In episode 541, Rob Walling flies solo to discuss things like product myths and the misinterpreted Henry Ford quote, selling a company, defining life-changing money, and dual funnels.
The topics we cover
[02:48] Product myths and the misinterpreted Henry Ford quote
[07:21] Post-exit thoughts
[15:32] Life-changing money
[22:30] The power of dual-funnels
Links from the show
- Becoming Steve Jobs: The Evolution of a Reckless Upstart into a Visionary Leader
- Rob Walling – Mailing List
- Episode 510 | The Story of Startups.com
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If you have questions about starting or scaling a software business that you’d like for us to cover, please submit your question for an upcoming episode. We’d love to hear from you!
But first I wanted to let you know that MicroConf Remote is happening today. MicroConf Remote v2, which is a take on the 8-bit video game theme. If you have not checked out this platform, gather.town, that’s what we’re running this version of remote on. It’s pretty amazing and I think it’s going to be good. As this comes out, I’m doing a live keynote with one of the several amazing speakers. We’re going to be covering five topics specific to early-stage SaaS and gaining traction, so it’s for folks who are pre-$10,000 MMR.
We dig-in to Ruben Gomez’s AppSumo deal that he did, complete with numbers and advice, and how he thought about it, do’s and don’t, pros and cons, all that. We look at Derrick Reimer’s product […] launch that happened a few months ago. We look at some content marketing. We look at several topics that if you’re not in there you should head to mircoconfremote.com, you can still buy tickets. Whether you just watch the keynotes or just watch the videos, whether you participate in the hallway track in the gather.town environment, it’s really a unique event. Props again to producer, Xander, for putting it all together. Hope to see you there.
Finally, before I dive into today’s episode, Startups For the Rest of Us has 899 worldwide ratings, and I’m trying to get to 1000. It would be amazing if you could give us a five-star review in Apple Podcasts, Stitcher, Spotify, wherever creator podcasts are sold. Our most recent review, and it’s different in a rating. A rating if you just click five stars, I’m forever indebted to you. A review is when people write in text. These are the things that I read late at night when I’m close to crying myself to sleep. I use these to keep me happy, motivated, and focus on pushing this forward.
The subject line that this review is fundamental. “I’ve enjoyed listening to this podcast for a few years now without running a SaaS. It’ll still take a while, but I know that after we’ve launched, I think back to this podcast together with MicroConf as providing the fundamentals for getting started. I really appreciate the mix between tactics, strategy, and combined with humour.” Really? You’re the one that thinks this podcast is funny. “Combined with humor,” I appreciate that, “this is a go-to podcast for me.” The humor is included in the podcast. He specifically calls it out, this is great. Thank you John Erling from Sweden. Thank you so much John Erling. If you have not left us a rating or review, I really appreciate it.
Now, let me dive-in to the first topic that I want to cover today. I’m calling this product myths. I’ve always been annoyed with the quotes from the Steve Jobs’s and the Henry Fords, where it’s like, whether it’s focus groups, if I’d ask people what they wanted, they would have wanted a faster horse and instead I’ve built them a car. Here’s why I hated those quotes.
Number one, it’s unlikely you have the resources that Steve Jobs and Henry Ford did. But the time Steve Jobs was, I think he was 20, he was worth $1 million. By the time he was 21 he was worth $10 million. By the time he was 22 he was worth $100 million. A lot of that was on the back of this incredible once-in-a-generation invention that Steve Wozniak had designed. It was called the Apple I. That’s what made them have all these amazingness.
After that Steve Jobs then proceeded to launch failure after failure, from the Lisa to the original Macintosh, which eventually became successful but it was a trainwreck when it launched; to the Apple Newton, fail, fail, fail. He was running the company so poorly that he got kicked out. The board voted him out, and he went off. If you read the book, I think it’s called Becoming Steve Jobs, it’s a lot about the interim years and how he matured during that time. Then he did figure himself out when he went back to Apple in the late 90s. He was amazing not only as a business person but as a product person.
Before that, yes, he was a good marketer. Yes, he could talk. Yes, he could stare at people and convince them to do things that they maybe they shouldn’t do or they were scared to do. You would say it’s either persuasion, intimidation, or something. But he was not a great product person in the early days. It was Wozniak and, obviously, Jobs learned this and did become that overtime.
All that said, these luminaires are quoted and I feel like it’s this myth of should you listen to your customers or not. There’s an in-between because when Henry Ford says, that “people would have asked for a faster horse,” that’s like saying, I ask my customers what they wanted and they said that they want a button in my interface to download a CSV, and then make changes, and reupload it. Are you’re going to give them exactly what they want, or you’re going to put your product hat on—maybe your vision hat, your founder gut feel hat—and say, that’s a dumb idea, there’s a way easier way to do that. Why don’t I just build a lightweight kind of Excel manipulation widget within my app? This is just an example, I’m not saying that’s the better or worst way to do it.
If you’re a product person, you’ll never take customer suggestions and build what they want because you wind up with crap software. You wind up a million settings, you wind up terrible UX, you wind up with terrible UI because customers are not product people. They’re not experts for the most part in general. When Henry Ford says they were asking for a faster horse, I put on my visionary, my product hat, and I think what’s the job to be done? They want something that moves faster than a horse, what can do that? Well, trains can do that these days. Locomotives. When was this—1905, 1910. Locomotives can do that. Can we build a locomotive that runs at something that’s not on rails?
That’s the type of innovation that Ford put into place. To take his quote and to act, like don’t listen to customers at all, I think is a grave misuse of that as product people. Instead of taking exactly verbatim, literally what a customer said in building that in your app, there’s a balance there. It’s that product vision that you have. Where do I want my product to go? How do I want it to feel? How do I want it to be used? What do I want to build and not build in it? What do I want it to become and not become?
I tell you, in the early days of Drip, people wanted us to build affiliate management software into it because a competitor had it, they wanted us to build shopping carts into landing pages where all these things that other competitors had built, and we’re opinionated enough that we said our opinion is that we should integrate with the best of breed. So we had 35 tier 1 integrations.
By the time we’re 1½–2 years into Drip, and that was the approach we took. That was our opinionated stance on whether we’re going to make this thing an all-in-one, I’ll say monstrosity. Not that all all-in-ones are monstrosities, but that’s what it felt like, is that we would be a worst in class and we’d have five tools built into one, or we could be best in class marketing automation and integrate with the other best in class. That’s my stance on this whole Henry Ford quote.
I’d love to hear your thoughts, maybe I’ll tweet this out too to get a conversation going because it kills me every time someone says it. It rubs me the wrong way that it’s touted as it is. This big grandiose thing of, I’m such an innovator, look at me. Yes, you did invent it and you did innovate in the way that you solved customer problems, but then don’t go back and say, I didn’t do anything customers were asking for, because they were actually asking for a car. They just didn’t know it.
My next topic is post-exit thoughts. I seem to be talking with a lot of founders these days who are considering selling their company, are in the process of selling their company, have sold their company, and are thinking through what they would do next or what to do next, and what this all means.
I’m not honestly sure why this is happening, if it’s truly a wave or if it’s just my experience of it right now. I know that I’ve talked about it maybe six episodes ago. I said, hey, if you’re thinking about selling your company, just book a time on my calendar because I’m always happy to talk for 30 minutes.
This is a life-changing moment, for better or worse. It’s a pretty much undoable decision, and this is something I’m happy to talk to people. I probably talk to 4–5 people over the next few weeks, but even the prior year I get us an email or two per month of a founder who says, I’m in this boat, and I’m either thinking about it, or in the process, or I’ve done it. What’s next?
In addition, obviously, a lot of my angel investments have matured to the point where they are starting to have inbound acquisition, interest, and TinySeed companies, as well, definitely received kind of, you get accepted into accelerator, you get some funding from a venture capitalists, and you’re certainly get offer for more funding, and often start to have offers to be acquired. There’s been something on my mind.
I’ve always been up to the stance that, look, if you bootstrap or mostly bootstrap your company, you’re in control. If you want to run it forever, amazing, and if you want to throw off profits, amazing. A lot of people do that, a lot of people do it for a few years, and then eventually they decide, well, I want my next act, or they decide, if I sell it now, I can actually make 15 years of net profit. Instantly, that goes into my bank account, and what can I do with that? How does that change my life?
You do see founders. Back in the day, I thought Josh from Baremetrics would run Baremetrics forever, and I thought Adii Pienaar might run Conversio forever. There are certain people that you watch, and they do exit. They move on and do really interesting things after that.
I don’t take a stance that you should sell or shouldn’t. It’s not always or never, it really does come down to this situation you find yourself. Honestly, if you get an amazing offer it very well maybe once in a lifetime. That’s the point where I find some founders where they’re getting an offer for 10 or 15 times revenue, and that’s like, I’m not saying that it’ll never happen again, but you really to grow this company and keep growing it, and ride it over the top to ever see that dollar amount offered to you again.
With that said, Dan Norris and I talked a couple of episodes ago about selling. He and I actually have a difference of opinion on this, which I think is good. I don’t think either of us are incorrect on this. I just think there’s a lot of nuance into it. There were some thoughts around these two topics. The first is, what would I do if I sold my company? There’s that question.
Back in the day, I remember Basecamp, Jason Fried saying, why would I ever sell? I don’t know what I would do next. This is my life’s work. That’s great, that’s great for them, that’s their opinion. I would just say don’t necessarily take that opinion as yours unless you really thought about it.
The most interesting people I know—or I say a lot of the most people I know—have a lot of creativity in them. They have the next thing. Even if you call back to my conversation with Josh from Baremetrics a few weeks ago, he’s laser etching tweets on wood right now, and is that going to turn into his next company? Probably not. But is that something interesting for him to do for a while until he does figure out what that next thing is? Yeah.
In fact, I believe yesterday I saw a tweet from Josh already. I chatted with him a month ago, maybe. He said, I don’t have anything. I’m not going to do software. I’ve been doing software for 15 years. I’m looking to do something else. I saw a tweet from him yesterday, I’m building another software product. He’s building a personal finance or investing thing because he’s kind of running into issues managing, not managing his money, but he has a substantial amount of wealth now and becomes complicated to manage, and Google Docs doesn’t always work.
What I found is that fear of what would I do if I sold my company? I wouldn’t have anything to do. I might just sit around, play golf, and drink all day. I might just curl up and die. Just knowing you, knowing the founders that I know, in MicroConf, in MicroConf Connect, listeners of this podcast, people in TinySeed, the founders that I’ve run into with that conversation over the years? What would you do? You’ll probably do something really interesting, you probably will. I feel like I don’t really necessarily want to equate it to a fixed mindset vs growth mindset because I do think it’s pretty binary.
If you have read that book by Carol Dweck called Mindset, it’s about having the ability to see or learning the ability to see change, to become more comfortable with change, and to learn that I can change. Just because I can’t do math today doesn’t mean I can’t learn it. Just because I don’t have an idea today doesn’t mean I can’t come up with one. Just because I don’t have the ability to be a great public speaker or a great writer today doesn’t mean I can’t work and change that. I think there is, again, it’s not exact, but I do think it’s a little bit of that, it is fear, I guess what I see.
I grew up in a family where the lot of decisions were made based on fear. My dad had and has clinical OCD, not that joke OCD of I need everything to be on a table or I wash my hands. He had OCD so bad he didn’t leave his bedroom for 7 months when I was a senior in high school. He lost 80 lbs because he couldn’t eat, because of the compulsions. It was not a good show. It was severe, severe mental illness, and the doctors who saw him said you should be hospitalized, this is so bad. You can imagine how that shaped my upbringing.
There’s a lot of fear involved, and it’s like an anxiety disorder OCD, so there’s a lot of fear involved in OCD. That then became a mindset around everything. I was like, the unknown is scary and therefore you shouldn’t do it because there are negative repercussions, bad things can happen, blah-blah-blah. I guess that that’s how I feel a little bit about this. When I see fear as a mindset for any decision, I have to question if that’s a good way to think about it.
I’ll caveat that. Of course, there are some things that truly are scary. You can die climbing Mount Everest, or there are situations you can get yourself in where fear is good, they’re dangerous. Let’s take these career decisions and founder decisions as not those things that are going to endanger my life.
In thinking about what would I do if I sold my company, I almost think if you’re a creative, driven, motivated person who has built a company or multiple companies, or been launching things for a long time, of course, there’s a lot involved. There’s hard work, luck, and skill involved with building this company, and maybe you do want to run it forever. But run it forever because you want to, not because you’re scared of what you’ll do if you sell the company.
If you still have work to do, you still have work to do in your space, or in your app, or you’re not done yet, by all means to do that. It really does feel like, if you’re gonna just avoid potential change or potential uncertainty, I’m just not sure that’s the best way to live your life.
Again, there are many reasons not to sell a company. I think what would I do if I sold it is not a great reason. Now granted this comes from me who, every company I’ve sold, I’ve always had MicroConf going on. I have had this podcast going on. I knew that when I sold HitTail—I was working on Drip and I sold that, and before that I was writing a book, I built a membership site, I did all the stuff—then when we sold Drip, I knew there was MicroConf and this podcast, figured I write another book, which I’m working on now—robwalling.com, by the way, if you want to learn more about what I’m up to there—I knew that there would be something.
I started hacking PHP again. Right after I sold Drip, I started tying into stock trading APIs and crypto APIs. I never did anything with it, but I told around and it was fun. I hadn’t written code in years, and I found things to do with my time. Now, there’s TinySeed. What would it be like if I said, what would I do if I sold Drip? I’d still be running it, we wouldn’t have sold it.
My guess is Derrick being super ambitious and wanting to do new interesting things, he would have moved on and I wouldn’t begrudge him that. I feel like I made the right choice. I’m not saying because I made the right choice for this end of what happened and now I’m super happy with what I’ve built, means that everyone should. My thought holds that using the thought of what would I do if I sold my company has a reason not to do it, in my mind is a mistake.
Let’s cover another topic relating to selling. It’s really less about selling, I guess. It’s more about this term life-changing money. Something that I realized and felt but had not heard words put to it until I interviewed Will Schroter back six or eight months ago. He’s the founder of startups.com. Something I felt, I remember the first time I had, honestly, even like $20,000 in my bank account, it was so much more money than I’d ever seen in a bank account. It was more money than, I’m sure my parents had that money at some point, but I just remember drinking powdered milk as a kid, I always had food to eat but there was always this issue of we can’t do this because of the money, or I can’t do things that I want to basically.
That’s why I started being an entrepreneur, to be honest, selling candy at a markup, selling comic books at school in order to get the things that I wanted. I remember the first time I had $20,000 or $50,000 or $100,000 in the bank it was this feeling of, wow, I have some safety now. I can take time off if the world economy crashes, if a lot of bad things can happen and I’ll still be okay.
To me that changed my life and it changed the way I was willing to take risks, because when I have $1000 in the bank and my rent was $700 a month, I couldn’t take many financial risks. But when I had $50,000 in the bank, could I spend $11,000 dollars to buy DotNetInvoice back in 2006 or 2007, whenever that happened? Could I do that?
Yes, I could take that risk because I knew I could replenish it, I knew it wouldn’t bankrupt us, I knew I wasn’t taking out a loan. It allowed me to then take a risk that I then built up to, let’s say, $40,000 in the bank, and then could I spend $30,000 to buy HitTail? It’s a pretty big risk, but my life was changed by each of these moments. My life was changed both in the security of it and also in my risk tolerance increased to the point where I could make bigger bets and have a bigger impact.
Will sure to put this into words and he said, I tell people that $250,000 in the bank is life-changing money, when you didn’t grow up rich grow up rich. I mean, I would even posit that $100,000 in the bank is enough for most people to take a year off, or multiple years, it depends on where you live in the world. When I say life-changing, I don’t mean I go out and buy a Maserati or buy some ridiculous house. I just mean that it changes the way you think about your life and the risks you can take.
Another way my life has changed is generosity. My wife and I’ve always done our best to use our resources for people. I’ve had friends whose grandparent was dying when Sherry was in grad school. They weren’t able to afford to go see him and we’re like, here’s $600 for a plane ticket. That was the last time they saw the grandparent alive. We’ve actually done that multiple times to be honest. That’s one of those things where a few hundred dollars is just priceless in that instance if you can do that.
In fact, we had a friend who came back years later. I didn’t even remember doing it, but they said that was a life-changing moment for them because not only did they get to see the grandparent, but it occurred to them the generosity involved there. It wasn’t the amount of money. They were kind of like, I should be more generous, too. It’s just a fascinating thing. Life-changing money for us has allowed us to be more generous in more ways to more people in bigger ways. I guess all that to say that life-changing money can be different things to different people.
If you grew up in an awesome middle class suburban, middle or upper class, or whatever then maybe you didn’t have the fears that I have of going broke or of not making your rent. Life-changing money can mean different things to different people. If your upbringing was great and you have a fallback, your parents will bail you out or whatever, or you have friends and family money which is this whole other expression—maybe I’ll have time to go into it today or maybe another—then maybe $50,000 in the bank isn’t that big of a deal to you.
But to me and I think to most people, there does hit a point where your ability to be generous, your ability to solve problems and make them go away, your ability to take bigger risks really ramps up the more money you have. I’m not saying it’s a quest for money so you can do all these things, but there are certain notches. I do tend to disagree with the survey you hear around like, hey, if you make more than $70,000 a year, then it’s really incremental how much better, how much you enjoy your life, or how much happier you are. That hasn’t been the case for me, nothing gives me more joy than to have the resources to then be able to put into these startups.
If you think about it, startups and these small companies, even these 1-, 10-, 30-person companies are what really drives the American economy. That’s where the majority of the hiring comes from. I can see that, it has been a future, and I continue to see it as a future, especially as companies get bigger and bigger and bigger, they’re less fun to work for, and that freelancer economy, the gig economy, and startups are just up into the right. I’m all in on that right.
For me, my life has changed at every step along the way. At the time when I had $2000 of side income from a software product while I was working consulting the day job. Then boom, I quit that day job and it made full product income in 2008 or 2009. When was that? Thirteen years ago, to that moment when HitTail which was the product that then made two or three times in a month more than I had ever made in a month before. Now that was a life-changing moment. On and on and on, each of these things have been such incredible steps along the way.
Dan Norris and I talked about the arrival fallacy. I never arrived in terms of, oh, I’m here, and now I’m going to be happy forever, but that’s not what I’m here for. What makes me happy forever is being creative and being able to work on what I want when I want to. Having that control is something I wouldn’t have had 20 years ago when I was coding, as a W-2 employee and as a consultant.
Even once when I was working on my own products, there was this fear. I had control, but there is this fear of which of these is going to be squashed. Frankly, most of them eventually did, whether it was after I sold them or while I was running them. A lot of them got squashed by Google or got squashed by a competitor. AdWords stopped working. While I had it, there was, I needed that next step, the next step, that was the drive.
I don’t mind the arrival fallacy. I don’t kid myself anymore to think, oh, I have arrived, I’m gonna be happy forever. But I do think this is great. It feels great to be here and what’s next? Maybe I’d take a month off, maybe I take six months off like I did after I left Drip, between Drip and launching or announcing TinySeed was six months. I’ll be honest. It was on that two or three months until Einar and I started talking and kind of mapping it out and all that.
All that said, none of that would have been possible without that life-changing money. Again, whether life-changing is $20,000, $50,000, or whether it’s a million, your life is different at each of those milestones.
My next topic is something I’ve talked about in passing on the podcast usually with a guest. Just want to put it down for you here to think about and it’s about funnels. There are obviously low- to no-touch funnels, there are high-touch funnels. Something I’m seeing that’s fascinating in the really quick growth that I’m seeing in a lot of my investments and companies that I advise are these dual funnels. It’s where you have that really wide funnel—low-touch, no-touch—so you can imagine, say, Castos which is podcast hosting, or you can imagine Docsketch which is esignatures, competes with DocuSign. It’s a very wide market and it’s a very large funnel. You get a lot of leads in and it’s lower priced. Docsketch is $10 per user, and Castos (I believe) is $19 for their lowest plan.
On the flip side, you might have an app that is high-touch. David Heller’s Reimbi, for example, is—I don’t know what the pricing is—$500 a month, I believe. This is a high-touch funnel, midmarket to enterprise sales, as we would call it. The companies that I’m seeing that are really crushing it have both. It’s really interesting because the wide funnel with a lower in price point allows a lot of people to use it, allows it to spread via word of mouth, and it gives you a brand because when you have a 1000 versus 5000 versus 10,000 people who are using and paying for an app, you’re just kind of everywhere, and that’s amazing.
Then if on top of that, you then also have that high-touch, high-price funnel where enterprises are coming to you saying, I need an enterprise version of that. You’ve heard it if you’ve listened to either Craig’s podcast called Seeking Scale, that I really enjoy, that he does with Andy Baldacci, and then there’s Rogue Startups, but he’s talking about how there’s a higher-end funnel in private podcasting. If you go to castos.com right now, you’ll see they talk about podcast hosting and private podcasting. Those are in the marquee, they’re in the H1. You can imagine that this funnel is really powerful because of exactly what I’ve said, is the way these two play into each other.
Similar with an e-signature app, you can imagine this, I’ve already talked about the low-touch end of it, but well aren’t there enterprises out there? What if you’re a mortgage broker, or realty, or do a lot of sales or whatever, you need 5000 docs a month or 10,000 docs a month. That would be that high-touch, high-end, expensive, top part of the dual funnel.
The takeaway here is dual funnels are really interesting. We had it with Drip, not to this extent. We obviously have the really wide funnel on the lower end starting at $49. I think even better, if we had been able to have like a $19 plan, that would’ve been cool. Then we had folks in the $500 to, I forgot the top end was by the time I left, but it was definitely in the low 4 figures per month. It wasn’t to the extent, some of these dual funnels I’m seeing in terms of the top end, but we had it. I just didn’t necessarily recognize it and I didn’t realize how powerful it was.
Realistically, what often happens in this case is that when you get this dual funnel, in the early days the low-touch or no-touch funnel winds up being the majority of the revenue, as you’re getting because you don’t have the logos and you don’t have the user base. But as you start getting the higher-end users in, the more expensive enterprise folks, they become more and more and more higher percentage of your revenue base. That, of course, is when you’re growing on both fronts and you have that brand, that’s when growth is accelerated dramatically.
That’s it for this week’s solo episode. I hope you enjoyed it. You can certainly let me know in the comments or you can tweet me @robwalling if we’re not connected on Twitter, let’s do it. As always you can find detailed show notes at startupsfortherestofus.com. This is episode 541.
If you want even more detailed show notes, sign-up for the mailing list. startupsfortherestofus.com enter your email. We send out a weekly email where my assistant producer, Aaron, does a fantastic job of doing time stamps with topics and bullets. It’s even more in-depth than what we release to the public on the web site.
As always, thank you for joining me this week and I’ll be back in your earbuds next Tuesday morning.