In Episode 590, Rob Walling chats with Craig Hewitt about building versus buying internal tools, how to compete in a competitive space, accounting software, a founder who has a zombie company where investors want their money back, and more.
The topics we cover
[5:03] Finding a co-founder as a non-technical founder
[11:20] Balancing priorities between day job and a SaaS idea
[17:35] Zombie company where investors want their money back
[26:00] Accounting software for startups
[28:10] Building in a competitive market as a solo-founder
[32:24] When to buy vs build internal tools
Links from the show
- The Mom Test – a book by Rob Fitzpatrick
- Audience Podcast
- Bench Accounting | Online Bookkeeping and Tax Filing Services for Your Small Business
- Craig Hewitt (@thecraighewitt) | Twitter
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!
Rob: It’s another episode of Startups for the Rest of Us. It’s episode 590 with Craig Hewitt and I answer listener questions. We cover topics ranging from building versus buying internal tools, how to compete in a competitive space, accounting software, a founder who has a zombie company where investors want their money back, and I think there are at least two or three more.
If you recall, Craig Hewitt was the subject of the first season of TinySeed Tales. He’s the founder of Castos, which is a podcast hosting both public and private as well as podcast production services. Craig Hewitt also co-hosts a couple of podcasts, one called Rogue Startups and the other is Seeking Scale. Craig is a wealth of knowledge, runs a very successful SaaS company, and has a great take on all the questions that we talked about today.
Before we dive into that, I want to let you know that MicroConf mastermind matching is happening again. We do it a few times a year, I think it’s about every 3–6 months. If you’re not familiar, I’ve been espousing the benefit of startup masterminds for almost a decade on this podcast. I’ve personally relied on masterminds to sanity check decisions, help myself with accountability, and frankly, just maintaining motivation and having other founders invested and interested in what I’m doing has been an invaluable part of my journey.
We now have over 600 successful matches under our belt at MicroConf from over 50 countries across 20 time zones, with a collective ARR north of $150 million. There is a small one-time fee to be matched with your mastermind and that’s all visible on microconfmasterminds.com. That’s where you would also go if you wanted to start your application. It takes I think 5–7 minutes. You give a few pieces of information, like location, experience level, your goals, your skill sets, some business metrics, and producer Xander and the crack team at MicroConf matches you up with other folks.
Again, we have hundreds and hundreds of successful matches. Hundreds of masterminds that are currently operating and providing value to founders. If you’re not in a mastermind—I think you should be—head to microconfmasterminds.com. With that, let’s dive into answering listener questions with Craig Hewitt.
Craig Hewitt, thanks for joining me back on the show.
Craig: Hey, thanks, Rob.
Rob: It’s always great to have you, man. You said you’ve been on the show three times. I think you’ve been on more.
Craig: I think four, maybe five? Yeah, it’s been a hot minute though.
Rob: It mixes with TinySeed Tales where we did 10 episodes or something across that year. You were Season One of TinySeed tales. Have you gone back and listened to that? Because I haven’t in a while.
Craig: I haven’t gone back and listened to it, but I think about a few of those recordings a lot. We had some really great times and some really horrible times, and I’m scarred. I’d definitely go back and say I cannot believe that happened, for sure, but it’s really cool to capture it in the moment because it’s like having kids. You forget about changing diapers at two in the morning and it all seems like roses so it’s really good to grab it in the moment.
Rob: I would agree. There was one recording you made at 11 o’clock at night. You’re just like I feel so terrible. You did the reality TV thing where they go in the booth and you sent me that recording. That’s a really good episode. I’m working on season three right now.
Rob: Well, sir, let’s dive into some listener questions today. These are some of my favorite episodes where we get to hear from listeners who write in to email@example.com. Sometimes they just send a text question like Devon Tracy did, which I’ll read in a second. Or sometimes they go to the website and they can send a video or an audio question using the link at the top, Ask a Question.
The subject of this one is a non-technical founder. He says, “Hey, Rob. I am a non-technical founder. I have an idea for a business/software that I’m interested in pursuing. As a non-technical founder with a day job as a high school math teacher and a decent amount of marketing background selling products, memberships, et cetera through Facebook and Google ads, I have an idea. How do I go about finding programmers to help me build this? I know you’ve answered the questions about vetting partners and hiring good talent on the show. My question is even more fundamental than that. Quite literally, how do I find people to talk to about this? Short of going on Fiverr which doesn’t seem like the best option yet. I have no idea how to go about it. Thanks for any insights you have.”
Craig Hewitt, coincidentally or not, you are also a non-developer founder. What do you think of Devon’s question?
Craig: I’m just smiling hearing this question. We’re about five years into Castos at this point. I am a solo non-technical founder and can totally relate to this situation. I’ll just say for background, I got really lucky on our first developer. Jonathan Basinger was with us for four years. It was just amazing, like really good work. It would help me kind of level up my skills as a founder working with a technical team for the first time because that is super hard. For people who haven’t built software before, to work with a developer, cold, out-of-the-box is just super hard.
My advice would be to find a technical co-founder. I will never, ever, ever do this again by myself because we’re just at the point now with 14 people to where I feel it’s honestly tolerable, that the risk of me not being technical is okay right now. But before, it was just silly. I had no idea what I was doing and we got by with a lot of help and with a lot of really good early people.
I think they’re asking how do you make sure you get those good people? It’s so hard. Then the risk of if you get the wrong developer, you’re just sunk. You’re going to spend a whole bunch of time, money, and knock it off the ground. I think you need somebody with skin in the game, or them like that. Unless you had a bunch of money or were really sure of your hypothesis for product-market fit and your marketing abilities, to where you’d think you’d get off the ground really quick, like a big audience or something, then you probably could swing it. If you don’t have those few things, I would find a technical co-founder.
Rob: Yeah, there is a reason that I think it’s a low two-digit percentage of bootstrap SaaS founders don’t have at least one technical co-founder. I’m going to take these off the top my head, but it’s ballpark. I think it’s somewhere around 15% of TinySeed companies don’t have a technical co-founder like yourself. Somewhere in that 10%–20%, but I think it’s about 15%.
I think in the broader kind of indie SaaS space—we did the State of Independent SaaS with MicroConf—the number is a little higher. I think it’s maybe 20% or maybe just north of 20%. It’s a vast minority because of just what you’ve said, of SaaS is really complicated. Building info products, courses, and all of that takes some expertise, it takes some time in front of a microphone, or writing, or audio or whatever, and those are skills unto themselves. SaaS is like a moving jet engine. As Reid Hoffman says, you’re assembling it on the way down as it’s crashing to try to keep it from going. It’s very complicated and it’s constantly moving.
Craig: And just to peel back what you’re saying, the needs of your technical team change over time. That’s the really hard thing. You could find a good developer for an MVP, but they’re probably not the person that’s going to help you scale and stabilize your AWS setup. That’s where a person that 100% you trust has your back no matter what is just super important because you don’t even know. You don’t know what you don’t know.
Rob: That’s right. When I think about it, if you had buckets of money, you could try to hire and find an expensive, really good developer in your own country. And that is possible. If I were good to go about that, I would get referrals, I would go to the Toptal. There are certain sites that are just higher priced, it’s not Fiverr. It’s places like that.
One way to get to the point where you have those buckets of money is to stair-step your way up if you’re non-technical. It is to start with those simple products, whether they’re info or courses. Building a Shopify app, having that built, or a WordPress plugin, is simpler than SaaS, and the technical debt is less. You’re not self-hosting it so you don’t have to worry about all the DevOps stuff.
Again, you don’t know what you don’t know, but there’s a reason that I’ve espoused the stair-step approach for years and years, it’s for both technical and non-technical people is that then you learn 60% of what you know, 70% of what you need to know in order to run a SaaS. If you’re successful, you get some revenue out of it. Now you take that revenue, and you parlay that into either hiring your co-founder, or at least when you approach a technical person and say, I want you to work nights and weekends, while you have a day job as a developer at a Fortune 1000 Company.
They get these offers all the time, so they’re going to say, why should I do this for you? You can say, well, I have this money that I can pay you. Or look, I’ve already built a successful product. I have an audience and I want to sell it to the same one. Or I validated it, I pre-sold it. I have an MVP. There are all these things. Coming to a developer and asking him to be your co-founder for free, may be even more challenging than trying to hire one because developers just get this pitch all the time. If you’re a good developer, you do, every few months—a relative, someone says this—and that’s the challenge.
Craig: I would say if you are hell-bent on going this way and wanting to do it right now like some kind of community like MicroConf Connect or whatever, because there are those people searching for their next thing in there, too. It’s the right time to fit in a lot of times. It’s the right person at the right time in their career, changing career paths. You might say, hey, yeah, I got six months of the runway. I can go do this. Let’s give it a whirl. But that’s a big risk for them, so you just have to understand that.
Rob: We make that analogy often of finding a co-founder is like finding a spouse, a life partner, in that you’re probably going to have to date several, and it’s not going to work out. That’s the hard part. Okay, so you start this SaaS app, someone starts writing the code, and then it doesn’t work out. Now you have this code base. You have this legacy that may be even more concrete and heavy than the emotional baggage of dating. Am I right?
Rob: So Devon, it’s a great question and obviously, it’s not all sunshine and roses. I wish I could tell you there was a magical thing. I’ve hired good devs on Upwork. I’ve hired terrible devs on Upwork. I’ve hired good devs from Elance back in the day and I’ve heard folks hiring through Toptal.
Again, if you have the budget, there are agencies that can build a good product, but boy, to pay them to build a SaaS app when I don’t know if you have a product-market fit. Certainly you don’t have it, but how far along your confidence level is, that this actually is a good idea and you want to drop $30,000–$40,000 on it. It gets tough.
Then what do you do? You launch. You get a couple of thousand in MRR, best case. Now, who maintains that? Because agencies are expensive. I’ll stop talking there. Thanks again for the question, Devon. Let’s move on to our next one.
This question is from Prabat and he says, “Looking for advice for a poor startup founder. I’m a new founder from a beautiful but poor country, Nepal. I believe software has no borders and all it needs is a good idea to be a global idea. Hence, I’ve been trying to learn for the past nine months.
I have a question. I have a SaaS idea but I lack funding as my country’s startup ecosystem is not very advanced. I’ve started to do some client projects, which allow me to invest in my idea, but sometimes I find it very hard to manage between client projects versus my in-house ideas of my SaaS idea.
Clients sometimes come up with very hard deadlines, which happens quite often, and that gives us no time to manage our own in-house SaaS ideas. What do you think would be a wise way to manage between these two pulling the forces? I don’t want to be dependent on client projects to sustain my startup. Every week listener, Prabat.”
What do you think, Craig Hewitt? Have you ever been in that boat where it’s kind of nights and weekends and they are competing for priorities?
Craig: Yeah. I think all of us come from this type of scenario. Day job and wanting to start something up on the side, or doing consulting or client work and starting something up on the side. For me, there are a couple of paths. If you’re quite sure that your idea is good and/or you have an MVP, then joining an accelerator program and getting money is a good way to go. I will say in all fairness, the amount of money that you get from TinySeed is often not enough to get you from zero to one if you’re by yourself. I know that’s not the model that TinySeed is going after these days.
This probably my second part is to try to make it work with nights and weekends and maybe work for days on client projects and Fridays on your own thing or something. Be pretty regimented about that. I know someone who owns a consultancy and owns a bunch of products. They actually build the products back through the consultancy, to make all of this work from an accountability and accounting standpoint.
I would maybe try to do both, really be diligent about setting aside a day or a half a day a couple of times a week for your product, and pay the bills with client work. Raising prices on the client work obviously makes that a lot easier, so if you can raise prices by 20% then you don’t lose any of your revenue. Generally, I think there’s almost always room for that as a consultant.
Then once you get a product and have some degree of product-market fit, things like TinySeed make a lot of sense to really just accelerate your ability to stop doing client work and go full-time on this more so. That’s probably what I would do.
Rob: I think that’s a really good suggestion. There is no easy answer here. There is no silver bullet or magic pill that you’re going to take that’s going to help you. I’ve heard of a lot of agencies and in fact, I was on micro agency myself as I was doing these products. I also had to say, I can bill $150 for the next 60 minutes or I can go work on this product that is making me almost no money right now. I had to make that decision every day.
That $150 went to my bottom line and my family’s bottom line, and I really struggled with it emotionally. Morally, am I doing the best for my family if I’m taking two hours a day, $300 a day, that’s $1500 a week, that’s more than $6000 a month that I could have been billing because I was always booked full time? I just had a good funnel. I had to wrestle with that, which is the same thing that you’re asking about. How do I reconcile that? Especially with things that aren’t a sure thing. And that’s the hard part.
I really liked Craig’s idea of being disciplined about it at either carving out one day a week, or it sounds like you have a small team. You fork one developer off and they’re doing the skunkworks project and you never pull them into client projects anymore. I don’t know how big your team is.
At a certain point, I’ve heard some agencies that take 10% of their entire team, all you’re doing is focus on this one idea. I would be careful. I think Prabat may have mentioned that it was in-house products or projects. I would focus on one with your already limited time. Then I think a big thing is are you building or are you validating?
If you haven’t validated, you shouldn’t be building at all. Just because you can write code doesn’t mean you should be writing code. The biggest risk is not whether you can build this product. The biggest risk is that no one will care and that you won’t be able to market it.
That’s the very first thing I’d be figuring out is, what are my channels? Where am I going to get customers from? Then start building those and talking to those potential customers to find out do they actually need this? Do they actually need this thing we’re building? Or are we wasting our time? Very much a customer development mentality.
Craig: There’s a very popular book called The Mom Test that talks a lot about this, is people tell you what they think you want to hear. They’re dishonest, not in a malicious way, but they don’t want to be jerks. I think when doing customer validation, especially these days, I think it’s super hard without a product. Maybe pick that book up and read through it so that you can make sure you’re getting honest and objective feedback on your idea before you build something.
I’ve seen a lot of friends and colleagues in space, validate something they thought, they go build it, and then it doesn’t work out. That’s a bummer, just in terms of opportunity cost, real cost, and everything. I would definitely be careful about how you approach that.
Rob: Here’s an advantage you have, Prabat. You live in a country with a very low cost of living. I’m guessing the wages are low compared to what you might be able to charge if you’re going to market to the US market. You’re going to have a lot more revenue than you will have cost. We have some folks, TinySeed applicants or folks at MicroConf who I talked to. They’ll be at $10,000 MRR, and they’ll have a team of eight working on it. I’m like how are you bleeding money? They’re like no, we’re at breakeven. Well, how are you breakeven? Well, we are in India and it’s just very inexpensive. I can hire developers for pennies on the dollar compared to what would be in the US. You have that advantage of your cost basis is low.
Another thing is if you are able to do agency work, do your consulting work for international clients in Europe, in the US, you can obviously bill more. That’s the internationalization of all this, the kind of globalization I think can provide you with some pretty incredible opportunities. That’s the advantage you have.
It’s the advantage we kind of had being in Fresno, California and bootstrapping, not to the extent that you are in Nepal, but to hire a developer was about a third of the cost of the Bay Area, which was a three-hour drive away. That was a reason I didn’t live in the Bay Area. I didn’t want to deal with those costs as a bootstrapper. Think about that as potentially your superpower. Thanks for the question. I hope that was helpful.
Our next question asker would like to remain anonymous. He says, “I have a zombie company and investors want their money back.” He says, “Hey, Rob. I’ve been a longtime listener of the show and your approach and ethos have always resonated with me. Your podcast subjects have an uncanny knack of being timed perfectly with whatever stage of the startup journey I happen to be up to.
My question is essentially about whether I should be prioritizing getting investors their initial investment back to them or continue to grow my company for the benefit of the co-founders, but probably not the investors at least for a number of years. I will say this is a longer email so bear with me.”
He says, “To keep the stories brief as I can, my company raised two rounds of capital—2017 and 2018—from a mix of venture high net worth individuals and a couple of friends and family. The total amount raised over both rounds was in the low hundred thousand. It’s not a huge sum overall, but let’s say the friends and family would love to have their chunk of change returned as soon as possible.”
I’m going to break in here. It’s the first two months of 2022. Let’s just say it’s the end of 2021 for date’s sake. This is a three- to four-year-old investment. If people want their money back, that’s a problem because startups don’t return money back quickly. I will couch that and resume the email.
“My business had a rather inflated valuation for the second round so those friends and family got a pretty rough deal. Then in 2020, the business took a dramatic change in direction.” Basically, he lost his co-founder. Now, he’s running it solo.
He says, “Although we’re finally breaking even, seeing good growth, ultimately, the company is in more of a lifestyle business for the next few years. Not so much the venture or the high net worth investors, but the friends and family seem to be getting impatient. Realizing they didn’t invest in the next rocket ship, they’re questioning when they can get their money out. If we sold the business now—and there is no guarantee we could sell—investors might get 75% of their money back, but the ordinary shareholders, meaning the co-founders, would likely get nothing.”
Breaking in here, I guess there’s a 1X liquidation preference. “If the business continues to grow for (say) another five years, it’s likely the co-founders would get something back after sale and investors are more likely to get all their money back, but realistically not much more. In other words, investors’ money would be stuck in the company, not doing a great deal for them for five or more years, but co-founders would benefit from the extended period of growth.
Should I feel guilty for building the business essentially for my own employment and future gains of the co-founders? Or should my priorities be to maximize the return to investors no matter what, and therefore sell the company now given that they’re unlikely to see much additional return for a number of years?”
Craig Hewitt, what a predicament. what do you think?
Craig: This is a really hard one. We have raised money in two different rounds, just under a million dollars total. I will say, personally—and this is a really personal thing—I feel an enormous obligation to return money to our investors. It is probably the thing that drives me most days, the business is for me, but also a chunk of the business is not for me anymore. It’s for our investors. That’s the decision that I made about 3½ years ago when we joined TinySeed.
I think that for folks who haven’t brought on investors, that’s definitely something I say, when you have an investor, it’s not just your business anymore. You have a responsibility to them. This is going into answering the question. I would say that you need to do a little bit of both here. You definitely have a responsibility to make a return for investors if at all possible. If they’re not going to get their money back right now, then right now is not the time to sell. I would ask them to just be patient and just explain this exactly to them. If we sold the business right now, you’d get $0.75 on the dollar back. I think that’s a pretty bummer deal and if you’re hell bent on that, then maybe we can work something out to where you could start paying it back over time or something.
To break even, that would be tough. They don’t have hundreds of thousands of dollars in the bank to just pay them back with. That’s tough, but I probably would not try to just sell the business now and liquidate to give people an impartial return. Just try to frame it with this is where we are. This is what has happened with the co-founder and the setbacks we’ve had in the business. This is what I see as our trajectory over the next couple of years and in two, three, or four years, this is what I’m hoping to see.
There’s this term of lifestyle business in there. Some people that listen to this podcast might not like this. To me, lifestyle business and investors do not go together. When you take investors, you’re signing up for the hardball and really trying to build a great business that is really high value in the market. When you create a lifestyle business, you’re creating the business for yourself so you can make a bunch of money and not work a lot, to me. There’s nothing wrong with either of those but the two can’t go together to their fullest extent.
I would say that they probably need to get serious about growing the business and make that return for their investors. That might not be the answer they want to hear, though.
Rob: I don’t know that I disagree with anything you’ve said. I think that this is the trouble with friends and family money. There’s this phrase, it’s a pejorative term, but they say they’re smart money and there’s dumb money. Usually dumb money is it’s friends and family who don’t understand startups or it’s maybe the dentist or the doctor down the street who wants to write a $25,000 check and then feels like they need to give you a bunch of business advice about your start up.
That’s not what you want. You want business advice from the smart people, the venture capitalists, potentially high net worth individuals if they were entrepreneurs. You want advice from them. I guess as a cautionary tale, it’s not going to help the asker here, but as a cautionary tale if you’re going to take money from friends and family, I would not only sit down with them, but I would put it in writing as well in an email, please realize that this is more than likely to go to zero than do anything else. It is also, if it’s going to do anything else, going to take me 7–10 years. That’s typical liquidity for venture backed startups.
I’m just going to throw that number out. For bootstrappers, that’s actually quite a long time for someone to run a company, but I would just set the expectation. It’s really far out. The go to zero part, what’s so interesting is the venture capitalists and high net worth individuals are like whatever, because (a) they probably already knew that. They did not expect money out of a startup in three years. And (b) they have a portfolio of investments. How much do you want to bet, they don’t have one startup investment. They have 10, or 50, or 100 and you’re one of many.
Friends and family, again, the trouble with it is exactly that. If they write you a check and it’s a chunk of their net worth, everything’s riding on that. If it doesn’t win, they lose a lot of money versus if they had a portfolio of 10 or 20, which realistically if you’re going to get into angel investing that typical advice is, you don’t make a lot of small bets. If you have $25,000 to invest in startups and you’re accredited, make 25 $1000 bets, or 10 $2500 bets because you just don’t know which of these is going to hit.
Craig: Maybe applicable to this but just curious, for me the return expectation for an early-stage angel investor is double their money. I’m just reading between the lines here. This is maybe not a unicorn business, which is totally cool. We’re not either, but we’re hoping to double our investors’ money. I think that that’s a fair expectation. For folks who maybe are earlier on the process of just talking to angels, that’s what they should expect and a good outcome.
Rob: Angels who are used to venture investing, they want it to go to zero or 100X usually. There are certainly more angels like a lot of the TinySeed LPs who would say a 5X or a 10X return is good because there are a lot of downside protection in SaaS because the value usually doesn’t go to zero. If you build anything of any revenue these days, you can sell it. I don’t know of angel investors who would be happy with a 2X return. Usually, in my head 3–5 is the more sure bet, the more sure thing, but also it’s a lot of individuals.
You and I are just generalizing across a bunch of people and some people are fine with a really not risky bet. Because betting on a SaaS company, once they’re north of $1 million and have a pretty consistent growth rate, there are not many bets I know that are as sure in the space. Certainly buying individual stocks is not. I don’t think it is as predictable as a return. The downside protection is really strong.
Anyway, question-asker, I think Craig’s advice is probably correct. If I were in your shoes, if I was still interested in the business, I would continue to run the business. I would focus on growth. I would focus on getting investor returns, but also focus on getting me a return for the years that you put into this business.
To walk away from it now and walk away with nothing because some people want money, and I get it. Friends and family can be a pain in the ass and they can ruin your thanksgiving. Some people don’t take friends and family money because of it, but the right decision, the non-emotional decision is to keep going and hopefully provide them with a return and you as well but definitely feel your pain. It sucks to be in a predicament.
The next question is actually From Twitter. I had posted a few weeks ago about topics for Courtland Allen and I to discuss. There were 30-something topics and we covered four of them. I just pulled this one down because I feel like it’s a quick one. “Do you guys have any resource recommendations for accounting software for founders? It’s a boring topic but it’s essential when you do actually start making money.” What do you think?
Craig: We’ve used Bench for a long time all the way back to the PodcastMotor days and it’s really great. I think that we are just getting to the point where we might need something more at this point, and that’s a whole other topic. I don’t have a recommendation for whatever the next step is after Bench, just to get a little more sophisticated and fine-tuned or fine-detailed accounting, but it is accounting software and a service in one. It’s about $150 a month and I think it’s great until you get to (say) $1 million. I think it does everything you want it to do.
Rob: For me I use Xero. I believe they’re an Australian company and they basically went after QuickBooks Online and they said we’re not the QuickBooks Online. We are not the crappy version of that. They import from all the credit cards and all the Stripes and PayPals and all that. Then I have an accountant/bookkeeper who monthly logs in and does the reconciling. Bench has it built in where they have people on staff and I don’t know if Xero does or if you just go to their page with a bunch of freelancers and hire people. But if you’re just looking for software, I think either of those is a great resource.
Next question, “How do you build in a competitive market as a solo founder? Example, a community platform, social media tools,” and he didn’t say it, podcast hosting. I’m throwing it in there. I picked this one out just for you. How do you build a competitive market, sir?
Craig: I think that the couple of things that I would really keep in mind are first of all to have something that’s different. For us it was our integration with WordPress early on. Now it’s how we think about and how we integrate with other tools around private podcasting. Those are the two things we hang our hat on. You can easily say we’re podcast hosting for people that do X, or Y, or want Z. That’s just really easy because then you can be really opinionated on your marketing copy on your website, where you stand in the market, and how you talk to potential customers. That’s the easiest not knowing where the question asker is coming from.
I think the other one that’s really powerful is early on, especially the founder having a really strong brand. I think that scales to a point and then doesn’t anymore. It is a really nice advantage to have early on. I think I had a personal brand we started and that helped. There certainly are people that have bigger ones. That just helps you get off the ground, but I think just being as opinionated as you can, your positioning, stance, messaging, and everything is the easiest way to stand out.
Rob: You’ve touched on one of the four advantages for faster SaaS growth that I had named in this talk that I did four or five years ago, but it was having an audience, having a network, being early to a space which, while there’s competition—that one doesn’t apply—and owning a unique traffic channel. I think any of those can help you in a competitive space.
I liked your mention of private podcasting because that’s essentially a unique position that you’re taking. You’re being opinionated in your copying and you’re positioning Castos as different from all the other players. You’re carving out this corner and if you want public and private podcasting, you come here.
I think I’ve harped on this a lot with Mike Taber, when he comes back on the show of what do you have that’s unique in your startup? You either need unique positioning or you need to own a traffic channel. I’ve seen entire businesses built on buying a WordPress plugin and owning that traffic channel, or being really good at SEO. We see SignWell doing quite well, but he’s competing against DocuSign and all these other e-signature things.
He does have some unique positioning. This is Ruben Gamez, the founder. He has been on the show many times. He has some unique positioning but really without owning that traffic channel. I used to call it a proprietary traffic channel, but that’s not really what it is. I’m really good at this or I own, like I said, an add-on for an ecosystem and I rank for this traffic.
So there’s unique positioning—we’ve touched on—audience network, and owning a traffic channel. The one other thing that can help you and I don’t know if on its own if it’s enough, but it’s having a big incumbent that is hated. Having a QuickBooks for Xero to go against. Having an Infusionsoft for Drip to go against. Having—
Craig: Having Libsyn for Castos to go against.
Rob: Yes. Where people are, I use this thing and the incumbent is such a pain in the ass. It’s like, we are not that. We are that that doesn’t suck. That’s your headline. I hear this with, I think Intercom. Intercom is a good product and offers all kinds of stuff, but what they’ve done with their pricing, they’ve gone so far up market that I’m still shocked that no one has come in underneath them.
I hear people complaining about Intercom and yet, where is that? Where’s that upstart who’s going to come in and take out the, not the bottom end of the market because that sounds like your bottom feeding but I do think there’s room in the spaces where the money’s in the enterprise and they just keep going up, up, up, up, and it leaves room for you to sneak in as a starter founder.
Craig: I got just two things to piggyback there. One, I think Userlist has a really good chance of capitalizing on Intercom’s move up market. They’re a great tool and add a lot of really cool features that are addressing the needs that people who would use Intercom have. I think that that’s one to watch out for. I agree, I think it’s an enormous opportunity.
A recommendation for resources on positioning is a podcast called Everyone Hates Marketers. Louis there is a friend and a customer of ours. I’ve known him for a year, but just really strongly positioned himself and talks about this a lot and is just a really good resource for folks who want to say, how do I stand out in this market? He definitely does sink in.
Rob: I’ve been on that show. I was on it a few years ago. It was cool. Last question for the day. When do you buy versus build tools that you use in your business? I’m thinking this one is a softball, but I think we’re going to agree. When do you folks at Castos build versus buy tools?
Craig: We almost never built. Do the math on it. Josh Pigford had a great blog post about this from Baremetrics. It just almost never makes sense to build it in-house, unless it is really integral to the day-to-day customer experience of your application. I’m talking just SaaS specifically, but what I wouldn’t do is take people off of my platform onto the Stripe-hosted checkout page to check out or to cancel their subscriptions. I want that in-house. That’s a really specific example. Basically, anything else you use to run your business should integrate or Zapier-connect to what you’re doing and you shouldn’t have to build any of it.
Rob: Yup. That’s pretty much it. Whenever I used to hear people say we’ll just build this in-house. They’ll be talking to potential customers with whatever SaaS I happen to be part of or advising, or whatever, it’s like they have no idea. Developers think you can build… SavvyCal, it’s just this link. I’ll build Drip in a week. That’s what we think until you get to the DevOps and the security and the spam. It’s endless. It’s really hard. Build Castos in a week. I can just host some flat files on the server. Yeah, but then there’s no CDN. Okay, so now I’m going to have a CDN. Okay, but no you don’t have X, Y, Z.
It’s just this endless thing. There’s a reason that you have a team of 14 people working on a product that some developers somewhere thinks they can build in a weekend. The same thing, if you want to get onboarding stuff to Appcues-type stuff into your SaaS.
At Drip when we were going to do this, one of our developers said why don’t we just build it in-house? I’m like, because then we have to maintain that product. You have to make it, so marketing and customer success can come in and update it. Do you want to build and manage a WYSIWYG editor? Then they report bugs and they go to you? Because I don’t want to pull you off the core product that’s making us millions of dollars to maintain this other thing that we can pay $200 a month, $500 a month. It’s crazy cheap compared to your salary
Also I think as developers, as a recovering developer myself, we just think we can hack everything together. It’s usually not the right choice. Usually, the right choice is building things that provide value to your end user.
Here’s when we used to have to build everything was in 2005–2007. You’re building a SaaS app. There was no Zapier. There was no Stripe. There was no Appcues. All the stuff we rely on today is great that we have this ecosystem. I know it’s expensive and I know we get subscription fatigue. I’m sure you’re like $10,000 a month in a $50 a month app.
Craig: Why is my American Express bill four pages long?
Rob: Exactly, and it’s because of that. But you know what? If you didn’t have that, you would need another developer or two to build and maintain crappier versions of all of that just for you. We live in an amazing time I think.
Craig: I think that the next level topic with this is leverage of your time. Just paying Appcues $800 a month lets you not worry about it and focus on other things. The kind of rotation you’re talking about is not maintaining this thing but letting you, your developers, your team, and your support folks all focus on really important things that move the ball forward in a meaningful way, because it’s worth way more than that $800 a month to those folks.
Rob: Yes indeed, sir. Thanks again for joining me on the show today.
Craig: Good time. Thanks Rob.
Rob: If folks want to keep up with you, you are @TheCraigHewitt on Twitter. I’d like to recommend your audience a podcast. I know Matt’s doing a lot of the hosting there now, but audience, it’s legit. If folks are into podcasting and want to hear about the creative process, episodes come out every week. I’d encourage you to go check that out. And of course castos.com, but that almost goes without saying. Thanks again, Craig.
Craig: Thanks Rob.
Rob: If you have not checked out Craig’s podcasts, they are two shows that I listen to every week, Rogue Startups and Seeking Scale. I recommend you check them out. Thanks for joining me every week on the show. We are approaching episode 600 and I believe next month, we’ll be 12 years of Startups For The Rest Of Us. I’ll be back in your ears again next Tuesday morning.