Episode 707 | Once.com, Open Source to FT Income, and More (Hot Take Tuesday)

Rob Walling:
It’s another episode of Startups For the Rest of Us. I am your host, Rob Walling, in this episode of Hot Take Tuesday. Einar Vollset and Tracy Osborn join me to talk about once.com, to talk about how a company sold for half a billion dollars and the founders got nothing, at least according to this article. A developer who went from open source to a full-time income. Then we give some book recommendations and have a lightning round of reactions to controversial startup opinions. Before we dive into that, I want to let you know it’s your last chance to get tickets to MicroConf Atlanta. The event is April 21st through the 23rd. Speakers include Rand Fishkin from SparkToro, Asia Orangio from DemandMaven, Stephen Steers, myself, and Dr. Sherry Walling.
It’s going to be hosted and emceed by me and Lianna Patch of Punchline Copy. I’m also going to be doing a fireside chat with Ben Chestnut, the co-founder of Mailchimp. He does not do very many public appearances, and so I’m very excited to host him at MicroConf this year. Microconf.com/us, if you’re interested in grabbing tickets. Again, tickets are going to sell out soon, so if you’re thinking about joining me and about 225 of your closest bootstrap founder friends, head to microconf.com/us. And with that, let’s dive into Hot Take Tuesday. Tracy Makes back for another Hot Take Tuesday.

Tracy Osborn:
I’m ready to fight with Einar.

Rob Walling:
Yes, it’s going to be great. Einar Vollset, thanks so much for joining us.

Einar Vollset:
Thanks for having me.

Rob Walling:
We have some nice, fun, not at all spicy topics to jump into today. Kick us off. Once.com from 37signals. They’re basically saying, “It’s not software as a service, it’s just a software.” No subscription. You download the code, you set up your VM, your virtual machine or whatever it is. I’m sure they have, what is it, Docker containers and such. But is one-time software the best thing since Clippy, best thing since [inaudible 00:02:14] shooting first? Tracy, I want your opinion on this.

Tracy Osborn:
I think it’s good to have options, but I think there’s a reason why the world moved towards SaaS. And you’re looking at once.com and their first product, Campfire. For anyone who has a technical team who wants to dive in and do everything themselves, then this is a interesting idea to replace Slack. And for folks who just don’t want to go in that direction, again, having the technical teams to do this because Campfire says, “Free updates to any 1.x version.” So that means that updates are going to end at some point. And it says, “Bare bones support included.” So there might be support, but most stuff you’re going to have to figure on your own.
This is why, for most folks, a SaaS product makes more sense for them even if it does have that subscription model and that idea they’re going to be paying for it forever and dealing with price increases and all that. I have other things to say about the product itself, Campfire, but I’m glad to see there’s other options. I can see that this being intriguing to a lot of folks, but not the majority of folks, and that’s why people are paying out the butt for things like Slack.

Rob Walling:
Einar Vollset, are we pivoting TinySeed to invest in one time sale software?

Tracy Osborn:
Why are you asking him?

Einar Vollset:
No. No, we’re definitely not.

Tracy Osborn:
I have opinions about that too.

Rob Walling:
We’ll come back to it.

Einar Vollset:
I think part of this grows out with how after the Slack acquisition, we’re now basically on the Salesforce pricing type in the Salesforce pricing world. So that means just going to get more expensive more quickly as we’re finding out with MicroConf and TinySeed. People get shocked when I tell them what our Slack bill is just for TinySeed and clearly there’s space there for… I actually think Slack itself has sort of failed at, or maybe by choice, but certainly they don’t cater well to this type of community. Not really like a business and not completely volunteer, but this halfway house where you want some of the features, but it really doesn’t make any ton of sense to be spending 50 or a hundred grand just for Slack software. And something like ONCE comes along. And if it’s good enough and you pay $299 once or whatever the price is, then certainly that’s very attractive from a consumer standpoint.
I sort of echo most of the stuff that Tracy says. I think maybe the Basecamp guys are in a unique position, whether they realize quite how unique their sort of position with the fame and their whole… It feels to me their whole marketing approach has been contrarian takes as marketing. That’s sort of been Basecamp stick, so it doesn’t surprise me that a pricing effort like this comes from Basecamp. As much as I love them, I know that they probably get a lot of attention every time they say something unusual or different, so that fits in with that pattern more than anything else, I think. I don’t think it’s a winning formula for your average startup indie hacker, bootstrapper, TinySeed founder to be like, “Oh, screw it. Let’s not charge $250 a month or whatever. Let’s just do $300 once.” We’re already struggling hard enough to get founders to charge enough money of the value, like charge enough so that they capture some of the value that they create. If this becomes a, this is our standard, then that becomes even harder, I think.

Rob Walling:
Yeah. For me as both a founder and as a customer or consumer of software, I don’t want ONCE. And I get it, my opinion, I’m doing mere research instead of market research, but I used to own downloadable software that ran on a server, it was called .NET Invoice. And I will never go back because the headache of support was brutal. People would install it. And people would install it on their own server or on a GoDaddy shared hosting account and it wouldn’t work and it was their problem. They didn’t care it was their problem. They would flame me, they would charge back, they would ask for a refund, they would do whatever. Even though I was like, “Look, it’s your thing.” So then I’d spend an hour or two troubleshooting finally be like, “Oh, your server’s misconfigured here,” and they’re like, “Oh, sorry,” and then they’d fix it. And so two hours of my time for a $300 one time, although it was-

Einar Vollset:
Rob the IT consultants. That’s great. I’m sorry. You missed those days, don’t you?

Rob Walling:
Not at all. And it wasn’t recurring, right? It was 300 one time and then I got 20% annual maintenance, right, so $60 a year per. And I don’t want to do that ever again. I know this long slow SaaS ramp of death is a thing, but also it’s recurring and it’s my servers. And if there’s a problem, I’m responsible for it, but it’s my servers and I know that they’re configured. I know that ONCE says, “Minimal support,” but it’s like, yeah, but come on, people are still going to flame you. They’re still going to charge you back. They don’t give a [inaudible 00:07:10] when you say minimal because they’ll be convinced that it’s your bug. It’s your bug, and then guess what? It’s not, but they don’t care, right?

Einar Vollset:
Right.

Rob Walling:
Because people are idiots on the internet. And so I don’t want it as a entrepreneur, I also don’t want it as a consumer. I would prefer to just please just handle this. I don’t want to spend above, like I have enough trouble. We have a couple apps written in Python and I’m always like, “Where are those hosted, dude? Does anyone have access to those? What if they go down?” It’s like, enough that we’re be… Tracy [inaudible 00:07:38]. So, I don’t know. For me it’s like, as you said, I think it’s a contrarian thing. I think it’s an interesting experiment. I do not at all see that it’s where the market’s going.

Einar Vollset:
Basically, the way that I think about it, you’re basically building in a 100% monthly churn. I spent so much time thinking about how to reduce churn. The fact that you would design your software business model in a way that, “Hey, let’s have a 100% churn every month.”

Rob Walling:
And with .NET Invoice, the first of every month I had zero in revenue and I was like, “I got to start from nothing.” The only thing that worked was if I had ads running or SEO or some recurring traffic source, that was the only way to maintain. For me it was single digit thousands in revenue. Tracy, back to you.

Tracy Osborn:
It doesn’t make sense as a business model in our opinions, I guess for 37signals. It doesn’t make sense for large teams that are using Slack or Teams to switch to something like this because of the lack of supports. And I have some issues with the user experience. I’ve tried it out, I didn’t like it. So this product really only works for maybe small, very savvy tech teams that want to have control of their software and how many of those are out there and what’s going to stop those people from doing something else like Slack free or Discord or anything else? It just doesn’t seem like this is a problem where we’re like, “Okay, Slack is super expensive. It’s awful. People don’t like it, they want a solution for this,” but I don’t see this one being the thing that fixes that problem.

Rob Walling:
I heard Ian Landsman on a podcast, I forget what it was, but he was talking about the launch of this Campfire launch with ONCE. And I can’t find the source of this, but he said that they had sold 800 copies in the first week. 800 times $300 is a quarter million dollars. With 37signals reach, 800 copies just isn’t that much, and it’s not… Look, I know how one time sales go. The first week is the big week and then it goes down from there. It usually doesn’t go up, especially if it’s audience based. So it feels to me, I mean, $250,000 in revenue for them is a rounding error and it doesn’t feel like a success. That doesn’t feel like a success. It’s like, I don’t know. I would think they would need to move a lot more copies for them to be over the moon.

Einar Vollset:
You should get the Basecamp guys on here to ask them how it went.

Rob Walling:
Yeah.

Einar Vollset:
That should be, come on. Yeah, just invite them on and talk about it. Why not?

Rob Walling:
Yep, they’re TinySeed mentors and investors, so.

Tracy Osborn:
Yes, and we love them. We love them for that. I want a product like this to work, but it’s like when you really dig into the focus that would use it, the product itself, the way it’s sold, there’s a lot of issues they’re going to run into and they probably have our already run into at this point. Because I actually haven’t heard many people talk about it since it launched either.

Rob Walling:
No. For a second topic of the day, I go to fundablestartups.com. The headline is, Sell for Half a Billion & Get Nothing, and the summary is that FanDuel was acquired for 465 million in cash, but due to liquidation preferences, the FanDuel founders and most employees received nothing in the massive deal. And I’m going to kick it to you first on this one. Can you let our listeners know what liquidation preferences are and what happened in this deal?

Einar Vollset:
Yeah, I don’t know specifically what happened in this deal, but as a general concept, liquidation preferences are basically this notion that if an investor invests in your company, say they put a $100,000 in and they have a 1x liquidation preference, what that means is basically that when you sell, they get at least a $100,000 back if there is at least a $100,000 back if it’s a 1x liquidation preference. If there’s a 2x liquidation preference, then they get at least double their money back. And if it’s 3x liquidation preference, then they get three times their money back. And there are some nuances beyond that too in terms of like, is the liquidation preference participating or non-participating? So a non-participating 1x liquidation preference means the investor basically has to choose, do they want 1x their money back or do they want to participate in relation to how much they owe of the company?
So obviously, if the transaction is at less than the valuation, they’ll exercise their liquidation preference and get their money back. If it’s larger than that, then they will choose to participate alongside the investors and not get a liquidation preference back. If it’s participating, then they get both. So that means if it’s a 3x participating, liquidation preference means you get three times your money back as the investor and then you participate based on your pro-rata share of the equity. If you don’t know what you’re talking about, if you don’t know what you’re doing, then it can be to the point where sort of unintentionally you didn’t even realize that actually the investors are getting their share plus 3x and you didn’t know that, and that might materially impact the actual money that you put in your pocket at the end of the day.
With this one, I saw this come around for some reason it was back on Twitter the last couple of weeks and I was always like… The headline was this, “Here’s how you sell your business for a billion dollars and make zero.” And I was like, “There’s just no way on God’s green earth that’s actually accurate.” So usually what happens in these kinds of situations is you’re selling for less than the liquidation preference or your latest investors. But a lot of the time, most of the time, and also in this case you want the existing management team and team to stay on because if truly all the money does go directly to the investors, then what’s the point of keeping working there? You might as well just quit and then the company gets run into the ground.
So usually, there’s this notion of a founder or management carve out as part of the transaction. So if they’re selling for 500 million, they might carve out 50 million of that and say, “Okay, 450 goes to the investors and they’ll do whatever they need to do in terms of their liquidation preference or whatever, and then 50 gets carved out as retention bonuses or whatever for the executive team.” Now what seems to have happened here is that the people who truly got zero are the original founders, but those original founders were no longer with the company. And that I can believe, if you are a founder and you basically signed a deal like this and you brought in whatever money, I think it was 275,000 in their latest Series E round and then you walk away, then yeah, I can definitely see how with the 2x liquidation preference, which is high but not [inaudible 00:14:10] or anything like that. I can definitely see how you end up with nothing.
But I think what’s also been lost in that situation is there’s also no way that those founders didn’t get a bunch of money at that Series E. So the founders who walked away, I just do not believe that you get in a situation where you’re raising a 275 million Series E from private equity and family office money and you give up control. And so basically, you agree to 2x liquidation preference and drag along rights and then you take no money off the table as part of that transaction, that I don’t believe. I’m sure that the founders who are now suing already got paid a reasonable amount of money in 2015. I’d be shocked if not, and if not, then they are stupid and their advisors are even worse.

Rob Walling:
And so people listening might say, “Well, there should be no liquidation preferences. Those are predatory,” but they’re not, right? So when TinySeed invests, if we write you a check for $120,000, we have a 1x liquidation preference. And what that means is if tomorrow you were to sell your company for $200,000, we get our 120 back and then you get the rest. And it’s to protect us, because let’s say we invest that 120 for 12%, if we didn’t have a liquidation preference, you could sell it tomorrow for $200,000 and we’d only get 12%, we get 24,000 back, so you could just screw us. So that’s the case at least I know why they exist.

Einar Vollset:
Yeah, there’s a balance there, right? You have to have some level of investor protection, and different investors just have different rights and different approaches to things. We have zero liquidation preference in part because we invest in so many founders. So we have the full spectrum of personalities among our founders, and it just doesn’t make any sense for a professional investor not to have at least a 1x nonparticipating liquidation preference, which is what we have. But there are other investors who basically have 3x liquidation preferences. Yeah.

Rob Walling:
Tracy Makes, what are your thoughts on this?

Tracy Osborn:
I wish I had Einar on my team when I was back the day at my startup and I was joining a accelerator and trying to decide whether I was going to take outside money. I talked about this in MicroConf 2016 is how I met Rob because I started this startup and I bounced back and forth on raising, thinking I was like, “Oh, I’m going to raise money.” And then I was like, “No, I’m going to go back to bootstrapping.” And what actually happened is I raised money from this accelerator. A friend told me that this accelerator had, I want to say at least a 2x liquidation preference might’ve been three, and they were like, “FYI, this could cause trouble in the future.”
I was dumb back then. I was like, “Okay, I’ll sign this anyways,” deciding not to raise money and going to bootstrapping. When I wanted to shut down the business and ideally I would like to sell the business so that I can move on and do other things like join TinySeed. Because of those terms and liquidation preference, and because I hadn’t raised money and because the company was, I couldn’t just as a bootstrap business be like, “All right, cool, I’m sticking myself a $20,000 sale and have some money from that,” but no I had this liquidation preference, I had this investor on board, all these old terms. I would have to pay back two or three times what they invested in me before I would see anything.
So I just had to shut down the business at that point. I got so many emails from people being like, “Why can’t you just sell the business for peanuts and get a little bit of money?” And I was like, “Because I won’t because of this prior investor and the liquidation preference and all that stuff.” So it’s anecdotally, but it’s now I know more about terms and what to look out for when raising money. And hindsight being 2020, I wish that I heard for the great [inaudible 00:17:46], I could have negotiated that in some way, shape, or form, I didn’t do that. I just didn’t know back then. And now I understand how I got into that situation.

Einar Vollset:
Like a lot of founders they just look at the top line number, how much money am I getting in?

Tracy Osborn:
Yeah. Money.

Einar Vollset:
What’s the valuation and the story? And then they’re just like, “Whatever. Everything else will work out. We’ll just make a ton of money and then it doesn’t matter,” but it does matter. And really investor behavior and their terms particularly early on really matters. It can materially impact your ability to fundraise. It can materially impact your ability to sell the company. There’s lots of things with just making sure that the terms that you’re getting are reasonably balanced. It doesn’t have to be super founder-friendly because that 0x liquidation preference doesn’t make any sense either. But finding the right balance there I think is key.

Rob Walling:
And I could see an indie hacker posting this on Twitter and saying, “See? Funding, never raise funding. It’s the devil.” And it’s that’s not the lesson either, right? Funding is a tool. You don’t say that a hammer or a shovel is a tool, but understand when they work and when they don’t and understand what you’re getting into, understand which strings might be attached, educate yourself, hire a good lawyer and don’t just sign paper because funding can get you there faster. And we see this with TinySeed companies every day, so it’s not that it’s good or bad or indifferent, it is just a thing. And yes, there are predatory investors out there. There are really [inaudible 00:19:12] founders who try to screw their investors too. It cuts both ways. And so, that’s where liquidation preferences are a thing that’s part of the ecosystem.

Tracy Osborn:
I think it’s not just understanding the term, but also understanding different scenarios about what those mean. Because there are scenarios where a certain term could make sense and there’s scenarios where certain terms that don’t make sense and just being aware of where those are or will make the future less. Make it easier to plan for the future because you know what direction to go to based on the terms that you have. There is a book… Einar, don’t talk about books later, but I want to talk about, what was it, the book Venture Deals: Be Smarter than Your Lawyer and Venture Capitalist by Brad Feld, that was something I read post my investment in my prior startup that I wish I had read before I took that investment. Because people told me it was predatory. I thought I understood it, but that broke things down in a way where then I really understood what those scenarios meant for me.

Rob Walling:
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Our next story is titled, How I Turned My Open Source Project into a Business. It is the business of email engine. And for me, I mean, it’s an interesting story. Most people who started an open source project are not able to build a business around it. I believe it might even be supporting him full time, but the interesting part for me was he had the open source project and then it was under the AGPL license, which is extremely permissive. And then if you wanted an MIT license, then you had to pay him and it was €250 per year and basically he was making nothing. Like a year and a half, he made €750 in total revenue.
The big shift was basically saying, you need a valid license within 15 minutes after the app where it stops working. So he actually implemented what we would think of as a time-limited SaaS trial, and that instantly changed the whole game. He changed it from almost a donation model, right? It’s like, “Hey, can I have tips? To like, you need to pay to use the software?” Oh yeah, I guess he says at the end, the current MRR is €6,100 and growing steadily, which in Estonia where he lives allows him to pay himself a decent salary. So it is a full-time income. So Tracy, what’s your take on this story?

Tracy Osborn:
This is a fun topic because I have a lot of friends that are in the open source industry and I actually read this article and decided to ask a few friends, and I honestly don’t think that the licenses were the biggest factor here. It’s actually the founder or the creator of this service moving from a, “If I build it, they will come type,” of product to doing essentially sales. Because they talk about raising, they setting the price and they set a way for that they can get that money in and then they increase the pricing. And it’s all those kinds of things that we’ve talked about with founders just in general about, you can’t just build something and hope that people are going to send you money at some point. You have to be thoughtful about your pricing and how people are going to be using your product and do that sales stuff. That was the biggest difference. It wasn’t the changing of the licenses, it was the changing of how this person was selling and looking at the product through their own eyes.

Rob Walling:
Einar Vollset, what are your thoughts?

Einar Vollset:
My thought this is still probably vastly underpriced and he should probably 10X’s prices overnight. That’s what I think.

Rob Walling:
That’s what it feels like to me too.

Einar Vollset:
I mean, stuff [inaudible 00:23:35] around here. He already says it in the thing, 250 a year became 495, became 695, became 795, and finally 895. I’m like, “Brother, how about trying adding in a zero and see how that goes?”

Rob Walling:
There we go.

Einar Vollset:
Why not?

Tracy Osborn:
It’s [inaudible 00:23:47].

Einar Vollset:
What’s the worst that could happen?

Rob Walling:
Inspiring words from a man who knows SaaS pricing. Yep, that’s part of the TinySeed playbook, the not-so-secret part of raising prices. As we move towards wrapping up, I would like to get a book recommendation from each of you, and then we’re going to do a lightning round called Agree or Disagree, and it’s based on the Twitter thread that I started, which is what’s your most controversial opinion about building startups? I got 150 responses to that. I’m probably actually going to cover some of them in depth on a future podcast episode, but we’ll bounce through some of the spicy takes, controversial things, and I want to hear from each of you. Before we do that, Tracy Osborn, do you have a nonfiction book recommendation for folks?

Tracy Osborn:
All right, so in addition to Venture Deals, so if you ever want to raise money or you want to learn about these terms and things that go into taking a venture capital, definitely get Venture Deals by Brad Feld. But the other one I wanted to mention is a negotiation book by Chris Voss, Never Split the Difference. I have so much trouble with negotiation. I don’t like being in a position where I’m arguing against someone for my own benefit because my brain melts into a puddle and I get anxious and all that stuff. And I think this book really helps redefine how negotiation works in a way that really works for my brain, where a lot of it is taking that negotiation, having empathy for the person across the table, but then using that empathy to get what you want and that resonates with me.
So it’s not a fight back and forth when you’re negotiating. It’s seeing from their perspective, bringing up that perspective to that person as you’re going through the negotiation, finding that middle ground. It’s called Not Never Split the Difference, which I think is anti-middle ground, but it was a book that was really useful for me to understand a better way of negotiation.

Rob Walling:
And you also had a fiction book that you accidentally pasted in because you misread it. We might as well just throw that out as a bonus.

Tracy Osborn:
I read more fiction books than I do nonfiction because that was my way of turning off my brain from work, and I probably read about a book a week. Best book I’ve read fiction-wise recently is the Anomaly by French author Hervé Le Tellier. I hopefully I’m saying this correctly. If anyone wants a cool fiction book with beautiful writing, I would recommend just trusting my recommendation and don’t read the description of the book because it has a spoiler, and I think that the journey on that book is worth it to start completely scratch. Make sure you go through the first five chapters. It’s going to seem weird in the beginning, but I think it’s worth it. And I think it’s a good way to turn your brain off of business and read something fun and be transported to another world.

Rob Walling:
Einar Vollset, what’s your book recommendation?

Einar Vollset:
Oh, given that Tracy somehow managed to put three in there, I’m going to push with a combination of things. So, I really liked The Art of Learning by Josh Waitzkin, which is he was this chess wonder kid who also ended up becoming the world number two or world champion in some sort of an Asian fight sport thing that I don’t exactly recall now. He’s a very interesting guy. He’s this consultant to a high performers now and he talks about his approach to learning and how he coaches people on that. So I really like that one. And it is also just a good story. It’s pretty biographical about his growing up and him going through both the chess and the martial arts world.
That one’s good. And then I like a more philosophical book, which is David Deutsch’s, The Beginning of Infinity, which doesn’t really have any takeaways shape or form, particularly as it relates to B2B SaaS. It’s just an interesting way to think about the world that I think counters a lot of the… I think there’s an inherent negativity bias in the world in general. People are pretty convinced that finally, now here we are, it’s going to end very soon because we’re all [inaudible 00:27:30], versus this is the opposite and antidote to that, so I like that a fair bit.

Rob Walling:
Well, since you each gave a few recommendations, I won’t give one this week. People have heard enough from me. I had one, but I’ll table it for now. Now, I want a lightning round this, agree or disagree with these controversial opinions about building startups. We’ll start with Tracy. It’s from Dominic Mon, “Most developers get a better deal sitting it out in big tech.” Meaning instead of becoming a founder, sitting it out and working for FAANG or something, what do you think?

Tracy Osborn:
I mean, is money the only thing that matters or is working on something that’s interesting and challenging and having time freedom and all those other things? It’s like big tech works if you want to just make a whole bunch of money and then potentially be in a situation where you’re working on 09:00 to 05:00 and that’s it. But startups and they’re riskier, but it might be more challenging and more fun in different ways.

Rob Walling:
Einar, what do you think, “Most devs get a better deal sitting it out in big tech.”

Einar Vollset:
Yeah, financially speaking, most likely, yes. I think the expected financial outcome for the median one probably is probably higher, particularly if you get a job at the FAANG in Silicon Valley. Those US type salaries. Yeah, I think so. What you don’t get necessarily is the freedom to do your own thing and potential for a significantly higher outcome than you most likely to get in FAANG.

Rob Walling:
Next tweet is from our very own Interval Set, “Product led growth is where founders too scared to do sales, go to hide.” Tracy, what’s your lightning round take on this?

Tracy Osborn:
I mean, I’m drinking the TinySeed Kool-Aid at this point, so that comes straight from Ainar. I can’t disagree with him.

Rob Walling:
Yep. Ainar, you care to elaborate on this?

Einar Vollset:
I just agree with myself. I think it’s a very wise thing to say. I think in general, this Twitter account really truly is just quality after quality tweet nonstop.

Rob Walling:
Where’s the thumbs down? It is next to the heart, there should be a thumbs down. I want to dislike this tweet just because you said that.

Einar Vollset:
There’s a mute button, surely.

Tracy Osborn:
This relates to the open source stuff where there’s folks who want to build something and are like, “If I build it, people will come. Ooh, product-led growth. My product is going to be so amazing that people are going to be throwing themselves at me to pay me money.” As we’ve seen with many, many companies in TinySeed that marketing and sales is incredibly important.

Einar Vollset:
Yeah. I mean, to elaborate just a little bit more fundamentally what I’m trying to say here is I don’t think people realize that how consultancy sales really is, how you can’t just throw things up there and be like, “Hey, go use it whenever.” Probably the highest value SaaS businesses actually requires the sales, which almost looks like consulting. That’s what I think a lot of the time.

Rob Walling:
Our next take is from [inaudible 00:30:21] and Speaker James Kennedy. His take is, “It is not actually that hard.” Implying that building a startup is not actually that hard. Tracy, what’s your take?

Tracy Osborn:
It’s just the bold. I guess when you look at-

Rob Walling:
Bolds statement.

Tracy Osborn:
The bold statement, when you look at something again in hindsight, I’ll go back to looking at my startup and I look back at what I did with Wedding Lovely compressing those nine years altogether, I would agree that it wasn’t that hard, but the day-to-day stuff can feel like the worst thing in the world. You can go through those dips that it does feel like it’s harder than anything else that you’ve done because you’re having a bad day, things aren’t going well. So I think it’s long-term perspective, it can feel not as hard, but in the short term it’s really hard to tell people that.

Rob Walling:
Einar, what’s your take?

Einar Vollset:
I disagree with James here. I think it’s extremely hard. I think mentally more than anything else. I see that with founders and we support this question and TinySeed, it’s a mental rollercoaster in a way that just going to work and just the stress of it too, particularly once you start having employees that you feel like you’ve got to look after and all that stuff. Yeah, I think it’s hard.

Tracy Osborn:
It evolves. It’s hard to say that hard because you’re looking at everything, but getting from zero to one is a challenge and then scaling that is a challenge. Then working with employees is a challenge. Then jumping into enterprise sales can be the next challenge. Then having your mindset, right, so you can sell your company is also a challenge. All those things do add up.

Einar Vollset:
I think in general, people underestimate. I think a lot of the time people think like, “Oh, as soon as I get to a million in ARR,” or whatever number or there’s some hurdle, then it’ll just be coasting and just executing more versus that’s not the case. There’s always fresh things. Start again, add new things all the time in order to keep growth up.

Rob Walling:
So do two of you know the definition of a lightning round? You’re not supposed to go back and forth. You’re supposed to just-

Einar Vollset:
Yeah, yeah, yeah. Well, whatever.

Rob Walling:
… weigh in with a quick thought.

Tracy Osborn:
We like talk big.

Rob Walling:
I’m never doing-

Einar Vollset:
Whatever.

Rob Walling:
… a lightning round again with you two. I’m going to replace the-

Tracy Osborn:
I mean, to be fair, this is lightning round compared to our normal discussions.

Rob Walling:
Really, really? Yes.

Einar Vollset:
Yeah, I’m glad you just… Come on. This is superfast.

Tracy Osborn:
We like talking.

Rob Walling:
Our final lightning round is a tweet from Caesar Halmasian. “Startups are a trap. Businesses are way better.” Tracy, are startups a trap and lifestyle businesses way better?

Tracy Osborn:
I don’t like going first. If I’m going to be truly lightning round, I want to hear Einar go first.

Rob Walling:
Einar.

Einar Vollset:
No. You say, [inaudible 00:32:55]. No.

Rob Walling:
Care to elaborate or shall we just move on to…

Einar Vollset:
No. I mean, I think are startups are trapped? No. Lifestyle is way better. It depends what you’re optimizing for. If what you want to do is just futz around and start seven different an info product and some e-commerce drop shipping thing and a couple of SaaS’s and buy something and a newsletter that you monetize and just to start, if that’s what you’re happy doing, that’s great. But if what you’re wanting to do is something bigger, make most likely more money, then startups can definitely be the way. But there are different ways to do that too, right? There’s a difference between bootstrapping a SaaS business that you’re hoping to sell for 20 million bucks compared to starting Open AI where apparently you’re going to raise $7 trillion and build Silicon in the desert, right? They’re just different things. I don’t think anything is better. I think it’s a good thing that Elon Musk decides that he’s going to build Tesla and go to Mars or whatever. That’s fine. It just is what it is. For him, there’s no better or worse, I don’t think.

Rob Walling:
Yeah, I’ve done both, right? I’ve had great lifestyle businesses. I’ve had what I would consider startups. I mean, I would do consider TinySeeds a startup, MicroConf a startup, Drip certainly was, and I fall into the startup camp. Lifestyle business is great and it got a little boring and just working 10 hours a week for making my money was, I wanted something where I could be more ambitious about it and where I could really have a purpose around it. And that I think is what the startups that I’ve chosen to build have brought in addition to monetary rewards that were far beyond the lifestyle businesses. Lifestyle businesses in the short term, of course, you’re making income net profit on it. It’s taxed at income tax rates, and if you exit a startup, right, usually depending on where you live, you get that long-term cap gains and you accelerate, you get 10 years of net profit, 20 years of net profit if I’m talking SaaS. But it depends on multiples and such, but you can really accelerate that earning. Tracy closing thoughts on this tweet?

Tracy Osborn:
Ditto.

Rob Walling:
Nailed it.

Tracy Osborn:
Nice. I just wanted to go there. Boom.

Rob Walling:
Einar Vollset, folks want to keep up with you. Einar Vollset on Twitter, you work on TinySeed. You also are the principal of Discretion Capital. So someone’s listening to this and they have a SaaS company doing at least 2 million ARR and they’re thinking about selling. You’re a sell-side M&A advisory, and they should reach out to you. Einar@discretioncapital.com.

Einar Vollset:
[inaudible 00:35:23].

Rob Walling:
Tracey Makes, you are Tracey Makes on Twitter. So your name is Tracey Osborn. So everyone knows, but I call it your nickname as Tracey Makes, so that is-

Tracy Osborn:
Because I couldn’t get Tracey Osborn on Twitter, so I’m now Tracey Makes, yes.

Rob Walling:
Yes. Tracey Makes on Twitter, tinyseed.com. Anywhere else you want to send folks?

Tracy Osborn:
I’m probably more active on the TinySeed social media accounts than I am on my personal one. So if you’re ever talking with TinySeed [inaudible 00:35:46] on Twitter, that is me. I hesitate to mention this because then people are going to look at it, but I am also trying to get a TikTok account off the ground and I couldn’t get Tracy Makes for that one, so I’m [inaudible 00:35:58].

Rob Walling:
What?

Einar Vollset:
Just in time for it to be banned.

Tracy Osborn:
I know, right? I need to get better at doing videos.

Einar Vollset:
If you get banned right after you launched this, then I’m going to blame you. I’m going to say Tracy, you brought down TikTok with you.

Tracy Osborn:
Yeah. Yeah, my little startup talking about negotiation and other little videos I’m doing took it all down. But itstracymakes on TikTok because that is another place I did not get my preferred username.

Rob Walling:
Oh, so it’s I-T-S-

Tracy Osborn:
Tracy Makes.

Rob Walling:
So, itstracymakes-

Tracy Osborn:
Yep, on TikTok.

Rob Walling:
… on TikTok.

Tracy Osborn:
Yep.

Rob Walling:
Amazing. And if you’re not following me @robwalling on Twitter and saasplaybook.com these days is probably my most recent effort that you should check out. Tracy, thanks for joining me for this Hot Take Tuesday.

Tracy Osborn:
Always fun.

Rob Walling:
Einar, thanks for coming around, man.

Einar Vollset:
Thanks for having me.

Rob Walling:
Thanks again to Tracy and Einar for joining me on this week’s episode. And thank you for listening this week and every week. This is Rob Walling signing off from episode 707.