do.” So it’s going to be within the sales and marketing hire, but I think we’re trying to define what that is and what that actually means in the marketplace.
Yeah, outbound is amazing when it works and it’s, like any marketing approach, it’s an experiment and it’s hard to get it to work, just like SEO and pay per click and integrations. It’s a bunch of stuff that you have to try and obviously it’s a bummer to go in the loss column there, given that I know how much time and obviously money you just mentioned that you spent on it, so.
I think kind of flipping my mentality or trying to is like, okay, we actually learned a lot from it. And it’s not fun seeing that money go down to drain, but you don’t really know unless you try it. So that’s kind of my big takeaway.
In terms of losses from the past couple months, the pipeline didn’t materialize, so really haven’t been able to close many deals. You lost the SDR, didn’t find a new one, and you spent a bunch of time on it. Any other notable failures or setbacks?
Those would be the major ones, honestly. Usually it’s one or two things, but just felt like it really compiled during October and September and so on. So yeah, it took a lot of Ls since Francois’ been away.
And what, I mean at your low point while Francois was gone, what was that like? You can pick a moment or a day.
I started questioning, are we working on the right thing? Or are we solving the problem in the right way? And I think it goes back to what we were talking about is the psychology of it. This has only been maybe a month and a half, two months problem. And easily your mind can go in a really deep place where it’s like, “Things are not working out.” But really, we had a really big months in August, and maybe it was a string of bad luck, things did not work out the way we wanted and things that we can’t control.
Tony just voiced an important question that I think a lot of founders ask themselves, especially in the early stages. Are we solving this problem the right way? Back when we were first building Drip, there was a point where we realized we didn’t have product market fit. And I remember freaking out saying, “What are we doing? Should we even build an email service provider?” It’s these doubts that I feel are not talked about enough. They’re not on the front page of Tech Crunch because everyone’s crushing it and raising huge rounds of funding. But this is something that needs to be normalized because all of us feel it at one time or another, and some of us feel it for a really long time. Back to CloudForecast, let’s find out what Tony’s looking forward to in the near future.
What’s one or two things that you’re most looking forward to between now and the next time we talk?
Yeah, so I’ve actually been doing some initial planning for 2022 and just reviewing our 2021 financial numbers. And I think one thing that startup founders kind of have a propensity of doing is they think their business is going to go up in flames tomorrow, even though we have 200k ARR and we have customers and we’re profitable. That’s not coming from a logical point of view. So looking at our financial numbers and from a quick outlook, it looks like the money we made this year will cover majority or all of our expenses that we’ve accrued this year, which is a huge plus. So that means we actually didn’t touch any of our TinySeed money this year, which is a bit surprising because we’ve done a lot of tests, we burned some money here and there, and we’ve increased our costs in various areas, but the money we’ve made and the growth that we have with our expansion revenue and a few net new here and there has covered everything that we’ve done this year. Which means we probably should be a little bit more aggressive with spending the TinySeed money next year.
We felt that we were very aggressive this year, especially the last four or five months. But it sounds like there’s another part of aggressiveness that we need to unlock, and that’s where the hiring might come in, whether we hire one or two people. And I was using Matt Wensing’s product Summit to help us forecast, and that was a time saver. So I was able to plug in our expenses, plug in our revenue, and just, I’m like, “What is the worst case scenario? We don’t grow.” And our burn is actually not that bad. And I think that kind of gave me a positive outlook in terms of like, “Okay, we have some money. I thought we were aggressive, but we’re probably not aggressive enough. What can we do in 2022 that will really help us unlock things for us?” Whether it’s hiring someone that can execute on the marketing side way better than I can and can help alleviate some. How can I hire another Tony? Stuff like that.
So I’m really looking forward to sitting down with Francois the next month and a half, two months, and just have a good plan around product engineering. How can we give them more help? How can we give Katia more help? How can we get me more help? Because with our growth, it’s looking positive. There’s no reason why we shouldn’t be able to hire one or two more people, even at the worst case scenario where we just stay flat throughout next year.
That’s great. And it’s such an interesting realization as a, you bootstrap this company until you took TinySeed money. And as a bootstrapper you’re always thinking, I got to conservative cash, I got to be conservative with this. I need to grow the revenue before I can do it. And it’s weird to get $180,000 in the bank and then it’s like, “Oh, well, how fast should I spend this?” And if you don’t model it out, I think instinct is, even these days, running TinySeed, we’ve raised a gajillion dollars into funds, I’m still nitpicky about little expenses because that’s how I’ve run businesses for 20 years. And so I’m glad that you used Summit. I’m glad that you saw it visually.
You know what I mean? That’s what it takes. You either have to put in a spreadsheet, you have to sketch notes, or you have to put it in some tool that projects it out, and then you’re like, “Wait a minute, we’re actually not taking full advantage. Why do we take this money if we’re not going to at least spend some of it? It’s not like I need to blow through this in six months,” but being more aggressive gets you there faster, right?
Yeah. I think I modeled out, the worst case scenario was like 2% growth, and that seems very reasonable. That’s easy. And even then of increasing Francois and I’s salary and so on, we’re still going to make money. So yeah, I completely agree with that. You just need to sometimes see that, and I fully admit that’s not the strong part of me in terms of financial modeling and such. So I’m really thankful that this is a tool that just came in the right time and the right place where I can just play around with numbers with Francois, so I’m pretty excited about using this moving forward.
That was a completely unplanned and unsolicited plug for Summit, by the way. They’re TinySeed alumni though, and we love them. Anyway, as the CloudForecast team bounces back from some setbacks and celebrates some victories, we’re going to keep a close eye on how Tony and Francois end up spending the money we’ve given them. This is when things get really interesting, the risk, the reward, and the next stretch of the rollercoaster. That’s next time on TinySeed Tales.
In this episode of TinySeed Tales, Rob chats with Tony Chan from CloudForecast about the progress his rapidly growing team has made over the previous few weeks.
Tony is riding the roller coaster that is entrepreneurship and in this episode you get to follow along.
Topics we cover:
- 1:47 – New full time engineering hire onboarding results
- 4:50 – Part time SDR hire onboarding results
- 7:31 – How hiring affects company culture
- 10:19 – Tony’s biggest wins in the last few weeks
- 14:30 – Growing the product to grow Expansion Revenue
- 15:45 – CloudForecast’s summer sales lull
- 19:40 – Keeping sane as a founder
- 22:00 – What Tony is worried about coming out of summer
- 24:00 – The next MRR target
Links from the Show:
- Tony Chan (@toeknee123) I Twitter
- TinySeed Applications open September 12, 2022
- TinySeed Tales S2E1 I Introducing Gather
- TinySeed Tales 1 I A Non-Technical Saas Founder
If you have questions about starting or scaling a software business that you’d like for us to cover, please submit your question for an upcoming episode. We’d love to hear from you.
Welcome back to episode two season three of TinySeed Tales, where we continue hearing Tony and CloudForecast’s story, as they try to grow their company. Quick reminder before we dive in, applications for our next TinySeed batch, both our Europe, Middle East, and Africa batch and our America’s batch, they open next week, September 12th. If you’re interested in applying, head to tinyseed.com/apply. And with that, let’s dive back into our story.
It literally went from not having a clear path and then a month later having a clear path, right? That’s the never-ending cycle of being a startup founder.
Welcome back to TinySeed Tales, a series where I follow a founder through their struggles, victories, and failures as they build their startup. I’m your host, Rob Walling. I’m a serial entrepreneur and co-founder of TinySeed, the first startup accelerator designed for bootstrappers. Last episode, we met Tony Chan, CEO and co-founder of CloudForecast. CloudForecast sends engineering teams a daily email report that summarizes their Amazon Web Service expenses. It’s been a few weeks since that conversation, so let’s check in with Tony.
Last episode, we talked about your biggest wins, you mentioned, were getting into TinySeed and finalizing your first full-time engineering hire. One of your biggest fears was onboarding that first engineering hire, plus there was another part-time hire and your fear was that they wouldn’t be successful in the role. You had mentioned you feel responsible for their success in the role. I’d love to hear how those two are doing in the new roles, how Matt’s panning out.
Yeah. Specifically for the engineering hire, things are going well. Francois did a really great job in creating a big Wiki on all things onboarding and just being thoughtful from the process and putting himself in her shoes of, if I were Katya, how would I like to be onboarded and all the information I need to be successful? We spent a good week, two weeks maybe even just getting her involved, onboarding, figuring out a project that she could employ into production for her first week and making sure that she feels successful and constantly checking in.
I think it was just so satisfying to hear her say that we’ve been so helpful and her mentioning that she feels heard as well was just so gratifying, because all that work upfront really paid off in trying to be thoughtful about it. I think a lot of startups don’t think through that process, right? They’re like, “Hey, we’ll onboard someone and figure it out.” But there is 50/50 in terms of meeting the person halfway and making sure that’s successful as possible and putting yourself in their shoes and having a little bit of empathy of what they’re going on. But she’s already deploying things to production today. I had a bug and she jumped on it, fixed it, pushed it. She’s doing a great job so far.
That’s what I was going to ask, because there’s success on two levels, right? One is you want her to feel successful, and it sounds like she’s expressed that to you verbally, but the flip side of that is, is she fulfilling the role that you need her to at this point? It sounds like the answer is yes.
Yeah. There are some hidden skills that she had that she did not tell us. I wouldn’t say she hid, but she didn’t really kind of tout it in terms of front end skills and being able to create mock ups. We’re moving things towards Tailwind and she’s using Figma to create mock ups on some of the features that we’ve been building. Francois and I take a look and we’re like, “Wow! That is better than Francois and I can do any day,” right? She’s been contributing, giving her ideas and just taking projects that we’ve been giving her and running with it.
There’s a sense of ownership that she’s already taking with the company, which has been really great to see. She’s only, at this point, officially about one month in into the role. She’s a rockstar hands down. This has been a great hire for us and we’ve been including her on customer calls and such. She’s been great in terms of the work that she was hired to do.
It was finding secret buried treasure when you hire an employee for a specific role and suddenly they’re like, “Oh, by the way, I’m also really good at design. I can do mock ups. You need help with sales and customer success, because I’m really good at those too.” That’s super cool.
It was so surprising. We’re working on some new features and we needed some UI components of a report builder, and she just sent a Figma mock up and was like, “Hey, this is what I’m thinking and how it looks.” We’re like, “Oh my gosh! This is way better than what we can do.” That was really cool to see.
How about the part-time hire? Was it an SDR, someone who’s going to do outbound outreach, is that right?
Correct. We hired a part-time SDR and he’s been ramping up over the past month. He works about 10 hours a week for us. We see this as a three month test. It kind of helps us bridge to actually our full-time hire of what we’re thinking of is hiring someone full-time for this role. I’m actually learning a lot through him in terms of setting up the processes to make sure he’s successful, what’s working and what’s not. He’s already doing some outbound sequencing, poked some holes in terms of our messaging, and creating messaging that has worked for him at his full-time job and leveraging those skills to his part-time job and role there. It’s going okay.
But I think at 10 hours a week, we realized that’s not enough. With our business expanding and with the TinySeed money, it made us realize that we need to take a bigger risk and hire someone full-time for this role. Because at 10 hours a week, it’s just a little bit too slow in terms of what we like. There’s some things that he can’t do in terms of the outbound sales process that we would like this person take more ownership of that probably requires a more full-time position to execute, right? With the SDR role, we need someone to just take it from hunting to organizing things in HubSpot, to figure out where they should focus on, to sequencing, to booking us meetings.
At a part-time role, you can only maybe do two or three of those things. I think it helped us realize that we do need someone full-time in this role to help continue book meetings for Francois and I.
That’s a super common occurrence actually and it’s something that I still make the mistake of doing is the whole, well, we’re only spending five hours a week on it now, so certainly we can’t hire a full-time person for it. And then either trying to hire a contractor, trying to hire someone part-time, or trying to cobble together three of those kind of part-time needs into one Frankenstein full-time role, which I am guilty of way more than I should be. I should know better by now is the bottom line and I still do it.
I think that when you are hiring for a role, if you hire a smart, motivated person in almost any role, they can find things to do that will move the business forward, whether it’s just doing more of what you want them to do, or whether it’s taking on new initiatives and proposing things and pushing the business forward. I’ll say I’m not surprised that hiring someone 10 hours a week wasn’t enough given I think the emphasis on outbound that your company will probably have.
I think it’s also what type of company we want to build as well. Francois and I actually had a pretty extensive conversation about this because the extreme side is we can hire a bunch of people that are in other countries and help us run the sales process. That will require a lot of effort on our side. But I think the type of company we want to build is hire someone who is extremely motivated to be able to build this out, have some ownership in the company, and to be able to figure it out and fight for the business. I think that is a lot better than hiring someone part-time who is kind of…
They’re contract basis, right? They’re almost like a Hitman for outbound sales. Whereas we want someone who can grow in the role, maybe even build a team up behind them. I think that is a lot more satisfying to us and type of company we want to build.
What’s the process from here? Have you written up a job description? Is any of that in the works, or is that future?
Yeah, so that is into works. We’re actually interviewing right now someone who we think is a potential hire. They are just going through the process with Francois and I. Same as the engineering role, we’re trying to be thoughtful as possible in making sure this person can do the job of an SDR, someone who’s hungry, someone who will fight for the role, and giving us an opportunity to see if this is a channel that can continue to work for us on a full-time basis.
You realize we’re on the second episode of this podcast and you are already doubling the size of your team from two to four.
Yeah, it is what it is it. We’ve learned from hiring people part-time, right? That didn’t work out, but we need to move fast. We have the money. Acceleration and growth is the most important thing we have right now and making sure we continue the trajectory that we’re in at the moment and just keep pushing and fighting for it.
In the last episode, I asked Tony about some of his fears and worries, and he told me he wondered whether they were being too conservative with their money. Based on the way his part-time hire is working out, it sounds like the answer might be yes. That said, Tony and Francois are still in a great cash position. They have enough money to make some hires, but not so much that they have to hire a lot of people quickly. Too much funding at the wrong time can be detrimental to a business.
I’ve seen first and secondhand companies hire 20 or more people over the course of a year followed by a big round of layoffs. But let’s stay positive for now. I asked Tony about his high point since our last conversation. Looking back since you and I last spoke, what would you say is your biggest win?
I would say the whole Katya situation, the engineer that we hired full-time, and her contributing pretty quickly and being part of the team, not only as an engineer, but also as a fellow teammate, has been pretty successful I would say. We have been pretty intentional about how we can have her feel included, right? Doing things like we’re already discussing how can we do an Airbnb experience with her and doing team-based things. I think that has been a big win. I would say another pretty great win is our expansion revenue over the last three months that has continued to drive growth for us. Summer months has been tough in terms of net new opportunities and closing deals.
That’s been hard. I think everyone’s been on vacation or out of office more than last year and years previous. It’s been hard to grab conversations with people and try to close those enterprise opportunities that we’re seeking after. But one thing that has been consistent is just our expansion revenue. We’ve been 100% on our first set of renewals this year, and we’ve been able to grow some businesses that we already have currently. They’re seeing value of the product, good ROI with the product. They love working with us.
Building on that and continue to push hard on that is a theme that we’re going to continue to do. That has been our best two wins at the moment, hiring Katya and also just retention of big customers and also being able to expand on their MRR as well.
Net negative churn is the holy grail of SaaS and expansion revenue is what causes that to happen. It’s the cause of the thing that so many of us should be seeking as SaaS founders. As an investor and advisor to you and CloudForecast, that just warms my heart. It makes me so happy to hear any business that has true expansion revenue that is driving growth. Because a lot of times you have theoretical expansion revenue of like, well, we do have these pricing tiers and theoretically people should move up, but it doesn’t happen in practice. The fact that it is happening in reality is a big deal.
I think it says a lot about the future prospects of your business, assuming you can get the other things, get the execution and get the incoming lead flow and close deals and all that. That is such a solid cornerstone to be able to build a business from.
We’re very fortunate. There is definitely more opportunities for expansion revenue as we think about other products and areas to help with management of costs. There are few areas that we’re looking to. Kubernetes is one, Datadog and also Snowflake. Those are areas that we’ve seen while talking with customers where the monthly subscription is very variable based on usage and can have unexpected cost creep up. A lot of our big users are users of those tools, which then as we’re building more features, I think there’s opportunity to expand revenue beyond that.
We’ve already built their trusts with them directly that first year on just AWS. They know that we’re listening to them, we’re getting good feedback, and we’re solving the right problems for them. It’s a matter of just building those relationships up front to continue to push on our product and build iteration on our features that we have.
I want to call out what you’re saying here is that you are in that phase of basically approaching escape velocity, where you really do find… Obviously you have product market fit. Your churn is we’ll say effectively zero or close to it as you can get, and you have expansion revenue. You are looking for the one or two channels that you can just feed in and get that process going. But the fact that you are already thinking of other product add-ons that could potentially expand revenue is something that I think a listener can take away from this.
Now, you can make mistakes and get shiny object syndrome and want to go build an entirely new product, or you can want to add a bunch of features when you don’t really have the core of your product working well or serving the customer needs. But that’s not what’s happening here. I mean, this is something that you see as a genuine add-on customers can use and that you could potentially get more revenue from.
Yeah, absolutely. I think one thing I do want to iterate that it’s still very hard. You hear escape velocity and product market fit. It’s still a lot of work. You mentioned it in your podcast. Product market fit is a journey that you continue to iterate on. It still very feels much like that. Even though we have expansion revenue, even though things are slow and we’re growing, it does feel like it’s a lot of work and there’s a lot of effort for us to continue to push in terms of where we want the company to be at. It’s still very difficult regardless.
I’m interested to hear more in the coming weeks about CloudForecast planned expansion beyond offering reports on AWS. So far, the road to 200,000 in annual recurring revenue has had its ups and downs.
Summer’s been slow. People are on vacation. The part-time SDR that started, things have been slow this past month because he’s getting a lot of out of office more than usual. That’s kind of hard to see and hard to accept and not use that as an excuse where we can just take a step back and wait. Our signups are half of what they used to be. We haven’t closed any net new deals over the summer. We’ve been able to expand revenue, but I think we maybe close one or two smaller customers-ish. I see that as a setback, even though I have no control over it or no way to fix it. I think we have the mentality of just like, is there a way to fix it? But we can’t control that.
We also lost a pretty big opportunity. We had a customer that’s been trialing us for… A potential customer trialing us for 30 to 45 days on a free trial. We were so sure that we weren’t able to close them. And then we jumped on a call with them and the call did not go the way we thought it would. It made sense in terms of why we weren’t able to close them, but that was a gut punch because that would’ve given us a clearer path to 200K ARR. Which Francois and and I have been really fighting for. But it’s a roller coaster because literally the day after Katya started, we just needed to take a bit to learn from it and move on and make progress.
Those were the two biggest setback is just seeing the slowest summer and losing that deal. But out of nowhere, we’ve been able to close a big net new customer on the enterprise side. And then our biggest customers, we’re talking about further expansion opportunities. We might be able to increase our MRR by 30 to 40% and lock them on a longer deal. As I mentioned before, it’s a rollercoaster. We went from having a slow summer and somehow we’re back to having a clear path of hitting 200K ARR.
When I asked about your setback, you give me both good and bad. Signups are down, but you’re on a clear path to hit it. I mean, that’s essentially the rollercoaster of running a startup is like, it’s not all good, it’s not all bad. It’s too much of both I’d say.
It literally went from not having clear path, and then a month later having a clear path, right? I wouldn’t say we needed this win this past week in terms of this big opportunity that we’re about to close where it’s in procurement process at the moment, but it helped with morale, especially with the summer being slow and just being able to have that tangible grasp of like, “Okay, we’re almost there.” As we discussed before, once we hit 200K ARR, it’s going to feel like, “Oh my gosh, it doesn’t feel like enough.” That’s the never ending cycle of being a startup founder.
Yeah, indeed. As you sit and watch your signups not moving, in essence, many new signups happening, out of office responders, just in general, the numbers kind of sitting there flat, I guess, that’s a tough place to be in as a founder because that’s your number one KPI is to grow revenue, which is driven by new signups. It has to take a toll on you emotionally. I know this firsthand, right? On the months that we were flat, I would have existential questions of like, why are we even doing this? Is this going to happen permanently? Is this the way? Am I an imposter? Do I even know what I’m doing? Just all the questions that came up in my mind. Has it been like that for you?
A little bit. There’s a lot of questioning, faking yourself out, but we had to also kind of pull back and look at the bigger picture of things. I think one thing that has been helpful is being able to count those smaller wins, like Katya being successful, right? Expansion revenue being there and being able to wake up and work on this. That is a win. Being able to be okay. The other thing that’s been helpful is having extracurricular things outside of work that keeps us grounded as well.
Francois and I have very supportive wives that we can always count on and talk to and through things and be able to express our frustrations and our fears and our doubts. We have you as well that we can express these things and have someone that have a sense of empathy towards what we’re going through. Francois has disc golf. I have volleyball. Those are things that are also very important in terms of our mental wellness of going through the rollercoaster ride.
So much of it comes back to having someone to talk to about it who can empathize with you. If the only person you have to do that with is your spouse or significant other, that will I believe cause problems over time. You can’t put that burden on them. I made the mistake of doing that in the early days. And then turned to mastermind groups, and then turned to even just having other founder friends. It sounds like you’ve built yourself up a pretty nice network of folks who can empathize and support you in a way that keeps you from having to rely on any one individual.
Yeah, I think that’s one thing that Francois and I have strengthened is we shamelessly ask people for advice and help, especially when we’re feeling helpless. More often now, people are very open to spending some time with us to help us challenge some of maybe the false assumptions that we have going through at the time. Because you can be your own worst enemy with the thoughts that you kind of battle through when things are not going well.
When you’re part of a TinySeed batch, mentorship and perspective from other founders become some of your greatest assets. It sounds like Tony and Francois are doing a good job taking a step back and recognizing that the ups and downs of bootstrapping often balance out. Here’s hoping the rollercoaster doesn’t get too steep. Looking Ahead between now and the next time we speak, what is your biggest fear?
I would say our biggest fear is… I mentioned the summer months have been slow, right? We’re starting to see a nice little uptick this month, which is great in August. But what happens if it continues in September or October or November? That’s scary to think about. Probably won’t happen based on the data that we’ve seen last year and what we’ve seen this month. That’s a bit scary. Another kind of more on a personal level scary thing is Francois is going on paternity leave and I would be relatively by myself the next six weeks. Francois and I and Katya as well, we’ve been talking about a plan and we have a notion doc where we set boundaries and parameters.
I think it’s important for Francois to spend the six to eight weeks on being a father and being the best father as possible to his new son come in. But it is scary to think that I’m responsible for the business. I mean, he’ll be around here and there on emergency basis, but I have to continue to make progress on the business. I have to continue to push hard. I don’t have someone that’s going to be around that I can just ping quickly on Slack. I mean, I can text message him, but I also want to be respectful of his time as well. That’s pretty scary, but hopefully we can prepare for those things. Set the boundaries needed.
Francois has been doing a great job in making sure that everyone is taken care of and being thoughtful about his paternity leave towards Katya, towards me and also the business as possible, making sure that we have projects that we can do without him and that I can take care of and handle. We’re making progress on the business one the feature side, but also on the growth side as well.
What are you most looking forward to between now and the next time we speak?
I’m looking forward to hopefully finally getting to that 200K ARR hump. It just felt so elusive. We made that the goal to try to hit that by July. I mean, it’s August now and it seemed like we might be able to hit that in August or September. I think it’ll be a huge relief because Francois and I have been just trying to figure out any way we can hit that. It just feels so close and so within our reach to be able to hit that with the opportunities that we have at the moment and our sales pipeline.
I admire Tony’s fighting spirit. And at the moment, CloudForecast is doing so many things right. But as Francois takes his paternity leave, the added responsibility is going to test Tony’s medal. Stay with us and we’ll keep an eye on that 200K ARR goal and see what happens with the outbound sales role. Plus, we’ll keep tabs on what’s next for the CloudForecast product. All that and more next time on TinySeed Tales.
Welcome to Season 3 of TinySeed Tales, where we follow the founders of one SaaS startup throughout a year as they share their struggles, victories, and failures.
On the first episode of Season 3, Rob introduces us to Tony Chan, the cofounder of CloudForecast. CloudForecast is a daily AWS cost monitoring service for busy engineering teams. Tony is one of 33 startup founders from TinySeed’s Spring 2021 accelerator batch.
Topics we cover:
- 2:41- What’s CloudForecast?
- 4:09- How large is the CloudForecast team?
- 6:54- Why did Tony apply to TinySeed?
- 8:30- Why Tony turned down venture capital offers?
- 13:48- Tony reflects on the added complexity of taking funding
- 19:47- Tony’s biggest fear
- 22:34- What is Tony looking forward to?
Links from the Show:
- Tony Chan (@toeknee123) I Twitter
- TinySeed Tales S2E1 I Introducing Gather
- TinySeed Tales S1E1 I A Non-Technical Saas Founder
If you have questions about starting or scaling a software business that you’d like for us to cover, please submit your question for an upcoming episode. We’d love to hear from you.
This week, and for the next six weeks, we’re going to have episodes of TinySeed Tales season three in your feed on Thursday mornings. So you get a special bonus episode for this next six weeks. If you’re not familiar with TinySeed Tales, it’s a seasonal show where I interview a founder across about years time. I believe these six episodes were recorded over somewhere between 10 and 14 months. The idea is to give you some insight into the ups and the downs, the struggles, the victories, and the failures of a real startup founder growing a real SaaS company that was bootstrapped until they took money from TinySeed.
So in season one, I interviewed Craig Hewitt, founder of Castos, who many of you are familiar with. In season two, it was Brian and Scottie, the husband and wife pair, founders of Gather. And in this season, it is Tony Chan from CloudForecast.
I never know what to expect when we start one of these seasons, because it is just a conversation framing their business and finding out where are we headed with this? Some of these episodes are massive wins and some are crushing defeats. A lot are in between. If you’re not familiar with TinySeed, it’s the startup accelerator that I run for bootstrapped SaaS companies. We run applications twice a year and in fact, our next application period opens on September 12th, just a couple weeks from now. That will run for two weeks. So with that, let’s dive in to season three, episode one of TinySeed Tales.
From the very beginning, we were very focused on building a bootstrap business, cash positive, profitable to a point where we’ve turned down offers to raise money or to be part of accelerators because it just did not fit our convictions. And what we felt was best for the company.
Welcome to TinySeed Tales, a series where I follow a founder through their struggles, victories and failures, as they build their startup. I’m your host, Rob Walling. I’m a serial entrepreneur and co-founder of TinySeed, the first startup accelerator designed for bootstrappers.
We’re back with a third season of TinySeed Tales. In season one, we followed the founder of podcast hosting platform Castos. In season two, we followed the co-founders of Gatherer, the interior design project management software. Both companies have more than doubled their revenue since their seasons aired. Castos closed a $756,000 funding round. This season, we’re following Tony Chan, one of 33 startup founders in TinySeed’s, Spring 2021 accelerator batch.
I’m Tony and I’m the CEO and co-founder of CloudForecast. CloudForecast helps engineering teams manage and get better visibility on their Amazon web services cost through easy to understand report. So our main product is a simple daily email that summarizes everything they need about their AWS costs and our goals for them to understand what’s going on with their bill in less than 30 seconds. So they can focus on technical items that help grow the business and not financial reporting, and that’s where we come in.
Tony and his co-founder applied for TinySeed not once, not twice, but three times. As they say, the third time was a charm. He and his co-founder were convinced that our accelerator was a perfect match for them. We were impressed with their continued progress and tenacity. Before starting CloudForecast, Tony was employee number two at a company called Perfect Audience. His role there was something of a business Jack of all trades, handling customer success, support and sales.
Now he’s leveraged that experience to run sales and operations at CloudForecast. His co-founder, Francois, handles the technical side of the company. Together, they’ve been working on CloudForecast full-time for two and a half years as of this recording. We’ve recorded this episode in July of 2021.
How large is your team?
So it’s just Francois and I. A lot of companies are pleasantly surprised when we are on a sales call and we say, “You’re looking at the company.” Even our current customers as well, they think that we have a big team. But we are about to onboard. We just put a tentative offer to a full-time engineer. So we’re very excited about that. We do have a bunch of contractors, as well, that helps us with different parts of our business. So, that’s how big our team is at the moment.
Congratulations on making that offer. Is it scary to you? Or is it pure upside?
It is both. Because we’re moving from us doing the work and having everything we know in our heads, to putting all that information on paper or in an operation process and trusting someone to do the same thing, or have a similar output as us. I think that’s scary. We’re moving from just strategically how do Francois and I activate and do the work, to scaling and pushing other people to do the work.
It’s also scary on a personal level that we have someone on our payroll that relies on us for the food and the shelter and the monetary part. So this is definitely a very new experience for us because the money we make filters back to the employees we hire. So it is both, it is huge upside and we’re very excited. But also there’s the strategic and big picture thinking of how do we make sure that the person we’re hiring is very successful in what they do and setting them up for success. And being very thoughtful about the whole process.
That concept of letting go of a little bit of control, that is a very common refrain and a common feeling I think every founder faces in with their first or second or third hire. I think a big mistake that a lot of founders or even CEOs, or just early entrepreneurs make is you have these things and you want to hand them off. Instead of delegating them, you abdicate. Which is you just dump it on someone and don’t check back in. You don’t give them the guidance, you don’t answer the questions, you don’t provide the proper, as you said, procedure, or whether it’s just proper instructions or the tools they need to succeed. That’s why I’m glad to hear you say it’s exciting, but it sounds like you feel there’s pressure on you to make sure that this new hire is successful in the role. Not just that they show up and take a bunch of stuff off your plate. Why did you and Francois decide to apply for TinySeed?
I think there were a few reasons. The money is nice, helps us take bigger risk. We would not have even thought of hiring people or putting money into people without the 180k that we got from TinySeed. So, that’s one very small factor on our side. I think the vision of what TinySeed is, the mentorship, the community aligns perfectly with what we’ve been very convicted about on how we should build CloudForecast.
From the very beginning, we were very focused on building a bootstrap business, cash positive, profitable, to a point where we’ve turned down offers to raise money or to be part of accelerators because it just did not fit our convictions and what we felt was best for the company. We recognize what we do won’t be a unicorn. We operate a very niche market with Amazon Web Services. It could be a nice $15-20 million a year business. I think for us to get there, we need people behind us that understands that, that also have that same conviction, as well. So it was a very natural fit for us to apply one, two or three times. We would’ve applied a fourth time, as well, if needed and as many times as possible because we felt that it was just a perfect fit.
At the moment, CloudForecast annual recurring revenue is about $180,000. But I want to challenge Tony’s assumption that this company can only be a $15 million or $20 million business, he might be thinking too small. As Tony and Francois get further into this journey, new avenues will open up that weren’t obvious at this early stage. Maybe they sell at 15 to 20 million, or maybe they operated as a profitable company, or maybe it continues to grow. Any one of these options is life changing.
I’m not saying they need to think bigger, it’s really up to them. But to think that CloudForecast can’t get bigger or that it’s not in the right space to do so, feels like a limiting belief. TinySeed is all about guiding companies on the path that best fits them. I asked Tony why he and Francois didn’t opt to raise venture capital.
You could have kept bootstrapping and not taken any funding. Obviously you already described why you took money from TinySeed and the community and the mentorship and the guidance and all that. But I think, especially given that you and Francois had lived in The Bay Area, you have connections there, you had worked at a YC venture back startup in the past. You could also have said, “We’re not going to do something like TinySeed. We want raise venture funding. With CloudForecast, we want to go big, we do want it to be a unicorn. And we want to go out and try to raise that pre-seed or that seed round, series A, whatever, that puts us on the track to get really, really big.” Why not do that?
Yeah, I think it’s a life stage lifestyle question that every founder has to personally ask themselves. As I alluded to, we did turn down possible venture funding that would bring us to a different trajectory at Perfect Audience that was an angel round. So it was on a VC track. We grew from zero to eight figures in ARR in about 18 months. That was a whirlwind. We were in our early twenties, we had the energy to do it. Francois and I worked long hours. It was fun, it was satisfying and it was great. And we had a blast doing it.
However, just looking back and pulling back, I don’t think I can do that at my mid thirties at the moment and have that same energy. Priorities have changed, Francois and I are married, Francois is about to have a kid. I think as you grow older, your priorities and what’s important to you, changes. Like at the time we were single, not married. So life was work all the time. Whereas now, life becomes our wife and spending time with them and going on vacation and having a good work life balance. And Francois having a kid, that is a milestone in life that changes as you grow older, that is quite different from your early twenties to us being in our mid thirties at the moment.
So I think that’s a personal decision that we made. We’ve done it before, we experienced it, that was great. We don’t want to do it again. It’s also a business decision too, and how we want to frame our business model. So if you look at CloudForecast compared to all the other players in the space, they’ve all raised venture capital, they all have raised ton of money. But by doing that, they’ve all increased their prices a hundred folds and building a business model where it’s a percentage of their AWS costs. That’s because they’re beholden to their investors, they need to be unicorn and they need to do that.
However, charging a percentage of your AWS bill, 4 to 8%, is that really in the best interest of those companies? I believe the only reason why they need to do that is because of the money they’ve raised and there’s a level of expectation of growth that they have. Whereas for us as a mostly bootstrap founder, our business model flips. Like we are beholden to the user, we charge a flat fee and we feel that’s the best way to take care of our customers and not have ulterior motives and be able to have that transparency as well that we have in terms of our business model. So it’s a business model thing, as well, on our side.
In essence, you’re able to use your competitors, perhaps their biggest strength, which is all this investment money. You’ll be able to use that against them as a competitive advantage.
If we raised VC, they’re all going to tell us the same thing. You need to 100X your price, and you need to go after enterprise deals that are 2, 3, 4 years that are huge, huge, and percentage of spend. We feel like flat is the most transparent way we can price our users and have them feel that we don’t have ulterior motives on that side and our customers love that.
The ability to keep their price low is a competitive advantage for Tony and Francois. Not only that, but when you’re beholden to venture investors, there can be an additional mental burden. Founders taking part in TinySeed won’t have that experience. But the cash we’ve given CloudForecast has required its own mental adjustment.
I think our focus at the moment has been in a lot of different places. We’re thinking about hiring, we’re thinking about strategically, how do we leverage the investment that we got from TinySeed? It just feels like we’re being pulled in different areas and direction. For instance, I spent some time yesterday just figuring out what contractor docs to use and figuring out the onboarding process. It’s tiring to shift from doing those small tasks, to doing big picture tasks, to focusing growth, focus on marketing, making sure that our payrolls set, making sure our books are set and so on.
So it just feels like we’re being pulled … or me personally, being pulled in so many different directions as CEO. So I think we’re trying to figure out, or I’m personally trying to figure out what’s the best way to mitigate some of those things? Being more disciplined, maybe set up different days for different focuses. But these last two weeks in terms of just hiring and being part of TinySeed has shifted our focus in so many different directions that the money has created more problems, good problems. But we have to think about our business in a lot different ways than we’ve never had to in the past.
Yeah. It’s interesting you say that. I can imagine someone who is listening to this who does not plan to raise money. That might be a reason that they wouldn’t is that they feel like it could complicate things. I think investors taking over your business has always been the … I don’t know, the big fear. Because we see the news stories of founder CEO fired because investors, venture capitalists took over the company. That’s obviously not something that’s going to happen with our money because you guys are in control of your company.
I think some folks don’t want investor because they don’t want the pressure. They don’t want to feel like they’re being pressured to do something that they don’t want to do. Or they have a boss. I didn’t start a company to have a boss. But I think there’s another element to it. You’re bringing up perhaps the complexity that it creates. I’m curious, A, did you expect it to add more to your plate? And B, does it make you regret it? Does it make you think, “I wish we could just go back to the easy days of not having all this cash in our bank account to spend, to grow our startup.”
I don’t think we regret it at all. We have to pull back and look at the bigger picture of things. Like Francois and I can’t be doing what we’re doing as a business and as a growing business. It can’t be just two of us for the rest of our lives. We recognize that on our side. We fully have come to terms that if we want to scale the business beyond what we’re doing right now, we need to add more human capital, especially expertise in different areas to do what we’ve done, but do it a lot better.
I’m not a salesperson. I’m not a really strong SDR person who can hunt leads all day and every day. However, there might be people that have solved that problem before and have done a really, really good job. On the technical side, Francois always talks about not being really good on the front end side and he’s not happy when he has to work on the front end. So finding someone to be able to bring that level of expertise in and being able to shore things up on that side, where we might have a lot of technical debt in, that is the key and importance of growing the business. You’re taking your own expertise in what you’ve learned over the last two and a half, three years, and hoping to find someone who can really take it beyond what you do.
For example, for sales, I might be spending only 15% or 20% of my week on that. Just imagine being able to get someone that can spend 100% of their mental capacity on that. I think there is a bigger upside to get more people involved in the business than just Francois and I dilly dallying around with the same thing we went over. I think also by doing that, I think it will lessen the opportunity for burnout. There’s a lot of tasks that we do that are very mind numbing and just very tedious. I’m happy to do that at this stage of my career for 4, 5, 6, 7 months. But I’ve joked with Francois that I think if I keep doing this for a full year, I might just lose it. I think there’s some tasks on Francois’ side, it’s the same thing.
So it’s just kind of lessening the load that we’ve burdened ourselves with and put ourselves on and put on our shoulders for the last two and a half years. And be able to push that to other people that are expertise in. So I don’t think we regret it. Yeah, there’s a level of complexity, but I mean, that’s the part of doing business and that’s the part of growing. It’s growing pains, but we’ll figure it out. The best part is being part of the TinySeed community and just being able to ping the channel and be like, “Hey, I’m dealing with this. I just asked about healthcare and how does that look?” We had a huge thread of more than a hundred messages coming in and people chiming in. So there’s a level of comfort that we have that we have a community backing us, as well, and a family backing us, as well, that we can just ask questions and someone has dealt with that problem before.
There’s a phrase I’ve been saying for years, venture backed companies fail when they run out of money and bootstrapped companies fail when they run out of motivation. I’ve spoken about this before. It’s hard to feel satisfied as a founder when you’re always looking to the next milestone. Money probably won’t be the issue for Tony and Francois, but we will be keeping an eye out for signs of burnout. As we wrap up our conversation, I asked Tony about his expectations from now until the next time we talk.
Between now and the next time we chat, I’m curious, what’s on your mind as maybe the biggest fear? The thing that you think is going to keep you up at night. Not literally, hopefully it doesn’t keep you up at nigh., but what are you concerned about? What are you scared of?
Yeah, I think the biggest fear, there’s a few. As mentioned, we are onboarding our first full time hire outside of Francois and I, a part-time hire on the growth side. I think the biggest thing that we’re thinking of and the next time we chat, I believe that will be their first week of working. So Francois and I have pretty much a week and a half to think about, “How can we onboard them so they can be successful and do their roles and do their jobs really well?” Not only on a business level, but also how can we help them personally grow?
Them taking this job, it’s not only for them to help us grow the company, but they’re looking for external motivation, whether it’s personal growth in certain areas, wanting to work at a startup so they can learn. But how can we be thoughtful and provide that opportunity so they can feel that they’re contributing, but also growing personally as well? And that’s scary to be responsible for a person’s onboarding and not only on the business side, but on a personal level, as well.
So that’s something that Francois and I are going to start thinking about next week in a half, in two weeks. The other thing too is like, are we making the right decisions? Are we spending the money the best way possible? We’ve been very conservative with how we spend the money and are we moving too fast? Are we moving too slow? Are we doing it the right way? Those are the decisions that we keep up at night because we care very deeply about how we run our business. We care very deeply about the employees we are about to onboard. We care very deeply about investors that are specifically TinySeed that have given us the money to be able to grow.
I think it’s our biggest strength that we care a lot and is our biggest strength that it goes to a point where we want to be very thoughtful about it, but also it’s scary. That can be a weakness as well because sometimes we can be too conservative and not be able to pull the trigger right away or make decisions fast enough. So I think it’s a flip side. So in my mind, that’s my biggest fear. Hiring and onboarding properly and big pictures, are we doing the right thing? That’s something that we always constantly asking ourselves, are we doing the right thing?
And the flip side of that coin is, what are you most excited about? Most looking forward to between now and the next time we chat?
Yeah, it’s related to that because at the same time, we’re scared out of our minds and there’s just so much thought process to onboarding and that is fear, but we’re also trying to remember and think about the bigger picture is like, we just hired our first full-time hire. She will be ramped up in two weeks and the SDR should be ramped up in about a month. And if done properly, thoughtfully, and just being able to let them run with their jobs, this should help us scale our revenue and scale our company further.
So instead of Francois and I thinking about just everyday thing that we need to do to grow our business. We have other people that can help us now. It’s kind of like Lord of the Rings, we’re getting more people as we go on this journey to help us get the ultimate prize or achieve the ultimate prize. But it comes with a whole set of problems as we’ve been talking about. But I also have to have a big picture mindset that these are good problems to have on our side.
It sounds like Tony has a perspective to see how exciting the future looks and to give himself a well earned pat on the back for all the progress CloudForecast has made. Check in next time to see how Tony’s new hires onboard and adapt in terms of both business success and personal growth. Plus, we’ll see how the team at CloudForecast handles the new spending power that’s burning a hole in the proverbial pockets. That’s next week on TinySeed Tales.
Brian & Scottie Elliott are the husband & wife co-founders of Gather, an interior design project management app.
Join Rob as he chats with Brian & Scottie for the final episode of Season 2 of TinySeed Tales. In the last year, Gather managed to double their revenue and overcome most of the challenges they faced along the way.
It’s been about a month since we last spoke and during that time, their recent cash crunch has started to resolve itself.
In this episode, we reflect on the past year and their success (and struggle) with moving upmarket.
The topics we cover
[01:01] Gather’s recent cash crunch
- Cashflow is not our biggest concern anymore, which is a great relief.
- Since that time growth has been either sorta normal steady when you average it out or maybe a little slower the last month and a half.
- Small Business Association loan and PPP loan changed things for us,.
- One was the loans, the other was that Gather landed a bigger enterprise client who was willing to fund features and who was willing to put cash upfront for you to build them.
- That allowed us to ramp our developer up from the part-time back to full-time, which was great.
[06:46] Looking forward a year from now
- I think we’re just going to have a much more well-rounded product.
- I could easily see us doubling again, this coming year.
- I feel like we’ve just been learning a lot about where we’re lacking, what could be better, and what would be. More valuable or what to add.
[07:55] Did going upmarket save the business?
- No doubt. Previous, smaller clients are very cost-sensitive.
- With our larger firms, pricing doesn’t seem to ever really come up. It’s mostly about features.
- We’re not adding a ton of customers per month, but each one that we add they’re worth more and we’re just not turning out the smaller folks.
- It was such a big gamble right at the start.
- When you go upmarket, you can charge more and churn is going to tend to be lower Sales cycles will be longer, but people stick around longer. There’s more loyalty.
- We’re excited about where those next five years are going to go because we think we’re sort of just, even at the beginning of this journey, even though we’re a bit into it already.
[14:56] Advice for early-stage SaaS founders
- Relax into it. It doesn’t mean that you can be complacent and that you can’t pay attention, but just realize like you’re on this path, you’re on this journey and it’s going to take however long it’s going to take. It may not be the product that you’re working on right now. Maybe the next one, it may be five products down the line, but whatever it is, it’s just a matter of staying with it and being okay with the waves and roadblocks that come up around you and just go around them as gracefully as you can. Keep at it because the process is, for me, anyway, as much as the outcome.
Links from the show
Brian & Scottie Elliott are the husband & wife co-founders of Gather, an interior design project management app.
Last time we spoke, they were bouncing back from the initial shock of the COVID-19 crisis with the potential to sign two large enterprise deals that could help them out with an ongoing cash crunch.
In this episode, Rob talks with them about customer-funded development, always following up when doing outbound sales, and restarting a productized service.
The topics we cover
[01:14] Status on large enterprise deals
- One closed, one did not.
- The first touch with them was almost a year.
- They had a software proprietary software that they built internally and have been actively seeking a new tool
- Custom data migration and storage and it was also a bunch of custom development
- Win-win they got what they wanted and we got some new cool features
- Big win, I would say, to get paid, to build a feature that you expect other customers to be able to use.
- Optimistic that maybe we can sort of like build the product that we want by closing these sorts of deals and move into the hospitality world
- Referred to as customer-funded development
[06:51] Obstacles remain for moving upmarket
- Outbound is not going as well as it used to.
- Inbound has been fine. It’s a little down this month over the previous.
- Always be following up.
- Never letting go until you’re explicitly told to go away.
- Making sure you never lose track of someone is like a huge win.
[10:03] Moving past uncertainty
- There is still uncertainty. I think there’s always that whether there’s a pandemic or not. When you’re first getting started and plugging along, there’s always that kind of like tension, wondering how this month is going to be.
- We have plenty of signals that people are willing to pay us quite a bit more than they were paying us.
- When we started there, we were charging $29 or $39 a month, which in retrospect is just, you know, terrifying that we were priced that low.
- If we can get to that traction where, you know, we are selling 10 new customers per month at the price points that we’re doing right now like it’s a game-changer.
[13:49] Restarting a services venture
- Brian and Scotty decided to dip their toes into the world of services with a virtual coordinator that would complement their software.
- The idea was to bring in some high-value clients and make some extra cash. And although they had to shelve it due to the COVID crisis, there’s been some renewed interest.
- Initially, we thought of the services side as a way to get some revenue fast.
- This is pretty high touch services but finding a team to help with the services side. And then of course we’d be using the software. To also manage the services, which could potentially drive some of the features that we build for the software.
- The most important piece and that is going to be the process of setting up SOP and figuring out how I can best. Manage the services side.
[19:23] Last week of TinySeed Tales
- So much knowledge gained and relationships built. It was a great year.
- I think not being able to meet in person in the year together feels like it’s still, like, there’s no closure.
- It does feel just sort of finished, not finished.
Links from the show
Brian & Scottie Elliott are the husband & wife co-founders of Gather, an interior design project management app.
Today’s episode was recorded after the COVID-19 shelter in place orders went into effect. We talk with Brian and Scottie about how the pandemic has affected Gather as well as their life beyond the scope of their business.
The topics we cover
[01:10] How the pandemic has affected their lives beyond the scope of their business.
- Brian and Scottie live in Mexico
- Living in almost what feels like two worlds here. The ex-pat community is very tuned into what’s happening in the US and sheltering in place
[03:11] Current financial situation
- Our situation hasn’t changed financially. I think that at the time we had hopes that we could raise some money or at least get alone. We’re not even pursuing that at this point
- We’re certainly used to bootstrapping and feeling that stress and coming up with interesting solutions to our cash problems.
[05:57] High point or biggest wins since the last episode
- We have had a couple of requests for enterprise plans, one existing customer that has a lot of data that they need to be migrated over and they have a custom feature that they want
- Then a new customer who has a custom feature in data migration.
- It’s unexpected. Feasibly you think they’re going to cut back expenses, but larger deals are coming your way.
- The churn that we have had has been largely solo designers and smaller firms
- One of the things of going upmarket, the typical pattern is there price sensitive, they churn less.
- We’ve had a lot of inbound interest and a lot of them are saying things like now that we’re home working remotely, we’re sort of investigating better ways to work online
[09:21] Impacts from the COVID-19 crisis and biggest setbacks so far
- Across the portfolio of companies that are part of TinySeed, there is about 15% that are having real struggles with the impact of the pandemic on the industry they serve. Another 70% are waiting to see what happens, perhaps cutting back on expenses and generally seeing a growth plateau. Then, there’s the 15% of companies for whom remote work is a boon and their growth is accelerating faster than ever.
- Gather has had to cut their developer contract in half
- Big features are kind of on hold for a little while
- Staying focused has just been difficult
[13:54] Fears and hopes for the future
- I think my biggest fear is that the trend that we’ve seen this month as being a big uptick in sales and opportunities is just a flash in the pan.
- In different times, we might be able to pivot if we needed to, but because of our financial situation it’s going to be hard for us to pivot out of it
- Looking forward to seeing how these enterprise deals play out
- Trying to figure out ways that we could get customers to pay for some of the features that we’d like to build
Links from the show
On this episode, Brian and Scottie share with us an update on their unexpected MRR growth, the psychology of raising prices, and the difficulty of making decisions amidst a mountain of unknowns.
The topics we cover
01:07] Update on MRR growth since we last spoke
- Had a goal to grow a thousand dollars of MRR in a single month.
- Trailing 30 days is like $1,006.
- MRR is currently $8,200.
- Get caught up in the day to day to actually celebrate. Is good for us to stop and recognize that we have made a lot of progress.
- We’re still burning more cash than we’re making.
[03:53] Closing a large 20-person enterprise deal
- They did do a trial.
- Then they bumped up to an enterprise plan.
- You can have your sights set on a goal and before long you might achieve it. But that’s not the end of your journey. You’re onto the next hurdle.
- This is one of the things I’ve found so difficult about starting this kind of company, your to do list is never clear and things don’t end until you put someone in charge of the company or you sell it.
[05:47] Raising prices, again.
- We’ve even raised twice.
- Don’t get a lot of price objections.
- We have had to reject our previous customer avatar.
- Lower prices send a bad signal to them.
- The psychology of pricing, both at the founder level and also at the buyer level.
- This is a tried and true SaaS playbook. You start at the bottom of the market because you don’t have a brand and no one’s heard of you and your product is really early, and you don’t have the features that you need. You price yourself pretty low. You get a little bit of ttraction, use that to make a better product. You’ll find your positioning. You learn more about the market, and then you just go up, up, up from there.
- Lower price points, higher churn.
- A lot of people don’t realize product market fit is not just building a product that people want and are willing to pay for. It’s also having a good idea about your positioning and pricing and some idea of channels where you can reach future customers.
- You’re making a lot of decisions quickly with incomplete information and you only know which ones work in retrospect.
[12:21] Biggest wins so far and looking to the future
- In the beginning it felt a little bit scary and unknown when we were leaving, seeing the small teams.
- Biggest win: validating with these larger teams.
- Biggest win: we are selling into the kinds of firms that we hypothesized we could sell into.
- Doing these sales over the last couple of months has just taught me how to sell.
[15:33] Biggest fear right now
- That we’re going to run out of money.
- It’s scary to see the bank account dwindle.
- Just figuring out how we can keep going and keep growing and even accelerate growth.
- How are we going to cross this bridge? Because we can see the green pastures on the other side.
- Navigating a world that I don’t quite understand yet should be the title and subtitle and every subheading of being an entrepreneur.
- I’m most excited to see how we deal with this cash crunch that we’re heading into.
Links from the show
On Episode 5 of TinySeed Tales, we learn about the success of their recent outbound email campaign. We also hear about their progress with raising their prices and transitioning away from Gather’s solo pricing tier.
The topics we cover
[02:00] Checking in on the past few weeks
- A little bit of an emotional roller coaster
- We have definitely made some inroads with teams
- We haven’t had the growth that we were hoping for
- Feeling a a little anxious about how it’s all gonna play out.
- There’s a time here where it’s very uncertain because you’re kind of leaving the solo practitioners behind, but you haven’t quite reached product market fit.
- There’s also a little bit of insecurity with the product
- It’s a huge mind shift all together selling into these teams
- We were hoping for more of a spike and it’s just been this slow, steady growth, which is not bad. It’s growing as usual, but that’s not helpful when you had to take all this risk
[05:51] Patience can be dangerous
- Going forward Gather will be dropping their solar plan altogether.
- Half of their signups in the last month have come from their new cold email outreach campaign that’s focused on larger teams.
- Had success from a customer development standpoint early on in the product before we ever even built anything. Brian was emailing tons of people and talking to them as much as I could
- We actually had quite a bit of traffic last month but the conversion rate was half what we usually have, so it just speaks to the fact that we aren’t speaking to the right people right now.
[07:31] Yet another pricing increase
- Currently they offer a tier at $99 a month and one at $159 a month, as well as a custom enterprise plan. That’s way up from $39 a month, which was their lowest price plan when they joined TinySeed.
- My feeling is that price is not really an objection when we’re selling to new people
- It’ll be interesting to see, you know, if we do start getting price objections from at least the solo people, we kind of predict that we will.
- Next month we’re planning on doing another potentially really big price jump.
- Raising prices is increasing the speed of learning and if it works, although it’s a big gamble, the payoff is pretty
- In order to keep this up, like we would eventually need to hire some sales reps and some account executive types.
- But when we move into this double triple price thing, you know, like into the, let’s say $250 average revenue per customer, Then the whole model shifts and changes and it looks way more interesting.
[15:19] High points from last week
- We did have to literally within five minutes of each other team annual signups. Both of them were from our cold email outreach and they had both had demos and that felt really good
- We had an existing customer that’s requested pricing for 20 teammates, so we provided a custom quote for them. But if they do decide to go ahead and sign on that, that will become our single largest customer, both in number of users in revenue as well.
Links from the show
Today we’re going to dive into the stress that comes with entrepreneurship and how it shows up in their personal lives. Moving up from one customer segment to another is hard. Each customer segment is like an Island with a body of water between them. They’re crossing that body of water from servicing one and two-person teams to serving larger architecture firms with 20 person teams. We hear how they are managing this difficult and stressful moment both as co-founders and as married partners.
The topics we cover
[01:40] Leveraging testimonials when moving upmarket
- It’s an approach you should explore as early as possible when trying to move into a new segment of the market
- One of the reasons why trials are kind of a little bit lower this month is because some of the traffic that we’ve been getting is probably more geared towards the residential side and they’re seeing this new messaging.
- You have two islands and a body of water in between them and its messaging and sales process and pricing and positioning and all that around going after one person, two-person teams versus a 10 person team and those are the two different islands.
[06:09] Cold email experiments to attract larger teams
- Averaging 12-15 demos per week (initial goal was to get to 10)
- Finding one repeatable channel at this stage is huge
- Cold email has been the channel that has worked the best for Brian & Scottie
- Most businesses that start B2C end up transitioning to B2B and end up raising prices. Means less churn, fewer flakes for demos, better conversion.’
- Demo to trial isn’t as high as they’d like it to be.
- One reason for this could be due to the longer sales process
[11:27] Cashflow management
- We had a really good month last month — the best month we’ve ever had.
- The biggest stress is just around the channels that we’re investing in and wondering if they are going to perform like we want them to.
- These are challenges with going upmarket. First, you have to figure out if you have product-market fit with teams. Then you have to find a channel or two that work. If the channel works, do the people stick around and can you find enough people who sign up and stick around? Can you find them fast enough with the channels you have such that you don’t run out of cash
- At the current burn rate we have about 6 months cash in the bank
- If pushed, would consider debt-equity or debt financing as a fallback option
- Founders do all sorts of things to maintain their runway, including credit card debt, personal loans, raising funding, even borrowing from their 401k. But with each of these, you have to weigh the risks to the business, as well as your personal financial situation.
[18:09] Dealing with stress as entrepreneurs and a married couple
- The situation causes us to feel a little bit on edge and we have no one else to take it out on.
- Now we’re being much more conscious of our personal spending ad so I think that has also manifested itself just a little bit in some additional stress because we’re really tracking all of our expenses really tightly and we’re making sure that we don’t spend foolishly.
- No silver bullet for stress, but certainly meditation, exercise, and being aware that you are stressed.
- Even though there is this sort of stress and there’s sort of some existential risks to this experiment that we’re running, it also feels aligned with where we want to go as a family and as an exit plan from work life at some point.
Links from the show
- Default Alive
- Equity Financing vs. Debt Financing: What’s the difference?
- Gather | Website
- Brian Elliott | Twitter