In episode 536 of Startups For the Rest of Us, Rob does another solo adventure. As we all faced perhaps one of the worst years on record, Rob talks through some things that 2020 taught him personally, professionally, and at a higher level, philosophically. He also looks beyond 2020 and discusses opportunities for 2021 for software entrepreneurs.
The topics we cover
[01:53] Keeping perspective during difficult startup times
[04:03] We can make it through scary and dangerous moments
[07:04] There is always opportunity
[09:53] Doing things in public creates opportunity
[12:02] Growing niches/industries in 2021
[18:31] In search of problems
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As I was driving across the country, I just drove from Minneapolis all the way to the central coast of California with a car filled with instruments and bikes attached on the back and several pieces of luggage and an aerial rig, if you know what that is, and a dog. It was just me and the dog and all that stuff. I had a lot of time to think. It was four 8-hour days of driving.
Along the way, I was reflecting back. It was almost a mini-retreat for me. I was reflecting back on the year and thinking what are some lessons that I can take away both personally, professionally, and even higher level, just philosophically from what we all experienced in what I think will be, perhaps, one of the worst years on record for a lot of us for quite some time. That’s what I’m going to talk through today.
In true entrepreneurial form, these lessons are positive. I’m not going to belabor the terrible things that happened and then at the end, I have a little section that I’ve just titled Opportunities in 2021. I’m thinking about software entrepreneurs starting new SaaS apps and just trends that I think are going to continue to play out that will need more and better software over the next year or two or three as things panned out.
I have four things to cover today in addition to that Opportunities in 2021. The first thing I learned in 2020 is perspective that startup problems are one thing. That losing an employee, stagnating MRR, high churn, customer flaming you on Twitter really brings you down. It gives you anxiety. It can cause you lack of sleep chew through your mental cycles, but I learned that perspective in all of those things compared to massive wildfires in Australia and California, murder hornets, a global pandemic, massive racial injustice, and even storming the capitol which technically was 2021, put things into perspective for me.
In all honesty, I’ve had a personal reset now with my internal anxieties and concerns about my company, or other companies, or work, life, and professional progress, and just all these things that I think over time creep up on me personally. They start to make me question, and worry, and have concerns about, are we moving fast enough and what happens here, just all the things in your business that you think about. I’ve learned to hold those things just a little bit distant from me in the way that I’m concerned, I’m going to focus on them but I’m not going to let them be on my mind causing me stress 24 hours a day because compared to these other things that were happening in our world, they’re just not that important.
For me, 2020 was a reset of perspective and showed me that having a job where I could work from home and continue to provide for my family and none of us getting sick and on and on. The inconvenience was a rounding error compared to what so many people around our country and around our world have been dealing with. I’m thankful for that reset of perspective that I received over the past year.
The second thing I learned in 2020 is that we can make it through really scary and dangerous things and even when things felt almost hopeless and each of our individual experiences of the year was different. I have memories of gunshots and helicopters flying over our house because we live in Minneapolis, and there were protests, and fires, and all types of stuff that was happening around the time that George Floyd was killed.
Frankly, there’s trauma around that for me and my family. There’s trauma around having to worry about my parents whether they’re going to get COVID or whether we’re going to get COVID. Our friends, who got COVID, are they going to be okay. Our kids are feeling stressed about us. On and on, each of our experiences, I’m sure we have some share, but a lot of us have these individual memories or experiences. I’ll admit that even in those dark times, I remember thinking we’re going to make it through this. This is scary but we will press forward.
I’ve actually reflected back on something I said on this podcast back in either late March or early April of 2020. It was Episode 490 and I’m going to play that clip here right now. I was on the episode with Einar Vollsett and we were talking about things you should be thinking as a founder and as a business owner in this global pandemic as the early days of it unfold. I remember when I said this, I wondered if people would believe me if you as a listener would hear me and believe that I believed it because I did. There was a sense of calm and that was that sense of, we can make it through scary, hard, dangerous things. Let’s cut to that tape here.
Last point, point seven is just reminding you that we are going to make it through this. It feels terrible right now and it is terrible. The health crisis is not something that any of us could even imagine, but things will get better. We will figure this out. While it’s serious and tragic, we need to keep a level head. We need to kind of keep pushing things forward to take care of ourselves, our families, our communities. Again, it comes back to staying mentally healthy and not stressing so much about it, not thinking about it all the time. With little new information or no real new information, it doesn’t help to just think about something all the time. Worrying doesn’t solve anything. That’s something that Sherry and other psychologists have kind of drilled into me over the years. Worry with no new information, there’s no value to it.
While my advice to not worry without new information was easier said than done, I do hope that there was some value in me essentially trying to reassure us that we can make it through these hard things. In fact, we are and we continue to do so.
The third thing I learned in 2020 is that there is always opportunity. This is something I didn’t realize back in, let’s say, the 2001 dot-com bust and the recession that followed. I remember because I worked in tech. I was a web developer at the time and doing consulting and then also working for some startups. I felt like the world was ending. Unemployment shot through the roof, at least in the tech community and it was chaos. I was too early in the workforce to realize that A, this is cyclical, B, usually the best people are employed through the whole cycle, through the ups and the downs, and C, that there is always opportunity. In fact, there can be even added opportunity in big economic bust times. How many great companies came out of 2001 that were almost bootstrapped or just had tiny amounts of funding and then once the economic cycle comes back, these things take off like a rocket.
Similarly, in 2008, how many companies came out of that? In 2020, as the recession hit, what did we see just accelerating? We saw anything dealing with remote work. We saw anything dealing with podcasting, video conferencing. There’s a whole list of online event platforms. There’s a whole list of things that I’m sure you noticed increasing in demand and increasing in MRR. I certainly saw it across both the TinySeed companies and my own portfolio of angel companies. A couple of companies get hit real hard and a handful of companies, just up into the right, doubling month over month, a few months of just crazy growth.
In addition, we started raising TinySeed Fund 2. We were going to start raising it in March of 2020 and we had all the assets and everything ready to start pitching it and this happened. Everything just locked up. We ended up waiting one month or maybe two to start it. But things calmed down and in that ensuing, what has been not quite a year, I guess it’s eight or nine months, we have raised a substantial Fund 2 and are in the process of closing that now.
I’ve watched a handful of startups or even early-stage close angel rounds and start talking to venture capitalists about closing venture capital rounds. Funding was still flowing. There was an initial 1-2 months of uncertainty but after that, there was still opportunity. Even across, again, the TinySeed portfolio, as I look at the numbers, there was one month, six weeks of a pullback and then things kept moving forward. In addition to exits, we just heard from Josh from Baremetrics a couple of weeks ago, he’s still just a handful of months ago, amid arguably tumultuous times.
That ties into my fourth point that doing things in public creates opportunity. You couldn’t look at the pandemic happening and everyone starting to shelter in place and then suddenly build and launch Zoom, or build and launch Tuple, build and launch Squadcast or Castos. You had to be in the game doing something in order to hit it right at the right time and have a product out there that people could just adopt.
Is there luck involved in that? Of course, there was. These founders and others had obviously delivered products that people loved and had growth. They weren’t going up into the right but with the exponential growth that came in a lot of these tools, there was some luck that they were at the right place at the right time. They happened to choose an idea that in this case had such an outlier event as Nicholas Taleb calls it, a black swan event, that is just completely unpredictable. For them, they were in the right place at the right time. This is where that hard work, luck, and skill comes into play.
Did all these founders put in hard work? Absolutely. Did they have some skill and experience to get that product out and to be growing it? Absolutely. Was there luck involved perhaps in the fact that some of these were essentially doubling month over month? There was. But that’s the game. If you aren’t doing things in public, and if you aren’t working hard, and you are putting your skill to work, you’ll never get lucky. If you’re not in the game, no amount of luck will get you to that point of dramatic success. There’s an old quote from Thomas Jefferson that I like to paraphrase, the harder I work, the luckier I get. While I don’t think hard work directly correlates to it, I think there’s a lot of things that are involved. As I’ve been saying, hard work, luck, and skill I think all play a role, in this case, doing things in public continues to create opportunities for founders.
Those are a few things I learned in 2020. Obviously, there are more than that but I wanted to share this with you today. Maybe some of them resonated and I’d be interested to hear if you learned something. You can tweet me @robwalling or post in the comments for this episode which is 536.
Now, I wanted to throw out a few areas that I think opportunities exist in 2021. Frankly, I mean if you look at the TinySeed companies we’ve funded in the first two batches or I look at any of the companies that I see having success in the MicroConf community, or online, or in Indie Hackers, they’re in all types of niches. When you see a list of niches that are growing or industries that are taking off, there is an opportunity there. But there is an opportunity in a lot of places. There’s an opportunity in construction CRM software, like Builder Prime in our 2020 batch of TinySeed and in data for bio-pharma mergers and acquisitions like DealForma which is a batch two company, in online scheduling software, like there are […] SavvyCal which is a batch one company.
Some of these are horizontal. Some are vertical. There’s room to grow in a lot of places but some areas that I see growing over the next 3-5 years are these. Number one, I think there are going to be more freelance and more gig workers than there ever have been. I think part of that is due to the economy. I think part of that is due to people wanting remote work. Part of that is due to people seeing that perhaps working retail or working in a restaurant has been really impacted by COVID.
If there is another thing like this, another pandemic, or another thing that causes work to shut down, people want backup plans. Freelancing sites like Upwork and freelancing management software and ways to pay your freelancers like TransferWise are all things that I’m sure to have gotten just massive booms from this. Thinking about what do freelancers need, marketing, and having freelancers have remained customer-based is tough because they’re price sensitive and they churn and they go out of business because then they get a job. Take it for what it’s worth, but if you can build a business for freelancers, this is a really big market.
That’s why I like what when Dan and Ian are doing with dynamitejobs.com. If you haven’t been to that site in a while, I would check it out because they’re starting that two sets of marketplace but they have the advantage of already having basically both sides of the marketplace filled with their Dynamite Circle online community. I think they’re doing things in public and it’s going to create some opportunity here. I think they’re on their way to finding that innovation. It’s not reinventing something from scratch. It’s not making something completely novel that came out of their head. Let’s take this concept of an Upwork or a Fiverr and put a spin on it that we think is lacking in the market. Much like we did with Drip, where there are other ESPs out there but they don’t do this, and let’s do that better—Derrick Reimer SavvyCal, Ruben Gamez with Docsketch.
There are other e-signature apps out there but how can I put my unique spin on it? How can I get some proprietary traffic channels, and all that? Freelancers are one, obviously remote work. You’ve heard a ton about that. What software do people need for managing and dealing with remote work? They’re going to be more creative, full time and part-time, I’ve been asked in the past two months four times by two relatives and then some old friends from the city I used to live in, I think I want to learn to code, or learn to be a designer, or learn some skill that allows me to work from home on my laptop.
That’s not a surprise because if you were formally working in an accounting office or a legal office or you were going to school to get a degree in something that you were doubting if you’re going to get a job, and then suddenly the pandemic hits, and you realize, I can’t just push paper. I need to be in an office to do my job, or I can’t work at the restaurant like my backup plan. Learning these skills, I think there’s going to be more and more people doing it. What do they need? What opportunities are going to be there? Podcasting’s a big thing. You probably already knew this. You’ve seen the acquisition and the frothiness but it is mind-boggling to me that there continue to be new podcasting apps that are launched that do different things from podcast hosting like Castos to podcast editing productized service like Castos Productions to Squadcast which is the recording a podcast to Alitu. I interviewed the founder, Colin Gray, on this podcast maybe six weeks ago and that is in essence a podcast education but the software is easy podcast editing effectively in your web browser.
What other opportunities are there? I, frankly, could use help marketing our podcast. There are productized services that are doing all types of stuff to help podcasters get recognized, or have better visuals, or have better show notes, or have better editing. They’re out there and I think there continues to be an expansion of new podcasts, but there’s an opportunity to start your own. I know that podcast listening hours have probably gone down now. I think that is going to make a big comeback once everybody’s commuting again. I know not everyone will commute. Some people will stay remote. I still listen to a lot of podcasts. I force it into my day. That’s not going away especially as these cars get the direct podcast integrations, virtual events, online video streaming, maybe online audio streaming events once people are commuting again.
Look at Clubhouse, and isn’t that really what that is? It’s an online audio streaming event. It’s fascinating to think about. I never would have thought that that is the format that people would want. But think about what you’re doing when you’re listening to podcasts. I don’t actually watch a lot of online videos because I can’t background it very easily.
I do listen to a lot of audio—a lot of audiobooks, a lot of podcasts. I think online video and online audio events, that sky’s the limit there, and of course, then mixing that with in-person events as they come back is going to be a big deal. There’s software, there are services, there are all kinds of stuff that needs to be done there. Those are a few, perhaps, obvious areas that I think will be expanding right now and for the next several years. I always struggled with those kinds of niches, or verticals, or spaces because then I would go in and I would often try to create a solution in search of a problem for that audience.
That’s not necessarily the way that I think you should go about it but looking in those spaces and then trying to find problems in them is where I would go. That’s a big thing. I’ve announced a couple of times on MicroConf on Air, I don’t know if I’ve said it on this podcast, but I am working on my next book and it is in essence—it’s not a sequel to Start Small, Stay Small—but it is like the next steps. Start Small, Stay Small focused on these tiny little niche businesses, often with little competition, often having one or two marketing channels. They are really like step one and step two businesses if you remember my stairs step approach. The true lifestyle businesses, true businesses that, hey, I want to make $10,000, $50,000 a month, just small businesses that will maybe never outgrow that niche.
This book I’m working on now is maybe that next step. If you look at my trajectory of building those small niche businesses and then levelling up to HitTail and then levelling up to a Drip which became a 7-figure app that we sold and obviously, where my life-changing money came from, that’s what this is about. It’s building that million-dollar, multi multi-million dollar SaaS app with our venture capital.
In the book right now, I’m in the section of looking for ideas and how to think about generating ideas for a startup and it doesn’t start with niches. It starts with several different approaches that I’ve seen and I’ve either done it or I’ve seen it in companies that again TinySeed, MicroConf, Startups for the Rest of Us, all these sources than one approach to finding your ideas, to find a problem and then try to build a software that solves that. I have five different ways to find problems.
If you start with what problems do freelancers, or remote work, or creatives, or podcasts, or online videos, what problems are in those spaces and then you can go through these five things of I’m going to scratch my own itch. That’s only if I am a freelancer or I am a remote worker and I have a problem. You can look for a problem at your day job. You can look for the problem of a spouse relative or colleague. You can have a poor customer experience yourself and want to fix that with code and with your app. You can find a problem online by looking at Facebook groups, core threads, private Slack groups, product support forums, and on and on.
Finding a problem is one way. It’s a great way to start. There are other ways. I’m going to run through a few of them here real quick because I have my book up so why not just talk through it a little bit. Translate an existing idea to a new niche. Think about how Ruben Gamez launched Bidsketch in 2009. There was a proposal software out there but he made a proposal software for designers. He niched it down, later he expanded and Bidsketch is still doing very well.
A company in TinySeed batch two called BuilderPrime did this with great success by building a CRM for the home improvement industry. CRM existed, but they really didn’t have it for home improvement contractors. Another way is to go into a large space with hated competitors. That’s what we did with Drip going against InfusionSoft. Xero did this against QuickBooks. Stripe did this against every payment gateway ever. I would say that’s probably more of a step three thing that I wouldn’t do as my first effort but it’s really a fascinating way to dive into it.
There are a few other ways. You can build on your audience or your reputation if you have one. Build on your network. Build a less expensive version of an expensive enterprise competitor. Enter a fast-growing ecosystem that’s like Josh Pigford did with Stripe Analytics, […] did this with WooThemes back in 2008. Of course, you can build on an existing product. This is what Craig Hewitt did with his seriously simple podcasting WordPress plugin. He then built Castos SaaS app on top of that. I realized that’s a lot of information coming at you once. That’s all from a chapter of my book. Once I figure out when that’s coming out, I’ll be sure to let you know.
If you want to be sure, by the way, to be notified or to hear about it, certainly listen to this podcast because I’ll talk about it as we get closer but robwalling.com—sign up for my email list and I will definitely be mentioning it there as we get closer to it. I knew that writing the book would be an absolutely not fun, painful process and it has been that plus some. In fact, with the holidays, and then January, and then TinySeed applications, state of independence SaaS report, I have not touched it in almost two months and I actually feel bad about that. But there’s definitely perhaps a gap in the market for that type of book that I’m writing. I do find that it is easy to get.
There’s a lot of topics to cover. It’s easy to have a lot of content because I’ve been blogging about it for 15 years, talking about it on the show for more than a decade at this point. There’s plenty of words to be written and I will try to keep it succinct as I always do try to make the best use of your time.
Speaking of succinct, I think I should wrap up this episode. I like to do these solo adventures every couple of months, two or three months, and this one’s probably overdue at this point. I actually have an entire other solo episode outlined that I may record here in the next month or so.
If you liked this episode, let me know. I’m @robwalling on Twitter. You can always hit me up directly firstname.lastname@example.org or post a comment on this episode. It’s great to have you here. Thanks again for joining me this week and I’ll be back in your earbuds again next Tuesday morning.