In this episode of Startups For The Rest Of Us, Rob talks with Jane Portman of Userlist. They discuss the struggles of growing slowly, gaining traction in the crowded space, and some of the lessons learned from her first SaaS app.
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In this episode of Startups For The Rest Of Us, Rob checks in with Mike Taber on his progress with Bluetick. They talk about the finale of the Google audit, a new integration. and trying to find differentiation in the market.
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In this episode of Startups For The Rest Of Us, Rob and Mike walk you through some of the talks and key takeways from MicroConf Europe 2019.
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picture of an evening reception at MicroConf Europe 2019 at Vala Beach
Rob: In this episode of Startups for the Rest of Us, Mike and I talk about our key takeaways from MicroConf Europe 2019. This is Startups for the Rest of Us episode 469.
Welcome to Startups for the Rest of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at building, launching, and growing startups whether you’ve built your fifth startup or you’re thinking about your first. I’m Rob.
Mike: And I’m Mike.
Rob: And we’re here to share our experiences to help you avoid the mistakes we made. So, where this week, sir?
Mike: Not much. Just working on my security audit for Google.
Rob: I was going to ask about that. That’s the running thread. I think in the next couple of weeks, we should get back a full updates episode, but talk me through it briefly.
Mike: It started earlier this week, so I scheduled it for the week after MicroConf Europe because obviously I wasn’t going to be here at last week. I didn’t want to start it the week that I wasn’t here because it’s expensive. We went through, how to kick-off call, they said, “Which environments do you want?” and then they asked, “How much can your server handle in terms of requests per second?” and I hesitated a little bit because I wasn’t really sure what to tell them.
On one hand, I want them to do a good job, but on the other hand I don’t want it to fall over and die on itself. I said, “Try to be a little careful, but I should be alright generally if anything happens. Just email me right away and be done with it.” I just turned them loose.
Rob: Do you think it was a good call to do it immediately after MicroConf Europe? I guess you flew back on Wednesday, I flew back on Thursday. It wasn’t just jet lag. It’s just that extravert hangover being around so many people. It’s so amazing and you want to stay up late and have a bazillion conversations but then, I find that on the flight back I am completely worthless. Basically, I can’t do any work and frankly, several days after MicroConf, I just don’t book anything. Even doing phone calls is a real stretch for me. The fact that the audit started the week after, were you geared back up again by then?
Mike: I was, but I didn’t have all the stuff ready to go right away. We ended up starting about a day late, but that was partially my fault because any email come through that I didn’t fully read absolutely everything in it, it said, “Reply to this email just to confirm that we’re good to go on this date.” I confirmed it on the call but then they followed it up with an email afterwards just to verify and I hadn’t replied to that.
So we ended up starting a day late, but there’s a bunch of paperwork that I was still working on to get over to them. So, documentation, policies, procedures, that sort of stuff. Anyway, we really didn’t start any too much later. I could be a lot worse. It could’ve been them saying, “Oh. Well, our schedule is booked for the next three weeks, so you’re going to have to wait three weeks.” I’m glad that it didn’t come to that.
Rob: That makes sense. From my end, really spent a week-and-a-half in Dubrovnik. I guess it was eight days and the first part of that for several days was second in-person TinySeed retreat and then rolled into MicroConf Europe and then I stayed one extra day just purely because I couldn’t get a flight out at a good time, but that was nice to have that extra day. Most people were gone and that view from that hotel is just amazing.
If you’re on Twitter and you saw any pictures—we’ll even try to grab a picture and put it in the show notes here. Tt really is the nicest venue we’ve ever had in MicroConf fat ever in either continent. There’s something about being that close to water. It’s the Adriatic sea and there are boats out there and there are people’s scuba diving.
With TinySeed, we did as a kayak trip although I couldn’t go out there because I was busy writing my talk, but it really is just amazing to be in the venue, you want to talk, then the break starts, the curtains open, and you’re just looking out on the sea. It’s this feeling of we’re not trapped in this conference room for six or seven hours today.
We are in the conference room intermittently between walking out on the deck, hanging out in the sunlight, listening to seagulls and that kind of stuff. It really is this very unique venue that we found.
Mike: Did you get to go swimming at all or no?
Rob: I had time to swim. I don’t particularly love swimming in cold water. It wasn’t that cold but it was cold to me. I’m from California. I like hot tubs and I like warm swimming pools, so no. I sat there and waved at people and took pictures at folks while they swam and they did it because they were like, “Yeah, I want to prove that I was in the Adriatic sea and stuff,” but I did not get up in the actual water past my knees.
I did get it last year. For listeners, this is the second year we’ve done it at the same venue and I’ve don’t it last year. How about you?
Mike: I went twice. I was planning on going to the third time just before I left, but then I realized that if I went swimming just beforehand, then it was probably going to be an issue because all my stuff would be all wet. I just didn’t want to make it all wet with the sea water and then get on a plane because I would have to put them in a plastic bag or something. I’m like, “No.” I just don’t want to do that.
Rob: Twenty hours of flying? Yeah. We definitely got a lot of positive feedback about the venue. It was interesting. There were more first timers there than usual this year and I’m not sure what to make of that. There were also just more attendees than we had at most MicroConf Europes. It was between 130 and 140 and folks were basically saying, “You should do it here again next year.” That was the overall consensus that I heard.
Normally, we move it every 2 years. I moved in Prague for two years, Barcelona two years. We only did Lisbon for one due to issues with the hotel and then we’ve done it two years in Croatia. So, next year we would think about moving it, but folks are saying, “No. Do it here another year.” Is that what you heard as well?
Mike: For the most part, I did hear one or two people say that we should have it in very specific places. I asked if they lived there and they said yes.
Rob: Yeah, it doesn’t count. If you recommend a city, I’m always like, “Great. Do you live there?” because then I completely discount it. If you don’t live there and the event recommend it, it’s going to be one vote for every city everybody lives in, and then we’re just going to go to the place with the most attendees from that.
The only real drawback for me about doing it in Dubrovnik again is it’s hard to get to. Even for Minneapolis, which is a delta hub, I have to do three flights. I have two stops and it takes me 17 hours each way. It’s not that far. I can get to Heathrow in London. It’s an eight-hour flight tops, direct. It’s not that Europe is that far. It’s that it’s these three hops with the gaps between and customs in all this and that.
It’s not the end of the world. If you’re in Europe, I’ve heard it’s actually pretty easy to get to, so I’m willing to discount that, but the other thing that has me concerned is we do it in shoulder season because the hotel is a five-star hotel. It’s €250–€300 a night during the main part of the year, during high season, but when we do it, it’s €120 a night. It’s way, way less expensive, but as a result, the risk of having a bunch of rain is higher.
In both years, we’ve dodged it and within two or three days after we left, it just started pouring rain most of the days and stormy. That’s my one concern with doing it next year is do we roll the dice again a third time?
Mike: Well, we have had in Vegas for a long time. I feel like rolling the dice is a real par for the course. We do run businesses, too. I guess you could say that, but with running your own business, you actually have some measure of control. Maybe a fall solution, but you do feel like you have control with the weather totally out of the window, literally and figuratively.
Rob: Someone pointed out I said that to someone the other day and they said, “How bad would it be if it was raining outside? Would that ruin the event?” and I was like, “No, I guess it wouldn’t. It would just be different. The evening events would have to be indoors, but we’d still have the view of the ocean and frankly stormy ocean is pretty cool.” I actually think even if it rained, it wouldn’t be the end of the world.
Mike: Yup, I totally agree.
Rob: Sounds good, so no verdict yet. We’re actually still getting survey responses from the attendees about all the myriad of things, the talks, the venue, and all that stuff. So, news to come on that in the future once we figure ourselves out.
Today, we wanted to walk through a handful of the talks. Talk through some key takeaways that you and I took away from these talks. We never have time to go through all the talks. We had nine speakers and eight attendee talks. With 17 different talks there’s just no chance we could fit into an episode like this. But we do hand-pick a few of the talks that we feel like had the most comments, or the most positive feedback, or just that had really interesting takeaways.
The first one talk we’re going to talk about is from Peldi Guilizzoni of Balsamiq. He is a multi-time MicroConf speaker and he kicked off the conference with his talk, Victories in Tragedies: The Three Year Journey Building Balsamic Cloud.
Balsamiq has traditionally been a desktop app, one Peldi built, but they basically wanted to move it into the cloud. Part of his description of the talk was, “Build a SaaS app, they said. It’ll be great, they said. It turns out, running an online service is a big pain in the SaaS.” What did you take away from his talk?
Mike: The biggest takeaway I had was when he was talking about the data loss. I guess somebody had run something and it started deleting a bunch of customer data. They didn’t realize right away, but it started deleting very, very rapidly. I forget how long he said it has been running for. It’s six or eight hours or something like that before they noticed it. It already deleted a ton of data.
His advice for that was don’t have anything in production that’s going to delete a lot of data all at once. Have it parsed out over a long period of time like 30 days, or 60 days, or something like that. That way it will get deleted eventually, but you have more time to interject yourself into the process.
I think he said they’ve gotten about 20% done before they had noticed it and were able to do anything. If that time period were longer, then they would have more time to notice and do something about it.
Although I would question whether or not over that time period, are you going to notice it? What sorts of controls or things you have in place, especially for a new app that you’re building, and trying to figure out things as you go? You’re probably not putting every single safety precaution in place that you probably should and would it be something that you would notice over a longer period of time or not?
Rob: Yeah. That was the most memorable part of talk for me as well. It was partly just because how devastating I know that would feel. He said in the talk where they deleted, I believe it was 1200 or 1600, I forget which number of mock-ups. If you don’t know Balsamiq, you can mock up a web page or you can mock up a user interface or whatever, so across hundreds, if not more than 1000 customers, they deleted 1200–1600 of these work spaces, in essence.
My favorite part about it was when he said, “I turned to my co-founder, my wife, and I said, ‘Well this is it. We sure had a good run.’” He was basically implying like, “We’re done. This will kill Balsamiq.” That was how bad it felt. It turns out that wasn’t the case at all. There were a few pissed-off people. Most people didn’t care. I think a bunch of them had wind up being the example mock-up or whatever.
Bust just when you hear a story like that, I’ve never had a mistake as that big where you lose data, but I have had mistakes where we accidentally send double the emails to this whole list, or via a bug, or we accidentally didn’t send these emails and they were delayed by two hours and this person is doing the launch.
That’s how it feels at the 3time. It feels like this is unbelievable, this is catastrophic. and it’s not going to fix itself. In retrospect, it was three years ago, I think he said, two or three years ago. They obviously recovered from it and frankly I didn’t even know it wasn’t that big of a deal in the sense that I hadn’t even heard about that. It wasn’t like it got widely publicized and people on Twitter just railing on or anything.
Mike: I feel like you and I could probably to an episode at some point on the worst engineering mistakes that we made to that nobody noticed, like sending double emails to people and things like that. You and I probably both have a couple of pretty good stories about it if we could both share.
Rob: I know. We definitely have stories and some of them were back when I was an engineer than others were just the Drip team, just bugs sinking through because you’re shipping software fast.
That was a good piece of Peldi’s talk, but overall, the talk was that the three years that it took them to build and deploy this, the starts and stops, the highs and lows. I always love a good founder story, and they did a good job of having takeaways. It wasn’t just a story but this is what we learned from that and if you’re in the same place, this is what you can do as well.
Mike: Something else I noticed that was in his talk that caught my eye, which was something I wish I had found out a lot earlier than I did, was have a small dashboard that allows you to do different things for your early access customers.
For example, having a button there that just simply allows you to click on it and allows you to, say, reset the trial for this particular customer or delete this customer outright just because they’re gone and they’re not going to use it, or they just need to reset everything up because everything got completely screwed up and it needs to be blown away and restarted.
Those are the things that are simple enough to overlook but also important enough that you’re probably going to run into them time and time again. By the time you need it, it’s a pain in the neck to just say, “Okay. Let me whip this up for you,” and it takes 8 or 12 hours of work to do all that stuff. Then, the next customer comes along and you have to do it again. You may or may not have sat down and taken the time to think through all the different things that need to be done for that.
I think there were four different buttons he got on there and one of them was restart trial, one was delete the account, and there were a couple of other ones I forget what they were, but it was a very simple sounding piece of advice which have gone through the process a number of times before. It seems obvious, but in retrospect, it may not have been at the time.
Rob: It’s every admin console I’ve ever built had built for a SaaS app, but I like what Peldi went through. I wish I had a screen shot of the Drip admin dashboard which we called faucet because faucet drip, pun, water. That is what we called it. It’s a MicroConf joke. It literally was called that. We had all these buttons.
I remember early on I would say, “Derek, we need to restart someone’s trial.” He would go into the rails console and he would do it. It was a state machine, so he would say, “Set it back to the state.” But after asking him to do that two or three times, he’s like, “There’s now just a button on every user record. Just click that and all it does is change the state machine.”
There were a bunch of things, so actually I wished I had a screenshot of it. I’m sure I can go back and get one but…
Mike: My joke would be actually that he just didn’t want to talk to you, so he made a button so you could do it yourself.
Rob: Oh yeah. That’s not a joke. That’s an actual reality. It became more efficient and we had a bunch of buttons like that. It’s just something you run into as you’re running an app.
The next talk we’ll talk about is from Irina Nica. She works for HubSpot and her talk was a little bit about SEO, but the title was, How to Build Buzz and Backlinks on a Bootstrapper’s Budget, and it was more about getting inbound links. It was off-page optimization. We also had a talk that was more about on-page stuff.
This is cool because every day this is what she is thinking about. This is what she does full-time, she has a team that does it, and HubSpot is really good at this. We hear her run through the key things to think about if you’re going to take this approach. Coming from someone who is an expert in the space, I appreciate that.
Mike: She’s had some really great advice on doing podcast tours and guest posts and really talk about the process of getting backlinks in a way that looks organic, even though you have to work at it.
There’s a couple of different strategies. One is just throw your website out there and hope that people link to it. I think it’s what Google expects people to do, but it just doesn’t work. You really have to be proactive about it and find ways that are going to be useful to other people to get them to link to your site, whether it’s tools or you do a podcast tour. As part of that, you get links back to your site because people are linking to your profile, or your website, or what have you.
Even just doing guest post where you are literally writing and then you have in your byline you can have something there that says, “Hey, click here for more information about what I do or what we do,” or even if there’s just resources that you provide to them, that they can look back on your website. All those different things add up and over time, what you’re really looking for is for things to go up into the right in terms of the number of backlinks.
I also like how she had this internal dashboard that they use to figure out what the terms were that people were thinking back to the website she was working on. I thought that was pretty ingenious because there was basically a Google spreadsheet that she had up there and it would basically parse the HTML. I think it was a parse XML function or something like that, but it would look for certain key terms on the websites that they were linking back to them. I thought that was a really cool hack which I don’t think I’ve seen before.
Rob: They’ve taken what is often done is a haphazard effort of trying to build backlinks. They’ve really systematize, they’ve turned it into a repeatable system, and at their scale, with the team working on it, that’s what you have to do. It was an interesting insight into how that’s done.
From 10 years ago, SEO has gotten a lot harder, but in certain elements or in certain ways, it’s almost like there’s less competition because there’s less people doing it because it did get so hard, so if you’re able to execute on getting backlinks and getting high quality backlinks, you can really move the needle today.
Ten years ago, it was easier to move the needle if you’re willing to just buy links and do greyhat stuff or blackhat stuff, but the tide has shifted and I think we’ll continue to move around under our feet all the time because it’s Google and they just do what they want to. You have no exposure to that, do you, Mike? No experience with that.
Mike: None whatsoever.
Rob: The other thing we did is at every MicroConf, we tend to have this 30–35 minute slot where we do something experimental. Sometimes, it was a Q&A with Jason Fried at MicroConf Growth last year and that was an experiment as much as it was just a sloppy kind of comes together at the very last minute. Or we did a panel a few years ago in MicroConf Europe.
This year, you did an AMA and I kind of couched. The interesting thing is I don’t know if it was 40% of the people were new, maybe 50% new in the room and I didn’t want to assume that everyone knew your story or anything, so I started the first five minutes and basically talked about the years of MicroConf and your history with the podcast, then Bluetick and where you’re at, how you’re not happy with it’s not supporting you full-time, then we kicked in and people ask do anything. I was pleased with the range of questions that you received.
Mike: I love how you position it as this 30–40 minute slot where we try something experimental, and usually as we have it blocked off or something, we decide at the last minute that it’s not a good idea, and somehow I end up in that slot.
Rob: It has happened before, yeah. “We don’t want to do this. Mike, quick. Fill in.”
Mike: Yeah, I was cool. I was a little worried about whether the context of the questions that were going to be asked was going to be relevant to some of the newcomers, especially if they haven’t listened to the podcast or been following along with the story, so I think you gave us a great summary of that. There are some really interesting and challenging questions that came up. You were in the audience, so you would have a better handle on how it came across because I haven’t seen the video.
That’s actually something else we can talk about before at the beginning of the episode is we recorded this series of talks this year at MicroConf Europe, which is not something that we’ve done in the past.
Rob: That’s right. This is the first time I believe we’ve had a professional photographer at a MicroConf, so we got some good stills and then this is the first time we have a video recording of that Europe one. That will be interesting to watch your AMA.
I was in the audience, but I was running around with a microphone. I was definitely paying attention. but I was also distracted looking for the next hand to come up. There were fascinating questions about Bluetick. There was like, “How can we in the audience help you?” and at one point, someone asked you how it is that you managed to keep going, and they’re at it for themselves. We all get discouraged, we know you’re going through a tough time, I believe the guy said, “So am I,” or, “So have I been,” at different times, and, “How is it that you stay motivated to keep going?”
Honestly, AMAs, especially live, can be hard if you get hard questions, and I felt you did get a couple of hard questions. It wasn’t people trying to be mean at all, but it was just honest questions of, “How do you keep going, Mike? You’ve been through all this,” and I thought your your answers were clever. You’re at your best in this thing, so once these videos come out, you should watch this AMA because you were making jokes and your answers were just really honest. I didn’t feel you sugar-coated or BS’d your way through them.
Mike: Thanks, I appreciate that. I did feel the vast majority of the questions were, I don’t want to see easy answer, but they felt relatively straightforward and I felt comfortable answering them, as opposed to previous situations where I’ve been up on stage and either been asked questions I haven’t really thought about, and being put on the spot in terms of what I’m going to give as an answer or how I want to portray. I was just like, “You know? I’m just up here, I’m comfortable being up here, so I’ll just answer them in the best way that I can, with the knowledge that I have. If I hadn’t thought about it, then I’ll just say that I don’t really know yet.”
Rob: And I rounded out the first day with my talk, Lessons from the Field: Five Proven Strategies for Faster SaaS Growth. It was interesting coming up with this talk because in the past I have typically look back at the prior year, I’ve said what have I done that was hard, what did I done that I learned, and try to write a talk around it.
Basically, I tell a story, I try to pull the takeaways that people could apply their business, and that’s a formula that has worked for me. At this point, I’m not doing that anymore. For me to talk about building TinySeed just doesn’t make sense to apply that to SaaS apps.
What I do instead is I talked to most of the companies in the first TinySeed batch, got their permission to basically share high-level info about what they’ve been up to. We’re approaching halfway done with the first year and there’s a bunch of interesting information advantage, in essence, that I have and that I’m no longer working in one start up. I am seeing the inner workings, including the financials, the day-to-day, and see what they’re doing across 10 startups plus my investments.
I have another 10 angel investments and I’m not working with those as day-to-day, but I really do start to have a view that is differentiated from someone working on a single company. I’m seeing trends, I’m seeing things that three, four, five people in the batch are all doing, and seeing how it’s working for them. That’s however at the talk.
I literally took five things—with permission—that people in the batch are doing successfully and unsuccessfully. I didn’t just say they’re doing cold email or there are more people moving credit card or going freemium. I then dug into why I think that’s working and when I think that’s working. I talked about, “If you’re in this type of vertical versus that, I don’t think you should do cold email.” That was the gist of the talk.
Generally, I felt it came off well. When I get up on stage, I’m always like the first time I’ve done a talk. I don’t know how is this going to go. Even though I’ve rehearsed it 5–6 times in a row in real time, it’s not until I get up there that I really know how it feels.
Mike: Yeah. I think it was a really good talk. If I were to rephrase or reframe what you said about your standpoint on it, it’s almost like when you’re building your own start up you’ve got this silo of information you’re only privy to what’s there. The position you’re in now within TinySeed, you’ve got access to 5 or 10 of the silos simultaneously, versus previously you were looking at one silo, then you move on to a different start up, you look at a different one. But because the time frames are different, it’s not always easy to correlate lessons from one to the next.
Right now, you’re seeing them across all of them at the same time and you can use that to extrapolate what is and isn’t working, whereas there’s very few other people who’d really have that insight, or knowledge, or ability to be able to analyze that information. Other people have to be limited by it, not just their own information, but by the virtual working in their startup. You’re a little bit removed from it, not completely removed, but a little bit. So you can see what’s going on and then think about the implications versus those startup founders have to look at their own stuff and what they’re doing.
Rob: The other thing I did that I enjoyed is I had just gotten back maybe 20 or 30 of them at the time, but it was the initial rough graphs from the state of independent SaaS survey that we did through MicroConf last month. I had these bar graphs embedded in Excel. They’re accurate, they just don’t look great. They’re very plain, but I had pieces of those that I could share. I believe I should maybe four or five throughout the talk. That felt good too, to have some type of data.
I wasn’t trying to use them to say, “Oh, this is working. Look at these graphs.” It was more like, “This is added context of I’m super surprised at how many companies are not asking for credit card before their trial.” We have numbers on that now for more than 1000 nonventure-backed SaaS companies. So, I included that in the part where I talked about specific examples of TinySeed companies doing this. Then, I brought in the higher level of like, “Hey, there’s more the 1000 who responded and they’re doing it, too. This is an interesting trend. Let’s keep our eye on it.”
Another talk that went over well was Craig Hewitt’s talk and it was, Staying on Top of Your SaaS Metrics, Knowing What to Measure and What Not To, to Help Maintain Sustainable Growth. What’s your takeaway from Craig’s talk?
Mike: One of the things I liked that he drew attention to is the fact that he looks at his own metrics every day. There are a lot of different schools of thought on whether you should look at them on a daily basis or not. If you look at him every single day, then it’s probably going to be distracting and you’re possibly spending too much time on it. But he obsesses about his revenue on a day-to-day basis. Some people only look at it once a week or once a month.
He said that it almost doesn’t matter how often you look at it as long as you’re actually on the right track. If you’re going off-track, then obviously something’s wrong. There is a certain amount of personal value that he places on looking at it every single day, whereas somebody else is looking it at every week. It’s not right or wrong either way. It’s what you are most comfortable with. I think the correlation he drew between certain KPIs and saying these things don’t matter nearly as much on a day-to-day basis or week-to-week basis as these other ones. I think that was an important point to make.
The other thing I liked about what he did was he talked about the different phases of the customer journey and how you really need to concentrate some of your marketing on where people are in those. For example, for Castos, he talked about new podcasters and how people who want to start a podcast but don’t really know where to begin their problem or where, but then there’s other people who don’t even really understand that they have a problem. It makes a difference as to what it is that you’re building for, marketing materials, or the types of people that you’re targeting for the pieces of marketing collateral that you’re putting together.
Rob: Yup. I like his talk quite a bit and I the way he looks at metrics. He had his rules of thumb and, of course, I’m comparing my mental rules of thumb to his as he was doing it. He has a very metrics-driven approach and it reminds me of my approach of how I’ve built and grown SaaS apps. It resonated with me and in his thought process of, “Hey, here’s how to get in, here’s a look at the numbers, and here’s how to grow.”
[…] grow an app that if you’re charging $500 a month, $1000 a month, and knows your bottom-end prices, you don’t tend to do a bunch of split testing. You don’t tend to do these big, “Oh, I need to look at my churn number,” because when you only have 20 or 30 customers, one of them churning is this huge number, but it’s an anomaly because you just don’t have the law of large numbers going.
Whereas, when you’re building a service that is $20–$200 lowest price point and you’re in the $10,000–$100,000 month or up, you just have a lot of customers. That’s where looking at these things in aggregate and having these rules of thumb is really helpful for optimizing your funnel. That’s what he’s talking through.
And the last talk of MicroConf Europe 2019 was Shai Schechter. He’s the co-founder of RightMessage with Brennan Dunne and his talk was called, RightMessage Year One: From a $75,000 Launch Week, to Virtually Bankrupt, to Product Market Fit. I enjoyed his talk as that is a tale of going through it and he was pulling out these actionable things, the mistakes they made, things he felt other people could apply. What did you think about it?
Mike: I think that it was not obvious from somebody being on the outside of that company, what a dire situation they were in. I’m not sure exactly the time frame. It was probably about a year ago it seemed, where they were burning through money a lot faster than it was coming in, their churn was really high, and they essentially had to put the brakes on and say, “Okay, look. This is a problem. Our churn is so high that we’re bleeding customers faster than we’re getting them. We don’t have enough money coming in to cover all of our expenses.”
If you’ve got some level of funding that’s fine, but you still need to bridge that gap at some point. They were actually deviating from bridging that gap. They’re going away from it rather than closing it. It was interesting to see that they had a bunch of different options to try and they had to use all of them. It doesn’t sound like it was a pleasant experience in any way, shape, or form, but they were able to do it and they were able to essentially save the company and continue forward.
That’s not really something that I’ve ever gotten or seen from their company. I think it’s just interesting to see it laid out on the table like that, which is what you’d expect to see to MicroConf talk. There’s not too many other conferences I’ve been to where somebody will lay out the company troubles and say, “Yeah, we almost completely went under and if it weren’t for these things that we did, we would have.”
Rob: What I appreciated is, again, he didn’t sugarcoat it. He talked about how hard it was, he talked about where they made mistakes, and he talked about what he would do differently in the future. It wasn’t this, “Hey, look. We survived,” and, “Isn’t this an amazing success story?” He was still like, “Yeah and we’re not done. We’re doing better now, but it’s not a 100% complete Cinderella story now and we ride off into the sunset. There’s still a lot of hard work and a lot of stuff going on.”
I enjoy that talk and we headed off to watch the sunset from Vala beach, which is attached to the hotel. Overall, I really enjoyed this year’s event, not just because the weather is amazing. I got to meet a lot of new people, which is cool, but I also got to see the returning folks, the Kristoffs, the Benedicts, and all the other people I’m not going to name because I don’t forget somebody but just folks that I haven’t seen. Some folks are on every other year schedule and we haven’t seen each other for a couple years. It’s cool to settle back in and just see old friends and make some new ones. I appreciate everybody who came.
Mike: I agree. It’s always great just to catch up with those people in person that you catch them online, or through Twitter, or something like that, but it’s very different being in the same room and talking to them. We really appreciate everybody coming out to MicroConf regardless whether it’s in Dubrovnik, or Minneapolis or Vegas. It’s always great to just come together with other people in the community, talk business, and catch up on personal […]. I really feel there’s a lot of that too, not just the business aspect. It’s meeting other people, learning about them, their journey, their struggles, their family, and what’s going throughout their whole lives. It’s just nice to have those connections make those friends and revisit them every year.
Rob: We’re also up to our Twitter game this year. I know you didn’t see it because you’re not on Twitter, but Tracy Osborn was there helping out and she was taking a picture of every speaker I got on stage and tweeting that out. I was actually doing video interviews on my phone. I got this cool little attachment that just plugs right into the iPhone’s lightning port and this directional mic it’s really high quality sound even though you’re just filming with an iPhone. With the iPhone 11, the video quality was really high.
It was nice. I was just doing behind the scenes interviews and just throwing that up on Twitter as well. It’s something we haven’t done in the past, really haven’t had the time or the bandwidth, to be honest, because it’s pretty intense to run the event and then also try to do that, but that was pretty fun and I enjoyed it. I feel we got more.
There was more of a groundswell around this event. There were more pictures posted by us and there were also by the attendees. It leads to this social media momentum mostly on Twitter, but that’s a good thing. It’s something I hope we can continue to do, such that even if you aren’t able to make it, you still do get some concept of what the experience is like and you do know what’s going on at different times of the day. It’s just nice to be able to do that and include more than just 150 or 250 or how many people can show up in the room.
If this sounds interesting and you’ve never attended a MicroConf or you’re not on the mailing list, you should head to microconf.com and enter your email. We don’t email that much. We just email to let people know there’s an event coming up or a state of independence has survey. It’s not an overwhelming volume of it, but we’re going to continue to double down on MicroConf as we head into the new year. If this all sounds like fun, you should be in the know.
And that wraps us up for today. If you have a question for the show leave us a voicemail at (888) 801-9690 or email us firstname.lastname@example.org. Our theme music is an excerpt from We’re Outta Control by MoOt. It’s used under Creative Commons. You can subscribe to us in any podcatcher. Just search for “startups.” If you want a full transcript of this episode, wait a week or two after it’s posted and head to startupsfortherestofus.com for that transcript. Thank you for listening and we will see you next time.
In this episode of Startups For The Rest Of Us, the tables have turned as Tracy Osborn interviews Rob about his past year. They talk life after Drip, focusing on the backstory of TinySeed and the ups and downs that have come along since its launch.
Items mentioned in this episode:
Rob: In today’s episode of Startups for the Rest of Us, Tracy Osborn turns the tables and interviews me about what I’ve been up to for the past year. This is Startups for the Rest of Us, episode 468.
Welcome to Startups for the Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome in building, launching, and growing startups. Whether you’ve built your fifth startup or you’re thinking about your first. I’m Rob. Today with Tracy Osborn, we’re here to share our experiences to help you avoid the mistakes we’ve made.
Welcome to this week’s episode, I’m your host, Rob Walling. Each week on the show, we cover topics relating to building and growing startups, but startups that are real businesses, not the Silicon Valley myth of building a company, having billions of people adopt it organically, virally overnight and not paying you, and suddenly you come up with that monetization strategy. We talk about building real businesses where real people pay us real money. We talk about building businesses that provide us with a purpose that we’re fascinated with, but we don’t sacrifice our lives at the expense of building these companies.
We also talk about building companies that provide us with the freedom, and it’s a freedom from a day job, it’s the freedom of working on crappy projects, and it’s the freedom to own our own destiny. With many different show topics, often times, we talk about tactics or teaching. We answer a lot of listener questions, sometimes with guests. We do founder hot seats and we also have interviews, as well as breaking news, episodes like we did last week with Adii Pienaar. This week, we turn the tables on me as Tracy Osborn takes the interview seat and she asked me really about what’s been going on for me post-Drip and it focuses around TinySeed. That’s really the main day-to-day thing that I’ve been doing since then.
During the course of the conversation, we look at some highs, some lows, things that have been surprises. It’s really the background story that I would tell, if I was talking about building a SaaS app. It’s all the customer development, challenges that we faced and just kind of the story that I haven’t particularly talked about on the show or really for the most part anywhere else. I enjoyed the conversation and I hope you enjoyed this inside look at what’s been going on with me for about the last 12 to 18 months. Let’s dive in.
Tracy: Hey Rob. Thanks for coming on the show. I am excited to be the interviewer for once.
Rob: Absolutely. Yeah, my pleasure.
Tracy: I was looking forward to it, actually, after you answered the questions on WeddingLovely, I was like, “Cool, I can turn the tables on you.” Put you in the hot seat.
Rob: Yup, dig into my successes and failures. Really, really put the thumb down on me. “How did you feel when you were at the bottom of the bottomless pit?” This will be fun. I’ve actually had multiple people tell me that I should do this. They said, “You know? You still have a story going on and you are growing a startup yourself,” and there’s obviously a lot of uncertainty any time you start something new and folks told me it’ll be interesting to hear what’s been going on.
Tracy: Yeah and honestly, you don’t talk a lot about TinySeed. I went through a lot of the episodes of Startups for the Rest of Us, and there were a few dedicated episodes, but in general, it’s been really cool listening to you and Mike talk about Bluetick. I feel like there is a lot of opportunity for you to talk about TinySeed, not just to promote it, but it’s just like a really interesting process and something that’s completely new. We’re not technically working on a startup, like what’s involved in running and funding and all that.
Rob: Yeah, I would agree. I think I’ve probably been overly sensitive to that and not wanting it to feel like I’m promoting it, but I don’t know that anyone’s ever accused me of promoting stuff on the podcast. We’ve been really careful about it, so I do think I want to start sharing more of the inside track. It’s like you started SaaS app. You start a productized service. You start an accelerator, like TinySeed. There’s an 80% overlap. You still have to get all the systems in place. You still have to find customers. You might need to raise funding if you’re going to do it.
You still need to figure out and do customer development. We’ll talk a little bit about that, but our terms are essentially like our pricing. That’s the thing that someone could look at our terms and say, “Oh, you’re pricing’s too high.” Just like in a SaaS or productized service, they would say that. I’m finding a lot of commonalities and I feel like my experience running startups in the past is absolutely translated here.
Tracy: Right. The funny thing is I was looking at the previous podcast episode. As of this recording, it’s almost one year to the day of when you announced TinySeed. It’s been a pretty epic year, I think.
Rob: Yeah, it really has. It doesn’t feel like it’s been that long. So much is going on, though. It’s one of those things were the days are long but the years are short. It’s kind of like that.
Tracy: Maybe we should backtrack a bit, just in case someone comes on this podcast and doesn’t have a lot of background. Do you want to go over TinySeed and what we’re doing?
Rob: Yeah sure. I mean the basics, TinySeed is the first startup accelerator designed for people who’d traditionally bootstrap and unlike most accelerators, like Y Combinator or Techstars, we’re fully remote and we’re a year long. Most accelerators, you have to move to a city, they’re typically three months, usually the goal is to learn how to pitch, and you’re going to raise money at the end of it. That’s going to be a big demo today.
We are not doing that because my money and fundraising is not the end goal of all of our startups. I think there are a few that will raise follow-on rounds, but it’s going to be totally up to the founders. We’re remote, we’re one year, we focus on subscription software, so mostly SaaS, although we almost funded to set a marketplace that was software-enabled, that had a subscription tied to it. It wasn’t just processing fee. We have a really top notch group of mentors, to be honest. tinyseed.com/people, if you go there, it’s kind of a who’s who of folks who know about SaaS.
That’s one of the beauties of, I think, being able to focus like we did. We didn’t say, “Hey, we’re remote accelerator for consumer packaged goods,” and any startup that has software that enables it. We may get there eventually, but right now being so focused on this, we can have mentors like the Jason Frieds, the DHHs, the Rand Fishskins, Chris Savage from Wistia, Ruben Gomez from Bidsketch, and Laura Roeder from MeetEdgar. It’s folks who are really in it and can provide really detailed info.
I like to say, with TinySeed there’s five elements that we provide the founders. One is the money, two is the mentorship, three is the community of being in the batch—we meet four times during the year in-person, our second one ‘s coming up here in a week—and then the fifth is really the network.
You can come to me. My network is now at the disposal of the batch of any of the founders we backed, as well as the networks of most of our mentors. I’ve heard Craig Hewitt talk about a couple episodes ago, a lot of second order intro, where he’ll talk to whoever, Asia Matos or Reuben Gomez, who are both mentors and they will intro him to someone they know to help solve a particular problem.
That’s been the goal. I got to be honest, it was a year ago we announced and there was a lot of uncertainty as to whether this model would work, whether we could pull it off, and in all honesty, it’s gone very smoothly.
Tracy: That was my next question, overall how has last year gone? How are you feeling today about everything?
Rob: Today, we’re about 4½ months into the first batch for the year long batch and there have been very few days in the past year that I have felt down. There have been a few and we’ll talk about some of those today, but compared to probably every other startup I’ve ever done, this has been more fun, less stress. I feel like I’m having as much or more of an impact or at least a deeper impact than a lot of other things that I’ve done. I feel really positive about it.
One of the reasons Sherry and I talk through this on Zen Founder episode, and she said, “Is it less stressed because it truly is less complicated? Because I hear you guys…” we were making deals with startups, we were fundraising, we were trying to figure out terms, there was a lot of complexity and a lot of moving pieces all at once and it was way more complicated, this time.
Yet, I felt less stressed and we kind of started boiling it down to, (a) I’m probably a little more mature, (b) it helps to work with a really strong cofounder like Einar, who took a bunch of the complexity. He’s really good at making deals and working with people in finding things that work, so I didn’t have to bear all the burden of that. It’s interesting. With prior startups for me, my chips were always all on the table, where if the startup failed, it was years of my life that was down the drain and it was potentially most of my net worth that was down the drain. I always took that really as a big burden.
Now, I was able to take chips off the table, in all honesty with Drip. There’s a certain level of comfort where I’m still confident that it’s going to work every day when I get up. I’m like, “Yeah, this is helping people,” it’s providing real value and I’m not worried all the time of, “Oh, it’s going to…” I don’t know why I woke up three days a week when I was running Drip and thought this could all come crashing down tomorrow. It wasn’t a healthy attitude and I kind of regret it, and I think I’ve made it a point not to do that here. It’s made it easier mentally, but it’s also made me a better as a founder, that I’m not so worried about that.
Tracy: That’s really fun, I say as a team member, it’s really fun to work on something that I feel so positive and exciting, just working with these founders and riding their success. It’s been a really fulfilling thing to work on,
Rob: Yeah, I think being able to live through them vicariously is super helpful. I’ve told the founders that, “Hey, when you succeed I get the dopamine rush and when you’re going through the struggles, let’s get on the phone and I will work with you through that.” It’s nice to have that ability without really having to do it day-to-day at this point. I kept telling Sherry towards the end of Drip when we were selling it like, “I just don’t want to do this again. I’ve done this enough.” I’m looking for something different, but also challenging and also that has a lot of impact and I’m really glad that this is what we settled on.
Tracy: A year ago, the TinySeed was kind of just an idea, just like a plan, like you said, we’re about 4½ months into the first batch. What has changed in terms of how you thought the process, how the management of TinySeed, and how things would go? What has changed between that idea versus reality what’s going on today?
Rob: It’s surprisingly little actually. Einar and I had started talking about TinySeed around April of 2018 and then we announced about six months later and Einar have heard my MicroConf talk and said, “That’s something that should exist and I know limited partners who would fund that.” We were at the black jack tables at MicroConf and I kind of waved off like, “I don’t know, man. It seems like a lot of work, a lot of headache,” all that stuff.
Within a week or two, I got to thinking because I had this idea YC for bootstrappers, like 2011, I had written down and started sketching it out and I thought, “That sounds like a lot of headache dealing with it. I’ve never raised money.” It’s like, “I don’t really want to deal with limited partners.” It’s a lot of work. But the idea became more and more intriguing the more I thought about the need from the founder side.
Since I started investing, writing the little angel checks in, the more bootstrapper companies, the capital efficient independent startups like the CartHook, the RightMessages, and the SparkToros, I just didn’t have the money or the time to really go all in on that. But the need was obvious and the need was there and a lot of it was at MicroConf, frankly, people I would meet.
All that said, we started just kind of collaborating and working on the deck and stuff and I really was like—we haven’t worked together before, but he’s come to a bunch of MicroConfs, I checked references and asked around. Some people I’ve been in a master mind with them. People are like, “He’s legit. He’s super smart. He gets stuff done and he’d be a good partner.” It took us I think a couple months of back and forth to configure out really what we wanted to do, but even in the early incarnation, I think I’d said a three or a six-month remote accelerator is what we’re thinking.
At some point one of us said, “Why not make a year since SaaS takes so long.” That was one thing that changed. The other thing that changed were the terms. We just didn’t know what terms could possibly work, because the only model for this was indie.vc. Everyone else who funds things really does it either way, it’s like safes, convertible notes and those aren’t going to work here, because if you don’t raise another round, then you never get your equity. Then there’s venture terms and we don’t want any of those. That is where we just started. That was the biggest iteration of probably what changed the most, was I think we went through six different versions of the terms and customer developed the hell out of those.
We talked to founders. We talked to investors and looked at myself and said, “Which of these makes sense and is the most fair?” and obviously we eventually landed on them. Our current terms, which are modeled after SparkToro’s terms, Rand Fishkin came up with to raise money for himself. Other than that, I think with Fred from the start we said, “We’re going to do weekly calls. There will be office hours. We’ll get together two to four times per year.” The basic structure was in place really early. Frankly, I’m surprised more hasn’t changed, because we are very willing. As founders, if it doesn’t work and I’m willing to change it.
I’ve been surprised at how little we’ve had to change. I would’ve expected more things to go wrong. Typically, when you’re starting something with a lot of uncertainty, things go wrong and you just have to pivot, or change, or whatever. I guess it helps that the accelerator model is proven and there is a lot of accelerators and models to look at that already work. All we did was make it remote and we can essentially model ourselves after an in-person one and just make the adjustments necessary to translate it to a remote situation.
Tracy: Let’s go back to that term process because I know that there is a lot of hullabaloo that went into nailing down the terms, getting investors on board, and some ups and downs there. If you want to expand on that process?
Rob: In all honesty, I think my two low points came while we were trying to figure out the terms. I don’t like uncertainty, I’m an engineer, I’m left brain, I like things to be ones and zeros and the process of trying to figure out what terms were fair to founders but that also provide some type of return, such that you can be super founder friendly and if you provide a crappy return, then no one will invest in your fund. They will put their money to REIT instead, if you can’t provide more venture-like returns.
There were a couple of conversations in there. One was with a potential TinySeed founder and one was with a potential TinySeed investor. The terms were changing literally weekly at this point. Each of those conversations—we had a few dozen—there were two in particular where after I basically got the feedback, I told Sherry like, “I just don’t think this is going to work.” I don’t think we’re ever going to find terms that both satisfy both investors and founders because it’s a lot harder than it looks. I was super down during that point and it was for about a day or two. Frankly, I was catastrophizing. It was not that big of a deal. It was one data point and it’s so easy to do that in the early days. Your ideas are just so fragile.
When you launch your SaaS app and someone tells you, “This isn’t going to work,” or, “The pricing is too high,” or whatever, the first time you hear that, you’re like, “Oh, no. My pricing is too high.” But when you have 500 customers paying you and someone comes and tells your pricing is too high or you’ve funded an entire batch of really talented ambitious founders who are growing fast and the terms work for them, you just gain that level of confidence where batch two opens in just probably less than a week after this. If someone comes and says, “I don’t like your terms,” I’m going to say, “Okay.” It doesn’t matter.
The first few times you hear that when you just have three data points and one of them is that they’re not going to work, it’s really hard for me. I think that’s actually something I’d like to get better at and I think it’s a weakness of mine, is I take those things really hard. I get myself tied up in the success of my startup. Einar was basically like, “Nah. One data point. We’ll make this work.” He helped pull me out of those two moments. That’s where I’m thankful. It’s been a year plus but those were the two moments where I was like, “Man, this sucks.” Aside from that it’s definitely been more fun, except for due diligence in dealing with the lawyers.
Tracy: That would be the next question actually, because trying to create the terms was made even harder because of working with lawyers and people who don’t understand what we’re trying to do, or at least they work off a rubric that works for traditional venture firms, but we’re not that.
Rob: Yeah, we figured out our terms. We talked to one law firm, of course we’re talking to Silicon Valley lawyers and we worked with them for about three weeks, and we bailed. We switched lawyers because they just didn’t get it. They couldn’t get their heads around we’re funding LLCs and C Corps in all 50 states. They gave us docs and it was all Delaware C Corp language. We’re like, “No, we’ve told you like four times on calls, this is not that,” and they just didn’t understand it. We bailed, went to another firm and they did that although they figured themselves out a little sooner.
We were making offers to companies and going to sign the docs, and our lawyers were like, “We might have six or eight weeks of due diligence to do on these companies,” I’m like, “What?” I don’t know, it’s frustrating for me. I often get frustrated dealing with lawyers and my goal every year to not to have to talk to lawyers. At a certain point, I worked through the due diligence, took a couple of months, most of the companies and eventually I got so burned out on it. Einar was like, “Do you want me to step in on this?” He actually had to take over. He didn’t have to, I could’ve got it done but it really pulled a big burden off me.
I think we’re probably 7 or 8 into our 10 that we funded and he took over. It’s a thing where I can do that stuff, but it’s not fulfilling and it’s frustrating and that’s when you know, if you do that for a long time you’re going to burn out. Just because you’re capable of something as a founder, doesn’t mean you should do it. I think that is a lesson I learned over the past year is if I’m able to hand that off completely this time, just the mechanical due diligence of it and not be involved, that will that will probably be my goal.
Tracy: TinySeed was a little bit delayed starting the first batch, right? How long was that?
Rob: Yeah. We wanted to announce at MicroConf 2019 which was March 23rd, I believe, 24th, and I think of first docs that were signed were maybe five weeks after that. It was the first company and everyone else came within the next four to six weeks. It was like May, early June that everybody got signed. It was a couple months later than we had intended. I would say it’s frustrating, but it also was a little bit disappointing. I didn’t take it super hard, but like in the past, if I set a deadline and we missed it, I would have been devastated, like we failed. I didn’t necessarily feel that way this time.
Tracy: And we could take it to round two which is going to be happening pretty soon. I think all these things we’ve learned about the application process and the due diligence stuff should be easier this time around now that we’ve worked things out have lawyers and all that.
Rob: Yeah, absolutely. We have a checklist Einar put together and I would expect it to be shorter. The other thing we learned is we’re opening applications November 1st. They’ll be open for a month. We’re giving ourselves a month or a little more to evaluate and interview, and then we give ourselves another couple months just to make sure the due diligence is dialed in, everything gets signed, and we can plan for folks to frankly come to MicroConf which is our first retreat for the second batch will be a couple of days prior to MicroConf here in Minneapolis next April. We’ve given ourselves ample time this time. Last time was definitely an aggressive schedule and I feel like you get experience under your belt and you’re just a little more cautious with it.
Tracy: On the founder side of things, what has changed in the application?
Rob: Our first cut of the application was good. It wasn’t great. Some of the wordings was off. You can tell when someone puts a monthly number and another person puts an annual number, and you can tell, “Oops. Should have specified monthly,” because that’s what you wanted. There were some things like that.
Tracy: So is on Google. It was kind of very MVP before. They were using Google form or is it type form I think and then pushed into Google sheets.
Rob: It was a square space form that’s pushed into Google sheets and I had Zapier monitoring the Google sheet to send a confirmation email because I didn’t have that at first and I probably got 50 emails on the first day or two saying, “Was my application received? I got the message, but I never got an email,” I got a message on the screen but never had an email. I like, okay, I guess people wanted an email confirmation.
It was very taped together. Google sheet was almost 900 rows. You saw it as you came in right at the end of the process. It was a kind of a mess to deal with. It was very MVP as you said. It was in retrospect, I don’t know that I would do anything different. I didn’t want to vet and find applicant tracking software. I didn’t want to drop the money. We didn’t know if we had the money to invest in that at that time.
We knew we had money to invest in the founders, I just didn’t know how much budget we would have for things like that. We were doing it almost like a bootstrapped fund and just doing it super scrappy, but this time around, you have gone through a bunch of potential pieces of software. That was a fun journey, huh?
Tracy: Yeah. The founder side of the application is going to change. I’m raising a new system and that should be really great. There’s everything administrative-wise I think will be improved on our side. Our founder facing side, the questions aren’t really changing. They’re just updating a few of the questions there. We’re kind of working through that process, continue working at that process at the moment, but a lot of lessons learned.
I think it’s really fascinating to see. This was places where we’re not launching our own product per se, but it’s still a lot of those lessons from doing something really small, scrappy, and MVP, and then taking those lessons, then be, “Okay, cool. Now we actually know what we need, what we want to build, and implement that into our process.”
Rob: Yeah. I think that’s a bigger thing that we’ll change is the internal process that we have. We just have a better software this time. The application itself is I think 95% the same as the first time because we found that we had really good information, that we needed to evaluate folks.
Tracy: The terms for the founders who get accepted at TinySeed aren’t changing or at least aren’t changing significantly, because there’s some other funds out there that will do version one, version two, and whatnot, but we’re largely saying it’s pretty much the same.
Rob: Yeah. There’s just one minor adjustment to multiple founders. The single founder rate of $120,000 that we invest is staying the same, but we did get some feedback that only we were only adding $20,000 per additional founder. It did start to feel after many conversations like, “Yeah, that’s not enough,” so we’re increasing that amount for subsequent founders this time. Multiple founder teams will get a bit more.
Tracy: We have 10 companies in our initial batch. Any fun surprises about working with our initial batch of startups?
Rob: I think the biggest surprise is like I said earlier, how smooth it has actually been given that we were making it up as we were going along. I expected to have to change more things to be honest. I expected things to go wrong just because when you’re writing it out on a piece of paper, you figure, “Cool. This is our V0.5 and I’m ready to change a lot of things.” I’ve also been pleasantly surprised with how well the batch came together in terms of the personalities and in terms of people helping really going out of their way to help one another.
We have a couple of folks who are really good with UX. We have some folks that are really good at sales, dealing with big contracts, all these skill sets. There’s a myriad of skill sets in there and the people in that batch are just willing to jump in and help one another. I had hoped that would be the case. That’s the point of funding people in batches. You get a group of 10 super talented, we have 2-person teams so it’s 12 super talented founders.
If they were off on their own, we just wrote a check. and then we’re like, “Okay, yeah. You could deal with us and the mentors,” you lose something there. That was why from the start, Einar had gone through YCombinator, I was always a believer in community. I’ve been a part of building MicroConf and building online communities and such, I’ve seen folks help one another. That was a hope, not an expectation, and that has come together in a way that I’m very, very pleased with.
Tracy: One of the things I found really fascinating when I joined—I do a lot of the day-to-day administration of the batch—there are some founders who are very active and involved, and there’s other founders that are a little bit more quiet. It was funny […] building of the systems we use in TinySeed. We have some of the traditional things. We’re using Notion, we’re using Slack, and we looked at some other project management solutions. They’re kind of geared towards people running companies where you have to have the people who are involved be involved and responding, like check-ins and all that.
The funny thing is, with us, with our community, we want people to be involved, but these are founders who are heads down working on their own companies, and we have to also have these things in place so that they can focus on their companies. There are times where they’re not going to be as involved at TinySeed, and people float in and float out as they need us. I thought that was really interesting to me, really interesting to build up an accelerator and build up these systems, but then how they’re different than how you run a company with employees.
Rob: That makes a lot of sense. That’s a good differentiation. Einar had said, when he went through YCombinator, that some of the companies used office hours all the time, or super engage with the batch, and there were a few that were just less engaged they were off doing their own thing. It wasn’t a sign of success either way. It wasn’t predictive who was more involved, then they grew faster, whatever. It was just personality, they just wanted different things out of the batch. That’s something that we’ve tried to do, build the systems in a way that doesn’t force anyone.
I was kind of a loner. I’ve had a lot of co-founders, but I’ve always been just kind of like to go and work off on my own. I get it. I get that some folks don’t want to be on calls. If we were doing two calls a week or something, I feel like you’d start to detract from founder productivity and then it just gets to be too much.
Tracy: Yeah, totally. The same thing with me. When I went to 500 Startups, I didn’t involve myself a lot in office hours. Personally for me, that was one of my regrets, but it’s been fascinating to be on the other side of the table, see how different people work, and what people prefer. On the TinySeed side, trying to make sure that we’re successful for all these different kinds of founders. Will you remind me, was Drip remote or did you have a team in place?
Rob: We were half remote. We are five Fresno and then five remote.
Tracy: We’re entirely remote. I met you at MicroConf, but really the first time we really worked together in-person was at the Minneapolis retreat, the TinySeed retreat. How has been that process of (a) TinySeed itself is remote, and then (b) working with the founders as all entirely remote and we get to meet each other on these retreats, but we’re all in on the remote culture. How’s that been as a founder, as the person who’s managing everything?
Rob: I think personally, I’m fine with it. I work really well remote. I don’t need a lot of in-person communication and all that. Some folks want more interaction. We had a founder or two mention, “Hey, can we do more calls? I wish the Slack group had more action going on,” and then other folks are fine with the way it is or frankly probably wished there was less conversation going on. That’s what I’ve been thinking about is how do we make this work for a broad range of people.
The remote aspect, I’m curious to hear your thoughts. I haven’t felt like that’s been a detriment. I think that’s a testament to this day and age. The tools like Slack and Zoom, and the fact that we are meeting together four times during the year. We’re so well-enabled that if you have a high speed internet to connect with one another. Even Voxer, I know most of us have a love/hate relationship with Voxer, but the push to talk and just to get audio to someone quickly, I just think we have more tools now than we ever have. I don’t feel like that’s been a big hindrance, but I’m curious to hear your thoughts if there’s something that’s come up about us being remote that has been a challenge.
Tracy: Well, it’s funny, again, looking back on my experience with 500 and also YC because those are in-person. They attribute a lot of their success to being like, “Okay, we’re all working together in-person for these three months heads down,” a lot of that has to do with that whole Series A process or the whole fundraising process when you’re getting on the full roller coaster. It’s been really interesting also. This works for us for the founders, because we’re working a little slower, a little bit more reasonable, a little bit better work-life balance for the founders for this year long process.
It’s nice to have that trickle down to the TinySeed team, because another thing I was going to ask you actually is you’re juggling a lot of things. You’re running MicroConf, you’re running TinySeed, we just did a big survey for MicroConf. I helped you out on that. You’re running this podcast, you’re running a new podcast project which you’ve been mentioning a few times on this podcast, you’re an angel investor in other companies, you do a lot of speaking engagements, you have a family. That’s why I think the nicest things about having this remote first company is that I think it allowed you to work through all these different projects that you’re working on which is kind of overwhelming when I listed it out like that. I’m just going to roll right into it. How has that been? Just juggling all these different things?
Rob: What’s interesting is it feels less stressful now than it did when I was running software companies, because at least more of the things overlap. Now the podcast overlaps, it’s always overlapped with MicroConf, but much like the conversation today, and my ability to bring some of the TinySeed founders on as I have, David Heller, Craig Hewitt, Matt Wensing, it almost feels like things are more in sync than they have been in the past with me.
The other advantage I have that I didn’t back in the day is, given our funding, we were able to bring you on full time to do a lot of the day-to-day, the grind, the operations, that I would have had to do. What I did with my prior companies. This is probably the first time I’m talking about on the podcast, but we brought Xander on full time to essentially head up MicroConf and continue to produce it. I’m not as in the trenches as I have been in the past and everything’s aligned and going in the same direction.
I’m not doing all of this. Everything you just mentioned, I was doing except for TinySeed, but insert Drip in there. I’m running a software company with a team of developers and there are 10 of us and in essence. That split my focus because MicroConf podcast mode was different than Drip mode. It’s just two different problem sets. TinySeed and MicroConf are not the same, but at least it’s the same headspace of community, and helping folks, and pushing this forward. At least for me, there’s a lot that I can stay in the same headspace with each of those things, and then frankly working with really good people has helped tremendously.
Tracy: In terms of all these projects, do you have any processes in place that help you keep track of everything you have to do?
Rob: Yes. I get a lot of email, quite a lot of email. I’m in email constantly and my process is to triage things and use the Trello board. Literally, if someone texts me something that is like a task or if you Slack me something, I will often copy-paste or screenshot that and throw it into Trello, because otherwise, I’ll read it, forget about it, and it’ll never get done. I’ll remember it three days later and be like, “I’m sorry I didn’t get back to you about that one thing you asked me about,” if it’s a quick yes or no of course I just answer, but if it’s more than two minutes, I need to be prioritized.
I’m in Trello and email a lot. I boomerang a ton of stuff. I have a “this week” folder. If it doesn’t need to get done, if it’s not urgent and I know I can handle it in a week or in the next week, I’ll throw it into this week and I have 30 minutes like on Thursday morning where I go through that whole folder and I respond to things. Often it’s speaking invitations, it’s asking for advice from random people I don’t know, or people outside of the batch. Other stuff that’s not time-sensitive.
I think really the core of why all that works is Trello. If you’re ever in a conversation with me and I get on my phone, I will say, “I’m emailing myself that right now.” If you were to mention a really good book right now, I would email that to the Trello board and I would later add it to my audible wishlist if I wanted to listen to it. Or if you are to recommend a tool for applicant processing, I would email it there first, then later I would go and I would mention it to you that I put it in Notion or something. That’s kind of my inbox triage. Just getting fast with keyboard shortcuts.
Tracy: There was that one time that you emailed me rather than Trello with your to-do. That was funny, because Tracy starts with TR.
Rob: Yup. I know of a good TR and it’s the Trello board and for some reason, you were there, and it was only a subject line, it was like, “Remember to X, Y, Z,” and you’re like, “Was this for me?”
Tracy: I was like, “Okay, this is clearly not for me but I’m not sure what it was for.”
Tracy: Batch number two, the application is going to start on November 1st. It will probably last about a month. For people who are applying for batch two, do you have any big pieces of advice?
Rob: That’s an interesting question. We do look at every application, we will read all of your answers, do think them through. We’re serious about the questions we ask there. We feel like it provides a lot of insight. We actually got a feedback last time from multiple people saying, the questions, especially the latter half where we ask about, “What would be three ideal customers for you? Why is now the time for this idea?” these are just some high-level questions.
We got multiple people that told us, “Those helped me think through my business. I learned something by having to think those through.” I would say I look at the people, I look at product market fit, and I look at price sensitivity. Those are the 3Ps, the high level P’s. We have this whole list of 40 something things that we evaluate folks on. If it’s a solid team, you’re shipping, you’re getting stuff done, and have some kind of traction, we really want to have a conversation.
I don’t know if there are any hacks or quick ways to get attention, but I do feel that in this day and age, I don’t know any angel, or VC, or accelerator, that will fund ideas. If you’re at the idea stage, get out of that. Get validation, get someone using it. Even if it’s a productized service that will ultimately be beaten by software, or you’re just hacking stuff together with Zapier and Duct Tape. Get to revenue, get to where you’ve proven that there is a need and people are willing to pay for this, because that’s so much of it.
The cone of uncertainty is widest in those early days and it’s so hard to break through from $0-$50 MRR. It might be the hardest point, or $50-$500. There’s just these little hurdles that are so hard to get through. It’s what I tell any founder, whether they’re applying for funding or not. This is the hard part. Get past that to prove to yourself as much as anyone else that that is a viable idea, and it gives you the confidence to keep pouring your time into your business.
Tracy: The nice part thinking about their new application process is that people can save their work compared to last time which is just a form.
Rob: Yup, big one-page form. That is nice. There will be improvements this whole time, little iterations and such.
Tracy: When I was working my startup before TinySeed, I never got into YCombinator. Like what you said, the application process helped me so much in terms of making me think through what are the issues that I wasn’t thinking about beforehand, what are the things that I could be anticipating, that I can put into place in the next three months? Who are the competitors out there? What does the competitor last week look at that moment? Because oftentimes. I’d forget to look at that as things popup over time.
We’ve gotten quite a few emails from people saying, “Hey, should I apply? I don’t know if I should apply,” and I said, “Yeah, definitely apply if only for that process of going through those questions and forcing yourself to think about these things, you might’ve forgotten to think about for awhile.” I think it’s a really useful process and I hope to see a lot of applications. This is my first time being 100% involved, so I’m really looking forward to it.
Rob: Yeah. It’ll be fun.
Tracy: Cool. I think that’s a good place to end this.
Rob: Sounds good. If folks want to keep up with you, they can go to @tracymakes on Twitter or tracymakes.com.
Tracy: And if they want to keep up with you, they can go to @robwalling or robwalling.com.
Rob: Nice. Well done.
Thanks again to Tracy for coming on the show and interviewing me and maybe I’ll do that again in another month or two to continue my story. If you have a question for the show, leave us a voicemail at (888) 801-9690 or email email@example.com. Our theme music is an excerpt from We’re Outta Control by MoOt it’s used under Creative Commons. Visit startupsfortherestofus.com for a full transcript of each episode. Thank you for listening and we’ll see you next time.
In this episode of Startups For The Rest Of Us, Rob talks with Adii Pienaar of Conversio, about his life changing exit, when and why he decided to sell, and what the whole process was like.
Items mentioned in this episode:
Rob: In this breaking news edition of Startups for the Rest of Us, we have the first interview with Adii Pienaar of Conversio after he sold his company to Campaign Monitor for a life-changing amount of money. This is Startups for the Rest of Us Episode 467.
Welcome to Startups for the Rest of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at building, launching, and growing startups, whether you’ve built your fifth startup or you’re thinking about your first. I’m Rob, and today with Adii Pienaar, we’re here to share our experiences to help you avoid the mistakes we’ve made.
Welcome to this week’s episode of Startups for the Rest of Us. I’m Rob Walling. Each week on this show, we cover topics relating to building and growing startups in order to provide a better life for ourselves and our family but also to improve the world in a small way.
This podcast aims to highlight folks that are winning, highlight folks that are struggling, highlight folks that have one but let them talk about the struggles along the way because frankly, a lot of the media seems to whitewash it and the TechCrunch articles we read and Inked magazine and such, I don’t know, they paint the picture that maybe this is easy or that we should have millions in revenue in the first couple of years and that if you sell for less than a billion dollars, that’s somehow a failure, but it’s not.
We talk on this show about building businesses, building real companies instead of building slide decks. We don’t ask for permission to start companies. We go and start them and we build real businesses with real customers who pay us real money.
Starting a company is hard. More than half of building a successful startup is managing your own psychology. We’re going to dive into that today with Adii Pienaar as we do a breaking news interview with him after he exited from his company Conversio. Now, Adii Pienaar was a co-founder of WooThemes many years ago which later sold to WordPress (parent company Automattic). After leaving WooThemes, he started Conversio, which in the beginning was called Receiptful to SaaS app and it was essentially an email service provider that catered to eCommerce companies. They integrate with Shopify, BigCommerce, a few others, and he built it up into a multiple seven-figure SaaS app.
Adii and I have known each other for years. He’s a three-time MicroConf speaker. I was super happy for Adii that this exit went through and that he was able to have this moment especially with Campaign Monitor which is a company a lot of us know and respect. Now, he and his team are working for Campaign Monitor and they’ve rebranded Conversio to CM Commerce.
Before we dive in, I wanted to remind you that the TinySeed batch two applications open on November 1st. Head over to tinyseed.com and you can get an email when the applications open.
In this interview, Adii and I walk through it all. We talk a little bit about growing Conversio but we dive in mid-story, as I like to do, to cover when did Adii decide to sell, why did he decide to sell, what that process was like, how painful or not it was, how it took, how the transition’s been, and a couple of things that he bought shortly after the exit closed. I hope you enjoy this conversion with Adii Pienaar.
Adii Pienaar, thank you so much for joining me on the show.
Adii: Thanks for having me, Rob.
Rob: I’m so surprised. This is the first time that you’ve been on Startups for the Rest of Us. I just thought somewhere in the back of my mind, I had invited you on before but apparently, as you just told me, this is it, this is your premier.
Adii: Yeah. I’m just going to say, The most politically correct thing to say is absence makes the hardcore founder. I know I’m here just because of all these years of absence.
Rob: That’s right. What an episode to be on, man. We could have had you on years ago to talk about WooThemes, we could have talked about when you started Receiptful, renamed it to Conversio. The agony, the victories, and everything that it takes to build a seven-figure SaaS app, but here we are, we’re able to talk about essentially what I’m calling a life-changing exit. Does that sound reasonably correct.
Adii: Yeah, it does. That’s the way I describe it as well in more ways than one, but yeah, definitely life-changing. Even on the ground, saying that and thinking about, that you hear me say that […] into that new normal. That’s all I know that is life-changing because I don’t get settled into that new normal, I just know that it’s on the horizon.
Rob: Yeah, exactly. Can you take me back to the moment that the docs were signed and were you like me refreshing your bank account just to see when the wire came through? What did that feel like when you saw that many zeros in your bank account?
Adii: I think the […] Rob is that I saw the first cash from deal. I got paid last. Everyone else is all about I get paid first. I don’t know why some British legal thing. Then the money also went to our family office and they didn’t really have got to me in South Africa. By the time it got here, I’ve already just dipped into bit in South Africa just to buy a few things to reward myself. The money itself was odd. You think about that now, actually just receiving the money, it ended up not being the predominant experience that I seem to remember from recent weeks.
Rob: Yeah, that’s interesting. It never ceases to amaze me how something that you can chase your whole life, you can achieve it, and then within days or weeks, it suddenly becomes a new normal, as you said.
Adii: The way I think about it, money itself has never been a good motivator for me. I know that to many people that sounds weird because I have […] adult life, at least I’ve been an entrepreneur and I’ve been working my own things. There is that pursuit of money, but money itself is never a motivator. To me, it’s the kind of things that I attach the money, the kind of life I can build in a way.
To that extent, the thing that both Joan (my wife) and I said to each other beforehand was that we already had a really good life before and we didn’t need a single event, especially not one of this magnitude to change the fundamentals of our lives. We aren’t going to change our family values just because we had more money. That’s part of why I’ve probably just not enjoyed or indulged on the financial aspect of the exit just get.
Rob: I find that very common with makers. You’re a developer yourself and a lot of the makers I know, most of them start the companies not for the money but for the freedom that money can potentially bring them. In the same way, I just wanted to be able to go build interesting things. I found that working for other people, I couldn’t do that. I built really boring things that I didn’t like and I didn’t have any equity. Then at the end, finally starting your own thing, it’s like, “Wow, I just won enough time to build fun things and cool things that I’m interested in.” How do you get there? I think starting a company is one way to do that.
Adii: Exactly. We’re a little beyond two months now since the transaction closed. In those two months, my team and I had been hustling in terms of evolving the product, rebranding the product, trying to focus our attention on doing more good work because I just gravitate towards that. Everything else is a distraction to what I actually want to do. I just like to create value, do cool stuff, whether it’s my own or otherwise. I only have experience on working my own things, so I think going into a new parent company, that’s […] and it’s something I will evolve into, but that’s at least has been the focus for those two months. As I said, just getting back to doing good, focused work.
Rob: Folks who are listening know that you started Conversio, which essentially is an email service provider and you mentioned to me that you started it in 2014. Now, selling it here five years later, you grew it into a seven-figure SaaS app and then you had an exit, that’s “only” five years. When I say only, I either literally mean that or I mean it in quotes because sometimes, five years of running a software company and growing it can be very painful. How do you feel about that? Do you feel like, “Wow, this was a quick victory for me, a Cinderella story,” or do you feel like it was a grind and five years was really tough, “I feel good to have made this next step into this next stage of my life”?
Adii: I think on average, Rob, we started the […] this is life-changing and I do think positive at the whole exit like in that […], It is life-changing and the fact that I’m really happy about the new home that we found for both product and the team. The cool thing there is there’s some personal affinity with Campaign Monitor, our new parent company, in the sense that I […] user forever, like firstly a customer. We were still customers of theirs at the point of acquisition and that’s always been by choice, but also when I started working on WooThemes back in the day like 2007, those are the wild, wild west of software, online software, SaaS, et cetera. From afar, we always looked at Campaign Monitor and we would ship or […].
I can remember, for example, when they put up their fancy Sydney office. Magnus, Mark, and I were looking at that and drooling. Not that we needed a fancy office because we had a mostly-distributed team, but there’s always been that personal affinity and when you get almost your heroes, a hero company where you come in and express interest to buy this thing that you’ve built, that’s a great feeling as well.
That’s predominantly the lens that I look at the exit and depending on how deep you would get. Ultimately the flipside to that is we were operating in a pretty competitive space and I also knew that to compete, we had to either accelerate our growth organically or sustainably with our own means or we had to raise more money because we had well-funded competitors that were definitely making moves within the industry.
You look at that five years and say, “Could we have done more to grow it further and exited at a year or two, three, four down the line for some exponential model?” and yes, I think that is possible. But you sometimes just get an opportunity to get a really good exit which is what we got and you can actually see that. I want to see that moment because you never know what changes beyond your control the next 2–3 years.
Rob: Yeah, I’ve seen folks ride their business over the top, so to speak. Once that growth stops, suddenly your multiple is not 4X instead of 5X multiple. It becomes 1½X instead of 5X. It’s a huge change once your stop growing. Given the potential for recession that folks are talking about, it’s easy. If you’re in it for another 5–10 years, go for it, but if you’re at the point—like my mental model—where you’re burned out, or you’re thinking about doing something else, or “Hey, having enough money where I can ride off into the sunset,” is starting to sound appealing and you can get that, what’s the difference between having that and two times that? You know what I mean? I talk about this in a MicroConf talk after we sold Drip and it was the same model. It’s like, “Yeah, I can keep riding this stuff,” but I don’t want to be that person that winds up having a major regret about it.
Last year, you spoke at MicroConf Europe in Croatia and if I recall, your talk was pretty raw. You talked about running Conversio and some of the challenges that you’re facing, both emotionally and just with the business, that there were competitors. There are all kinds of stuff, as you said, in this space that make it difficult. When did you decide to sell and why? Was that part of it?
Adii: Yeah, definitely. I think many people look at—I hate the term, by the way—serial founders and they figure, “Oh, the second, third, or fourth time is just so much easier.” I actually found it was completely the opposite for me. The second time was much harder possibly because the first part was partly […] way than the extent of our success was you […] lack in timing et cetera. Coming into Conversio, it was just harder than that. We also started off growing wildly. Then the growth plateaued and it was harder.
The other thing that made Conversio really much harder for me over the years was the fact that Adii Jr. was born, I believe, two years. He was two years old by the time that I left WooThemes and sold out WooThemes. By the time I had started working on Conversio, I had a six-month-old baby in the house. Having dependent and two dependents, as well as Joan, that always seem to aggravate my fears, my awareness of risk, those kind of things, so the second time was just much, much harder.
By the time we had gotten to MicroConf, my talk was mostly sense of being tired. The short story there was about a year before, we thought we had revenue which we didn’t have and it contradicts with the message. We literally lost due to reporting. We lost about $25,000 MRR. We’ve been pretty frugal and keeping revenue and expenses close to break even, some months just over, some months just under, not a big cash reserve. Then, this revenue just disappears. The revenue we thought was there and there was a lag from our payment process […]. I had to lay off two team members. That’s November 2017.
For the next year, all we had to do was really be brutal in terms of turning the business around and making sure it was profitable. We did that on almost, not zero, but minimal. We probably did around about 10% revenue growth in that whole year, start to finish in that process, but we turned profitability around drastically. It was just a hard year. For me, just given an overall overarching experience of the second time being harder and then going through a tough year like that, I was just tired. At least for me, when I feel like that I don’t feel as energized and ambitious, then I start looking at options, which meant that throughout that year, for that lost year, I at least started putting feelers out there to see should we raise more money—that was one option—or should we actually look for some kind of strategic partnership or acquisition.
Rob: Those layoffs must have been really tough. Was that the first time you had to lay people off?
Adii: Yeah. I’ve had to let people go before due to performance or something, but this is the first time that a big reason for them leaving the team was just we couldn’t afford to keep them, and that was on me and that sucked.
Rob: Yeah, it’s really hard to be doing your best and trying to take care of everybody and to make a mistake like that. I know how that feels myself. A lot of people don’t realize how close to the margins so many of these successful SaaS apps actually run. You have an app doing $1 million–$3 million dollars a year and that sounds like this amazing windfall.
Of course, when an app stops growing, it will plateau and you can have this amazing profit margins. 50% is the net margin I hear thrown around for SaaS, if you need a team to do it and if there’s this special Cinderella SaaS where HitTail had 85% net margin or something.
You can get a lot out of it, but when an app is growing, you’re driving, you have a bunch of competitors, you’re building features, and you’re basically trying to keep your head above water as you’re growing, most of these apps will run at breakeven for a very long time. I don’t think that a lot of people realize that.
What that means is that one small misstep with cash or as you’re saying with an accounting snafu can really mean some pretty drastic stuff. I bet at that time, now we say like, “Oh, you have to lay two people off.” That was tough. At that time, did that feel catastrophic? Was that a huge weight on you?
Adii: Yeah. I can’t remember, Rob, at least in terms from day one of starting Conversio, going through a darker period of my life because part of that is I’m also a solo founder, nobody was as invested in this business as I was. Even if I consider Joan from a family perspective, she has that financial exposure but it wasn’t her decision that influenced what happened in the business.
It wasn’t on the shareholders either. They were passive ever since. They obviously had their capital exposed in that risk, but it’s not the same thing. It very quickly became a very, very lonely thing both in terms of taking responsibility for what happened but also, literally, the next steps in terms of telling two people, “Listen. You’re unfortunately redundant. Here’s the situation…” You’re doing that, handling the you’re being there for the rest of the team. Often, they lose friends to friends, for example. That’s hard.
Thinking about it now, the hardest part is going through such a tough experience also at the end of the calendar year, when one tends to be a little bit more tired probably than in January, having to rally the troops because the business needed to be turned around. It wasn’t just about letting two people go. We needed to shift momentum drastically. I probably walked through 2018 just feeling this immense, immense weight on my shoulders like I’ve never felt before, not with WooThemes, not with Conversio before, and probably not with anything else that I’ve done in my life.
Rob: How large was your team at the time?
Adii: Fourteen, I believe, we went down from 14 to 12.
Rob: To 12, yeah, that’s a big hit. Obviously, we can hear it in your voice and just in the events you’re talking about that why you would start thinking about other options? You mentioned raising funding and you actually dropped me a line, I believe. You sent me an email and asked about the Drip exit. Did you and I jump on a call? Remind me of what happened because I remember introducing you to Einar and this is before TinySeed, I believe, and then the two of you got in a conversation about what it would look like to exit. Remind me the process because I’m guessing you’ll remember better than I do.
Adii: Yeah. I don’t think we spoke enough after that, by the way. The last time before this split was a couple of weeks ago just after the exit.
Rob: Got it. Was it in MicroConf Europe?
Rob: Okay, so that was it. That would have been almost a year ago now.
Rob: You must have asked me about what it would look like to exit and I think I said, “Hey, I know this guy.” We’ve probably just announced TinySeed, literally, a week before that and I knew that Einar had hopes. Part of what he’s done over the past several years is helping seven-figure and eight-figure SaaS founders exit and then run a process and sell their companies to really strategic buyers is what they do. I intrude you there. Now, did you follow other leads as well or once you talked to Einar, were you like, “This is something”?
Adii: Yeah, I actually stuck to Einar. I’m a big believer, at least, both in life and business but in business, too. You need to tie and consolidate relationships as much as possible. If I find someone that resonated with me and there’s a fit for my personality, then I’m all in.
Rob: Einar is the founder of Discretion Capital and you worked with him to essentially run a process, is what it’s called. Folks who’ve done it know what that means but for folks who don’t know what that phrase means, can you talk about what that looks like? I guess from a high level what it looks like, but also I’m curious to hear your individual story as you went through that process.
Adii: We ended up having quite a simple process, but it’s also the first one that I ran. What that meant was Einar and I worked together to put together a prospectus of some kind for the business and then identify potential acquirers, both strategic or just financial sponsors, which was a new term that I learned as well. Then, the ultimate goal with any exits is once you have that, try and get multiple parties interested. If you have multiple parties interested, you can probably pay that interest off each other to make sure you get the best possible bid. In saying that, the best possible bid isn’t necessarily the one that has the highest variation. It could be related to payment terms, some restrictions or warranties, or just almost a cultural thing.
I know a friend, for example, that ran through a process. There’s one friend […] that has sold multiple businesses and he told me that in his last business, he didn’t choose the one that had the highest valuation. He chose the company and team that he thought would really make progress with the product because that was more important to him at that stage. I think that’s what that competitive bidding process looks like in terms of getting multiple interested parties and then hopefully multiple bids on the table.
Rob: Yeah, that makes a lot of sense. I’ve never been through a process and I’m not super familiar with it, but my understanding is when you work with a broker or an investment banker like this—they do run a process—they essentially take all your financials, they put them together, they crunch them, they run numbers, they put spreadsheets together, they put a 1–5-page teaser together that is totally anonymous and they circulate that out to folks that they think would be interested strategically and financially, as you said, and then they circulate that confidentially. Folks will respond and say, “Oh, I’m interested,” and then they sign an NDA. Then, they have a deck that they’ve prepared in essence and talks go from there. As you said, the key here is to get multiple offers because it’s a market and it’s the way to get the best price.
I’m curious, when I went through the Drip sale process to Leadpages, it was not that. We didn’t run a process. They approached us. It was still very, very painful. It was agonizing for me. It was a 13-month process total, but it was really hardcore for about 6 months, where it was maybe 10–20 hours a week for 6 months for me of negotiation, getting to the letter of intent, and then all that stuff. How long did it take once things started getting moving? I don’t just mean getting your financials together and doing other stuff, but actually when you started doing calls? Because it becomes real once you get on the phone or get on the Zoom call with a potential acquirer who’s like, “We’re going to write you a big check but we have all these hurdles to go through.” From that point when it started getting real, how long did it take until the deal closed?
Adii: Timeline from the first email indicating interest to transaction closing is less than three months.
Adii: It definitely has its advantages. Objectively, this wasn’t something as necessarily was top of mind for me, but having such a short close is generally beneficial to the seller because if for whatever reason the deal falls through, you can quickly get back on the market. If you had multiple interested parties before, you can pursue them.
That’s the objective benefit of a shorter close. I wasn’t concerned about that at all, and this is what we say in hindsight because my boss and colleagues are listening, that was just never a concern for me. I like the fact that there was momentum because it became a forcing function to get through tedious due diligence things, which was crazy. Ultimately at the same time—as I said, I’ll elaborate on all these benefits of the short close— I now just know what it felt like drinking from a firehose. I just had to learn so many different things like a legal documented compliance standpoint. I was exposed to new things at an incredible rate. That definitely took its toll just for me, personally, and again, because I’m a solo founder.
I was lucky to that extent. I had Einar who we’ve chatted about. I think his experience was really helpful in just guiding me through that process and also just running interference on certain things, so that was helpful. The other thing that I know it did, even though it cost me a lot of money, it shaved a couple of years off of the […] that would have had to, stressful that I would have had to pay, but as soon as we had lifeline, Einar advised me and he said, “If you don’t have your legal counsel that has M&A experience, find the best legal counsel you can find and get them involved.” We’ve got a fantastic firm in the UK that assisted us here with this and that’s I said, “It’s not cheap. It’s almost when you eventually bite the bullet. It feels like the grudge purchase thing, but objectively I know that there was no way for me to navigate this transaction without that experienced and expert help.
Rob: Yeah, it’s a big deal when this much money is thrown around. I went through the same mental process when Leadpages approached us to acquire Drip. It was like, “Do I hire someone to represent me like a broker? Do I hire a lawyer?” I hired both and you’re right, it’s not cheap, but I think it saved years of my life, I think, is what you were saying. It reduced so much stress because I just felt like I was dotting I’s and crossing the T’s, and I’m going to sell a couple of companies in my life probably.
Whereas on the other side, acquirers have often acquired 5, 10 15, 20, and the lawyers know way more about it than you do. Not having an expert on your side is tough. I do know some folks who have done it and they are better people than I in terms of being able to put up with the uncertainty.
Ninety days is short. I said wow when you said that. I hear a lot of acquisitions take a lot longer than that. Did it feel quick to you or did it feel like 90 days of agony, uncertainty, pain, due diligence?
Adii: Due diligence wasn’t that bad. I went into it expecting much, much worse and it wasn’t bad. My gut feel is it wasn’t that bad for two reasons. First is the parent company were trying to do almost—this is obviously not a term—malicious due diligence. They were not just doing due diligence for due diligence’ sake. I think that’s the first part.
The second part that I am actually proud of is that I ran a really clean business. I say that in the way that I’m not a tax advisor, so don’t take any of my words here as a tax advice, but I think most founders know how to find a few tax deficiencies in their businesses by interlacing personal interests, business interests, and whatnot. I just never did that. Even though I was a solo founder, even though I had more than 70% of the equity by the time this transaction closed, there just wasn’t stuff there and our accounts were up to date.
We tried to run, in terms of our […] back to solutions we used with a software or some process within the business. Everything, we tried to simplify things and that greatly assisted us, that due diligence wasn’t that bad. But the uncertainty was still there. For me, it was a tipping point and it was very early on where I know I shouldn’t get attached to things and then your mind pulls a trick on you where it says, “Don’t screw this up now because this is significant and potentially life-changing,” and then that uncertainty kicks in like, “What happens if I get onto one of these calls and they find some kind of skeleton in the closet that I wasn’t even aware of and the deal falls through?” Up until close, that was something that at least pulled a few mental strains for me in the way that wasn’t unnecessary pleasant or helpful.
Rob: As founders, we always find something to worry about, don’t we?
Adii: Yeah, because if we didn’t have that, we will also wouldn’t apply the same kind of mental gymnastics to conjure up creative valuable ideas and bring them to life.
Rob: Indeed. Exiting the Campaign Monitor is awesome. To be honest, Campaign Monitor may have been the first ESPI ever used even before Mailchimp. I’ve always had a lot of respect. It was an ESP for designers is what I thought of it. I was guessing it was started by a couple of designers based on the UX that they’ve had over the years.
You had a huge transition now and you were able to sell the company. Your whole team now works for Campaign Monitor that have actually rebranded Conversio to CM Commerce. What is it like to go from a team of a dozen or so people to working at a company that large? How many employees does Campaign Monitor have?
Adii: Almost 650, I think.
Rob: That’s a big difference. Talk us through that. How is that felt?
Adii: It definitely has its challenges. The way we used to work has to change. That’s the simple reality because the things that we did as a completely distributed team, small team, an intimate team at that, that doesn’t translate well to such a big corporation. I think part of that as well is we are the smallest conservation in terms of people volume. We were 11 people that ultimately went a long acquisition and those 600 people there that are already more settled. Some of them have been there for 10,11,12, or 13 years. That has to change and for us at least, we went through that change very quickly because we wanted to get to the improved rebranded version of the product pretty quickly.
We had to literally make relationships on the fly with our new colleagues which I think is just challenging because relationships take time. What struck me most is the fact that most people on my team—doesn’t matter which role they were hired for—wear multiple hats in terms of doing things that just needed to get done. I know that was true for me as founder and leader of the team as well.
The biggest change that I’ve noticed is that most people are more narrow in their definition of how they add value to the organization. This is my skill set, this is my expertise, these are my responsibilities. At least for me as a founder, that’s a hard natural jump to make. I think that’s the biggest challenge that I have, but it also brings along with it quite a bit of excitement where I can probably do some things that are a little freer, more creative, more suited to a particular strength of mine instead of having to unnecessarily worry about all these things.
I did conversions, bookkeeping, all the way up to […]. I could do it, they were perfect, and as I mentioned they […] flag them. Due diligence, for example, and taxes got paid, et cetera. But that’s probably not my magic. There’s probably better bookkeepers, accountants, and whatnot in the world, but I think that opportunity and that change is bittersweet to some extent because I am someone that can wear multiple hats. But as I said, I’m mostly focused on seeing where being a bit more of a specialist and focus on the specific area of business and seeing where that takes me in the future.
Rob: What was the hardest moment of the acquisition process? Remember a time during those 90 days when you just thought, “This is brutal”?
Adii: I guess the last week or so, the discussion seemed both sides as legal teams. It seems to extend and seem to get into […]. I literally had the sense of, we just have to wrap this up now. We are getting into semantics and I’m also just generally a very trusting person. That part of it felt very unnatural to me, but I can’t remember a single event, like a single email, or a single call, or a single issue that popped up, that I felt would threaten everything. The only thing that comes to my mind is the last week or two where it feels like we got 90% of the deal done, and then we literally have to cram that last 10% into that last week.
What made it worse was, I was actually on a trip in Europe, a pre-planned holiday with Jean and our best friends. I was literally having to jump on calls and answer emails in between those things, which just extenuated that. By the time that we got, literally Friday afternoon 6:00 PM kind of thing, got to a point where both parties had agreed that we put pencils down and we’ll be signing […] as it was in that stage.
The first thing I did was I literally broke down in Jean’s arms. I just cried and I don’t want to call it sadness, but it was just things pure outpouring of all of these pent up emotions and thoughts that culminated over the preceding weeks.
Rob: I have totally been there and shortly thereafter, I cracked open a bottle of whiskey. I literally remember the night that I closed, when we sold […]. It’s funny how many parallels that even though our experiences are different in terms of you running a process and me having a strategic or whatever, so much of what you are talking about is bringing up a little bit of trauma for me.
You’re right. The last week feels like a month’s worth of work. It’s like,”There’s no chance that we are going to close. Are you kidding me?” Then everyone is arguing about this sentence and that word, and what it means, and it’s infuriating. I was so frustrated, angry, and stressed because I’m like, “This has to go through.” That’s what you said. You’re mind is playing tricks on you and it’s like, “I don’t want to get attached to this, but really I’m kind of attached to it. I want this to happen,” and yet you can’t just give in. You can’t just be, ” I want this to happen,” so okay go ahead and do what you want. It’s an incredible mental battle.
Adii: Exactly. That’s the thing, Rob. For me, that part of selling a business is very unnatural, at least for me an entrepreneur. I suspect that it’s probably the case of most entrepreneurs. That most entrepreneurs are bigger picture people and negotiating an acquisition like this is going on to those very, very fine details. Those details where you know there was an email thread about three weeks ago, but for the life of you, you can’t find that exact line in that email anymore because that email thread is now a novel. Gmail has magically decided to split this up into multiple threads.
I just think that’s a very unnatural state for me, at least, you are getting to that level of […] and specially so late in the transaction because you get to the point of attachment where it is point of no return, where I know that I need to push through now because trying to turn this back and for this thing not to go through, that outcome is so much worse.
Rob: Are there one or two things that you bought after the acquisition that you bought to celebrate, that you wouldn’t have bought before? Do you now have a tesla in your driveway, for example?
Adii: No, I do not have a Tesla. Mostly because I figure there’s not, by far, any public charging stations. It’s not a vital purchase. If that wasn’t the case, then I might have. I’ve done two things. One is totally juvenile and the other one is pretty cool.
The juvenile thing is I’ve never bought as much wine as I have in the last two months and I already have too much wine. I’m a bit of a collector. I’m mostly a wine drinker, but we have too much wine. I definitely enjoyed taking out on wine and probably making purchases that I would not have made before.
The more significant thing for me, this is the biggest reward, direct reward at least, that I am also giving myself from the exit. I still wish I could claim that this was my idea, but it was Jean’s idea. We are actually taking my whole family—my parents, my sisters and their spouses, my one sister has two young kids I raised as mine—on a Disney cruise which has been pre-booked and planned for the middle of next year.
We are doing that. The reason I look forward to it is because getting the extended family to get together for any amount of item is already hard and getting to experience something like that with them is just something that I really look forward to. Those are the things I have for myself and […].
Rob: Love it. I often talk about freedom purpose in relationships and it’s like you’ve now achieved a level of freedom. I’m guessing 20 years ago, you would have pinched yourself to have. You did it while diving into a deeper purpose of starting a company doing something to improve your corner of the world.
I love the capstone comes back to relationships because one of the things you start spending a bit of money on is being with family. I guess it’s very poignant and I’m super happy for you in all honesty. I just wanted to say congratulations and thank you so much for taking the time to talk us through.
Folks actually wanted to hear more about it. I guess I got scooped. I thought that this was the first interview you were doing about the acquisition, but it turns out about four days ago on Friday, Zenfounder, my very own wife, scooped me. I know you didn’t go nearly as much detail but you did talk a little bit about that on her show so folks can certainly go check that out if they are interested.
Adii: The other thing that you should know, Rob, because I didn’t know how much I did share with you is that we also scooped a newfound interest in poetry. I’m curious to see how that’s going to play out for you well in the future, whether I’m going to see tweets about what kind of poetry from you.
Rob: Alright. I would love to hear it. Speaking of Twitter, you are @adii on Twitter. That’s an awesome first name. Anywhere else you like folks to follow you online?
Adii: It’s either @adii on Twitter as you said or adii.me which is my blog. Now that this massive live event has passed, I have more time and I’m back to weekly writing discipline. If anyone wants to hear what I’m thinking, then that’s where the place to go.
Rob: You did a really nice write up about this just about a week and a half ago. Folks can go to adii.me if they want to check it out. Frankly, if you have questions for Adii and you like to see him come back in the show and answer questions—I totally did not pitch him on this beforehand—you can email questions at startupsfortherestofus.com or tweet at @robwalling and if we get enough questions, we’ll get Adii back on to answer those assuming he’s up for it and can carve up the time.
Adii: I’m definitely up to it. I’ve been up for these kind of things. Ever since, as a teenager, I read Richard Branson […] where they said, “There’s no such thing as bad publicity.” Whatever kind of spotlight I could get, I will be happy to take. If there’s questions, I’ll be happy to pop back into the show.
Rob: Sounds great. Thanks again, man, for coming into the show.
Adii: Thanks for having me, Rob.
Rob: Thanks again to Adii for coming to the show. As I mentioned, if you have questions for him, tweet them at me, email me. You can email us questions at startupfortherestofus.com or you could call our voice mail number (888) 801-9690 and leave a voicemail. I would bring Adii back on the show if we have enough questions for him to run through those in a future episode. This podcast’s theme music is an excerpt from We’re Outta Control by MoOt, used under Creative Commons. You should subscribe to this podcast. You can do it in iTunes, Stitcher, Spotify so that you don’t miss any episodes. Visit startupsfortherestofus.com to get a full transcript of each episode. Thank you so much for listening. I’ll see you next time.
In this episode of Startups For The Rest Of Us, Craig Hewitt returns to the show to answer a number of listener questions on topics including productized services, podcasting, and more.
Items mentioned in this episode:
Rob: In this episode of Startups for the Rest of Us, Craig Hewitt returns to the show to answer listener questions about productized services, podcasting, and more. This is Startups for the Rest of Us Episode 466.
Welcome to Startups for the Rest of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at building, launching, and growing startups. Whether you’ve built your fifth start up or you’re thinking about your first. I’m Rob and today with Craig Hewitt, we’re here to share our experiences to help you avoid the mistakes we’ve made.
Welcome back to the show. As you know on this show, we value building real businesses with real customers who pay us real money. We value the freedom to work on projects that are interesting to us. We value the purpose that it brings us to start our own endeavors and to have equity and ownership, and we value relationships, whether that’s relationships with our family or our friends. We don’t decimate our personal life for the gain of our company. We are ambitious founders, but we are not willing to sacrifice our life or our health to get to where we want to go. We know that starting a company is hard. More than half of being a startup founder is managing your own psychology.
Joining me again today is our guest, Craig Hewitt. He’s the founder of Castos. I did an interview with him a few episodes ago, and I did a call out for questions that folks have for him about his experience about his interview. I wanted to bring him back on the show and it’s something I want to start doing, assuming there is enough demand for it. If you didn’t hear that interview, Craig has grown Castos to six team members, including himself. They are a member of the inaugural TinySeed batch and Craig is really crushing it with Castos, his podcast hosting platform.
Before we dive into that, I want to give some special thanks to Kenneth Khaw for his epic enterprise sales tip. He sent an email to me after David Heller’s hot seat episode, where we dug into David’s enterprise sales issues with things taking too long. Kenneth Khaw obviously has tons of credentials around being in enterprise enterprise sales for 12 years and he had some tips for David, including screenshots, a long write up, and talking about summarizing a quote in one page, providing variations of a quote, figuring out what the get over the line number is for negotiating. He really dug into it.
That was super cool, super appreciated, and David just wants to tell us, “Wow, he really spent a lot of time on this,” so it’s much appreciated that the community can give back to someone like David who is pushing forward and trying to solve problems. That was great when we can share our expertise with one another.
Lastly, another reminder that TinySeed applications for our second batch open on November 1st. Those who don’t know, I run TinySeed, the first startup accelerator designed for bootstrappers and we fund companies in batches for a year-long remote accelerator. If you’re interested, head over to tinyseed.com, enter your email there, and we will notify you when the applications’ available.
With that, let’s dig into some questions with Craig Hewitt. Craig, thanks so much for coming back on the show.
Craig: My pleasure. Thanks for having me, Rob.
Rob: I am excited to dig into some questions today. We got a few questions that were asked directly to you and then there’s a few more general mail bag questions. The first question came from Matt Stainer and he said, “Why TinySeed? Going into it, what were you hoping to get out of it? Now that you’ve been in a while, how’s it going? I ask because as I understand it, TinySeed is focused on helping founders and ‘move from nights and weekends to full-time focus.’ Essentially quit their day job and go all in on your startup. And yet, it sounds like you are already full-time on Castos with six employees. So I’m curious what drew you to TinySeed. Thanks, Matt.”
Craig: That’s a really good question. This was a question I asked myself a lot and had a lot of real heart-to-heart with my wife, and even with other people coming in the space that I know, trust, and respect. Really now, what it came down to is the terms for TinySeed are really, really favorable for founders who want to run a business for a long time just as a high-growth lifestyle business. Not on the VC track but want to accelerate the growth of their business, past what they can do by pure bootstrapping.
If it’s like you mentioned, some of the copy on the website might be let you quit your nights and weekends and focus on this full-time, that would obviously accelerate the growth of business. For us, we had a pretty solid beginning of product market fit when we applied and I thought that joining TinySeed, both for the mentorship and for the funding, would allow us to accelerate that. Rob, we’ve for five months into it now. I think it definitely has. We’re growing faster the we were before and the business is absolutely a better business now than it was six months ago.
I think what drew me to it was the people behind it and the opportunities that will allow me professionally and personally to develop but also to put Castos on the map and give us access to resources both financially and mentors and network that I don’t have access to myself, and really at a pretty reasonable cost. I won’t say it’s a cheap cost because it’s not. Giving up a piece of your company is always a big decision and a really super personal one, but I think that the trade-off is really reasonable in this respect.
Rob: I remember you felt a lot about it. You and I had a number of conversations as I did with most of the founders that wound up making into the batch. There were conversations about us feeling people out and there was them feeling us out and saying, “What is this going to be like.” We had an interesting almost conundrum of we were startup, too, and this was our first batch. I think it will be much, much easier. I expected to be much easier with the second batch because it’s just more proven. We have more products market fit now. There are a lot of conversations then.
The other interesting thing is we did start out with a thesis of “I think we’ll fund a lot of founders who will move from nights and weekends to full-time” and if I recall correctly, we funded 10 companies and I think two of them and maybe three went from had a day job to went full-time. Everyone else was already working on it.
Even that hypothesis we had is not entirely accurate. Now, one of them has a small software product that essentially provides him with the full-time income, so he didn’t need to have a day job. Another founding team moved to a cheaper place. They did geo-arbitrage. They moved from the US to a much cheaper and that allowed them to live full-time even though they didn’t have a US full-time income coming in.
There were exception-ish things, but overall, if we haven’t already updated on the website, I think we need to in terms of you figure out really who your best prospects, the people who can use this the most, and message to them.
You said Castos is growing and it’s absolutely in a better position today than it was when it joined TinySeed. Honestly, I haven’t talked a lot about TinySeed on the podcast because I never want the podcast to feel like a sales pitch for anything I’m doing. I would talk about my journey building HitTail, or journey doing MicroConf, or journey of Drip, but I try really hard to keep that balance of I’m not just sitting here pitching what I’m doing.
Actually, I have a couple of people ask me to bring someone on to interview me about what’s going on, not necessarily talk about TinySeed but what’s going on with me, my founder’s journey. I think that can be interesting.
All that said, I haven’t talked to […] about it, but I’m curious. You’ve now been in for almost four months at this point; it’s a third of the accelerator. Without putting you on the spot, is it what you expected in terms of the benefits?
Obviously, there is money, and then there’s the mentorship—our list of mentors is pretty solid—then there’s the office hours themselves of hang-out or kind of the mastermind, the community of it, of being in Slack and being on the weekly calls, then the in-person event, and even the network. Even beyond the mentors if you say, “Hey, I need an intro to somebody.” My network and a lot of the mentor’s network are at your disposal. Has it been what you expected and do you feel like it’s contributed to your success over the past four or five months?
Craig: The money is really nice. I think that a lot of people that take money that have a bootstrapper mindset—Josh from Baremetrics talk about this a lot—they haven’t spent a lot of the money they took, and we haven’t either. We used it as a cushion—it’s a big cushion for me—but we’re not burning hardly any money right now. We’ve hired a lot of full-time person-and-a-half since joining TinySeed. That’s been really nice. It makes me feel good to have a lot of reserves and the business is really sound at this point.
It’s cool that comes through in everything we do because we’re able to take a longer-term approach to building the business, features, marketing approaches and things like that, that we don’t have to worry about making payroll next month or next week because we have money in the bank. Where if things went sideways, we’ll be good for a while. That’s how we are using the money.
The best part really is the network and the community, the difference being the network is with the mentors and the mentor’s networks because we definitely have gone second and third layer with some of the mentors that I’ve talked to and they said, “Hey, if you want to talk to this person, we can intro you over here.” I probably have two or three calls a week with either you and Einar, or a mentor, or a mentor’s friend, or a connection that I’ve made somewhere like that. Then we all, the 10 companies, are in Slack all the time sharing stories. We have a fail whale channel, so sharing our successes and learning opportunities. That’s really great because a lot of us are solo founders.
There’s two founding teams in the cohort, but it gets lonely sometimes out here, especially to have people that are doing exactly the same thing that you’re doing. We’re all building SaaS apps that are less than whatever $50,000 a month. We were all in the same boat pretty much. So, it’s a really homogeneous group. That’s what makes a lot of the discussions really interesting among the founding teams. I think that’s the biggest surprise, though, is that the value of the network of mentors, the support of the other companies, and the founders has been awesome.
I know that we numbered the TinySeed 2019 Slack channel that’s just for us. I know there’ll be a TinySeed 2020 and 2021 stuff that I still will definitely be active in our little part in our channel within the group, just with us and the other 11 people because these are really valuable relationships.
Rob: Awesome. That’s what I would hope to hear from anyone who does become part of the batch. Thanks for the question, Matt. Appreciate that. I hope context was helpful.
Our next question is from Meryl Johnston. She is the founder of Bean Ninjas, which is a pretty well-known productized accounting service. I believe they focus on Xero, but they’re pretty well-known. They’ve sponsored a lot of conferences and Meryl is actually one of the TinySeed mentors. She says, “Hi, Rob. I think it’s a great idea to get Craig back on for another episode to answer questions from the listeners.” Meryl sent a voicemail, so let’s dive into that now.
Meryl: Hi, Rob and Craig. It’s Meryl Johnston here from Bean Ninjas. I’ve got a question for you both. Cool content, by the way. I like the idea of having an interview and then giving listeners the opportunity to ask follow-up questions, which you then answer on a podcast. Going back, understanding is that you started with consulting before you transitioned to products and then software, and that Craig used a productized service business model to then leverage your network and skills, and maybe branding as well, to then going to software.
My transition was also from I went from consulting. I did that for nine months, then created a productized service, and then you see it with been moving into digital products. Based on my own experience, I think there is that when you, in building a skillset, as an entrepreneur while running a service business and in my experience it was a faster way to leave a job and transition to working full-time in their business than if I had created products from day one.
So, my question to you both is, if you were starting from scratch again and is transitioning from a job to running a business, and you didn’t yet have much business, you didn’t have much of the network, and didn’t have a lot of capital behind you, what kind of business would you start? Rob, would it be consulting? And Craig, would it be a productized service?
Rob: That’s a good question. Thanks for that, Meryl. What do you think, Craig? Have you thought about this?
Craig: Yeah, I have pretty strong feelings about this. I think a productized service model or even consulting is a fantastic way to transition out of a day job into running your own business. The reason is, as opposed to software where there’s a ton of time and financial overhead that you need before you can start making any money, you can put up a WordPress site with WooCommerce or Gravity Forms or whatever and start making money literally today.
Justin McGill launched the first version of LeadFuze and this 24-hour challenge to himself. We launched Podcast Motor in maybe a week, and that was because it was my third time ever putting up a WordPress site. We were doing $10,000 a month within a couple of months. You compare that to what a SaaS founder has to do to get that $10,000 a month. It’s like moving planets to get to that kind of MRR for SaaS, especially the first time.
I think that if someone has a skill set or a passion and you can create a productized service around it, you absolutely should do that if you goal is to get out of a day job and into this world. But I think Meryl really nailed it on the head when she said leverage because that’s how I view what we’re doing now.
Rob, you probably see it from consulting to your first software product to what you’re doing now is another form of leverage. I just see that a unit of work I do now in Castos is worth a lot more to the value of the entity than a unit of work that I do into Podcast Motor which is our productized service. I think it’s just because creating a piece of software and a team that supports that is more scalable, probably has better margins, and in some ways is easier to run at a higher level.
I think it’s a fantastic way to start and I think that like Meryl is getting into, getting into a digital or software product is really great because they’re more complicated and if you’ve learned some of the things like marketing, project management, and customer service through a productized service, then you have a really good chance at being successful on software.
Rob: For me, I honestly don’t know. I have an inclination of what I would do, but I think if someone came to me for a blanket advice, I would say, “Look, I had a day job and I want to work for myself. I would say there’s the Robert Kiyosaki levels. I’m not a Poor Dad Rich Dad fan, but I do like this one paradigm he has where it’s like, you’re employed for someone else, then you’re self-employed, which typically is consulting where it’s dollars for hours, then you’re an entrepreneur which is where other people work for you, and as you said, it’s that moment of leverage when you have a whole team, and then it’s investor where you’re no longer running the day-to-day and you’re putting money into other businesses.
So, I would first decide do you just want to recur self in this terms of self-employed or do you want to go as far as to be the entrepreneur and let’s just say to have a product business in this context and then go from there? For me, if I could go back, I wished that I could have kept the day job and had it not just drive me up the wall. I hated my day job. I really, really despised working in a cubicle. I liked some of my co-workers and I didn’t like others. I didn’t like that I couldn’t choose who to work with and I didn’t like that a bunch of the policies seemed just dumb. I didn’t like that we’re forced to write really crappy code a lot of the time.
Our CEO is a sales guy and he would go out and sell something. It would be like, “Hey, we have to ship this in six weeks,” and we’re like, “Yeah, that’s four months of effort.” He’s like, I don’t care. Get it done.” So, then we go get it done and then […] would break because we wrote […] code. Then he’d come down and I was like, “This is dumb. Why isn’t someone smarter here?” That seemed to just be an ongoing thing.
Had I been a little more chill or been able to deal a little better with it or just found jobs that weren’t like that because there are certainly jobs that exist and there are people that are calmer and I would like to say I’m unemployable. I am just not going to be a good employee. But if some is like, “Look. I’m at my day job. I’m making $125,000 or $150,000 as a salesperson or as a developer. I work 40 hours a week, I don’t think about it when I get home, and it doesn’t suck the life out of me,” I would say keep doing that and launch something on the side.
Maybe your first step is consulting. Maybe it is productized consulting like you did, Craig, and like Meryl has done, but maybe it’s a stair step approach. Maybe it’s that WordPress plugin, or you write an ebook, or maybe it’s a Shopify add-on, or any one-time sale product. I definitely went to the consulting route because I wanted to be out of a day job in a hurry and I thought that consulting, to be honest, was the end goal for me originally. I thought that would fix all my woes and as I got out, bill $100–$125 an hour. It’s like, “Oh my gosh, this is great, I’m making more money that I ever had.”
I didn’t dislike it as much as I dislike salaried employment for sure, but it definitely got old after a couple of years. For me, it was about I wasn’t building anything that would last. There is no permanence to it. I didn’t build anything that I owned, I had no equity, and my consulting “firm” was never sellable. I thought to myself, “Am I going to do this for 20 years?” and that didn’t appeal to me.
It’s hard when you’re doing consulting and you’re addicted to the incoming cash. It’s really hard to justify. I could work another hour. I used to be booked 60 hours a week, I would say. I didn’t work that much, but I could have worked that much. So, I would look at it like, “All right. It is Saturday afternoon and I could put in three hours and I could make $375 or I could work on this beach towel website that is doing $200 a month.” It was a very hard transition.
So, for me, going from consulting to products was actually harder than if I had just kept the day job because at the day job, I wouldn’t have had that extra motivation to work more on it. Does that make sense?
Craig: Yeah and I think that’s where consulting and productized services differ. Brian Casel talk about this with Audience Ops. You’re able to take a productized service that has a team that supports it, and systems, and processes, and documentation to—I don’t know—say, run itself, because nothing runs itself. But I spend an hour a day on Podcast Motor right now, maybe two on a bad day or whatever, a good day, and it’s a solid mid six-figure business. You could never do that with consulting because you’re directly trading dollars for hours or hours for dollars. I think that’s the difference.
I agree with all you said, Rob, that most high-leveraged thing you might be able to do is keep your day job because you can just save a bunch of money, maybe, and go buy your way into freedom, you can buy an app. Or you can get experience and something that will then allow you to be successful when you do go out on your own.
I had a sales background before and it’s hugely beneficial to me in the biz world to know how to sell stuff. If you have the opportunity, get into a sales or marketing role where you can learn that side of the business and of the world. I think that might set you up for success. I won’t say more, but it will definitely give you a leg-up versus just going on flailing around and figuring out on your own if you’re able to hold down that day job.
Rob: Yup. I think that if you can learn skill sets either at the day job or as you’re consulting or productized consulting, if you can learn skill sets there that add to your product tool belt—your product marketing, your product sales, your product development, whatever—that’s a big win. That’s something that I found.
Again when I was solo consulting, I had 1–3 clients at any one time, my marketing was my blog, I invoiced using Excel spreadsheets, it was very stripped down, and I didn’t have direct copy, I didn’t learn marketing, I didn’t learn AdWords, I didn’t learn any of that from consulting.
When I look back on my experience, if I had any regrets, is that my salary job. I learned to code for sure, got better at it. So I was already coding before that. That obviously helped me with products. Eventually, you top out and you’re working on different problems than you work if you had a little SaaS website or whatever.
When I transitioned to consulting, I don’t feel like I really learned much that later helped me to translate it into supporting and building a product. Whereas productized services, it sounds like to me from what you’ve said and what I’ve observed that there’s a lot more parallels between that and, say, SaaS. Would you agree with that?
Craig: Everything about it is the same except for the software. It’s marketing, it’s customer service, it’s processes and deliverables, and then SaaS adds on project management of development teams, testing of technology and stuff like that.
Rob: Yup, it really is a nice proxy for that. It’s not just a revenue stream. I already mentioned it in the intro, but if you haven’t already heard Craig’s story, if you go back to episode 459, he tells a story of how he had a day job, launched Podcast Motor which is his productized service, left the day job, and then leveraged that into essentially a WordPress plugin and doing Castos. Not only did it provide revenue, but it provided that whole skill set and the learning curve that you didn’t have to do while you’re communicating with developers and designers, building and supporting a product, and doing all that stuff.
Thanks again for the question, Meryl. I hope that was helpful. Our next question is from Cain about how to run a beta. He references an episode from 2012 where Mike and I talked about running a beta, and he said he’d love to hear a little more on how to select the beta users and figure out beta phases. Any references, similar discussion happen on Matt Wensing’s podcast which is called Out of Beta, not coincidentally I hope, which made me think to look and see what you guys had on this subject.
Craig, I know that you had beta periods with Castos. Talk about that.
Craig: We don’t. No, we don’t have any beta testers or beta functionality in the app.
Rob: Really? Have you never? Were you in beta early on? Or did you just never have a beta?
Craig: No. We just launched.
Rob: I guess to define it so people know, typically I don’t call it beta. I typically call it early access. Beta implies that it is a buggy product and it’s pre-launch. It’s a preview you can use, but beware of the bugs. Typically, we might nuke the data. There’s different agreements and such. Google is famous for having Gmail in beta for five years or something. But betas are, (a) not required, and (b) these days, I would like not to have a buggy product.
When we did Drip, we did early access and we tried to make sure there’s minimal bugs. It wasn’t about testing, it was more about customer development. User experience or fun rather than, “Oh, they clicked on a link and something crashed.”
With that said, I had assumed wrongly, obviously, that you had run a beta with Castos in the early days. So, you just launched straight away.
Craig: Yeah. We just dove head first. I also think there’s two parts to beta. One is before you launch and then the other is beta testing or beta releasing features after you’ve launched. You develop a new feature, you release it to a small cohort of your total user base to let them test it before you go throw it out to the whole world.
We very much would like to do the latter now because we have thousands of users and we don’t want to release something to everybody that could be buggy or whatever. We have extensive unit test and staging environments, and we have testers that run through everything before it goes out the door. But I would still like to take the time to develop feature flags or beta flags for certain users.
I think that if you have an established product, it’s super valuable because you can pick the people that have been around for a long time and you know they really care about you and your product and are going to be there even if you ship something that isn’t the best experience the first time. Those are the perfect beta testers. They’re the people that love what you do no matter what but will give you a lot of latitude if you ship a feature that’s in beta that might be a little rough around the edges.
That’s how I would select those people. You probably know who they are. They’ve been around for a long time, your exchanges with them and support are really positive, they refer other people over to you. Those are the characteristics of what I would consider a good beta user to be and they’re inquisitive, natural, learning people, still go poke around and give you constructive feedback without being overly critical in a non-productive way.
When it comes to beta, that’s the only place I really see a good use for beta. We launched Castos and just launched it. It was not pretty, but it worked. I think we only did it because we tested the hell out of it in staging and had confidence that the product and the market had good alignment because there are other people doing similar things. It’s not like we’re creating a whole new product segment or something like that. That’s why we just launched it.
Rob: And how did that go? How were the results? Because you referenced it was not pretty.
Craig: We had some technical issues with deployment. I think that just happens sometimes. We learn and do things smarter and better now, but that would have happened even if we would have released it as a beta, I think. We would have these issues.
I think people might get hung up on this a little bit and there’s a lot of discussion around this, like when is a launch really a launch, when do you come out of beta, and what does that mean? I think it’s fuzzy, to be honest with you and maybe not super important, like how and where do you draw those lines?
You get the thing out there, have some people use it, make sure it’s not going to break the world, then release it and start getting real, new, fresh customers or trial users so you can see unbiased people using your app. I think that’s the real thing that you want to get to, is how does this person I don’t know and won’t give me that extra leeway, how are they interacting with what I build? Because that’s the real acid test.
How did you guys do both beta period when you were launching Drip and then did you beta release features to certain users?
Rob: Yeah, we did. This is what I would do today. The fact that I’m referring back to Drip doesn’t change […]. This is still […]. The first, let’s say, 10 or 15 customers we let in that weren’t paying yet, they were just on an unlimited free trial and I said, “Look. Once you start really using this and get value out of it, then you pay and I’m just going to monitor it.” So, I would just boomerang emails back to them every 2–3 weeks, checking on their account, touch base with them. It was a very manual process.
Those people knew we were building something new and we said, “Look. We don’t expect it to be buggy and we test the crap out of this stuff. There is a possibility of bugs, but we don’t expect any.” The people were early adopters, obviously, and the way we hand-picked those people was that I looked at people, a lot of them actually either had a dire need for it or they were folks who ran other SaaS apps.
The reason I did that because I knew that they would give helpful, constructive feedback from a product-minded perspective. I had the luxury of folks on the launch list who, when they gave their email, I could tell that they ran another SaaS app. Again, when you have a lay person, they can know a problem that they have, but they’ll often try to propose a solution and that’s not a good solution for you to build into your product.
Having folks like Ruben Gamez from Bidsketch, Jeff Epstein from Ambassador, Brennan Dunn from then Planscope but now with RightMessage, it’s folks who have a pretty good knowledge of that, and then there were some folks that were from ecommerce and there was a couple of bloggers, but they were all folks who I think had good ideas and, as you said, didn’t have a bunch of noise.
That’s the struggle you run into is if you get 15 or 20 people in there and they’re all have diverse goals—you get a blogger, then you get a photographer, then you get someone who runs ecomm, and you SaaS—they’ll have just wildly different request for you and that starts getting complicated. It starts making it hard to figure out what to do next.
And then really, our beta, I say, truly ran—again it’s called early access—from about July to November. It’s five months long. The reason we did that is we have this big launch list and we were still doing customer development. We hadn’t even proven that we build something people were going to pay for. Podcast hosting existed and you knew that if you build a platform, customers will pay you for it. You just needed a channel. That’s how I would see Castos.
With Drip, we were trying to build something new and I didn’t know if we sent an email to the 3500 person launch list, if everyone would just show up and leave. So, we were pretty cautious about who we let in. Then, we just did 300 people at a time every couple of weeks, let them in, build some features.
That was quite stable during that time. I think we only had one bug that missent email, like double send it to a group or something, which is a big deal. That sucks when you are running an ASP to oversend or to miss a schedule. If someone wants it to send at 11:00 AM and it sends three hours later, that’s a problem. More so than some apps, you have the leeway of it not being mission-critical but any ASP can be that.
It could have been more compressed, for sure. I think that also comes back to Derick and I work 40-hour weeks. If we had worked 70-hour weeks, we probably could have gotten it then in two months, but that was a lifestyle choice. That wasn’t the time when I was going to work long hours. That’s not totally on-topic with beta, but that is how we ran it.
To your other point, you said you beta test features. The answer is yes, we have feature flags from the start where we could just ship something and I’m trying to think about split testing or even automation and such, and it was just a checkbox. In the admin panel we would open it up for three four early access folks, send them an email, “Hey, you have this. Check it out. You want to test it.” Get feedback, iterate quickly, and then slowly either release it to a few more people if you are still in doubt or at that point, then we’d actually launch the feature to the whole audience.
Do you guys do that as well? Are you able to feature gate to specific users?
Craig: Yeah. We’re able to do that to really just the admins. It’s myself and our lead developer. Basically, both who have podcasts, so we’re able to run stuff on our podcasts. I guess we definitely have beta versions of the plugin. We manage a WordPress plugin called Seriously Simple Podcasting that integrates with Castos and we absolutely run beta versions of that on our live and test sites all the time. I think that’s more important because not like a SaaS app where you can ship it and then if it’s not exactly right just fix it, push new code, and everyone is happy.
With a WordPress plugin, people’s sites can break or their podcasting go down or whatever, so we are ultraconservative with what we ship there. We test beta versions of the plugin for weeks sometimes, just on our live site to make sure everything is cool. That’s another thing to consider. So, if you have a Shopify app or a WordPress plugin or something like that, running a proper beta program there is very important for different reasons than a SaaS app where you push it, if it’s nice […] right, just fix it and push it again. That’s what we do a lot of times and it works.
Rob: So, thanks for the question, Cain, I hope that was helpful. We will answer one more question and this one is about podcast sponsorships. He asked it for Startups for the Rest of Us but it’s cool that you’re on the show because you have your own podcast. He says, “I’m a long-time listener on your podcast and I’ve followed your startup journey over the years. I, myself have worked for several VC-backed startups until about 10 years ago when I got interested in bootstrapped companies and decided to be a marketing consultant for non VC-backed companies.
I was recently looking at podcast sponsorship opportunities and I read your FAQ that you’re not interested in sponsors. I thought to reach out more out of curiosity. Why did you decide to not have ads? I assume doing a podcast is a time-consuming effort and while not all endeavors need to be money-making, I’m curious what the motivation is for why you do the podcast. I figure you want to help other entrepreneurs, but is that it?” and that’s from […].
So, Craig, you run a podcast and you don’t sponsors. Why is that?
Craig: We coach a lot of our clients, particularly on the Podcast Motor side of things on the why you do a podcast. I think around monetizing a podcast, there are two distinct routes you can take. One is directly monetizing your podcast which is ads or now becoming more popular is selling premium subscription so you can charge $5 or $10 a month for access to limited content or something like that. That’s directly monetizing your podcast.
The other way that I would argue and the vast majority of situations is more lucrative and maybe easier is to indirectly monetize your podcast with products, or services, or conferences, or membership sites, which is what you guys do. Most or all of our customers at Podcast Motor, which are a lot of startups and successful entrepreneurs that everyone that listens to this podcast has heard of, that’s what they do. We have very, very few people who monetize their podcasts just through advertising or through this premium subscription memberships that are becoming popular now.
I think the reason is you have to have enormous download volume to make good money through sponsorships. I know you guys have a really successful podcast, Rob, but you wouldn’t make nearly the money that you might through other things that you can do with having a whole bunch of people that are interested in what you’re doing. Then you have a conference or a membership site that people can become a part of if they like what they hear on the podcast.
That’s a really natural way to use content marketing and podcasting is a form of content marketing. That’s what we really like to see and is more successful and easier for people to do. I think that’s why you don’t see a lot of ads in podcasts, especially in our space.
Rob: I would second that. I think that’s a good way to think about it. Mike and I toyed around with sponsorships. Some listeners might recall us making an announcement nine months or a year ago and saying, “Hey, were thinking about this. If you want to sponsor, email in,” and we just never made it that far.
We got a few emails and, to be honest, managing a sponsorship program is quite a lot of work. It’s enterprise sales in a way and you’re going to many conversations, there’s going to be lead times. Then you’re going to need to follow-up on invoice and get paid. Then you need to work on ad copy because most people do not know how to advertise on podcast. Typically, the first ad copy you get is not very good, so then you’re rewriting that.
It’s not as if you’re cashing a check for free. It is an amount of effort, it is another side job for two software entrepreneurs who also run multiple conferences, also have a podcast, and also write books. It’s just one more thing to tack on and it’s always been like how much value will this actually provide? So that’s it. I would never say never. Might we have sponsorships someday? Maybe. I’m not opposed to them. I just want them to be a fit and I want them to be the right choice both for us and for the audience.
To you point about monetizing indirectly, when we started the podcast, I remember we had the Micropreneur Academy already and I remember I viewed it as a way to not only build more credibility but also have a more personal connection to the audience that I was already building on the blog.
To be honest, I really did want to build a community of folks like us because I knew five people who are doing what we’re doing in 2009 when I started writing my book. I could list them in one hand of like, “These are the solo software entrepreneurs,” Every time I would hear about one of them, it’s like, “What? This is just crazy. There are that many people.”
As the blog started going and after I published my book, more people started coming out of the woodwork. The podcast I really view it as an avenue to just get more of us together. Of course, in 2011 it was finally like, “I think we might actually get together in a room,” and our delusions of grandeur of 200 people in a room quickly turned into, “Uh-oh. How are we going to sell enough tickets to fill 105 seats?”
I think the first MicroConf […] be 105 and I had to discount tickets late there, but all of that became more important than making a couple of grand a month. I don’t know how much we’d make if we monetize the podcast, but I just think that other stuff is more important than the platform. I don’t do it to directly monetize. I just never thought of it that way.
I do it for all of these other things and it’s to continue to be a voice in the community, but also to continue making sure that this community of bootstrappers, independent startups, and indie funded startups that this thing keeps moving forward. I’m playing long ball and I believe we have decades and decades of growth, and this is the new frontier. 99% of companies don’t need venture funding and that’s us. So, let’s band together.
I don’t know. I don’t want to get grandiose and act like that I hate it. That’s what I thought from day one because it wasn’t that deliberate, but that’s where I see it now and that’s why I’m spending my focus, instead of doing enterprise sales, asking for invoices, and rewriting ad copy, I’m focusing on the MicroConfs, the TinySeed, the blogging, and all the other stuff to try to push that forward.
Craig: Yeah, the leverage we talked about from Meryl’s question, right? That the podcast is your probably biggest form of reach and you’re able to do a lot of things now with it that you could never do just by making some ad money.
Rob: Yeah, it’s a good point. That’s a good question. Thanks for sending it in, […]. Craig, thanks again. That was super fun. As your first Q&A episode, how did that feel?
Craig: It was great, a lot of fun, really interesting questions, and thanks for having me on. It was a blast.
Rob: Absolutely. So, if folks want to know what you’re up to, they can head to castos.com for your podcast hosting services and @TheCraigHewitt on Twitter, is that right?
Craig: That’s it, yup.
Rob: Awesome. Talk to you again soon.
Craig: Thanks, Rob.
Rob: And if you have a question for the show, whether it’s myself or a guest, leave us a voice mail at (888) 801-9690 or email us an MP3, or an Ogg-Vorbis, or attach a Dropbox link, or even just write your question out in text, old school style, firstname.lastname@example.org.
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Frankly, just sign-up for the email list. I’ve been emailing just a little bit more but not too much, and I think it’s good to stay in touch with the community. I love it if you would go to startupsfortherestofus.com, enter your email, and we promise to only send you stuff that’s on-topic and relevant for you as a startup founder. Thank you for listening. We’ll see you next time.
In this episode of Startups For The Rest Of Us, Rob checks in with Mike Taber on his progress with Bluetick. They talk about Mike’s motivation, specifically over the long term , the continuing Google security audit, differentiating from competitors and more.
Items mentioned in this episode:
Rob: Welcome to this week’s episode of Startups for the Rest of Us. I’m your host Rob Walling. Each week on the show, we cover topics that help software entrepreneurs, developers, designers, people who want to launch a product into the software space and ultimately gain the freedom from their full-time job and even be ambitious beyond that. It’s not just about lifestyle, having a sustainable lifestyle and maintaining relationships. That’s all important, but a lot of the founders that listen to the show and that come to MicroConf are folks that are ambitious, but not willing to sacrifice their life or their health to grow their company.
We have many different show formats. Sometimes we do interviews, we answer a lot of listener questions, we have founder hot seats, but over the past 465 episodes, we have followed a lot of stories. We followed stories of folks in the MicroConf community. We have followed the stories of myself and Mike Taber. If you’re a new listener. Mike has been on the show since the beginning, but now he comes on about once a month and updates us on his progress as he’s doubling down and focusing on his software product called Bluetick. In this episode of Startups for the Rest of Us, we get a Bluetick update from Mike Taber. This is Startups for the Rest of Us episode 465.
Welcome to Startups for the Rest of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at building, launching, and growing startups. Whether you’ve built your fifth startup or you’re thinking about your first. I’m Rob, and today with Mike, we are going to share our experiences to help you avoid the mistakes we’ve made. Thanks again for coming back. We’re going to be talking with Mike here in just a minute. Before we dive in, I had a couple things I wanted to mention. First is, if you haven’t already left a review on Spotify, Stitcher, Apple podcast, Google podcast, I would really appreciate you logging and clicking that five stars.
We had a recent review from Josh Krist and he says, “The real experience of bootstrapping. This show absolutely rocks. If your bootstrapping a company, thinking about starting a company in the future or just curious to understand what it really feels and looks like to start a company without outside funding, this is a must listen. Thank you Rob and Mike.” Thank you so much for that review Josh and we’d love to hear a review from you as a listener, if you feel you’ve gotten value out of the show or you don’t even need to do a full review, you can click the five stars and that helps new people discover us.
We have, I believe it’s 354 five star reviews that actually contain text and we have another 200 or 300 that are just people rating us, but I can’t seem to find the numbers anywhere. It’s hard to get worldwide numbers and there was an app I was using that that stop working, so I think we’re in the 600–700 range of reviews and I would love to just add a few more this week. I haven’t mentioned them in a while and if you can be obliged to click that five star, we’d really appreciate it.
Next item on the agenda is MicroConf Minneapolis is April 19th to 23rd and tickets will be going on sale very soon in the next, I’ll say, week, maybe two, tops. If you are interested in potentially becoming a growth or starter, Minneapolis late April, head microconf.com and get on the email list. The other thing I wanted to mention is the state of independent SaaS report, which I record a little mini episode, a half episode that I put in the feed last week, that survey is alive right now. It’s only live for another couple of days after this recording.
If you’re able to head over to stateofindiesaas.com. I didn’t do independent because it’s so long and I got tired of typing it, stateofindiesaas.com, that takes you right to the survey and that will help yourself and your fellow independent SaaS companies because we’re going to try to get a bunch of metrics together and put out this MicroConf state of independent SaaS report. Listen to shore episode I recorded. If you want the full details on that, but that’s only open for another couple days now we’re going to start the data crunching and start working on that report.
With that, let’s dive into today’s conversation with Mike. Mike, welcome back to the show.
Mike: Thanks, how you doing?
Rob: I’m pretty good. It’s good to hear your voice, man. It’s been a while.
Rob: It’s been a month.
Mike: Has it been? Okay, yeah, I think so.
Rob: I think so. The episodes about four weeks apart and we record, I don’t know, a couple days before, so yeah. I think it’s been somewhere in the three or four week range.
Mike: I lose track of time when I’m not talking to people. Obviously, I haven’t talked to you, really, other than email, but there are certain things that used to be on my schedule that are no longer my schedule and I used to use those as benchmarks as time passes. I don’t really have as much of that anymore, so I lose track of even just what day of the week it is sometimes.
Rob: Yeah, I totally get it. I think not being on social media, I’m guessing you’re not reading a bunch of news all the time. You’re trying to keep distraction-free, so you don’t get it. That’s part of being an entrepreneur, too. If you didn’t have kids, you would really forget what day of the week it is.
Mike: Yeah, totally. Just because they have to go to school five days a week, so other than that, I would just completely lose track of time, I think.
Rob: Right. I remember, it was before our kids were in school and I was just working on my stuff solo, maybe with contractors and a holiday would come up, whatever, Labor Day, Memorial Day and I just be like, “Oh, are people taking that off today?” just out of the blue, I was not paying attention to any of that stuff. There was no vacation schedule.
Mike: Yeah. Sometimes, the kids will have a vacation for something, I’m like, “Why did they have Monday off? What’s going on here?” and then like, “Oh, it’s a federal holiday,” or something like that, “Oh okay, whatever.” I just don’t even notice most of the time. I think that’s a direct result of working for yourself and not having to go into an office, because otherwise, if you work for somebody else, then your schedule is theirs and they tell you when you do you don’t have to come in, so you’re looking forward to those days versus when you’re on the other side of the fence when you’re trying to get things done, days off doesn’t, I’ll say, really mean a whole lot to you. You’re distracted sometimes, a little bit more disruptive than it would be otherwise.
Rob: Yes, especially if you’re in a flow, like a day-to-day or week-to-week flow. I think that’s a big thing, to touch on it like flexibility is what you’re talking about. It’s like the flexibility to take a day off when you need to, the flexibility to work on a holiday, and have it really move the needle circles back to what I believe is a big motivator for you in being an entrepreneur.
Mike: Yeah. I feel having kids, though, does tend to screw that up a little bit because if they have a day off then their expectation is that you do as well so I think that that throws a wrench in it to some extent.
Rob: Yeah, I would agree with that. We have some stuff to resume from our last conversation, whenever it was, three or four weeks ago. I have some notes here I work from to remind us where we’re headed, but I am super curious how your sleep has been because over the course of the last several years, that has tended to be a big source of ups and downs, that when you’re sleeping well, it’s easier to have a positive outlook, easier to find motivation and when you’re not, that can that can negatively impact it.
Mike: I would say up until about a week ago, my sleep was pretty good, but then I screwed up my shoulder, I almost always sleep on my left side and I screwed up my left shoulder at the gym, so it’s sore. It’s not overly painful, not enough that I would feel the need to go to the doctor and have them take a look at it because there’s going to say, “Don’t lift as much weight,” or whatever, because I’ve done that before and I messed up that shoulder and it’s just a recurring thing that comes up once in awhile, but because I sleep on that side, it has a tendency to wake me up. My sleep’s gotten better over the past day or two, but for probably three or four days, it was pretty messed up.
Rob: Did that impact you during the day? Did it impact your productivity?
Mike: Yeah, totally. I would wake up in the middle and then I couldn’t get back to sleep and then of course the cascade of thoughts throughout the course of the night, it’s like, “Alright, here we go again,” but it’s gotten better the past day or two.
Rob: Good. Glad to hear that. I guess that that leads to motivation, which is something I’ll probably be asking you about every time we talk. I’ll put it this way, over the past several years, you’ve seen times of extremely high motivation and extremely low and a lot in between. What has the last month felt like, look like for you?
Mike: I wouldn’t say it’s been really high, but I wouldn’t say it’s been super low, either. It’s one of those middle of the road, things are just plotting forward and I wish things were going faster, but at the same time it’s just takes longer to get certain things done that I would like. For example, I’ve got the Google security audit that’s coming up, where it’s just sucking up a ton of my time for something that I know is just not going to make a meaningful impact in my business, other than the fact that it’s going to allow me to continue to be in business. I would say it’s detrimental to have to be doing those things, which sucks, but you have to take the good with the bad and you have to do those things too.
Rob: Right, I feel the Google security audit as this slog, that’s exactly how I would describe it. It’s like the stuff you don’t want to be doing but that you’re really, in your case, you have to, to stay in business. How much of your time is that taking?
Mike: There’s two different sides of it. There’s documentation and then there’s the technical audit itself. For the technical side of it, that’s not scheduled until, I think, the 28th. It’s basically the week after MicroConf Europe, because they asked me, “Hey, when would this fit in your schedule.” They wanted to know if I had any vacations or breaks or anything like that where I wouldn’t be in contact with them. I said, “Look, this really has to start after this date,” and they said, “Okay, we’ll schedule it for that.” In the meantime, there’s all this documentation that we’ve got to get gathered. It’s all processes and procedures and things like that which are, I’ll say, a waste of time, because really, all these things are stuff that I would be doing anyway. It’s just that they want to document it.
It’s like, “Okay. Well, what do you do if this happens? What do you do if that happens? How is this handled and how was that handled?” They just want to review everything to make sure that, I don’t know, I guess you’re doing a good job, so to speak. In my mind, it’s all a bunch of paperwork for the sake of having paperwork. It feels like dealing with the government to be honest.
Rob: Yeah, it feels to me like PCI or GDPR or it’s just reams of docs that sit in a filing cabinet, figuratively or literally, and I agree with you there, that it totally sounds like that.
Mike: Yeah, in terms of describing that it’s a slog, yeah, absolutely. It sucks because there’s a lot of documentation and they said flat out that this is going to be the bulk of the effort and the most time-consuming part. Because it’s a different team, it doesn’t count towards this technical side of things. Hopefully, I can get most of that, all of it taken care of before they start the technical stuff and then when they do that, then they’ll do penetration testing, black box testing, and all these different things to try and make sure that the application itself is secure.
If anything comes up, then I have to address those issues. Assuming that everything’s okay at the end of the technical audit, then they’ll give me the stamp of approval and I can immediately send it to Google, but I think that some of that’s contingent upon them receiving the final check and everything else as well, but it’s a slog, it sucks.
Mike: Yeah, it sounds like it. What’s the timeline on that? Is this a two week thing you’ll have this cert or is a month? When will this be over?
Mike: My hope is mid-November.
Rob: Wow. Okay, so that’s another six weeks when we’re recording.
Mike: Yeah. It’s wild.
Rob: That’s brutal. I should say as much as we’re bagging on this, I’m guessing that much like PCI and GDPR, I feel there’s a reason these things exist, but I think 90% of it is unnecessary at our scale and it’s probably 10%. If they do penetration testing and they find something, it will be like, “Cool, you fixed something.” I’m guessing there’s going to be a couple things that improve your security, a couple out of it. Maybe it’s 5% or 10%, but most of it I think is, as you’ve said, huge waste of time.
Mike: Yeah, it is. I’m not the type of person to go out and totally bash on other companies for the way that they’re doing things but Google in this particular situation, I really feel them taking back their “don’t be evil thing” several years ago, which probably is a decade at this point, but all the things that they’re doing, I just feel the company itself is really abusing their position to force people to do things in a certain way, in cases like for my app and things that are below a certain scale, really don’t make a difference. It doesn’t make a meaningful impact and it doesn’t help the world in any way, shape, or form but they’re forcing do it for no other reason because they can.
Rob: It’s CYA. They’re trying to cover their ass for if suddenly, there’s a breach, they’re going to be in the headlines, not you. If there’s a breach, they’re going to get called in front of Congress, not you.
Mike: I guess, but at the same time, the scale of the breach. For example, if I have 20 customers and Google has 10 billion—let’s call it 50 million for them and call it 50 for me. The scale between the breach between those two things is very, very different and forcing me to go through the exact same processes and procedures as Google or somebody of a comparable size just does not make sense. It’s just the way it is. Like I said, I don’t like to bash other people for the way that they’re doing things, but I feel this is just extortion 101 to be perfectly honest. There’s no other real way to put it .
Rob: How much of your time? Has it been 20 hours a week you’re spending on this?
Mike: It’s probably not quite that much, but things are ramping up as time goes on, because I have to fab this basically finished and all the back and forth done, probably before MicroConf, which I leave for that in a couple weeks. The next couple weeks, that’s probably going to be 30 to 40 hours a week of my time.
Rob: Yeah, that’s tough. Looking back over the previous month, you have had some time. If it was 15 hours a week then you got another, I don’t know, 20 hours a week or whatever to do stuff. This kind of stuff, this slog, doing things that I don’t want to do, tends to de-motivate me. I almost have a tough time then transitioning because it sucks the joy out of the day. It sucks the good glucose or the joy or whatever it is and when I turned it like, “Well, now I got to write code or I got to the market, I have a tough time separating those.” Are you similar to that?
Rob: Okay. This is negatively impacted your motivation then.
Mike: Yeah. It’s not just motivation but overall productivity. I’ve been trying to figure out ways to segment out my days, so that I’m not working on those types of things that are de-motivational, first thing, because what I’ve found is that, if I work on some of those things to start the day and then I take a break for whatever reason, the rest of my day is shot. Even if I’m trying to work on other things that would be motivational. I just don’t get anything done because my mind is wandering back to the stuff that I was working on before.
Rob: Interesting, because if I were to do it, I would think that since it’s the thing that I want to do the least, I would try to get into work, drink coffee, listen to loud music and hammer through it in an hour or two, such that I can breathe and reward myself with a break and then I can spend the rest of the day working on other stuff. That’s how I would mentally approach it, but you’re saying that’s not. It’s bleeding over, it sounds like.
Mike: Yeah, it definitely is. I don’t say this doesn’t factor into it at all but I’ve been talking to my wife about my exercise routines and stuff like that, modifying my diet and all these other things. It’s just like, “I hate exercising. I hate going to the gym. I hate dieting. I hate working on this stuff for the Google security audit.” I’m going through some third party integrations and stuff and going through all the fine print all the other things for that stuff. I can’t stand doing that as well. I’m stuck in this position where I’m forced to do all of these things that I absolutely hate doing. There’s a light at the end of the tunnel, but there’s not really fun parts of the day, either.
Rob: Yeah, that makes it tough. I’m sorry to hear that, honestly. I know exactly what that feels like, where everything on your to do list is […] and you don’t want to do any of it. I know what that feels like. “No, I’m not in that mode today,” but I have done that and had to deal with it throughout my career. Those are the times where it’s like, “This has to end soon or I’m going to burn out.” That’s what eventually what will happen. Hopefully, you’re done in a month, six weeks. It’s going to be a slog for a month or six weeks, but when that part goes away, it sounds like that could dramatically improve your day to day working conditions.
Mike: Yeah. That’s what I’m hoping as well. I say six weeks, mid-November. That’s what I’m hoping it’ll be done, but it could theoretically be as late as the end of November, because after the technical piece of the audit is done, if I don’t have everything fixed by the time they’ve done that, then I have to go fix a bunch of stuff. They can come back with a report on day one and say, “Hey, these 25 things are wrong or whatever and need to be addressed,” and then I could presumably fix them all that night and then the next day say, “Hey, you can retest the stuff now,” and during the course of the actual technical piece, they’ll continue to redo those things, but then once the end hits, I basically have 30 days to go back to them and say, “Okay, all of these other issues are fixed, you can retest it.” Then assuming that all of them fixed, great. If not or if it exceeds that 30 days, I can request that they retest it, but it is really expensive to have them retest it after that.
Rob: Got it. So, time is of the essence here for sure. We’ll move on from motivation in a minute, but I had this concern. It was at the last month or the month before where I said, “I’m concerned about your motivation over the long-term. Will you be able to stay motivated if flexibility is our only motivation?” You’d said, “Hey, am I running away from something, which is a crappy Dilbert job or running towards something and will that maintain over long-term?”
The times when that’s tested is when you’re in the middle of the slog. It’s when you’re not making progress because you said, “I’m motivated by progress,” and that motivates you, but it doesn’t sound like you’re making a ton of progress, right now. When you look out over the next month, do you feel is it time to just gather all the muster and just push it forward or are you concerned about what the next month or two months frankly might look like?
Mike: I wouldn’t say I’m necessarily concerned about the next couple of months. What I’m more concerned about, six months or eight months down the road. The reason for that is because there’s all the stuff that needs to be done right now, an example, one of the things that I spent a decent chunk of time in advance to this security audit was that there were multiple projects that I have that get deployed to different URLs and they are largely copies of one another and I had to merge them together. I wanted to merge them so that there wasn’t so much code for them to go through, so that it made sure that everything was consistent between every single API endpoint that I have out there.
Otherwise, I wouldn’t necessarily know. I think that they are, but you just wouldn’t have any real way of knowing for sure. I merge those together and made it so that it basically got one core API project and then three others import it and then use it as opposed to before I basically had two different separate copies of it. By spending time on that, I made sure that that was, I’ll say kind of fun, but at the same time, those things need to be taken care of.
There’s a lot of things that I’m not necessarily holding back from but I know that I probably can’t really get into until after this security audit is over. That includes making major changes to the product because I don’t want to be in the middle of making a major change and being unable to deploy it and have a discrepancy between the code that they’re looking at versus the code that’s deployed and not being able to push it out because it’s in a half completed state. There’s some stuff I’d just have to hold back on until the security audit is over. Those things are just on hold and I don’t really have much choice there.
Rob: Yeah. That makes a lot of sense. On a perhaps related note, is one of those things, that untestable sealed .NET component that you’ve been wrestling with for months and for six months more, and you want to work on replacing it but you don’t want to. Is that the idea or you can’t?
Mike: Yeah. I can’t because it would involve a pretty major change. Here’s the part of the issue. The backend data storage system that I have in place to store the emails uses that component as part of a naming convention for everything. In order to rip it out, I’d basically have to rewrite it, then have everything imported again from people’s mailboxes, then stored in a different file format with a different naming convention. Just to process that is probably going to take a week and that’s not even testing that.
I have to wait until the security audit is over, which again leads me back to the idea that this whole thing is stupid because I’m basically just trying to get to the finish line here so you guys can do this stuff. Then I can make a bunch of changes to make the app work better. What’s the whole point?
Rob: Something that strikes me is that early on, you were most concerned about the cost of the audit. It turns out the monetary price is not what’s taken the most hole on you and on the product, on Bluetick. It sounds like the motivation and the time it’s requiring.
Mike: Yeah. Absolutely it is, which sucks but at the same time, it’s nice that it doesn’t cost me as much in terms of actual revenue but at the same time, I’m still going to need to make that up next year.
Rob: There are other things. Something you had mentioned at the end of the last time that we spoke is that you’re going to hire someone to help with marketing. Did that happen and how has that been?
Mike: It did. I hired somebody to help out with a couple of very specific projects. The first one that we’re just going to be kicking off on the next week or so is a podcast tour. Basically put together a list of podcasts, go take a look at, and pars out. Obviously, being a host of this podcast, you and I get pitched all the time for different things. Sometimes they come across well and sometimes they don’t. It’s obvious the ones that don’t. What I’m trying to do is say, “Okay, well. How can I position myself for a pitch in a way that is going to actually resonate with the people who are on the receiving end of it?”
I’ve basically gone through the process of having the marketing person help out with filtering a lot of those out and deciding what the best pitch or the best way to present it would be for each of those podcasts, take a look at the history of each of those. If they don’t have guests at all, then probably not a great fit. If they do, then how many guests do they have? Is it a regular thing? Do they have guests on specific topics? Basically, we’re doing a decent amount of indepth research there. Then start emailing them, see if I can do sort of a podcast tour to get onto those different shows and drive some traffic to Bluetick.
Rob: Something that I’ve raised a number of times is that Bluetick, the differentiation, right? I’m bringing that up because if you’re not differentiated yet, do you feel driving more traffic is worthwhile? Are you trying to drive the traffic so that you can get more people using the app to do customer development to differentiate more? Is that the idea or are you really trying to scale the funnel in order to actually get more customers using the product as it is today?
Mike: We’re going to discuss those chicken and egg problem here.
Rob: I know. I guess it ends at some point which you have product market fit but the pre-product market fit, never ending circle.
Mike: Right. The product itself, I feel has enough value for the people who would use the current features. I would agree with you that I don’t think that is differentiated enough from some of the other competitors out there but I also think that that’s okay. If people are out there who have thought of doing email follow-ups in various situations or they don’t even necessarily realize that, “Hey, I could use email follow-ups in that situation. I just had never really thought about it.” I feel if I can get in front of those people to reach them, then that is going to be enough to at least push the revenue in the right direction.
Does it need to solve everything? I don’t think so. Is it suboptimal by having a product where I’m going and doing a podcast tour like this where I don’t have product market fit, I don’t have a lot of differentiation? Yes, it’s absolutely suboptimal. Does that matter? The answer is no. I don’t necessarily care about that. If I were to wait until it was the optimal time to go do it, the thing would be worth millions of dollars and why would I care about doing a podcast tour at that point because I’ve probably outgrown that channel to some extent. So, I have to.
Rob: One of the problems you mentioned last time we spoke was you don’t have enough traffic. I was going to ask about progress, have you made progress towards that end. It sounds like you haven’t made direct progress in terms of driving more traffic but that things are in the works to hopefully drive some from these podcasts.
Rob: If I were in your shoes, I like that you have a podcast tour because: (a) you’re good on the mic, (b) it’s not very much of your time especially if you have this other person doing it and you can just show up, do it, and see what the results are. I’m skeptical that it’s going to drive enough to move your needle but given the amount of time that it’s going to take which is not that much, I think it’s worth trying.
I also think, in your shoes I would consider some short-term stuff. By short-term I mean something that gets customers in very quickly which is cold email. You have a warm/cold email tool. You’ve seen shady cold email and you’ve seen ethical cold email. We’ve talked about this in the past. You could do it in a way that isn’t garbage and that I think you could feel good about. You have your own tools. You don’t need to pay for another one. It’s really just finding the data or the list but that’s something that can start working. If you can get it, it can create leads now, right, to get a lot more conversations started. Have you considered that?
Mike: Yes I have and I’ve already started working in that direction as well. Obviously, you aren’t aware of this because we didn’t talk about it in advance to the show but what I did was I went through and I started bucketing a lot of my prospects list. I was fortunate enough that I went into LinkedIn before LinkedIn decided that they were going to yank all the email addresses out of the export so I have over 1000 people that I’m connected to on LinkedIn where I have their email addresses. It’s closer than 900 or so because I went through and sorted them out because there’s some that appear in that list that I don’t have all the contact information for them or they’re duplicated on another list that I have.
By separating those out, I’ve basically got multiple buckets of people. There’s people who are on that LinkedIn list. There are also people who have signed up for an account in Bluetick but either never finished the process or they signed up and then they cancelled at some point. Then I also have people who I had listed in my Pipedrive account at one point where I was walking them through the process and then they either dropped off for one reason or another. Part of why I built Bluetick was because I didn’t feel Pipedrive helped me as well as it could have. I’ve got those people that are tracked there.
I’ve also got a separate list for people on my personal mailing list. I’ve got people on the Bluetick mailing list as well. All of those, I can reach out to individually through Bluetick. I’ve spent quite a bit of time bucketing those people into different lists and it’s a matter of going through those and sending out those cold emails as you call it. I don’t feel it’s quite as cold but just because we’ve had some contact in some way, shape, or form.
Rob: Yeah. You’re right. It’s not totally cold. It’s lukewarm to warm depending on who you put in there. That’s interesting. What’s your timeline for getting that started because I think that could move a needle here?
Mike: I don’t know and this is something I struggle with a little bit because I’ve got this upcoming Google security audit then I’ve got some of those changes I want to make in order to rip out all that .NET component. Let’s say that I add 50–100 customers, something like that or even just 50–100 trials, each one of those are going to have mailbox data associated with it and then assuming that they’re still active when I start doing conversions. It’s going to take longer for the data migration to happen.
Does that matter as much? Probably not, but it introduces places where things could fail. Having to look at a lot of the stuff that comes out of mailboxes, the more data that’s in there, the more likely you are to run to an edge case where there’s an expectation that there’s a datapoint there and there isn’t. The code crashes and you have to fix it, then redeploy it and potentially have to basically restart the process, which sucks. I’m between this rock and a hard place where I have to do it. I don’t really want to, but I may just have to bite the bullet and kick it off at some point and hope for the best.
Rob: Yeah. On this one, in particular, I think you got to do it. When I think of, “Is it an excuse or is it a valid reason?” I think you and I could come up with probably five reasons why you shouldn’t start sending these lukewarm emails. I think that your business is more important than that. Getting Bluetick to where it’s supporting you full-time because that’s your goal, I think that’s more important because if you wait until all these other stuff you’ve mentioned—there’s always going to be stuff you want to get done before you do whatever—I think you’re months out.
You could feasibly be two months out for the audit, you don’t really want to do this sealed .NET component before that’s done, which I get. As long as the audit keeps sucking up your time, I get it. It seems like that .NET component is really holding things up. I just would hate for it to be mid-December and have you start doing the cold email. You’re 2½ months from now and nobody’s buying at that point. Then you’re into January and it’s that’s a lot to push off.
Mike: Yeah and I’m feeling the best case scenario, if things go well with the security audit, as soon as that’s done, that’s when I should start sending out those emails. I’m okay with doing it through November but when December hits, it’s time to basically back off on that and say, “Okay, let’s pause this and let’s restart it in January,” because nothing’s really going to move in December. I just don’t think that it is unless I were to say, “Hey, you sign up this month and you get an extra two weeks to your trial, four weeks,” or something like that. “You get a six week trial instead of two weeks.” That I can see potentially doing, but aside from that, I agree. I’m not going to let the replacement of that .NET component be something that holds up pushing on that side of things, for the lukewarm outreach I guess.
Rob: Right but I would say, even this cold outreach, why wouldn’t you just start it this week? What’s holding you back from doing that?
Mike: Mostly I just have to sit down and write the email templates to send them. Then the big thing that I think holds me back from doing that is that when new customers come on, they typically need a lot of handholding in the early stages and that’s a huge time sync. As I said, I leave for MicroConf in two weeks, so if I have that coupled with all the documentation paperwork I’m trying to get together for the Google security audit which I know is going to take a huge chunk of time over the next couple of weeks, I feel what’s going to end up happening is I’m just not going to be as responsive to these customers and they’re like, “Well, why did I even give you a chance?” Because they’re lukewarm relationships, I don’t necessarily want to burn personal bridges.
Rob: Could you start with a small number though? Could you get these emails drafted, start cold emailing a ridiculously small amount like 10 a day? Normally, if you’re doing cold email campaigns, you’re sending thousands a month to be honest, but if you start sending 5 a day or 10 a day, so that you had 1–3 prospects in the pipeline? I know the MicroConf stuff is a problem and you’ll have to communicate that. It’s not a problem. It’s a speedbump, right? You’ll have to notify the people that you’re working with and be like, “I’m doing this conference, I’ll be out a few days.”
That’s a bummer but I just want to see you move forward with it, I think is how I feel about it with something. Again, we can think or reasons why you shouldn’t do this until after MicroConf, until after the audit, until after the .NET component, or until after Christmas. Pretty soon you’re in January and you’re 3½ months from now. I don’t think that’s good for your motivation or for the business growth, to be honest.
Mike: Yeah, I agree. I think you’re right. Starting with a smaller group would probably do it and that would at least get the ball started. Then I would have the whole system in place, so to speak, for ramping it up throughout November. That’s probably a better way to go than just holding off completely.
Rob: That’s how I feel about it because this stuff takes time.
Mike: I think that the other thing that comes to mind as a workaround for people who start to sign on a couple of days before MicroConf starts, I can email them, say, “Hey, look. I’m going to be out for the next week. I know you’re probably going to need help during this time but let me do this, let me extend your trial by another week or two weeks,” whatever, “to help get by that or overcome that just because I know I’m going to be less available during this time.”
Rob: That is such a roadblock to speedbump email that you just brought up. I love it. Seriously. You just figured out a way of like, “Here’s an objection. Here’s something that I can do that would probably work perfect.” It really has a low-risk of failure. That’s it man. When you’re building these types of funnels or these systems or whatever, this stuff takes a lot longer, not just hours in a day but a lot more duration in terms of weeks or months to get going.
If you’re starting from a cold stop in a month, then you’re not making any of that progress. If you start very slowly now, you’re going to see the bugs, the kinks, how you’re going to improve and you can tinker with it and lower risk and then you can basically ramp it up when you feel a little more comfortable about it. Awesome.
Mike: Other ways of it is to differentiate. In that weekly mastermind that I talk to you about, they’re still going with that, we still talk every week usually for at least 1 hour, sometimes 1½–2 hours. One of the things that we’ve specifically talked about is exactly how I can differentiate Bluetick.
Several things have come up which I won’t go into in detail here just because they bleed in for direction and they tend to be an extended conversation, but for the most part, if there are several things that I’ve looked at and say, “This would be a fantastic way to go but it’s almost a completely different product at that point,” it sounds nice in theory but I have to say no to it at that point because I’m not building another product at this point.
Rob: Yeah. It’s not even a pivot. It’s just a start from scratch.
Mike: It would probably be easier to start from scratch at that point. Yes. I don’t know.
Rob: On the plus side, you might not need the Google audit.
Mike: Right because I’ve already committed to that. I don’t know.
Mike: Then you’re like, “Is this a…”
Rob: Sunk cost?
Mike: Sunk cost, I don’t know.
Rob: No, no, no. At this point, you recommitted. We went through this two or three months ago, right? It was like, “Should you keep working on Bluetick? Should you keep being an entrepreneur?” You went on a retreat and you decided, “No, I’m going to do this.” That’s not just so you can’t pivot Bluetick to something but if you literally have to start from a new code base, if it’s that far off from where you are, it’s not the time. Maybe you’ll wind up doing that in a year or two, hopefully not but I don’t think that’s the time because you have all these other stuff moving forward now.
Mike: I think that if we’re incrementally going a direction like that and it’s through customer discovery, then great but this isn’t really that, I don’t think. At least a couple of different directions I thought of, I don’t really feel that’s it.
Rob: Yeah, that makes sense. I’ve come back to this question a lot. Do you know how to differentiate? You had mentioned the integrations could potentially be a differentiator and you mentioned a few minutes ago that you are working on some integrations? Is that part moving forward?
Mike: Yeah. That part is moving forward. I’ve got an integration I’ve been working on the past couple of weeks, on and off. I’m hoping to have it done and submitted by the end of this week but we’ll see how that goes. Actually, I have to. I committed in my mastermind group to absolutely having that done and submitted by the end of this week. I’ve got another day-and-a-half to finish it, but it’s close.
Rob: I missed it. Did you say who’s the integration’s with?
Mike: I did not.
Rob: Okay. Cool. This is the fun stuff is when you’re doing things that are covert and that you don’t want to say in public because you’re worried about a competitor or whatever. Obviously, you’ll announce it in public when it’s done. So you have been making progress then. You’ve been writing code and getting that in place.
Rob: Cool. Good to hear it. When I asked about differentiation last time you said, “I need to talk to some of my customers more, ask them why did they decide to use Bluetick.” What was that decision process to find out if you already have some type of differentiation that we just don’t know about or what that is? It’s like a job to be something, the switch interview. “Why did you decide to do this?” Did you have a chance to do any of that?
Mike: Yes. I talked to a couple of different people and I still have to get through, go in, and take a look at some of the other customers I have. What I’m trying to do is go through and actually talk to all of them. Unfortunately, some of them are run by agencies, the people running the account are not necessarily the people paying for it. They’re running 3–5 accounts or something like that. I’d be talking to the same person for five different “customers.”
I still have to sort out some of those because I don’t necessarily know exactly who all those people are. But from the conversations that I have had, one of the things that keep coming up, for example in Bluetick, you can have somebody in multiple sequences at the same time. I’m working on making it so that you can add somebody back into the same sequence multiple times. Something else people have been asking for a little bit is being able to add the same person to the same sequence multiple times.
I’m still trying to sort out exactly the use cases for those. I’ve got a couple of calls scheduled in the future to discuss those in a little bit more detail. But for my understanding, those types of things that are not things that any of my competitors can do because they are explicitly geared toward cold outreach. Once you have reached contact with somebody, once they have responded to an email, they’re so hands off that you literally cannot send them another email. I feel that’s a differentiator for some of my competitors but probably not all of them.
Rob: That’d be interesting. We actually got that request with Drip. We weren’t cold email obviously, it’s warm marketing list but originally, you could go through a sequence which we call a campaign, you can go through campaign once and you couldn’t restart it. We did it for a bunch of reasons. It doesn’t often makes sense to do that and there are some really, they weren’t spammers per se but there were people that were just doing really shady internet marketing stuff and they have a 52-week sequence. If you were still there at the end, they wanted to start over. We’re like, “Oh my gosh. I don’t want you to do that.”
Then there were some legit reasons for this like, “Hey, I throw an event twice a year and I have an email sequence that goes out to all the attendees around the event time and it’s the same sequence. In essence, I’m just going to update the dates in the emails, so I want to start them over with a bulk operation and just be able to boom drop people there. If they can’t go through it again, that doesn’t make sense.” There are totally valid use cases for these kinds of stuff.
Mike: That’s what I’ve found as well. Simple things that you wouldn’t necessarily think of dumping emails which coincidentally, my credit card expires at the end of next month and in the past two days I’ve gotten over a dozen emails saying, “Hey, your credit card expires at the end of the month.” I’m like, “Oh God, now I got to go update it,” like it does in different places but that is one of those cases where adding somebody into an email sequence in Bluetick would be a prime use case for that would be very simple to do that.
The problem is that you can’t really restart them so you could do it once. Then you have to delete them from the sequence then add them back. There is a workaround in place right now but people want the ability to basically restart them in the sequence and then also have the same person in the same sequence multiple times. Again, I’m still trying to dig in to exactly the reasons behind that. I’ve heard from 2–3 different people that they wanted to do that.
Rob: Got it but you want to talk to more customers, you were saying, just to get more ideas.
Mike: Yeah, well I want to talk to them more about the individual use cases for that because if I understand why it is they want to do that, it may dictate how those changes are made inside the code itself because I could just slap something in there that says, “Oh, just restart this person.” But then it has an impact on the data and statistics as well, for example. Bluetick goes, when it does a response to an email, it does a threaded response and it includes the text of the previous email that was sent. If I restart it, it basically has to be email one, for example and it can’t include the previous email that was sent in that thread because it shouldn’t.
Rob: Let’s talk offline about this because we came up with a solution that it’s just too deep in the weeds to go into here, but I remember how we designed it and we’ll see if it works for you.
Rob: But that’s exciting actually. I’m pleased to hear that there are these things that other tools can’t do. The interesting thing is that you can build these as features, but how do those bubble up to positioning? Not just as a feature, but how does that change your headline? What are you now? Are you the most robust one or all these use cases around specific things that then you become the niche player, you pick a couple of verticals that really need repeating, and then you just go after those? There’s a thread here that I think you should keep pulling.
Mike: Yeah. One of the things that has come up in conversations with one of my customers was like most people, they use Gmail as their email client but it’s immaterial which one you actually use. One of the thoughts that I have is about how do they use Bluetick without logging into it?
Let’s say that’s a one off situation. Typically, somebody will send an email from their mailbox and then that’s it. They’re hoping that somebody will come back whereas Bluetick, the expectation is the email sequence is launched from inside of Bluetick. That use case falls apart if they reply from their mailbox. There is a way to create a task, assign to Bluetick, and then you’ve got the email template. It’ll pop up a task and you can go in. You can change that first email and then the rest of it is templated.
Let’s say that there was a way to do that from inside your email client whether it’s Outlook, Office365, or Gmail. Let’s say that there was a folder there called _Bluetick so that it appears right at the top of the list. You send an email and you drag it over into that and then Bluetick picks that up and says, “Hey, I see that there’s this email here. I’m going to essentially add this to a particular email sequence and follow up with it using this first email that that person had as their original one.” Then it’s going to reply to that email several times until they get a response.
The question is, how does that mechanically really work? I don’t know the answer to that yet, but it seems like it’s a really good use case. I think that it would differentiate from the other things that are out there.
Rob: Yeah, I hope this pans out in a way that you can find more people who also have that need because that’s a question mark of course. Is this so niche that there aren’t going to be hundreds or thousands of people that need it? I think that’s TBD and I think that’s more conversations then figuring out how to present that to people when you’re positioning and in your marketing.
Rob: Sounds good, man. I guess I would summarize the past month, it sounds like it’s been okay but not great. The Google audit is really throwing a wrench it things and really impacted your productivity.
Mike: But it could be worse.
Rob: It could be worse and it has been worse. I’m pretty happy to hear where these threads are going. Let’s circle up again in about a month. I’m imagining you will either be still in the slog, I’m guessing you’ll be hopefully wrapping up the slog of the Google audit. Now, you’ll still have another two to potentially four weeks after that, actually.
Mike: It’s just going to be 45-minute recording of a solid continuous profanity beep. That’s all it’s going to be.
Rob: That’s a good idea. “Well, hey Mike. Welcome back to the show,” and then it just kicks off. Then I do an outro. “Thanks again. Thanks, Mike, for coming.” I hope things go well over the next month and we will catch up with you soo.
Mike: Sounds good. Talk to you soon.
Rob: All right, bye.
I was enjoying my conversations with Mike and of course, wish him well over the next month of slogging through the Google audit. We know that Mike has some challenges ahead of him with Bluetick, not just this audit but in continuing to prove out the market and differentiating Bluetick. A lot of work to be done, but it is nice to hear that he has continued to be productive since our last conversation. We’ll catch up with Mike again in about a month.
If you have a question for the show, whether it’s for me or a guest, leave us a voicemail at 1-888-801-9690 or email email@example.com. You can attach an MP3, send a dropbox link, or just send a text. Our theme music is an excerpt from We’re Outta Control by MoOt, used under Creative Commons. If you’re not already subscribed to us, you should search for ‘startups’ in any podcatcher of your choice and visit startupsfortherestofus.com for a full transcript to each episode. Thanks for listening and we’ll see you next time.
In this episode of Startups For The Rest Of Us, Rob talks with Steli Efti of Close.com, about his highs and lows of the past year as well as a in depth dive into starting your first sales process.
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Rob: In this week’s episode of Startups for the Rest of Us, I talk with talked Steli Efti about his highs and lows of the past year, and we talk about building your first sales process. This is Startups for the Rest of Us episode 464.
Welcome to Startups for the Rest of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at building, launching, and growing startups. Whether you’ve built your fifth startup or you’re thinking about your first. I’m Rob, and today with Steli Efti, we’re here to share our experiences to help you avoid the mistakes we’ve made. Each week on the show, we cover topics relating to building startups without venture funding. We’re ambitious founders, but we’re not willing to sacrifice our lives in order to get our startup off the ground.
This week, I talked with Steli Efti. You’ll know him as the founder of close.com, but also as one of the world’s foremost experts in startup sales processes. Both getting them going, optimizing them, scaling them up, sales compensation, inbound and outbound, all that kind of stuff. Steli has written close to a dozen books and eBooks on this topic. Today, he’s on the show. I asked him some fun questions. I asked him what his high of the past year was. I asked him what his low was and we dug into some topics from the book. Just hearing him talk about sales is like a master painter talking about how to put color on a canvas.
Steli knows so much and has thought so much about this topic that he could literally stand up and do a 30-minute talk that is well structured, coherent, and would help the audience at the drop of a hat on almost any sales topic. You could just ask him a single question and he would do it. He’s a wealth of knowledge and information, and this is the second time he’s coming back on the show. If you haven’t heard of Steli, he runs one of the world’s most popular CRMs, it used to be called close.io, and it recently got the .com, so it’s at close.com now.
There is a small amount of money, a single round, and I believe they either have since bought out their investors or at least investors are still onboard, but they went from trying to do the big venture funded thing and pretty quickly switched to being a fully remote basically indie funded, independently funded SaaS startup. They’re much more in the vein of a Zapier or CartHook, where they took that initial round and they did technically take funding, but much more a bootstrapper at heart. They run it like a bootstrap startup where I’m assuming there’s been profit thrown off.
Steli doesn’t talk about revenue numbers. If I were to guess, they have to be north of let’s say $7 million or $8 million. I’m guessing somewhere between $8 million and $15 million, if I were to guess. Again, he’s never told me that and their numbers are not public, but it gives you an idea of the scale that Close is running at.
On that note, I have been noodling on this term, trying to figure out a better term to describe these kinds of companies, the companies that did raise a small amount of funding. Whether it’s from […] or TinySeed, or whether it’s from a group of angels, there’s a whole swath of companies now. The RightMessage, CartHook, close.com, Zapier, LeadFuze, Churn Buster. They do raise this single rounds, but they’re not venture track. And yet, they’re still going to be highly profitable life-changing businesses.
They’re not technically self-funded anymore, but they’re also not VC funded. I’m loving this term independent. Independent SaaS, independently funded. I don’t know if I’d go so far to say they’re indie funded, or indie SaaS, but that is what I’m noodling on. It’s a nice catch-all phrase. I think the thing I like about independent is it doesn’t just speak to whether they’re funded or not, because saying somebody’s funded or not, it’s just a mechanism. It’s just, have they taken money? If I’ve taken $1 in funding versus $100 million, is that a binary thing? It’s not.
The idea of independent startup, independent SaaS to me is that ethos. It’s that I’m an ambitious founder, and I want to build something great, and I want to impact my small corner of the world, but I’m not here to make a dent in the universe. I’m not here to do the big Silicon Valley, go big go home, be a $1 billion company. I’m not willing to sacrifice my life, my health, my relationships to grow my company. It really is the MicroConf, Startups for the Rest of Us ethos.
We on this podcast and we at MicroConf have never been anti-funding, never. Go to Startups for the Rest of Us and search all the transcripts for funding and you’ll see that we have since the beginning talked about it as one option towards getting to your goals and if you can get to your goal of having a business that supports you, or building $1 million or $10 million business without losing control, without sacrificing yourself, doing it in a sustainable and organic fashion, in a way that fits around your life goals, then why wouldn’t you do that?
It’s just knowing what you’re getting into and what you’re doing. Independent SaaS and independent startup, I like that term because it implies that you haven’t given up control, that the founder or founders are still in control, and that they’re independent of this big machine—the VC industrial complex people might call it—where you lose the ability to sell your company even though you have a minority investor because they have some right to block a sale, or you can be removed as the CEO of your own company, or they demand that you sell you’re your company if you want to keep running and take dividends out.
The idea of being independent is really striking me lately and that’s something I’ve been noodling on and I think I’m going to continue to work with that term. I just like the way that it captures a lot of essence and a lot of nuance in one phrase.
I wanted to mention one other thing. Steli is speaking at MicroConf Europe in just about a month from when this airs. If you want to hear more from him or meet him, shake his hand, give him a high five, you can meet him at Dubrovnik, Croatia. Just head to microconfeurope.com, buy a ticket, and you could see him in a month. With that, let’s dive into the conversation.
Steli Efti, thank you so much for coming back on the show.
Steli: Thank you so much for having me, Rob.
Rob: Do you realize that five years almost to the day, it was September 16, 2014, you came on episode 202 of this podcast, outbound sales for startups with guest Steli Efti. Do you remember that?
Steli: No, I didn’t.
Rob: I don’t think we had ever met. I don’t think we’ve spoken at MicroConf by then and someone tweeted, it may have been patio11, it was someone I knew and trusted tweeted and said, “This guy knows what he’s talking about.” Again, I have never heard of you at that time. This guy knows about startup sales and I was like, “Okay,” and I read one of your books you had. I don’t remember which book it was, but I looked through it and I was like, “This guy seems to know what he’s talking about. I’ll bring him on,” especially back then, we didn’t do many guests at all on the show.
I was a little hesitant about when you came on. Mike dropped it. I think we went for 30 minutes and I was like, “All right, we’re all done.” I had people saying, “You should have just let it go longer,” this is one of the few times where we had people say, “Steli was on a roll,” it was great. Super funny man.
Steli: I definitely remember, I was listening to your podcast before I got invited to be on it and I remember in the very beginning of the episode, just my feeling was, you guys were quite unsure what I would do on it. Here’s this weird salesperson who we give key control over the situation, given too much space. Then over time, I think we had a lot of fun and it seems like you guys were like, “He’s not that bad. This might be useful to people who are listening.” I remember that.
Rob: We loosened up a little bit is probably what happened. We were like, “Uh-oh. Here we go.” You never know what a sales guy is going to do on your podcast, but it’s good to have you back and today, to give listeners an idea of what we’re going to cover, I want to just catch up with you a little bit here about some highs and lows over the past 6-12 months with close.com. Congrats on getting that domain by the way. That’s killer.
Steli: Thank you.
Rob: Then we’re going to talk a little about yours and your team’s new book, The 2020 Startup Sales Playbook: How to Close Deals, Grow Revenue, and Scale a High-Performing Sales Team. Let’s dig in, man. Folk have already heard from the intro about close.com and then how you’ve been on this long journey. I love to ask founders, if you think back over the past six months or maybe over the past year, what is the moment, your low point in terms of the company, in terms of some crisis. Something where you thought, “Oh my gosh, this sucks.” It’s that moment where you start questioning, or you’re really just kind of in the depths of despair.
Steli: That’s a good question. I think the last year, one of the biggest challenges was that we had hired a director of marketing. That person didn’t work out. The beginning of 2019 went to part ways with that hire and I had to embark on another mission to try to find our new director of marketing. The reason why that was hard is that, it took us a long time to find the first director of marketing and I think that by the time we hired him, he had really impressed us with a few things that we had found out in the interviewing process.
Working with him, he never lived up to the work product that he created during the interviewing process. I think I made the same mistake that I try to teach so many other founders not to make, especially when the higher salespeople or sales leaders for the first time is the typical mistake of, I have never hired somebody in this position before, this is somebody who comes from such a great background, such an amazing company, has done such incredible things, and this is such a senior role. Maybe I just need to be a bit more patient. Maybe I need to give this person more space to let their magic work. Maybe the little red flags that I see, maybe I’m overly critical.
I think I didn’t trust my instinct and act on my instinct fast enough, and by the time that I realized that things weren’t getting better, and this was not the right fit, we just had wasted an enormous amount of energy and time, and a bunch of things we’re going the wrong direction. Having to step in and part ways with that hire was really painful, and then even worse was that I knew, “Okay, next time around, I’m not going to make this mistake. I need to again, really increase the standards that I set.” In general, people tell us that we have unreasonable expectations and standards when it comes to hiring.
I knew that this time around, I would have to just make this my full time job and it took six months. It took the first half of 2019 to find our new director of marketing. I’m super glad we’ve invested that time because the person we hired is a world apart from the last hire and what he’s been able to do in a very short period of time, but it was just painful. Hiring is always painful and hiring super senior people which is something I’m increasingly doing is even more painful. It just takes so much time, so much energy. When I think about the last year, if I think one thing that’s soul crushing, it was the hiring process to find the director of marketing.
Rob: Yeah. If you’ve never hired at that level, at that senior level, a C level person, or a director, a managing director, whatever the title is, it’s shocking how few qualified candidates there are out there. A lot of us are used to hiring developers, or salespeople, or designers, and while there’s always a shortage, we know that there are tens of thousands of qualified people. If you’re remote, it’s hundreds of thousands, I would say, for any given position around the world, but when you’re looking at a C level or director level, there’s not that many. There’s not that many with the experience.
You can find a director at Target, director at Cargill or IBM or something, “Are they really going to be a fit?” having a director with actual startup experience maybe in SaaS, by the time you narrow that down, the universe of candidates is very, very small. I have been through and I went through it after the Drip acquisition because we hired a bunch senior people and that was an experience I had never done. When it took six months as you said, it takes six months to find the right person and then you find out they’re not the right person, it’s devastating. It impacts your morale, the morale of the team. I can only imagine. Did you feel like you took it harder, or your team took it harder in terms of a morale hit?
Steli: I don’t know. That’s a good question. The truth is maybe I’m so good at suppressing certain emotions that I’m not fully aware of the impact of some of the things. I wouldn’t even describe that I took it really hard. It was just one of those things where I knew I messed up by letting the situation go too long, giving this person too many chances, waiting too long, and then I knew the price I would have to pay. I part ways with this person and now the next year, I won’t do anything else than this.
It was more of a look in the mirror and going, “Yes buddy, this is not going to be fun, but you’re going to have to go through it,” then being devastated, being really down, or depressed, but I wasn’t shaken. It’s hard to say honestly sometimes, but I feel like we have a pretty senior team in terms of people are pretty experienced. When this happened, obviously everybody knew, this is going to affect our numbers, this is going to affect a lot of the things that we want to do, but there’s also a sense of, yeah, this is part of life and we will figure it out. It’s not great, but it’s not the end of the world. Nobody was necessarily super shaken.
I changed my strategy so much with this hiring. One big thing that I did that I hadn’t done in a long time was going really strong on outbound, not just relying on inbound candidates. I basically reached out to almost any CMO, VP of marketing, and director of marketing of any company that’s in SaaS that is significantly more successful than us. I reached out to a ton of people. I would ask for advice calls. I’d be like, “Hey, I need 50 minutes of your time. I’m trying to hire somebody.” There was always a mixture of me trying to build a relationship with this person and see if they might be the right hire, because the great people, they already have a job, they’re not applying for my job most of the time.
Maybe there’s an opportunity to hire them, but even if not, maybe I can ask them for some advice about my thoughts on hiring a great person like them and seeing if they have any advice, any tips, any ideas, or learnings that they could share with me, then I would always ask for referrals recommendations. “Do you know somebody that’s looking? Do you know somebody that fits that could get excited about this opportunity?” and that was an incredibly important part of the hiring process, but it’s so draining. It was so draining. I would have weeks where I’d have 6-7 of these calls every day, plus all the evaluating take homes, inbound candidates, and calls with inbound candidates, second calls with people after take homes.
It was just a super draining process and at times in the middle of it I was just like this is really not fun. I wish I would have to go through this. It was more of a quiet suffering than being devastated or being crushed. That would more accurately, I think, represent how I felt this year.
Rob: Quiet suffering, I like that phrase. I think that describes a good chunk of starting a company, actually. Let’s get off that topic. What’s been your high point? What is a big victory? Aside from getting this book out the door—congratulations, it’s a huge deal, it just went live I think in the last week or so—what’s the thing that you really look back on in the past year and you think, “We crushed it. That was such a high point.”
Steli: Actually, I’m very grateful for this. There were a couple of things this year, but I think the biggest was we’ve completely revamped our pricing in the first quarter of this year. That was by far the largest, most complicated, and riskiest project in our company’s history. The product Close has been around since January 2013, so that’s six years at the time that we did this project. In six years, this was the most complicated thing we’ve ever done. For us, our pricing was quite complicated because we did a few crazy things.
One, we gave you unlimited telephony features in packages with certain plans.You could do a limited North America calling and SMS in pro plan and unlimited international calling and SMS on our business plan. On top of this, we were the only SaaS product in this year and space, maybe even the only SaaS product ever with some significance that offered mixed and matched price plan. You could have one ORC or you could choose three different plans for three different users in your organization.
We did a bunch of other things. We have to change all of this. We lowered our base entry price, we disconnected the telephony feature and the cost associated with it from the core plans that we had. We stopped mix-and-match, so you had to choose one plan for all your users. We did a bunch of changes around prices that were quite complicated. We have a customer base of thousands of customers and with organizations of 300 users in one ORC that had seven different types of plan prices and used telephony in some crazy set-up way.
It was a very, very complicated project for us to switch new pricing, to communicate it with our current customer base, to use that opportunity to do a lot more annual contracts, to change the way we did discounts. It was such a complicated project both from how our product works, how do UI and billing works, how our relationship with our customers are, marketing funnels, everything.
It was one of those projects. There’s very few things that you do in a startup where it’s really life or death, most experimental things, you change. If they don’t work, it’s not usually life or death. It’s like, “This is annoying. This didn’t work as well,” but you can change it. This was one of those projects where we knew if we mess it up, this could cost us an insane amount of money and this could really affect the business. We’re also acutely aware during that time, a lot of other companies have changed their prices and a bunch of these pricing changes didn’t go down really well. We were hyper aware of treating our customers really well, over communicating, being really strong in our communication.
We spent an insane amount of time and energy preparing for that drastic pricing change and it was very stressful, to be honest, especially for me, as I was orchestrating all of it. That pricing project went down super smooth, no bugs, no hiccups, no backlash, most of our customers were super happy about the changes in our communication style. We hit every single KPI we wanted in terms of what we wanted to do with it. We wanted it to be more fair with our customers. We wanted to have more growth. We wanted to have a simpler business model. We wanted to see certain metrics go up. Now, six months after we launched, all these numbers are up. It was a huge success for us, but it was also super nerve-wracking because it was quite a complicated project.
Rob: Yeah. I often find it that when I asked this question to folks like, “What’s been your high point over six months or a year?” that the high points come after a period of extreme stress or extreme uncertainty or just extreme hard work because you don’t get to that high point by sitting on your laurels and not taking risks and hard work. Risks stress people out, so I find it the two go hand-in-hand. That’s great, that’s great to hear. Now, did you grandfather when you raise prices?
Steli: Sort of, but not really. We didn’t grandfather in the sense that you could stay on the old price forever, no. A bunch of customers actually net-net with the new price would pay us less money. Happy days, nobody complains about that. A good chunk of our customers would pay us around about the same amount. Nobody complains about that either. There was a small group of customers that would pay us more, some of them significantly more. In those cases, we had to go case by case and communicate with the customer trying to figure out how do we deal with this.
Some cases just highlighted that the relationship was completely out of whack. I would show them, “Listen, you’re paying us $5000 a month, that’s great, but you’re generating $8000 in calling cost.” Honestly, it is not a healthy relationship. We want to continue to support you for the next decade, but it won’t work if we are losing money every day we work with you. How do we deal with this? How can we come up with some plan that puts us in a much healthier place? I see most of the customers were like, “All right, this kind of makes sense,” and they work with us and we figured it out.
Then, there were some customers, usually the smaller ones, they said they would pay us $150 and they would have to pay us now $200. Those $50 for our business, they’re not that relevant, but for them it will be a significant percentage increase in cost. In some of these cases, we just offered them a good choice and say, “Hey listen, you’re not month-to-month, with the new pricing, prices would go up but here’s what we want to do. We want to invest in the relationship and for that we also need to see that you want to invest in the relationship. If you signed a one year or two year contract, we’ll give you a discount. Your pricing will change, but with the new discount, you’ll probably stay around $150. You’re not going to see any increase.”
We did some of that but what we didn’t do is we didn’t allow a customer to stay on the old price because our old price was not just a number, it was unlimited calling internationally, plus the ability to add users at any plan at any time. That was just something we couldn’t afford to support with thousands of customers indefinitely. It was a bit tricky. We had to be very careful with the customers that would have negatively been impacted, on how to offer them some deal that would move them to new price but still make this a good relationship for both and we’re able to do that.
Rob: Yeah. Whenever I talk to founders about changing pricing, I have this playbook. It’s like, “Look, grandfather if you can,” but that’s not always the case. People who say you should always grandfather, there’s some rule that God handed down to Moses that we should always grandfather things. That’s not true, but do it if you can. There are sometimes reasons why you cannot do this. The bases are going to go bankrupt, your plans are way under water, whatever, there’s a bunch of reasons. If you decide not to grandfather, then exactly what you just broke down, whoever saves money, you don’t need to worry about them. Whoever’s breaking even, you don’t need to worry about them. Anybody who increases, try, if you can, go one on one, just like you said.
Either cut deals, maybe give a little bit of a discount if you can, maybe do the annual plan—I love that idea—get creative with it. Just because you have 1000 customers, doesn’t mean you treat them like a number. You treat them like individuals and you break it down. Even if you have 50 or 100 individual emails that you’re sending of like, “Hey so and so, you’ve been a customer for three years…” that takes time to do, but that’s how we do this. These businesses are still serving individuals and companies, so it sounds like, as I would’ve expected, you guys handled that really well, so nice work on that.
Steli: Yeah and I think that just to underline this, it’s in those kind of big moments of change where you either strengthen the relationship to your customers or you weaken it. If I, as a customer feel like, “Wow, this company’s changing fundamentally how the product works they charge for, but look at this. They pinged me three months before they announced anything. They gave me all this transparency. They reached out. They helped. They worked creatively. They really care about me. They really care about me knowing what’s going on, understanding what’s going on, being prepared for it and being in a good space,” that leaves a strong impression with people and they go, “All right, this is a partner that I can rely on a long-term. This company is a company I want to work with long-term.”
The flip side of it is, if for whatever reason I feel blindsided by the change that’s happening, I feel not being taken cared of. I feel like not being valued, that’s going to now break and weaken the relationship and I’m going to go, “Shoot, this is a company I cannot trust. This is a company I can’t rely on. Who knows when the next change is going to come? How much of that is going to impact me? Maybe I should look around for alternatives.”
Anytime you make big changes you just need to see it as an opportunity to strengthen the relationship. Unfortunately, relationships don’t become stronger without a lot of work. You have to put the work in to make it happen.
Rob: I agree. Let’s transition into talking about your book. As I said at the top, it’s called, The 2020 Startup Sales Playbook. Just so folks know, the book is free. You’re giving it away. It’s 100 and something pages. I just got to flip through it. Obviously, we can link it up in the show notes, but I think you said you wanted folks to maybe email you.
Steli: Yeah. I always find it to be one of the simpler options, people always take me up on this. If you want the book you can just send me an email, firstname.lastname@example.org. You can just say, Startup for the rest of us book in the subject line. You don’t even have to write anything beyond that and I will send you the book for free. We got a ton of feedback, I always love when that happens, whenever we release a book.
The biggest feedback we get and this is true for this book that we just released on Product Hunt. A lot of people will tweet or email me or ping me in one way or another and go, “Just spent today two hours reading the book. So valuable and even more importantly, I was surprised that it’s not a lead gen magnet. There was no pitch about Close. This was not all about your software and how your software solve all my problems. This was just a bunch of chapters of highly tactical practical stuff. Two of these things that I read, I’m going to apply immediately in my business and try to see results from it.”
That’s really the aim that we have, the standard that we said when we put stuff out there. We want people to consume it, learn from it, and immediately get some value. We just trust that over a long enough time, we give and give. People know we’re on the sale space. People know we know a lot about it. People of that we’ve helped them. Then, whenever they need software, a lot of people will come back and go, “Let me check out close.com. Let me check out their software because I’ve received so much value from them up front.”
I’m super pump that people get a lot of value from this and we released it because we felt the last time we did a book about how to do sales when you’re super early stage, when you’re just starting out, was a couple of years ago. So much has changed in the space that we want to give people a quick update and set-up a lot of startups for success for 2020 and beyond.
Rob: Awesome, the whole giving things away and just building that brand and building the name brand of close.com and Steli, they really are here to help people. I mean, you’ve spoken at MicroConf many times and you take time out of your busy schedule and it’s not like we cut you a paycheck to do that. People see that and that does not go unnoticed.
As a listener right now, let’s show Steli what the Startup for the Rest of Us audience can do. Flip over into your little mail app on your phone and email@example.com and let him know. Put startups for the rest of us in the subject line and get this book. I’m actually looking at right now as we’re talking. It’s really, really well done. It looks like you actually collaborated with some other companies on it. It had Vidyard and LeadFuze. I’m an investor there and Predictable Revenue and PandaDoc. It mentioned they contributed some essays as well to the book.
What’s the difference? I know that you guys have written 11 books, I think you were telling me before we got on. What’s different about this book? If folks have read three or four of your other books, is this about early stage like, “Hey, I’m one to five sales people and I’m trying to get things going and figure out compensation. Should I do outbound-inbound?” or is it further down the line?
Steli: This is for the early stage of your sales playbook. This is for both the founders that are doing sales themselves just at the very beginning or a kind of the phase where you start hiring a couple of sales people where you try to put together your version one of your sales team and your sales playbook. It’s about the early stage, not the scale up.
We’ve written books about how to scale your sales organization. We’ve written a book about almost any aspect of selling, of the tactical stuff, email, cold calling, negotiations, how to give demos, all that stuff. This is much more of a playbook. A-Z, if I know very little about selling or I don’t have yet a team that is rocking and rolling, it’s about scaling that team and scaling our efforts. How do I get started or how do I take the next few steps after I have maybe close the first handful of deals? How do I do that today? And how do I think about that today?
Rob: That’s cool. As I’m looking through chapters, you have stuff all the way from identifying your perfect customer, inbound, outbound or both. That’s an interesting one. Talk me through how people should think about that inbound, outbound, or both.
Steli: First of all, people all the time ask me, “Is outbound sales dead? Is cold calling dead? Is email dead?” Every year there’s the headline of like everything that is dead now. Everything doesn’t work anymore. When it comes to outbound versus inbound, this is probably one of the biggest questions I get is like, “Does outbound even work anymore? Does it make sense?” and I always say, “It depends.” There’s companies today that are crushing it, crushing it. New startups today that are crushing it because they bet on outbound, because outbound was the right channel to succeed in the market. All their competitors were just focused on inbound.
Then there’s companies that try to make outbound work and they struggled and it never had a real chance. You have to look at who your buyer is. Who is your customer? How do they buy? How do they live life? How do they communicate? To try to understand if outbound would work or not, we have one customer, our largest customer in the world is a company that has become insanely valuable.
I just visited there from the US originally. They’re pretty big here but they also have a massive office in Amsterdam in Europe, expanding their Europe operations. I was meeting with their team a couple of months ago. They were telling me the reason we succeeded and our competitors failed and have all these insanely well-funded competitors that also built this insanely complicated technology, is that our competitors wanted to build software that basically sells itself, that does all these viral loops and does all these cool things to grow, and we just did hardcore, old school hitting the phones.
Our customer is not online all day long. They’re not searching for things all day long. It’s not that easy to target them. Even if you target them and show them an article or something else, they might not just want to spend the time to download things, read things, get into your online funnel but we know our customer is picking up the phone because that’s how they get business.
We just did it simple, focus on calling, and we call people hundreds of times and eventually we got them on the phone. When we had them on the phone, we would create accounts for them, we would do all the work for them. We’re able to crush the competition, build a billion dollar business by going at a very simple, straightforward route which is cold calling because it’s trying to be super neat, tricky, cool, hip, and using all the online ways to market and grow the software.
Inbound versus outbound, the answer the choice between one or the other or both always comes from your customer. Who is my customer? Does my customer pick-up the phone? Does my customer read emails and answer them? Does my customer buy things mostly online? If you research, “How does my customer buy?” based on their buying communication habits, that’s what you should use as the foundation to make a decision if you do outbound sales or inbound sales and not your personal preferences or your wishful thinking of how the world should work.
“I don’t like if people call me and pitch me so I’m not going to build a business that does it that way.” That can work for some people but in some industries, if you have that wishful thinking approach to reality and not a “What is my buyer? What is my customer? How does my customer buy software today?” you can get into a lot of trouble. I would say that outbound and inbound, both can work today. You should have both options on the table as you are considering what to do.
Rob: Another topic that I’m looking at that I’ve always been intrigued by and frankly, a little intimidated by, is creating a sales compensation plan. You have a chapter in here on that. Tell me, the chapter’s fairly short and it gives you some good ideas, but I know that in your head there’s more. There’s more in your about it than what’s here.
I know there’s not a one-size-fits-all sales compensation plan because it’s going to depend on your average ticket size, how long it takes the sales cycles and all that, but how would you think about advising a startup how they should set this up? Where do you even begin?
Steli: It’s a good question. I think a couple of things, there’s some basic principles that apply to many things that apply to compensation plans as well. First principle that I always advice on is to try to keep it as simple as humanly possible because it’s going to get very complicated very quickly.
If you start with a compensation plan that has 11 different criteria to compute the number that somebody is earning, you’re in trouble on day 1 already. That number is going to go from 11 to 45 and it’s going to crush you and it’s going to completely demotivate the salesperson because the salesperson needs to be able to do the math on how much money they’re going to earn at the back of a napkin. If it needs a spreadsheet, they’re not going to be doing the math which means the incentive, the driver of knowing, “If I do this extra thing, I’m going to get this extra bonus. I’m going to be bumped up with these new level of commission,” is not going to apply because the sales reps aren’t aware of it, because it’s too complicated for them to understand how all this works.
You want to sound very simple. You want to, in the beginning, make it simple to administer it and to pay out. I always advise companies highly against starting the first compensation plan in a way that is paying out commissions monthly. Again, here’s why. Doing this monthly is just going to be very complicated in their early days. Computing it monthly is going to be a pain in the ass.
What you want to do in the beginning is you want to probably start out with a commission structure that is much more formed like a bonus program than a commission program and that is paid out quarterly. Every three months, people get a good chunk of money, that they can work three months towards it. It’s not every four weeks. It doesn’t become a big distraction as quickly. It is a bonus that you pay out every three months and you probably want to have a balance of criteria.
We always want to have our sales rep, obviously, focused on closing deals but we don’t want them to focus on closing deals at any cost because that cost matters to us as a company. If I just say, “You’re going to get 20% commission on any deal you close,” most salespeople will close any deal they can close. They’re not going to ask themselves, “Is this customer going to churn a week later? Can we really make this customer successful? Is this really a long-term customer?” They’re just going to close anyone and everyone they can in any way they can, which is bad for us as a business. I’m paying you 20% on something that is worth very little because the customer instantly cancels.
You want to find some balance. The biggest portion of the bonus or commission structure has to be the revenue driving because that is the number one driver but there needs to be a counter balance to that rewards quality. Instead of paying you instantly a commission on a deal that you close, maybe I’ll only pay you a commission on a deal you closed and that’s still a customer three months down the line.
See how, now, this beautiful works with why I wouldn’t want to pay out somebody every month, why paying every three months can make these things much, much simpler? Because large organizations can’t pay commissions. You’re going to have a commission account as a sales rep and you can have a balance that goes up and down depending on your trends, your cancellations, lots and lots of criteria.
When you’re starting only you have a couple of sales reps. You want to put together a commission structure. You don’t have the infrastructure to do this at this level of complexity. Every three months, I’m paying you for the customers you’ve closed last three months that are still with us so they’re checked off as good customers.
I know one company had a criteria where if a new customer books a training session and has a 1-hour training call with our success team, 90% of the time they’re going to be a customer 6–12 months down the line. You’re only going to pay sales reps for deals where they closed a deal and the training session happened. The sales person will send advice to not just sell the product but also sell the training session and make sure that the customer gets to the training session.
If a customer didn’t want to talk to the success team and didn’t want to have a training, that was a big red flag. Why? Why don’t they want to talk to us? Why wouldn’t they want to get training, get, really, as much value out of the product as they could? What’s wrong here?
You want to incentivize and give a bonus or commission on the deals I’m closing, but you want to have a counter balance. One criteria could be customers to be around three months. It could be NPS scores to be a certain level. It could be has received onboarding calls with our successes support team. It could be qualifies because it’s a customer that does XYZ. It could be has signed an annual contract. Whatever it is, something that makes sure that the revenue that are brought in is quality revenue. It’s not just any type of revenue. I call my mom, tell her to buy this and cancel it the day later and I’m getting paid from this stuff. That’s how I would start.
Later on, you can always add more criteria. One thing I like to do for startup sales team is to not just have a bonus for personal performance but also have a little bit of a bonus for a team performance. Sales reps are individual team players. Think about athletes in a team sport, a basketball player, let’s say. If I’m the best player in the team, if I’m the super crucial, super star player, I don’t want to be paid what everybody else is paid, right? That’s not how this works because I performs so much more, create so much more value than anybody else.
I would mostly want to be paid on my performance but my team’s performance also matters. If everybody’s terrible in my team, no matter how great I am, we’re not going to win championships. We’re not going to win as many games. We’re not going to be as high-profile. It’s going to really affect my career, my life as well. It’s going to make me look worse and make my life harder.
Ideally, you want to have something where you pay me for my performances as a salesperson but if the entire sales team hits, let’s say a certain revenue goal or a certain milestone as a team, or maybe even the company hits a certain milestone, a customer-related milestone that I could affect as a salesperson, maybe it multiplies my commission. It adds another bonus to my commission or another incentive to my commission. There’s some alignment that I know if I help another salesperson on the team, I also benefit. If the entire team does well, I also do well on top of my personal unique performance. That’s high level, the way that I would think about this.
Another principle to keep in mind is that no matter how great your first version of commission structure or bonus structure looks like, no matter how thoughtful you were, no matter how many founders like me and other experts you talked to to get advice, whatever you start out with is not going to be the same thing that you are going to have 6 months, 9 months, 1 year, 2–5 years down the line.
Commission structures have to constantly be refined, adopted, adjusted, changed as the world changes, as your company changes, as your sales team changes. It’s really a living, breathing thing. You’re playing with human psychology and incentives and the way your commission structure changes, it will change the dynamic of your sales team, the performance, and the things that your salespeople do and don’t do.
You’re going to have to have this philosophy that you cannot just work on this for a couple of weeks and be done with it. You’re going to have to check in, change, adjust, learn, grow, and eventually, hopefully, you’ll hire a VP of sales where a really big part of that job is to constantly be refining that commission structure and revamping the commission structure as you’re scaling out your organization and your team but start simple. Don’t overcomplicate things. Pay people for their performance but also make sure that their performance is high quality. You don’t just pay them for anything that they do that might not be the real deal.
One last thing I’ll say before we wrap this up since I’m on a roll on the commission thing is please don’t pay people on a rolling, never-ending basis. If you’re in the SaaS space, what a really terrible idea is to say, “Every deal you close, Steli, I’m going to pay you 25% or 30% MRR every month for the life cycle of the customer.” It’s a terrible idea.
The reason why that’s a terrible idea is that every month as I’m closing more and more deals, I’m making more and more “automatic money.” Eventually, maybe 6–9 months on the line, I’m making $10,000–$15,000 in commission a month for all the customers that I’ve closed, cumulatively this year. I know if I don’t do anything, if I don’t do […] this month, I’m still making $10,000–$15,000. If I don’t do anything the next three months, I’ll still make pretty good money.
That’s not the way you want to incentivize a sales rep. Sales reps’ performance will definitely go down if they know that if they get lazy for a couple of weeks, there’s really no consequence. You’d rather pay them a bit more upfront but it’s all for now. Next month, my bank account is zero if I don’t perform then or the next quarter, I’m going to get zero bonus if I don’t really perform versus giving me this chance to build recurring commission which then creates this unfortunate situation where eventually, I know even if I don’t do anything for half a year, I’m still making money every month. Then, that’s exactly what I’m going to do.
I’m going to stop working. As a sales rep, I’m going to get distracted and do all kinds of other things and you’re going to keep paying me indefinitely. That’s not a good idea. I’ve seen a couple of startup funnels wanted to do this and all of them had massive issues with it so please avoid that mistake.
Rob: Yeah, that’s fascinating. I think there’s two things, specifically, you pointed out that I haven’t thought about. One is the dangers of doing recurring commissions. I think that makes a lot of sense as you spelled it out. I haven’t realized how often you would need to be updating your sales commission structure. It sounds like it’s just a fluid thing that changes 2–3 times a year as you go. Does that sound right?
Steli: Yeah, it can. In the early days, you might have to change your commission structure 2–3 times a year. Eventually, maybe, hopefully you’re going to get less, but you might do other things. A lot of times larger sales teams, they do a ton of things that are actually messing with the commission structure without publicly doing so.
They’ll do certain incentives. They’ll have big promotions going on. “This quarter we have this big promotion. If you do this thing, not just bringing in a lot of customers and a lot of revenue, but if you bring in this type of revenue, whoever closes the most new logos in the Fortune 500 or whoever does sell most of our new product as XYZ to the existing customer base will get first-class Vegas with three weekend in a 5-star hotel and $1000 to play,” which is basically just gamifying the whole thing but it’s just money.
They just find different ways to make their sales teams prioritize certain actions and outcomes. If you go to a massive organization, they might not mess around with their core commission structure 3 times a year, but in the earliest, as you’re building on your sales team, you might have to switch things around. Your product might change. The customer you go after might change. You started in the SMD sector and had one commission structure and then you go more and more up marketing, you figure out, “Wow, the way we pay commissions makes no sense for these enterprise deals that our sales reps are now closing because it’s either way too little, it’s way too much, or something entirely different.”
As your product changes, as the market changes, as the customer you’re going after changes, as your sales organization changes and widens, things become complicated. You start with three people that do anything and everything, from prospecting, to cold emailing, to warm emailing, to giving demos, to negotiating deals, to signing contracts, to eventually maybe having a team of SDRs, people that are sales development reps, they do all the prospecting, to teams of AEs, account executives that just close and negotiate deals. All that now changes the commission structure again, right? But the first couple of years, I find that most startups actually have to adjust and change their commission structure quite a bit.
Rob: That’s great, man. Well, thanks again for coming on the show. We’ve covered just maybe 3 topics out of 20 that are in the book but that gives people a good excuse to email you, firstname.lastname@example.org or they could obviously head over to close.com and search around for the book. Aside from heading to close.com to see what you’re up to, where should they go to keep up with you online?
Steli: For people who love podcasts like this one, I think a good group of the audience here is probably aware of it but I’ll say it nonetheless, Hiten Shah who is a legend in our world and a good friend of yours and mine, he and I have a podcast together, the Startup Chat. You can go to thestartupchat.com if you haven’t checked that out or if you’ve forgotten about it. Subscribe to it and take a listen. We publish twice a week on all the major platforms with our episodes on the Startup Chat.
Beside that, @Steli on Twitter. You have my email address, email@example.com. I always love to hear from the Startups for the Rest of Us community and the micropreneur community. If you have questions, if you have challenges, if you have problems, always happy to help if I can and always happy to encounter people in real life or online that have heard from me or about me on this podcast.
Rob: Sounds great, man. Thanks again.
Steli: Thank you.
Rob: Thanks again to Steli for coming on as always and enlightening us on sales topics. If you have a question for the show, please leave us a voicemail at 888-801-9690 or email us at firstname.lastname@example.org. Our theme music is an excerpt from We’re Outta Control by MoOt. It’s used under Creative Commons. If you come to startupsfortherestofus.com, you can see the fancy new website, you can subscribe to our email list and see the full transcript of each episode, typically within a week or two of it airing. Thank you for listening and I’ll talk to you next time.
In this half episode of Startups For The Rest Of Us, Rob announces the inaugural state of independent SaaS survey. A survey that looks at SaaS benchmarks for non-venture backed companies and how you can participate.
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In this episode of Startups For The Rest Of Us, Rob does a Founder Hotseat with David Heller of Reimbi, about dealing with his specific issues with enterprise sales.
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Rob: Welcome to this week’s episode of Startups for the Rest of Us. I’m your host Rob Walling. This week’s show is a founder hot seat with David Heller where we talk through Troubleshooting Enterprise Sales. This is Startups for the Rest of Us episode 463.
Welcome to Startups for the Rest of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at building, launching, and growing startups. Whether you’ve built your fifth startup or you’re thinking about your first. I’m Rob. Today, with David Heller, we’re going to share our experiences to help you avoid the mistakes we’ve made. Each week on this show, we cover topics relating to building and growing startups in an ambitious fashion, but in a way where we’re not willing to sacrifice our life or our health to grow a company.
We like to be meticulous, disciplined and have repeatable processes, have things that we could do again if we needed to, maybe we’ll run the same company for 30 years, but maybe we’ll wind up moving on, putting a CEO in place, maybe we’ll sell our company. We want to know that we can do this again with a relatively high level of success and that’s unusual in this world of startups. Because so many of the startups that we see are this one-off unicorn—1 in 100,000, 1 in 10,000 startups—and that’s not what we’re looking for here on this show. Today, I’m excited to speak with a TinySeed founder named David Heller. He is the co-founder of Reimbi, and we’re going to dig into his trials and tribulations in a hot seat format.
We have many formats on the show. Oftentimes, we bring folks on for in-depth interviews, we answer a lot of listener questions, we do some tactics, some teaching, sometimes I just wax philosophical. But founder hot seat is where we bring a founder in and focus on something that he/she is struggling with at that moment and try to think through it as two intelligent founders. Almost like we’re standing in front of a whiteboard, batting ideas back and forth. A lot of times it’s, “Here’s the problem. Here’s a potential solution. Have you tried that? Yes or no? What do you think? What’s your gut feel? Would you feel comfortable trying that?” That’s what I enjoy about these hot seat formats.
Over and over, we’ve gotten only positive feedback about the hot seat formats because they go beyond just teaching. I’ve had this concept I’ve been thinking about for a while, and that a lot of podcasts will teach, they’ll teach information, teach from a topic. But I feel I’ve enjoyed transforming this podcast into more of a mass mentorship. I believe more in mentorship than teaching. I think you get a lot more from being mentored and frankly, from being a mentor than just someone who is reading off instructions or giving blanket advice that you read in a book, or maybe you have experienced it, but that isn’t applicable to any one individual, that’s where mass mentorship has context. It has more context about a founder’s situation.
In the case of listener questions, we have context around when a listener writes in or calls in, they give us a background, and ask a very specific question. It’s not about just some random topic, “Here are 10 ways to do a landing page.” And they ask a question, “What’s an 11th way to do a landing page? How do you do that one right and this one wrong? What does it look like to do that right versus wrong?” They’re actually asking specifically, “Hey, here is my landing page. What have I done right? Here is my pricing. Here’s a conundrum.” Context is that next step towards being more of a mentorship relationship. Obviously, it’s not one-on-one, and that’s why I’m saying it’s a mass-mentorship idea.
The founder hot seat takes it even a step further, where we have a lot of back and forth. I can present an idea, a thought, a solution, proposed solution, and David, in this case, can respond and say, “We’ve already tried that. I’m not willing to try that. Here’s why I think it won’t work. Hey, I think that’s a great idea.” The beauty of it is, it’s not just to help David; it’s to help the tens of thousands of people who listen to this podcast. Both to hear the thought process of two intelligent, successful founders who are thinking through a hard problem, they might be struggling with something similar or something related, and they can take away some ideas from it.
In addition, on the show today, we walk through some issues that I think some listeners out there, you might be listening to this and think, “I’ve solved that already.” Or, “Here’s something I tried, and it worked.” I would love to hear it from you questions@startupsfortherestofus if that’s the case.
Before we dive into the hot seat, I actually had a listener ask me a question. I felt like it was worth addressing on the podcast. He said, “Hey, Mike, well, he took a hiatus and that made sense and now he’s coming on the show only once a month. What actually is going on there?” The answer to that is, Mike has really wanted to focus on Bluetick. As you’ve heard, he is off social media, he is heads down, he’s doing stuff with his friends, with his family, and he is focused on growing Bluetick, and that is his number one goal.
Frankly, I wholeheartedly support him in that. I have been in that heads down mode as well when I’m trying to get something off the ground. It’s not just the hours. It’s just the mental ability to focus on something and only think about that; that’s your one thing, the one metric, the one number you’re trying to drive. With that focus does come not wanting to show up every week, and record a podcast episode on something, and have to come up with an outline, and just do all of that.
Again, it’s not that it’s that much time, but it’s a lack of focus. Mike and I have been talking for a while about how to mix up the podcast because you get 450 episodes into something, we’re almost 10 years into this podcast, and it’s easy to get in a rut, and it’s easy to have a format that doesn’t change, and that can start to feel a little dated frankly. I took the opportunity—while Mike was off for a couple of months on his quick hiatus—to obviously revamp, and to do more hot seats, and do more interviews, and to do more thought pieces, and think about how, if I were starting a podcast today, how would I do it and how can I be different than all the other shows that are out there?
That’s what I’ve been trying to do during this time. For now, Mike is going to be coming on the show periodically. I think following his journey is valuable for me. I enjoy when he and I get on the mike; it’s like putting on a nice pair of slippers. Mike and I have recorded literally hundreds and hundreds of episodes. His are the episodes I prepare for the least, feel the most comfortable, and I think turn out well. All the other ones are outside of my comfort zone, so it’s stretching me, which is a good thing. That’s when I know that I’m learning.
That gives you an idea, hopefully, of what’s really going on behind-the-scenes in the podcast. We honestly don’t know what the future will hold—6 months, 12 months, what does it look like? We’re just taking it month-by-month at this point. Obviously, I think all of us wish Mike the best as he’s doubling down on Bluetick and he’ll be back on again a couple of episodes from now. With that, let’s dive into the hot seat.
I want to give you a little background about David Heller. David and his co-founder Paul Trojanowski founded Reimbi several years ago—and it is at reimbi.com—and it addresses the difficult and lengthy process of reimbursing job candidates for interview expenses. It’s kind of an HR vertical and have really good traction actually. Reimbi is a Tiny Seed company, they’re part of our first batch, one of the 10 companies in that first batch. They launched back in 2017. Paul is the technical co-founder and David—who I’m speaking with today—was a B2B product manager, worked in large organizations, he had eight years in the US army, and he brings a ton of experience. Reimbi has clients, including waste management Bridgewater, Kimberly Clark, and Peloton.
They have traction for a relatively early-stage startup in the space. I and the rest of the Tiny Seed team are impressed with how they’ve been executing on this opportunity. Today, we’re going to dig into just a couple issues that David is feeling with their enterprise sales process. He’s got it dialed in pretty well, and they’re landing big clients. We’ve moved from boulders to rocks to pebbles at this point, but it’s pretty fascinating to hear the things that are still troubling him with their process, and we troubleshoot and try to figure out how to fix those. I hope you enjoy this conversation with David Heller.
David, thank you so much for joining me on the show today.
David: Yeah, it’s good to be here, Rob. Thanks for having me.
Rob: You’re a listener as well.
David: I have been a listener for quite a while.
Rob: That’s cool. It’s a pleasure to have you. I think today’s episode, in digging into some of the challenges you’ve been facing and are currently facing, I think will be helpful to think through and helpful for the listeners. We don’t do that many hot seat episodes, they’re often hard to set up, and it’s hard to find a really good problem to dig into, but I think we have a pretty good one today. Do you want to kind of kick us off and explain the high level of what we’ll be thinking through? I know there are some individual points underneath that umbrella.
David: Sure. With Reimbi, we’re generally selling into larger enterprises. Fortune 1000 and up is our target customer. We aren’t selling where they just sign up with a credit card; we’re going through the contract process, there is usually a PO involved. We sometimes go through security reviews. We’re doing many of the steps that, if it was SAP or Concur or some workday, they would have to go through to sell into these companies, we’re having to do that but as a small startup. That’s the problem that I’ve been thinking through for the last couple of years, and working through, and iterating on to try to make better. That’s what I hope you and I can chat through.
Rob: Yeah. I’ve traditionally called these high touch sales. It’s not face-to-face, but it’s one step away from that. I’ve used this term in the past, I say, low touch sales is pretty much low touch or no touch is typically someone comes, self-sign up. I guess that’s technically no touch. Low touches, well, maybe some people need help to get on. Then I’ve always thought of medium as like what we did with Drip where anybody over a certain dollar amount, let’s say they’re over the $49 or over the $99 plan, it’s like, “Let’s funnel them into a sales or customer success call. Let’s get them on-boarded.” Because the lifetime value is there to be able to do it, but you really have been from the start dealing with Fortune 1000s and that, of course, is going to be high touch. They’re going to demand that, and they deserve it because of the dollar amounts that they pay.
As part of Tiny Seed, I know what your financials look like. Your LTV absolutely justifies the time that you spend doing this. It’s a good problem to have in a sense, it is a problem especially when you’re a small team to be doing high touch for every customer; it’s a good problem in that every customer you land, your MRR goes up by a lot more than most SaaS apps that are selling $20 or $30 a month. To give people an idea of that, on your website, you publish your pricing. What does your pricing plans range from on monthly plans?
David: Posted on the site, we have three prepackaged plans. The lowest one is $75, but we don’t have but a handful of customers on that, and then it goes up to $500 a month, and then we have what’s listed as an enterprise plan with a custom quote, and over half of our customers are on that enterprise custom quote.
Rob: Very good. Let’s dig in. I think this topic will be particularly interesting to those listeners who are also starting in this space. We’ve definitely had some emails about this over the past many years we’ve been doing the show. While I think the dream early on when you start a SaaS, for many of us, especially the developer types are that you build a no touch SaaS solution. But realistically, (a) that’s getting harder and (b) it takes a long time, your churn is high, you tend to peak out it whatever 10,000, 20,000, 30,000 MRR, you can’t get over that, so it depends on what you want to build. But having medium touch and high touch sales I think is relevant to almost any business specially ones where you can get customers at least 100 to 200 bucks a month and up.
Let’s talk about what kind of issues you’re facing and let’s bat them around.
David: Yeah, I think the first one is the long sales cycle. We’ll have customers that will reach out, and it’s usually somebody from recruiting that comes through us because they’re interested in improving candidate experience. They see Reimbi, we talk through it with them, and then they have to go off and talk to accounting or procurement because there are just multiple stakeholders that are involved in the candidate reimbursement process. There’s this circling of wagons inside of our customer—and we’ve got our champion and that’s great and we really foster that relationship.
But it seems like no matter what we do, the sales process is going to be long. Sometimes, we catch lightning in a bottle and it goes really quick, but generally, we’re talking up to six months. Sometimes it’s even longer than that where somebody will reach out to us and then they’ll just disappear, then all of a sudden—even after follow ups—unprompted show up a year later and say, “Hey, okay. We’re ready now.” The sales process and getting through that is probably our number one issue and selling the enterprise is just how long it takes to get from that first contact to a signed order form or contract.
Rob: Yeah. Is there a particular place where this gets held up? Is it often one demo and the stakeholder say, “Thumbs up,” and then it takes months? Or is it repeated demos to multiple groups to on and on and on? Where does the hang up typically happen or is it varied?
David: It’s usually in legal. Sometimes in procurement, so we’ll do the demo and over the last couple years we’ve gotten much better at getting the right people on the call for that first demo, so we don’t have to do a second or third one. Not that we’re perfect on that. We’ve done that and we’ve mostly solved that problem. Once everyone’s like, “Yep, this is what we need. This solves our problem,” and then send over the order form, and then it just sits in legal or whatever that is. This black box that no one can seem to crack of getting it through legal or through procurement. That’s usually the sticking point.
Rob: Right. It’s when there’s essentially a third party involved. I know they’re within the same company, but at companies this large, even if it’s on the same campus it’s like, “Yeah, they’re like a mile walk away because they’re in an entirely different thing, and I don’t know this person so I can’t rush it through legal, and it’s just in some queue somewhere.” That’s interesting. I mean the way I think about it is, is there any motivation for them to process it faster, and it doesn’t sound like there is. I think of like having an external motivator to make someone act. If you think about online marketing as an example, you don’t just say, “Send it from my newsletter.” You say, “Send it from my email list and you get this ebook.” There’s like an opt-in reward.
Oftentimes, to put time pressure on people, info marketers are taking it too far, but they’ll say, “Hey, this price is only available for the next 12 hours or on this webinar,” or whatever. I’m curious how this might pan out, I have heard of there being like, “Hey, this is our pricing if we can get this signed in the next 60 days or the next 30 days.” You don’t have to say in the next five days. You can say, “This price is only good for this long and then it goes up.” Whether the reason is our prices are going up or, “Hey, it’s the end of the quarter and we’re trying to make goals, trying to make a quota,” or whatever their justification is for it.
You could frame it as either a savings of like, “Hey, if you get this done, the real price is $500 but we’ll give it to you for $400. We’ll give you a discount.” Then you just raise your prices just to make that make sense for you or you tell them, “Hey, this has to go up at this point.” The reason that I’m internally able to justify that myself is, the longer it takes, the more headache it is for you, the more follow up; the more money is costing you.
I’m curious (a) have you ever heard of anyone doing that and (b) obviously, it could backfire, but do you feel it could potentially be a motivator for someone to say, “Let’s get this done. Let’s get this on the fast track,” because there has to be a way to fast track these and that’s what we’re trying to figure out as an external party, how can we help your stakeholder figure some type of carrot or stick to it to get it fast tracked?
David: Yeah. We’ve tried—and probably in the last three months—we’ll add a discount on the order form. “If this is signed by this date…” and it’s like you said, it’s not by tomorrow because that’s just not reasonable, “…but in the next 30 days or 15 days, then basically, what we’re doing is giving you this line item on the order form for free.” It’s almost like an upgrade in their minds and then they get that discounted out or lined out and get it for free for the first year if they can sign by this date. It’s hard to tell because no one will come back to you and say, “Yeah, we signed this quickly because you put that discount in.”
They’re not going to give you that feedback that your carrot worked—at least no one has so far. Then if it doesn’t work, no one ‘s come back and had a negative reaction to that, no one said, “That’s unreasonable. I don’t know why you’re doing that.” There hasn’t been any downside to doing it. I think about it from a motivation standpoint because I spent time working in procurement. Procurement people are measured by cost savings. If they can they can say, “Hey, we signed this contract and we were able to save $2,000 because we signed the contract faster,” then that’s motivation for that procurement person.
That was kind of my thought process of putting it in there, but that doesn’t work with legal. I haven’t figured out what that motivation is for legal yet. We have tried that line item and I can’t tell yet whether it’s working. We’ve had contracts that were signed before the date and they were kicked in. We’ve also had it where they were not signed. They ultimately were signed, but after the discount and I removed the discount and no one said, “Can you please still give that to us?” There hasn’t been any downside to doing it yet, so we’re going to keep doing that. Yeah, that’s kind of my experience with that so far.
Rob: Yeah. I like that. I’m glad you got there all on your own. I think it makes sense. I can’t think of a reason that legal would move faster either. I mean that is traditionally a thing. We pay our lawyers directly and they take way too long, you know what I mean? It’s one thing. I’m trying to wrap my brain of like, “Well, could you minimize back and forth by having your contracts extremely Fortune 1000 ready?” But you probably already do. Each lawyer is going to read it differently, each company’s going to have different standards. There’s always going to be some back and forth. I’m not sure if I have any insights there other than what you’re doing, which is I know you’re following up every week or whatever and just saying, “Hey, is it there? Hey, is it there?” I think that’s what I’d be doing too.
The biggest thing that I think about with long sales cycles is how can I get double the leads in the pipeline such that if it takes six months to close, if I only have one of the pipeline then I wait six months, but if I have six in the pipeline then I’m actually closing one every month. That’s the other way I like to flip it on its head, “Is there any way possible to get just purely just more leads to that point?”
David: Right. How about on the follow up emails? Because I don’t have the legal contact I don’t have the name of the attorney or the paralegal or whoever that’s sitting there holding the contract. In the follow up emails to my champion or to whomever that I do have contact with. Maybe even thinking about it like from a Drip marketing standpoint is like motivating those people to follow up or to arm them with how to make progress. I think I’m not doing a good job on that. I do follow up frequently, but it’s like, “Hey, any update? What’s new?” I don’t feel like that’s very successful.
Rob: Two things just came to me. One is, have you ever talked to anyone who you weren’t selling to, who worked at a Fortune 1000 company in either of these roles, either of the legal role or the kind of the champion role? Just to ask, whether it’s like your neighbor you know down the street or whether it’s someone you’ve been at MicroConf who you say, “How does this work? What should we be doing here? There has to be some inside secrets to this.” It’s like knowing the secret menu at In-N-Out or a secret handshake or something.
David: Yeah, I know we did it once. We have a customer, just incredibly long process that we’ve gone through with them, and then in the end there’s the procurement person that was actually on some of the calls, which is also helpful if you can get the procurement person on the call. He had to let me know that he was leaving the company and was handing off, so I kind of took that as an opportunity. Okay, I’m going to go talk to him now that he’s not tied to the company and like, “What could we have done better here to make this move faster?” He was just like, “That’s just the beast” and I don’t think they’re that much different than most companies. It just takes a long time and it is frustrating. The logical thing then is to try to raise prices to account for the lengthy sales cycle, but then you start running into this value equation problem. “How much value am I actually providing? Can I just price more because enterprises make it so difficult?”
Rob: That’s one of the reasons that enterprise apps are so expensive. When you look at $2000, $3000, $4000 a month, and you’re like, “Oh my God, our annual contract is probably $30,000, $40,000, $50,000. How can they justify that?” This is how they justify it—it’s that it just takes so many person hours to close a deal. This is a good one. If you’re listening to this and you are on the inside of a Fortune 1000 and you thought, “Wow, here’s something that David could be doing that you could help speed this up,” specifically with the legal side. Because it sounds like you’ve made some headway with the procurement with the kind of monetary incentive, feel free to write in questions at startupsfortherestofus.com or you can post a comment on this episode which is episode 463.
Back to your question about the emails. You’re saying you’re almost trying to arm them or allow them to do it. I think the two things I would think of—you have to try this to see how it works—but one is make the email summarize everything, so it’s easily just forwardable, so they can just hit F and say, “Hey, legal! What’s up? See below.” You’ve basically summarized the whole thing for them of, “Hey, just reminding you. I know this is in legal. I know it went in on this date. You could even say, “Typically, the turnaround is 14 days, but I haven’t heard from you,” and blah blah blah. They could kind of forward it over there. That arms them with something that they don’t have to create a big case. You create their case for them in the writing.
I think the other thing is as you said, getting them on the phone with procurement is helpful. If you’re not already suggesting that in your later stage, maybe you don’t do that in the first one when you check in, but if you’re on the second, third, or fourth is that part of your ask where you’re like, “Hey, just wanted to check in. Should we all just hop on the phone? I can totally do that.” At a certain point, you don’t want to be too forward, you don’t want to be the salesperson, so who’s stomping on feet, but at a certain point, that maybe worth doing.
David: Yeah, I’m always looking for that magic word or something. The phrase that’s going to unlock things but I haven’t found it yet but that’s good advice.
Rob: What else? I feel we’ve covered that pretty well. You had mentioned like these long forms or checklists or something that you have to fill out?
David: Yeah. It’s not uncommon for us to have to go through some sort of security review or fill out a form that talks about our security that we have with Reimbi. I would say, there’s an 80% overlap from company to company on the questions that they want us to answer. I think one thing we’ve done is we’re building up this library of, “Here’s a regular question and here’s our answer,” to try to make it so it’s that much easier to fill these out and just cut and paste and put that in there. But something that happened recently is one of the questions on the forms usually is, “How many people do you have?” Or, “Do you have like a chief security officer?” We’re really small.
I was on a call with the security person, actually, they’re already a customer, but they’re expanding internationally to use Reimbi outside of the US and that caused some additional scrutiny and reviews. I was on a call with their security person and he asked me, “How many people do you have?” The answer to that is three, but that doesn’t sound, at least to me, I definitely hesitated when I was answering that question. I want to be transparent. I’m not going to say something that’s incorrect, but I mean that’s just a topic for me. It’s always a concern going through those is, “Are we sophisticated enough in answering the security form? What our procedures are and all of this stuff when literally there’s three of us and we’re just grinding every day and just trying to get it done?” That’s been a challenge that we’re continuously trying to get better at.
Rob: Yeah. I can imagine that. With the checklists and forms, that’s also the cost of doing business as I see it and just getting more efficient with having a wiki, or notion, or whatever you’re using to collect that I think is good.
Delegate, that’s the other thin. Right now, I’m sure you’re doing most of it. I could see frankly, a $20 an hour VA able to fill that out. If 80% of it really is similar, and you train someone, and then you show them the repo of questions, you send it off, you pay $15 for three quarters of an hour or a full hour for someone to get 80% of the way there, they send it back and then it’s only 15 minutes of your time. That’s a really good human automation task because it’s something you can’t automate with code and you’re not going to fill them out. I mean, it’s a requirement of it. That probably would be the next step that I would consider taking.
David: I definitely can be delegating some of this. Another thing I’ve been considering—and I’d like to get your thoughts on—is contracting just like on a one-time fixed fee deliverable basis is like a CISO person. Someone that has the certifications, has been through this probably to work in an enterprise as a security person, and have them go through our answers and look at it from the reviewer’s perspective on what’s being looked at. Then also on those areas that we’re completely lacking on or insufficient on, what’s the right answer. What’s the right way to answer this question so that we can get through the security review?
Rob: I think that’s a great idea. I think the cool part about looking for the right answer is what’s the right answer such that we can make that be the truth? If the right answer is something we’re not doing today, how about we start doing that such that the right answer is actually what we’re doing. I love that idea. To be honest, I know a guy who was a chief security officer at about 175-person startup. If you need to connect who may be able to do that. I know a few who probably wouldn’t charge very much to walk through for a few hours and give you their opinions. I love that idea. I think that’s great. That’s the beauty of having the repository of your answers is that then those can be a living breathing document and you can really refine this over time.
Back to your other piece, I was fascinated by what to say when they ask how many employees you have. I mean that that is an issue with a lot of companies, especially a lot of startups folks who would listen to this podcast. I think you’re right. It’s not okay to lie because it’s not okay and whether you get caught or whether you don’t, you don’t want to be running a business like that. The way I think about it is this, your number is your number. I know that that you’re a three full time employees. Typically, I would think, if I had two or three part timers who are significantly—even if they were doing design work or support role or something—I would include them in there.
I would say, “Hey, there’s six people working on the product or whatever,” that gives it a little bit of a bump. But we talked before the call and that’s really not the case in your instance. I think that yeah, I think you’re loud and proud with the number three, but I think the way I would think about […] it is in my head, “Is three important? What’s the most important thing? What are they trying to get out with that question?” They’re trying to figure out, “Have you been around awhile? Are you going to stay around? Are you doing best practices? Are you any good?” It’s that kind of stuff.
The underlying questions they’re asking in that question, without trying to couch it too much, it would be like, “Well, we’re three employees but we’ve been in business now for 3 ½ years. We have 45 clients,” or whatever the number is including waste management. I forget who are your clients. You have some really big names that are already trusting you so that that’s credibility. You can point out that, ‘We’re a focus team, we don’t need a large team. We’re actually a profitable company and we have funding.” There are ways to build—credibility is the wrong word—but it’s build some concrete things for them to hang on to.
This is not the sales prospect; you’ve already sold the deal. It’s like a chief security officer, it’s someone who’s trying to assess it out. They don’t know all of that. They probably haven’t looked at any of your marketing material. They probably don’t know how long you’ve been in business or that Kimberly Clark or whoever are your customers. I think casually pointing those things out, giving them the exact right number, but then couching it with, “Hey, these are these are our other credibility building factors.”
David: Yeah, and that’s good. I didn’t do that and that would have been a good way of supplementing the answer instead of just saying three and then just pausing. It was an awkward pause.
Rob: He caught you off guard too. When you get caught off guard that often happens. You don’t think about the right answer until the next time which is cool because next time you will get asked this again, and you’ll be able to be prepared.
David: Yeah, like you said, its credibility. He’s just assessing risk. He’s just trying to make sure like how much risk are they taking on by handing off this process to Reimbi and is it going to come back to haunt them.
Rob: Right, and that’s the other thing you could land and I mean I know they already have it all laid out, your data architecture and your encryption and all that. I know your co-founder is the technical arm of the company. If he has any relevant experience where it’s like, “Well, my co-founder worked in the banking industry for 10 years as a developer.” Anything like that to imply, “We know what we’re doing,” basically I think is helpful or even yourself frankly. I know you worked in the industry before that and you worked for larger companies. “Yeah, I worked in the Fortune 500 for 15 years before this with my co-founder and we’re a focused team,” and blah blah.
Any time I get caught off guard with a question like that, I’m the same way. I tend to freeze. I’ll say something and then an hour later I’m like, “I did not like that answer.” Everyone can do that. The next step though, the way you get better is you say, “What should I have said? What’s the best answer to that?” Because now, every time it gets asked, you’ll have that answer right at your fingertips. It’ll come off smooth and I bet they’ll be impressed because I’m imagining that not everyone does well on that question.
David: Yeah, and then getting that documented as well. I’m not going to be on that call every time forever. Whether it’s Abbey or Paul, or whoever is going to be on that call that we are all like, “This is the answer to this question.” Every time there will be a new one, and we’ll add it to the library but I think having that, just like building up the team’s knowledge would be really helpful.
Rob: Yeah, I agree. There are several people in the TinySeed batch who are really into finding the right answer and then making sure it’s documented. That is a weakness of mine; it’s not a strength. In terms of process and documentation, I tend to flyby the seat of my pants. I get inspired and then I go do something and I like what happens and I get instant feedback, but I don’t go back and kind of systematize it. That I think is a real strong suit of yours especially when dealing with these big companies because you are going to do the same slog work as we’ve talked about here over and over: long sales cycles, large checklist, odd questions about company size on a call. The more you can do to document that I think the better off you’ll be.
Rob: Well, thanks so much for coming on the show today, David. I appreciate your time and glad we’re able to chat through this stuff. I think it was helpful for listeners as well. If folks want to keep up with you, aside from going to reimbi.com to check out what you’re up to, what’s the best place for them to keep in touch?
David: Because we do enterprise-y stuff, I’m on LinkedIn a lot. You can find David Heller and Reimbi so that’s one spot to connect with me, and then on Twitter we’re reimbi_app, and I’m @DavidHeller.
Rob: Sounds great. Thanks again.
David: Thanks, Rob.
Rob: If you have any questions for David or you feel like you have a thought or idea on how he could get around some of the issues that he’s facing, please do. Send us an email at questionsatstartupsfortherestofus.com or you can leave us a voicemail at 888-801-9690. Next episode, I’ll be talking with Steli Efti of clothes.com. We will, of course, be digging into sales topics.
Our theme music is an excerpt from We’re Outta Control by MoOt used under Creative Commons. Subscribe to us on iTunes by searching for Startups and visit startupsfortherestofus.com for a full transcript of each episode with a new Startups for the Rest of Us website. I have resurrected the email list. If you’re not on our email list, you really should be. Head over to startupsfortherestofus.com, enter your email, we don’t email that often, but when we do, it’s good stuff.