In Episode 587, join Rob Walling as he answers listener emails including feedback and a critique about the podcast, the state of microentrepreneurship, and where to start with user growth.
The topics we cover
[2:22] The reason Rob continues to podcast
[5:26] Renaming a company or podcast
[8:40] Revisiting inflation
[15:06] The state of microentrepreneurship
[20:00] Where to start with user growth
Links from the show
- Where to Publish Plugins
- Episode 581 | Inflation for Founders
- Start Small Stay Small
- Quiet Light Brokerage
- MicroAcquire, the #1 Startup Acquisition Marketplace
- Empire Flippers
- Rob Walling – Serial Entrepreneur | Building, Launching and Growing Startups
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!
It’s another episode of Startups for the Rest of Us. I’m your host, Rob Walling. I’m fired up to be here today. Thanks for joining me. A lot of interesting listener emails I’ve received over the last couple of weeks, couple of months, that we will be walking through. Some of these are questions. There is some feedback, there’s a critique of my episode 581 on Inflation for Founders that I think is really well written and well reasoned, some feedback on some statements I made about certain things being an inflation hedge or not, thoughts on renaming a podcast.
A funny story about our listener, Matt Paulson, who we’ve heard from before. He heard me on My First Million where we talked about potentially renaming podcasts and there’s a funny story there. We do have a couple of listener questions that I will dive into.
Before we dive into that tasty goodness, I wanted to let you know that as of yesterday, applications for two new TinySeed batches are once again open. We have our Americas batch and this will be a Spring 2022 batch that’ll start in just a few months, and then we have our EMEA or Europe, Middle East, and Africa time zones batch.
As you may have heard on this podcast, we raised a $10 million fund to invest in companies in Europe, the Middle East, and Africa time zones, that allow us to have a dedicated program manager there. It allows us to have calls at times that work for those time zones, so we are running a simultaneous application process.
Obviously head to tinyseed.com and there’s an apply button if you’re interested, or if you know a great bootstrapped founder who has some traction with their SaaS app. We would love for you to refer them to tinyseed.com. Those applications will run for about two weeks. I love the announcement when we get to pick the companies and then we do our live stream of talking about them.
With that, I’m going to dive into my first email. The sender asked to remain anonymous. He said, “Hey, Rob, I just wanted to say THANK YOU for everything you do on Startups for the Rest of Us. Biggest fan. I could listen to you all day long. On your podcast is how I heard about MicroAcquire, where I just sold one of my side projects. Granted, I’m on a much smaller scale but that never would have happened without you. If you ever need anything at all, I’m excited to help. Beta tester, feedback, development, help, conference. You name it, I’ll be there. I live within driving distance in Minneapolis, if you’re ever looking for someone to compare with, give me a shout.”
Thank you for sending that in. I have said this on the show many times, but I have a folder in Gmail that is just labeled thanks and it’s where I collect emails like this. These have a very deep meaning for me. They have a very deep impact and this more than anything, is why I still do what I do. This is my legacy.
I could walk away from all of this. In fact, at certain times in my career, I have evaluated what if I didn’t podcast anymore? What if I didn’t do events? What if we didn’t do MicroConf or whatever it was. This was years ago and there have been turning points in my career where I’ve doubled down on it. I’m at the point now where this is what I’m going to do for the rest of my life. I have made that decision.
I don’t need to do it for the money. The money’s nice. The money shows that there’s value to society. There’s the whole conversation around that, but honestly, that’s not why I do it these days. I do it for the impact, I do it to help founders, I do it to match the mission of Startups for the Rest of Us, MicroConf, and TinySeed, which is to multiply the world’s population of independent self-sustaining startups.
That’s why it’s so amazing to receive emails like this. Thank you so much for sending it. Obviously, if you have a success story, write in, let me know. I don’t even need to read it on the show. It means a lot.
I’m approaching episode 600 here on this podcast and working on my fourth book. In fact, my wife, Sherry, has already thought up a topic for a fifth book that she and I can collaborate on. I’m fired up about the next six months, about the next six years to keep doing this, so thank you to the person who wrote that email and thank you as a listener for showing up every week.
Piggybacking on that, we received another review, five-star review for Startups for the Rest of Us. It says, “Finally, a good podcast by and for SaaS founders.” It’s from Alex J. Sanfilippo from the US. He says, “I didn’t realize how difficult finding a good SaaS podcast would be. Most just cover theory or only want to talk about MRR, ARR. Also, they ramble on for a long time. Here’s a show with shorter episodes with a host who knows SaaS and asks the right questions while providing actionable value. A+, keep it up.”
Thank you so much, Alex. Wherever you listen to your podcast if you could drop a five-star rating, whether it’s Spotify, whether it’s Apple podcast, whether it’s the Google podcasts shop, what’s it called these days? I think they renamed it four times, it would be awesome. That’s just a small way to give back.
Next up is an email from a longtime listener, Matt Paulson. He’s the founder of marketbeat.com, who was having amazing success with his startup. He said, “Hey, Rob. I just listened to your podcast interview on My First Million. I thought that discussion on potentially renaming your podcast was fascinating. It reminded me of my experience renaming Analyst Ratings Network to MarketBeat after attending MicroConf in 2015. I told everyone the name of the business at the conference and nobody could repeat it back correctly after I told them the name. Everyone mangled it, which persuaded me I needed a simpler name.
I found marketbeat.com on Sedo for $9500 and the rest is history. When I made the change, I assume there would be a lot of confusion with our advertisers and subscribers, but really, nobody missed a beat. Everyone figured out the new name just fine. All our advertisers renewed, nobody emailed us and asked us what happened to the old name. The only thing we really couldn’t change is our sending email domain. We were never able to build up marketbeat.com’s email reputation in the way that we had with analystrating.net, so we’re still sending email from our old domain name.”
Thought you’d enjoyed the short trip down memory lane. Analyst Ratings Network, that is rough. That’s how I felt when I was talking to Sam on My First Million. I said, I avoided your show because I thought it was kind of a get-rich-quick or wannapreneur show, but it’s not. It’s actually the show talking about going deep on business ideas and business philosophy hosted by two smart dudes.
I was just talking about how hard it would actually be to change the name. I think that given the fact that you have subscribers and an RSS feed, that’s not going to change. You can just change that name, and essentially Apple podcasts and Spotify (I think) it will propagate. The harder part is do you have brand equity with people who maybe don’t make the transition? Or who looks different in their podcatcher and they get confused in the short term?
I think the bigger challenge—and I brought this up on the show—is (I said) what name do you pick? Because naming is hard. I’ve thought about it over the years. Startups for the Rest of Us, I love the name that starts with startups. It’s startups for us, for those of us who aren’t in the know, who don’t have friends and family—I always chuckle at that term—I remember the raise from friends and family ramble, […] good for you because I didn’t have rich friends or a rich family. It was never an option for me or for a lot of us.
Those of us who can’t move to Silicon Valley for three months to do an accelerator—that’s why we started TinySeed—those of us who didn’t fit in when we went to all the startup events that basically are about pitching investors, asking for permission to start your company—I never wanted to do that; that never felt right to me, and that’s why we started MicroConf—to the podcasts, the books, and the blog where all they talked about was raising funding and how to do a pitch deck and nothing about actually growing your company, that was all just this. It was like funding was the goal and that’s why we started Startups for the Rest of Us. That’s why I wrote Start Small, Stay Small was a reaction against this narrative in this script.
I think that name does still apply. The name is also long. I’ve often thought about is there a shorter, more succinct way to say, is there a better name given what the podcast has evolved into? But given that it still applies, I honestly struggle to change the name from Startups for the Rest of Us. The logo, on the other hand, that appears in Apple podcasts, that’s something that I revisit every few months about potentially redesigning that.
Onto our next email. This is from Pawel Brzeminski, founder and CEO of snapprojections.com. He has some feedback about episode 581, where I talked about inflation for founders. He says, “Rob, I tuned in to Episode 581 and I’ve got a few comments. I mostly agree with everything you said—a nice episode, by the way—but thought to comment on a few things as it may be valuable.
By the way, I was a personal finance nerd before starting a financial planning SaaS, but I learned a ton more about this when I was building and running Snap Projections. Then I learned even more about it when I started investing after I got acquired (I sold Snap to a public company, although I still run it for them). First off, gold is not an inflation hedge,” and now I’m going to flip back to me. This is news to me. I’m sure there are 10 or 20 people out there doing a facepalm, but I’ve just heard this narrative over and over and over and I never researched it, I just believed that we are holding on to gold as a hedge against inflation.
Back to his email. He said, “There is scientific research and empirical evidence that confirms this not unless you have centuries of an investing horizon. I got the papers, the long term returns to durable assets, the golden dilemma, and the gold constant with conclusions about gold pricing.”
That’s interesting. I don’t know. Do we have 2%, 3%-ish of our portfolio in metals? It’s for diversification but this is one of those things that I look at. It’s not generating any return, it’s not generating any income, and I’m always frustrated by assets like that, so not inflation hedge.
All right, next. “Successful investing relies on keeping costs low at broad diversification,” which I said and he agrees, “and reducing deferring taxes. The last bit is actually very important and usually underappreciated and worth mentioning. I spent seven years talking to financial planners and running the numbers. REITs,” which are real estate investment trusts, if you remember, “especially commercial ones could have issues not because of inflation but because of the remote work aspect. Granted, most leases are long-term, we may not see it immediately but I’d be very careful.” I do think that’s good advice. It’s not an inflation issue, but it’s just economic/changing the way we work. It’s a market force that could do damage to reach long-term.
Back to his email. “If you want to park cash, short-term bonds aren’t a bad place even if the rates are going to be increasing. VSP has a 2% payout ratio, which is a lot more than a standard checking account these days. HISA would be best, but the amounts are usually limited.” By the way, neither Pawel or I are financial advisors. This is not financial advice. For entertainment purposes only. We’re just talking about things right.
Lastly, back to his email, he says, “I was very surprised you didn’t include TinySeed in your discussion here. Angel investing like private equity or VC is another asset class and that episode gave you a perfect opportunity to talk about TinySeed. For example, I completed my first angel investment a few months ago and I totally include it as part of my overall asset allocation. There’s no perfect inflation hedge but investing in businesses, especially good SaaS, meets a lot of criteria of a good inflation hedge. Cheers, Pawel.”
Well, thank you so much for writing in. It is interesting. I didn’t want to show my own stuff, but frankly, it didn’t occur to me. What’s funny is, if you go to tinyseed.com/thesis, we talk about trying to broadly index across hundreds and hundreds of early stage SaaS companies. It’s not technically an index fund like a Vanguard fund.
We are diversifying risk right across a lot of companies. And I have thought about SaaS as a different asset class. I do include that in our family balance sheet. Since I made our very first angel investment in WP Engine in 2011, those sit off to the side. I don’t count them as such. I usually say, once I write the check, it goes to zero, but then as the company becomes worth more, we do some marking to market, as they say. Absolutely, B2B SaaS (I think) is an amazing inflation hedge.
In fact, a few years ago, we invested $22,500 I believe was the amount, and it was probably 2014, so this is 7–8 years ago. It’s one of those things where we write an angel check, I write it off. I assume that I’m going to 10X, 100X, or it’s going to go to zero, maybe something in between, but it’s not something that we’re banking on. It’s illiquid for a long period of time. That company has become quite profitable. It’s a SaaS company that’s doing single digit millions a year, but the profit margins are insane. I think their net margin is 50% or maybe it might even be 60% and they’ve started to kick off dividends.
They’re one of the handful of private angel investments we made that are LLC. Now every quarter, we get this check, this direct deposit into our bank account. The last one was a third of the initial investment. It was like $7500 and we get these every quarter. It’s super interesting that that is now an income stream and if they decided to sell that company, it would obviously give a lot back.
We actually had the opportunity to sell our stake in this company for a great markup. It would have been I think more than a 10x return on the money and I looked at it and said, but then what would I do with that cash?
That cash would come into the account, we already have an emergency fund, we have the cash we need to live on. I would then need to turn around and find an investment. What investment do I think is going to beat this company or B2B SaaS in general? And I couldn’t think of one. So we left it in there because I think it’s a great investment. All that said, yes, TinySeed is broadly indexing across B2B SaaS companies, and so far the results are looking really good. They’re definitely in line with all the projections we made.
We are closing our EMEA fund here soon, but frankly, we launched the TinySeed Syndicate, which is always open to new investors. The nice part about a syndicate is if you’re an accredited investor, you can say yes to each individual deal. Let’s say, we launch a syndicate deal every month or two deals each month, it’s going to be early stage, or even later stage B2B SaaS company that has a really low minimum investment, usually $2500 up to (say) $10,000 per investor, and you can decide to go in on it or not based on the terms.
I believe our first deal that we ran is about to fill up, which is great because this is all an experiment. We’re trying to find product/market fit ourselves. It’s like launching a new feature of your app, not knowing if anyone’s going to use it. So far, that’s great. Obviously, we’ll be raising more funds in the future but if you’re an accredited investor and if you are interested in potential inflation hedge or just having exposure to a different asset class, early stage SaaS is great.
From my own experience, we are 11 years from our first check and things have gone very, very well. Anyways, tinyseed.com/syndicate, if you’re interested in that. Of course, the syndicate folks will be the first to hear when we launch our next fund that invests through TinySeed accelerator.
My next email is a question from Matt on micropreneurship. He says, “I’m a C-level tech executive, and I’m very happy about where I am career-wise and professionally. In other words, not really interested in creating a large-scale technical B2B SaaS. When I look at investment opportunities, I’m intrigued by tech micropreneurship, as Rob laid out in Start Small, Stay Small. I viewed it as a better opportunity versus something like real estate or franchise ownership, both of which I have considered.”
I want to break in here. Before I started doing software products, I was in real estate. We were buying homes. We owned four homes in LA that we rented out, a total of seven units. I thought that was the path to early retirement—software developer by day, doing real estate by night. It was a pain and I had no advantage over anyone else. That was when I realized that as a software developer, you have an advantage in startups because non software developers don’t know the tech side of it. I different looked at franchises in real estate that any way to basically be in control of my own destiny. That was always the goal.
Back to Matt’s email. He said, “What is the state of micropreneurship? Is it dead? Or do opportunities exist for someone like myself looking to either start up or buy a smaller product with around 20%–30% return on investment? I would love to see an episode dedicated to micropreneurship. What are some markets to buy small SaaS products for example? I don’t see a whole lot on sites like Flippa. How do valuations on smaller SaaS or products work? Thank you and love the podcast.”
It’s such a great question. Micropreneurship, as laid out in Start Small, Stay Small, is truly that lifestyle bootstrapper where I want a business that’s going to do $5000 a month up to $100,000 a month. Some get bigger, but that’s usually the range. You don’t really care that much about growth. You care about cash flow. You go for net profit margins. I had apps doing 90% net profit margins. You’re doing tens of thousands a month with 90% net profit margin, absolutely life-changing. That’s what Start Small, Stay Small looks.
It doesn’t look at the more (say) ambitious bootstrappers. That’s actually my next book that I’ve now circled back on and I’m starting to focus on energy again. That’s what that focuses on. It’s more of I think that MicroConf growth, or the the TinySeed companies, the folks that say hey, I want to get to seven or eight figures in annual revenue and I either want to then become quite profitable, throw off a lot of cash, or I want to have a really nice $10 million, $20 million, or $30 million exit. Micropreneurship is definitely something you can and should do on the side. I think that’s certainly how the stair-step approach talks about it.
The state of micropreneurship is it’s absolutely alive and well. There are still a lot of folks doing that. If I were to do it today and try to launch from scratch, I would look at the ecosystem, the plugin, add-on, and extension ecosystems where you can build a product and get it into that app store. There’s the Chrome App Store, WordPress, there’s Shopify, Heroku, Jira, Slack, Figma, Jenkins, Amazon, AWS, Netlify, Grafana, and there are others. It’s not an exhaustive list.
We’re actually going to link up an article on code with wolf.com that talks about where to publish plugins, add-ons and extensions, and they have 12 on that list. I think there are at least 20 or 30 more that I would consider. You have Notion, Airtable. These are off the top of my head. A nice part about these ecosystems is you don’t need to do everything. You don’t need to do all the marketing. You kind of have this channel that’s already available to you, just to be found. It’s organic search. These are great step one businesses, which I think micropreneurship is really designed for, and that’s where I would start first.
I’m going to start today if I was going to acquire and I had the means to do it, which is what personally I would do. I had a mix of this as I was coming up. I acquired some and I built some, but I would be looking to Quiet Light Brokerage; I would get on their email list. I would look at FE International. I would look at Empire Flippers. I would look at MicroAcquire. I’ve had folks from I believe all of those companies except maybe Empire Flippers on this podcast in the past, talking about valuations.
If you go to Startups for the Rest of Us, you click that the magnifying glass at the top and you search for acquiring or acquisitions, you can get an idea of multiples, but frankly, content sites are 2–4, 3–5 times annual seller discretionary earnings, which is kind of equivalent to net profit. SaaS is a little higher now. It’s probably 4–6, I believe. This is for smaller apps. That’s kind of the going rate.
I’m going to be honest. When I was buying and selling these apps in 2006 to (I guess I acquired my last one in) 2011, it was 12–18 months of net profit. That was what we saw on Flippa. Flippa was a bit rough, as Matt pointed out, but that’s where the multiples are. Can you absolutely get 20%–30% return on investment? I think so. I guess I did it back in the day.
I know folks who are still acquiring you these micro private equity funds that are building these big portfolios of these profit-generating apps. They’re shockingly efficient and they’re capital efficient. That’s one of the reasons that SaaS and software are such a sought-after asset class. Is it alive and well? Absolutely. I think that if you haven’t taken the plunge, it’s a fun adventure.
My last email for today is from Luke. He’s the founder of bakup.io. He has a couple of questions he submitted. I actually answered one of them on an episode a while back about giving a SaaS demo, but his other question is, “If you know you have a potential $10,000 MRR product but don’t have the capital spend on advertising, where would you start with user growth? Starting a blog is easy with all the software we have access to, but what is the best way to attract readers and get them to click on your startup?”
We get this question every now and again. This is the fundamental question, isn’t it? This is what almost every article I’ve ever written or every podcast that we’ve recorded winds up being about. You could literally write a book on this. Advertising is usually, in most cases, not the way that startups—especially bootstrap startups—make it work. There are exceptions, you need a pretty high lifetime value to make it work. Starting a blog is not it either. You could start a blog and just publish articles, and no one’s going to come. You have to be strategic about it and think of it as content marketing.
I would start with SaaS Marketing Essentials—it’s a book—and Traction by Gabriel Weinberg. I would look through those marketing purchases and think where does this audience live? Is this audience online? Because if they’re not online, none of this is going to work and you have to try other things, in which case you have to charge more because you need a lifetime value or an annual contract value that can justify you spending the money to go offline.
If they are online, where do they hang out? Are they in Facebook groups? Are they on Hacker News? Are they on Indie Hackers? Or do they have their own forums or own closed communities? You can go hang out there and be part of those communities and just be helpful.
That gives you a start of seeing how those folks think about stuff. You don’t go in there and get and pitch your stuff, but you start to become part of the community where potential users are. Are they already looking in a certain place for the thing you’ve built? Are they looking in Google?
Then maybe you do need to pony up some Google ads just to see if it works, figure out which terms work for you, and convert, and then do hardcore SEO to rank for those terms. Maybe they’re searching in a marketplace because this is an add on. Maybe they’re looking at Heroku or wordpress.org. Then you build something, you put it in there, and you figure out how to do search engine optimization and rank there.
Are they on social media talking about this looking for solutions? It’s just a matter of getting in the headspace of those consumers. Even if they’re businesses, they’re still going to pay for and subscribe to your service. And they’re going to look for it somewhere. That’s how I would think about it.
To add a little more context, there are really five main B2B SaaS marketing approaches. These are the five that I think everyone should at least consider, if you think they’re going to work. There’s content, there’s SEO, there’s cold outreach, there’s business development/integration marketing partnerships, and there are ads. I’ll run through those again.
I’ve separated content and SEO, because sometimes people write content purely for SEO. They don’t care at all about the kind of social pop, or getting on Hacker News, or getting into these social news sites. Other times people do the content marketing, they don’t care about SEO at all, and they really just care about the social pop, or the initial sharing on the LinkedIn and the social media sites. Those are two ways that I’ve seen dozens, if not hundreds of startups, SaaS founders, grow amazing six, seven, eight figure companies almost solely on the back of those two.
Cold outreach, it’s a little saturated these days, but it still works in certain spaces. That can be email, that can be LinkedIn, however you do it. Certain people have opinions on that, they’ll never do it, that’s fine, too. Then don’t go into a space where that’s what you need to survive.
Then there’s business development, which is integrations. I think of that as affiliates and partnerships, where sometimes you do a full integration, sometimes you can just do a joint venture partnership quickly, and you just recommend the tool to each other’s audiences. Other times, you are trying to find affiliates who already have audiences in the space to do a webinar with or you give them a cut, 30%, 20% of the annual fees that the customers who they send you pay and now you have this amazing revenue stream from an influencer.
Then lastly, it’s ads. That could be Google ads, that can be Facebook, LinkedIn. There are all types of ad networks. These are high-level things, those are only five. There are also the caveats of well, then there are free tools, which are like engineering as marketing, there are in-person events, podcast tours, and on and on. Traction is a good book. I actually have, (I think) five or six marketing approaches that are not in Traction that work for some companies. I’m planning to mention them in this book that I’m writing. I’ve kind of put them in a chapter of it.
If you’re intrigued by the thought that I’m writing another book and want to hear when it comes out, you can head to robwalling.com, sign up for my email list or head to startupsfortherestofus.com. Sign up for the email list there.
The cool part about Startups for the Rest of Us is you receive two never released episodes that we have both an audio format and then a written guide so you can read through it—a nice-looking PDF guide. Those are called Eight Things You Must Know When Launching Your SaaS and 10 Things You Should Know as You Scale Your SaaS.
There are evergreen episodes that are fundamentals that I don’t believe will change this year or in five years but things that some of which I haven’t mentioned on the show. So startupsfortherestofus.com. You sign up for that email list, and then obviously, I’ll be notifying you when the book comes out.
Good question, Luke. I will say it’s a very broad question. There’s no super easy answer. This is the hard part of being a founder, is making hard decisions with incomplete information, because that’s usually what it is. You don’t have the complete information of what’s going to work. You have to take your best guess, you have to run experiments, you have to just see what works.
That wraps us up for today. Thanks so much again for joining me for this episode 587. Thanks for coming back every week. If you’re not subscribed, obviously hit that subscribe button and I will be back in your ears again next Tuesday morning.