In this episode of Startups For The Rest Of Us, Rob and Mike answer a number of listener questions on topics including the impact of GDPR, pruning e-mail lists, TinySeed and more.
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Rob: In this episode of Startups For The Rest Of Us, Mike and I talk about the impact of GDPR on mailing lists, keyword stuffing, shady competition, and more listener questions. This is Startups For The Rest Of Us Episode 422.
Welcome to Startups For The Rest Of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at building, launching, and growing software products, whether you’ve built your first product or you’re just thinking about it. I’m Rob.
Mike: And I’m Mike.
Rob: And we’re to share our experiences to help you avoid the same mistakes we’ve made. How did you like my announcer voice today?
Mike: It was great. It was very…
Rob: I was working on it.
Mike: Are you taking voice acting classes so you can announce movies and stuff?
Rob: A voice-over guy? I could be more annoying with it. I was trying not to sound like a radio DJ. What’s the word this week, man? What are you doing?
Mike: It occurred to me that last week you were giving me crap for forgetting the intro. I will remind you of the time in MicroConf Europe, we were on stage, you completely spaced on the intro.
Rob: I did, actually, and I can’t remember anything. That’s right.
Mike: It’s not just me. We’re both getting old.
Mike: Or not just you.
Rob: A couple of weeks back in episode 420 when Einar and I recorded it, we got on the mic, we recorded it, and after I hit stop he said, “Do you guys do one of these every week?” It’s super funny. I said, “Yeah, but it’s easier blah-blah-blah,” and I couldn’t tell if he was just saying, “What a slog this was.” It was just a funny question and I was like, “Well yeah, we do it every week. For the last four hundred 420 weeks we have done one every week.” It was just a realization. I don’t know. I think it may have taken a lot of energy or a lot of thought for him to kind of be there, to be on a podcast, for not used to doing it all the time, it can feel exhausting. Remember the first 20 or 30 of these? How hard they were? I would go take a nap after we record it because I was so stressed and so anxious and nervous and not knowing what to say.
Mike: For the four listeners that we had at the time.
Rob: Yup and then eventually that all goes away. That leaning into hard things and then doing things that scare you and getting better at them.
Mike: Yeah. I don’t know. I don’t really have a problem with just getting on and talking at this point. I’m not self-conscious about it but I also don’t think that there’s 300 or 3000 people staring at me while I talk.
Rob: Right. It’s definitely different than being up on stage. How about you? What’s going on this week?
Mike: Well, I got into a couple of extremely angry emails from people who are unsubscribing from a couple of my newsletters. I’ve gotten two separate ‘F off’ emails this week, so I think I’m doing something right.
Rob: Why do you think that is?
Mike: Well, one person I think—
Rob: You probably…
Mike: I think I have explanations for both of them. One of them, he said he unsubscribed three times. I looked and there was only one unsubscribe there. Either it just wasn’t working or he wasn’t actually unsubscribing but he thought he was. The way it’s set up is it takes you over to the unsubscribe page so you can manage your subscriptions but just clicking the link isn’t like a one-click unsubscribe. My suspicion is he didn’t actually do it right.
Rob: And there’s a big red button on that page that says, “It says you have not been unsubscribed,” and there’s a big red button that says, “Unsubscribe from all,” and you have to click that. Just so you know, there is a setting in Drip, you don’t need to do it but you could flip it so that the moment they click that one link in their email, it unsubscribes them from everything. We’d had people who want to do both ways which is why there is a setting. And I say we, I don’t work there anymore. But when we built it, I really tough time with that, dude. I still say ‘we’ all the time about Drip and it’s like, “How is it technically ‘we’ anymore if I’m not there?”
Mike: Usually, the way that I talk about it is, if it’s something that I want to “claim” responsibility for but somebody else is going to do it, it’s ‘we’ as in ‘those people. I totally understand that but I don’t know what the whole deal was there. And then the other one I’m still tracking it down. It looks like I got bad data in terms of the name and apparently he was extremely upset that I said the wrong name in the email. But the way I got it was that, so call them a completely different name.
Rob: Yeah, that’s weird. I mean, that’s the thing. You can’t please everybody and you get one or two of these out of thousands. Some people are just jerks or idiots or had a bad day. There’s a lot of bunch of different explanations for it.
Mike: Yeah, I’m not worried about it.
Rob: You bring up more to laugh about it than anything.
Rob: You must be doing something right. We have some new iTunes reviews. We’ve got one in October from Will and he said, “Both inspirational and actionable. Most entrepreneurial podcast fall either in the inspirational bucket or the actionable bucket, but rarely is a podcast both. Startups For The Rest Of Us is an exception to this.” We’ve got another review from Greech Jay. Man, his mom must’ve not liked him, Greech Jay? “Top notch,” it says, “Wow. Clearly brilliant and useful info. Huge value.” You think Greech Jay is just an online handle? Or do you think I’m mispronouncing it and it’s Greech or something like that?
Mike: No idea.
Rob: No idea, don’t care, huh? But thanks for the amazing reviews.
Mike: I didn’t say that I didn’t care. I just have no idea. I don’t have it in front of me. I can’t see how it’s spelt.
Rob: Are you eating something while we are recording?
Rob: Yes, you totally are. This is great. Ladies and gentlemen, Startups For The Rest—
Mike: …noon, so what do you want me to do?
Rob: That’s true, you’re starving. So, thanks for the iTunes reviews. If you have not left us a five-star review, I promise I will not make fun of your name and I will not say that Mike doesn’t care about you because I know that he cares about each and every listener. It would be great if you could log into the clunky iTunes interface, click the five star and leave us a sentence about, “Hey, these guys say things every week. Say something factual.” Even if you don’t like us, put five stars and be like, “Yeah, these guys really show every week.” That’s a thing, right? Five-star worthy.
Mike: I think the best five-star worthy, like you’re just showing up every single week for eight years. We’re going up on nine at this point, so that’s a lot of time, that’s dedication.
Rob: Yeah, stupidity.
Mike: And sandwiches.
Rob: There you go. We’re going to answer listener questions today. Our mailbag is full once again, which is nice. As usual, the voicemails went to the top of the stack. We’re going to start with a voice mail at the impact of GDPR on the value of mailing lists.
Paul: Hello, Mike. Hello, Rob. My name is Paul from Melbourne, Australia. Thanks for taking my question. You both espouse the value of developing and curating mailing lists. But I recently read an article from LeadPages, stating that, and I quote, “A required checkbox does not allow for freely given consent under the GDPR law. Therefore, it should be optional for a subscriber to consent to receiving marketing emails from you in order to receive a lead magnet, freebie, pay product, et cetera.” What do you think this means for the building of mailing lists going forward? And does this affect your view of the value of mailing lists in relation to the likely increase and effort required to develop enough traffic to make up for the loss of email signups due to this optionality? Thanks again and have a great day.
Rob: Thanks for the question, Paul. I appreciate that. I think you might be misunderstanding something. I just want to clarify that, “A required checkbox does not allow for freely given consent under the GDPR law.” That’s the quote you have and what that means is, if you force them to have the checkbox checked in order to proceed, you have not given them optionality. What that means is it needs to be an option when they submit your email for them. They put in their email, maybe their first name. But there is a checkbox there, I believe it has to be unchecked by default. That’s my understanding, not a lawyer, not a GDPR expert, but I believe it has to be unchecked by default, and you can’t force them to check it to submit the form. Does that makes sense? They should be able to submit that form. It doesn’t make any sense to me, but that’s how my understanding of the law is. If they check it and they submit it, then they have consented and now you can email them. If they don’t check it and submit it, then you need to figure out what to do with that customer because they have not consented to hear from you.
What they built in Drip—hey I just said ‘they’ finally—they’re kind of building it as I was leaving but I think they did a really elegant implementation and if that check, you can just add a GDPR checkbox. It’s a strongly-typed item in Drip’s settings and when you add it, if someone submits without that checkbox being checked, then they have a property on the subscriber that says, “GDPR permission given or something,” and that is either set to true, false, or unknown, and unknown is if they were added through other means, through an API or an import or maybe they were added before you enabled it or whatever.
But again, if they do check it and submit it, then it’s true and if they don’t, then it’s false. You as a Drip customer could just have a workflow or rule that says, “Anyone who’s added with it false, unsubscribe them from all, delete them, do something to get them out of your system.” Or you could keep them in your system, in the Drip account—I’m not sure why you would do that—and just make sure that when you send out an email to everybody that you exclude those subscribers from the segment.
Those are nuts and bolts that I’ll cover before. This question is not about that. It’s more about how do we think this is going to impact it but I kind of wanted to clarify that. I’m using Drip as an example because I know intimately the implementation. I think it’s a good one. I’m pretty sure MailChimp and ActiveCampaign and Infusionsoft have all done similar kind of related implementations.
Now, over to you, he actually had a question. What do you think this means for building of mailing list going forward?
Mike: I don’t think that it changes a whole lot in terms of building a mailing list but I do think it probably has an impact on what you do with it once you have those email addresses because you’re going to have to make a decision about whether or not you’re going to send them email or not. If they’re submitting it and they haven’t provided consent or anything like that, do you still email them anyway?
Rob: Isn’t it illegal if they’re in the EU? I mean, you’re breaking EU law if you do that, right?
Mike: Yeah, you are, or at least I believe that you are. The question is, do you care? I’m not saying that you should or should not, I’m not a lawyer here, you’ve got to make your own decisions here but at the same time, if they’re submitting that, what’s the instance your company want to take on this? Do you want to be hardline? You […] comfortably comply with GDPR and were going to take that extremely seriously and we won’t email you unless you click the check box? If you do that, it’s like organ donor cards. Whatever the default is, that’s what most people are going to tend to.
Me, I probably wouldn’t check it because I’ll be like, “Okay, it doesn’t apply to me. I’m not in the EU so I don’t have to click this checkbox and it doesn’t matter. I’ll just click and submit.” But does that mean that you shouldn’t send an email to me? And the answer would be, “No, because I live in the US. It’s not applicable.” But you as a marketer have to decide where does this person come in from? Can you figure that out technologically? And even if you can, where do they receive their email? Where are they actually based? Are they using a VPN? You don’t know any of that stuff.
I feel there’s still going to be some things that come down the line where some of these things are going to change a little bit, maybe GDPR is going to be modified to say that, “If you don’t get consent upfront, you can turn around and send them an email to ask for it,” and if you don’t get it then, okay fine. But that’s not really any different than double opt-in at that point.
I feel that with any laws that are written, inevitably they are never written by people who are technical enough to understand what they’re trying to implement. That kind of stuff is going to happen. Because this was the first pass of GDPR, expect there’s going to be many changes. I would hope that that’s one of them but I don’t know. Ultimately, it blows down to what is your risk tolerance moving forward with your company and how likely do you think you are to be brought to court for over something like that?
Rob: Yup, that’s it. There is a setting in many of the ESPs, and Drip is one as well, where you can show this checkbox but then there’s a setting, this is where I feel again, Drip point the extra mile. There’s a checkbox that you can check in your Drip console to only show the GDPR checkbox on your forms if client’s browser registers to the EU, meaning, it’s doing IP lookups, I’m assuming that’s what it’s doing and geolocating them.
You and I know as technologists that, that’s not 100% foolproof. Just like you said, maybe they’re on a trip, maybe they’re on a VPN, maybe whatever. There’s a bunch of ways that that could be spoofed or incorrect or whatever. But here’s the question. If GDPR or if the EU actually came after you, your little, small business which I just don’t think that they’re going to do and you said, “Look, we implemented all this stuff. (a) Are the auditors going to even be smart enough to realize that there’s this setting, they’re not smart enough is not the right thing but technical enough to understand it, and (b) if you say, “Look, I did this. I did the best I could.”
This is the kind of stuff that is such a gray area that I think fretting about it is, I don’t know. I think it’s been given a lot of wasted thought to GDPR that I think could have been spent doing productive things, I think is my opinion. Like you’re saying, it’s risk tolerance. It’s much like filing your taxes. You can go super conservative and you can go super liberal with your taxes. If you go liberal and liberally interpret things, yes, if you get audited, you may run the risk.
It depends on the auditor because it’s not black-and-white. As much as we want all these things to be black-and-white, they’re not. They’re shades of gray and there’s levels of interpretation and there’s precedents that’s here but not there. It’s kind of a tough thing because you have to make a judgment call on it but I don’t think that GDPR is going to really impact the ability to build email lists.
Kind of like what you said. Everyone kind of shrugs their shoulders. If I see the checkbox, I check it. Maybe it’s going to be really hard for B2C. Let’s say you are Verizon or some selling to consumers. They’re the ones that are gonna accidentally forget to check some checkbox and that you’re then going to miss out of half of your people. I think the more tech-savvy people that we deal with, they’re going to know it, they’re going to eyeroll, and they’re going to check the box when they need to.
Mike: You brought up taxes. That was actually the direction I was going to go in as well and mention that because I think if you’re filing your taxes, chances are really good that you’ve prolly violated the law in some way, shape, or form and can be theoretically be nailed to the wall. At that point when you are audited, it comes down to intent. Were you actively trying to evade the law or did you make a mistake?
If you make mistakes, technically ignorance is not a viable defense in the courts but at the same time, these government agencies realize that you got a lot of things going on and some things are going to slip through the cracks, mistakes that could be made. It’s not that big a deal. It’s not a criminal offense, so it doesn’t matter. If you are actively doing things that are trying to circumvent or subvert but the intent of their legislations or regulations, yeah, they’ll nail you to the wall and that’s what it comes down to.
Rob: Yeah. It’s the difference between a mistake and fraud. Fraud, they prosecute you for it, put you in jail, and the fines are tremendous, if you did it on purpose. If they think it’s an accidental miscalculation, that happens. They will still sometimes have leniency and sometimes they’ll do a penalty or they’ll certainly go back and say, “Well, you didn’t pay us 10 grand and then we’re going to add $1000 penalty, but still, it is 10 grand that you owed them anyway. I don’t know.
Mike: But this discussion is really why entrepreneurs hate legislations where people are making rules about stuff they don’t understand. It’s just like, “Please go away and let us do our thing.” I get why they’re trying to do it, I get the intent, and maybe it really does work that way in reverse. I’ve never had my business brought to the courts for stuff like that, and hopefully it will never happen, but I feel they take intent into account when they look at that stuff.
Rob: I’ll say it again, it’s my soapbox. This is my charge more. Patrick Pence has charged more, I have. GDPR should have excluded small businesses. In the US, there’s this lobby that excludes small businesses from tough regulations that will be hard for them to live up to. Typically, if it’s 25 employees or less, or 50 employees or less, there’s some number where you’re exempt from a lot of things because they know they put undue pressure on. GDPR, I believe, should have done that.
Mike: That’s 50 employees, I think, for most things.
Rob: Cool. That was a good question, Paul, thanks. Our next question is another voicemail. It’s actually a question about Tiny Seed, based on episode 420 from a couple of weeks ago.
Mike: Can I answer this one?
Rob: You get to answer this one.
Chris: Hi. My name is Chris and I’m from San Antonio. I have a question for Rob and Einar about Tiny Seed. I wanted to ask you about managing risk for both you the investors and the founders being invested in since obviously, both sides are assuming risk in such an investment. It seems to me that with your business model, where you invest in companies that already have some traction, that the biggest risk is instead of outright failure like a VC-backed company might have where they just run out of money, instead the biggest risk might just be mediocre growth, where the question of whether you keep investing or if you need to bail out or not, isn’t really black-and-white.
If you agree with that premise, I’m curious about what you think about the risk for the founder, rather than for the investors? Assuming you want the founder to work full-time in the product that’s being invested in, at what point are the founders allowed to explore other options if […] who wants out and do not really making enough to have a living salary like if they have a family? Are they allowed to freelance? Will they be expected for that freelance income to go into the company being invested in so you get a piece of that revenue? Or does the relationship simply end to that point? And even looking out past that runway, if the founder’s company is floundering two or three years later, what’s the responsibility that the founder has to you?
In other words, success is obviously a good problem to have for these companies that are investing in, but I’m really curious about the different ways that the companies or that the investment may fail, especially if it’s not a very black-and-white failure scenario. Thanks.
Rob: So, what do you think about this, Mike?
Mike: You could probably just confirm these for me.
Mike: My inclination is to believe that obviously, there’s the ones that do well and those are successful. There’s the ones that burn out and they are shut down and close out. Neither are those are you really worried about. It’s the ones that are floundering for, I’ll say, extended periods of time. I think in those cases, not just Tiny Seed Fund but funds in general, are just going to say like, “Okay, well, we put money into it. It didn’t really go anywhere.” And until the business is legally shut down, it doesn’t make any difference because nothing changes. The investors do not have enough equity in the business to make any business decisions or force anything to happen. It’s kind of out of their hands, so why worry about it?
Until the business is shut down because when the business is legally shut down and the entity goes away, there’s probably close out conditions or things that are in the paperwork that say, “X, Y, and Z is going to happen,” but beyond that it kind of doesn’t matter. If it’s floundering that badly, their time is probably better spent working on the dozens or hundreds of other startups that were invested in, where some of them are being successful, and they’re going to take away the focus from those to put it on something that’s floundering, versus spending that time with a business that is doing well and could be doing substantially better by focusing on it, you’re basically going down the wrong path as an investor.
Rob: Yeah. I don’t think that’s a bad sentiment. To be honest, I have not thought about this, I’m glad he’s sending the voicemail so it’s totally off-the-cuff. I have not discuss this with Einar but what do most funds do? They do basically what you’ve said and there’s a reason for that. If the business is floundering and the founder wants to shut it down, then you let him shut it down. If they don’t want to shut it down and they want to keep it, I have an angel investment where the founder just took a full-time job to keep this startup alive. He’s taking some of his money and pumping it in there because he still believes it still has merit and he still thinks he can grow it, that it kind of hit product market fit now. What “responsibility” does he have to me or to the investors?
I mean, he has a responsibility to do his best but honestly, if he has said, “Look, I’m going to sell this for parts,” or if he said, “I just can’t do it anymore and it’s totally floundering and I’m going to shut it down,” then he should do that. I would honestly want to have heart-to-heart with him before that, like, “Is this really which wanted do you have built this to a certain point?” I mean, that’s the thing is, unless the relationship goes south, which most don’t, the investor-founder relationship.
I’m in touch with every founder I’ve ever invested in, our relationships are good. If they just told me honestly, like, “This sucks. I’m out,” and they don’t burn it to the ground and they don’t screw anybody, but they’re like, “Look, this isn’t growing. We’re going to have to shut it down,” it’s like, “Okay, it’s an angel investment.” That’s what I thought it might go to zero. The odds are decent that it’s going to go to zero.
I guess all I’m saying is, it’s kind of the same way that most investments are. Some founders will feel like they have more work to do on their product even if it hasn’t hit traction yet, and would I encourage a founder to go freelance and then try to keep a business alive that wasn’t working? If it’s not working, probably not, but it tends to be that weird gray area where it’s not working but the founder thinks it’s going to work in the next couple of months. They have this deal that’s going to close or they have this feature that’s going to go live or they have something game-changing, and In that case, I would just talk like each situation is going to be different, I guess is what I’m saying.
So it’s going to be hard to make a blank statement about what you’re going to do and allow or not allow. I don’t feel I’m going to not allow much. This is all seat-of-the-pants. “Building startups is building the parachute as you jump out of the plane on your way down,” as Reid Hoffman says, so each of these things is like, “Well, let’s have a conversation. What’s the actual situation here? And then, let’s troubleshoot this like smart people who gets things done.” Thanks for the question. I appreciate it.
Out next question is about iTunes keyword stuffing. Actually, it isn’t a question. It’s a statement. It’s from Chris Christiansen. He says, “In your last podcast, you made a comment, suggesting doing keyword stuffing in podcast descriptions for iTunes on the Libsyn podcast called The Feed. They’ve been talking a lot about all the different podcasts that have been banned from iTunes for doing keyword stuffing. Don’t try it.”
We should definitely clarify. We weren’t saying do keyword stuffing. We were saying it does work because the way that the algorithm is not very advanced. They fixed that longer term but you’ve been able to keyword stuff and rank for searches relatively easy on iTunes. Now whether you do that, because if you do it, you could get banned. If you are a successful podcast, and you’re driving users, and you’re do little bit of it, meaning, a little bit of SEO. I’m not saying your stuff in 20 keywords that have nothing to do with your podcast, try to rank for all these topics that you don’t relate to, but if you do intelligent SEO on your podcast.
We’re a show about startups. In the description, I want startups at least a couple of times in plain English, in essence it’s not startups-comma-business-comma, mix – all this stuff, but it’s an English flow that makes sense. I don’t feel like you’re even walking a line there. I feel like that’s a pretty reasonable approach to this. So, stuffing is not what I would recommend and it’s not what we do but it is thinking deliberately about how you write the description, the subtitle, and the title of your podcast.
Mike: I don’t remember whether it was you or me that said that but I probably would have referred to it as keyword stuffing and saying to do that but it’s not exactly right or at least it’s not an accurate description of it. What I mean by keyword stuffing when you’re doing a podcast is being very strategic about what you name it because the search algorithms and most of those podcast directories are really, really dumb. So, it’s not and I responded to this via email as well.
It’s not an accident that our podcast is named Startups For The Rest Of Us. We did some basic research and found it like those engines are just stupid. They’re not very good. They look at the title, they may look at the subtitle but those things count much higher than anything else. It made a lot of sense for us to call it Startups For The Rest Of Us and plus, we have the domain name, so it just worked out. But it is a good distinction to point out the difference between being strategic about that versus what is legitimately keyword stuffing where you’re just repeating the same words over and over again.
Rob: Yeah. There’s a reason we still rank high for that term even though there’s the Gimlet Media startup podcast and then there’s Mixergy, and there’s Jason Calacanis. There’s a lot of competition for that term and yet we’ve always ranked in the top whatever 7-10 of those, depending on what area of the world you’re in.
Our next question is about shady competition and how to handle it. It’s an anonymous email. It says, “Hi, Rob and Mike. First of all, thank you for all the work you guys do with the podcast and the community. Rob’s book, Start Small, Stay Small was the beginning of my life as an entrepreneur and your podcast made me quit my job and start to work full time on products.” Hey, we should add him to our list, Mike, right now our success list. “Right now, I’m one of the two co-founders of a profitable SaaS business.”
“Earlier this year, we did an AppSumo deal and during its promotion, a competitor spread false rumors about us in several private Facebook groups. He said that we had sold the business and that the app is going to close up shop right after the AppSumo deal was over. ‘Here’s some evidence,’ and he sent us a screenshot of the person saying this. This is crazy. We decided to completely ignore this and do nothing about it. In hindsight, this was a good move because in some Facebook discussions, it completely backfired on him and right now he has stopped this as far as we know. Im worried about facing this situation again now that we are growing bigger. What would you do in situations like these? Thanks for all your hard work.”
It’s a good question. It’s a tough question.
Mike: It is a tough question and I think it comes up as your business gets bigger and as you’ve been in business for longer, these situations come up more often just by virtue of being around. I think in most cases it comes back to like, what is likely the north star for your business and how do you conduct your business? Are you really shady about it or are you pretty honest with your customers, upfront, and transparent with them? Then, that has to be contrasted against who is making these types of claims, what people think of that person, and what they know about him versus what they think about you and what they know about you.
It boils down to the audience themselves and how much they like or trust the source of their information. I think in cases like this, most people are going to be pretty—at least—objective enough to say, “Yes, that’s true or false or that goes against my fundamental beliefs about what I’m hearing,” and that’s the way that they’re going to side.
If you know that you run your business on the up and up, I would totally not worry about that stuff. You might make one comment or response and say, “Hey, that’s totally not true,” or you could just ignore it. The people who know you well enough are going to ignore that and they’re probably not going to apply any credibility to it. There’s going to be people who don’t like that person already and is not going to take much for it to backfire in their faces, which will stain them basically in that person’s eyes forever.
I’ve seen this happen in a bunch of different cases. Some people get into fights on Twitter or Facebook or wherever. There were some of them are just personalities and they clash. The audience of one person’s side with that person. The other one’s side’s the other. It’s just going to happen because those audiences tend to be siloed. It’s based on their relationship to them and their trust. If you develop that trust over a long period of time, it’s not going to go away. I would not worry about it.
Rob: Yeah. I think you kind of have three options when this happens. You can do nothing. Intentionally decide, “Hey, I’m going to let this person burn themselves down and makes them look dumb.” Also, I would say most people who do this stuff don’t have very large audiences. You and I dealt with trolls over the years. I’ve had some pretty gnarly ones and all of them, except for maybe one or two, had 80 followers. I mean, there’s just nobody who cared what they were saying and they were trying to pull me into a fight because as soon as you engage with them when you have 13,000 or 14,000 followers, or 50,000 or 100,000, then you’re giving them attention.
That’s one thing, I would say is these folks tend to be to not have a big audience and then I totally lean towards completely ignoring because it just makes more sense to do that because no one’s hearing them anyway. But if they’re that rare exception and they are reaching people—in this case, probably Facebook groups—is tough because they are at least being heard. You can do nothing and if they’re being torn down in a group and people are saying, “I know that’s not true or whatever,” then I don’t need to say anything. You could just post one post and decide that you are not going to reply.
Someone like this is probably going to be a troll and is going to say things intentionally, that are going to try to make you respond because that’s a big thing that trolls do. That’s one of the good skills. If you have good troll game. You know what to say things to make people mad but you say things that make them want to respond, and you responding is actually losing. That’s how I think about it. That you’re giving in and you’re letting them have power over you, to make you respond to something that you probably know you shouldn’t.
Back to the three options, it’s do nothing, it’s post one thing that says, “No, this is not true, this is completely false or whatever,” and then don’t respond again. So you have come out, said it, been clear, and say nothing. Or the third one is to go on a full-on war with them right in. We’ve seen this on Twitter but you spend of time, you spend a bunch of energy, you just waste a bunch of things, and both of you look like idiots. People sit there, watching, and think, “What are these fools doing?”
You can obviously tell where I land. Its number one or number two, depending on the circumstance. But no, it sounds like in this case, you made the right call and then moving forward, I think you just got to use your judgment on that. But it’s a tough one, tough one when this happens because it feels crappy, especially when something is this false. It sounds just coming complete manufactured, something that wasn’t true. It’s bizarre.
Mike: Yeah. It’s very easy to take it personally, too, because it’s your business and then there’s making comments and you don’t want people to believe them. The reality is people are going to believe kind of what they want to and what they’re inclined to anyway. Interjecting yourself is not going to do yourself any favors in most cases.
I think Rob’s advice of either do nothing and ignore it, or one post and that’s it, do not re-engage. If any sort of protracted engagement, especially publicly, is never going to fall in your favor. I don’t know of anyone that has.
Rob: And our last question of the day is about pruning email lists. It’s from an anonymous emailer. He says, “Hi, Rob and Mike. We’ve got an email list focused on WordPress development. It’s currently around 6000 subscribers. It has a 20% open rate. I believe that we should regularly purge non-engagers. People who are not opening, has a Drip lead score of 0 or less, et cetera.”
“But my business partner disagrees. I think that pruning non-engagers helps our list health, which keeps us in the best hub of Gmail, et cetera. He thinks that non-engagers may reactivate and also pad our numbers for sounding impressive to prospective advertisers, et cetera. What are you think? Is there a right answer? What would you do?”
Mike: That’s tough because it sounds like there’s two different things going on. One is how are those subscribers impacting your business itself and the sales. Then there’s also the padding the numbers to sound impressive to advertisers. That’s a tough call there. I think that if you’re going down the route of purging them, I would put together a re-engagement campaign instead of outright purging them. That way, you reach out to them and say, “Hey, looks like you haven’t been engaged with our emails lately. Click here to stay on the list.” You can send a couple of those and if they re-engage, great, keep them on the list, and if not, then purge them.
I don’t think that I would go down the route of just blatantly getting rid of them. The other thing I would question is how got on your list and this is something for you to think about is, was it double opt-in or single opt-in? If it’s single opt-in, they submitted something or you got their email address from some place else, you just added them and they’re not opening the emails, then chances are good those are totally bogus and you’re not getting through them anyway, doesn’t matter. Those are the two things I would consider for that.
In terms of the trying to pad your numbers for advertisers, I don’t know if I could go down that path, either. You could give them the top line number and then caveat it. Your open rate is really what they’re going to be interested in anyway. You can just do the quick math on it and say, “Well, what’s the actual reach?” If you’ve got a 6000 subscribers and a 20% open rate, then you’re reach is actually 1200. It doesn’t matter how many of those subscribers you purge. You’re still going to have that 20% open rate and a 1200 reach. It doesn’t make a difference even if you purge half of them. You’re still going to end up with the same numbers.
I don’t know if I would worry about that too much. Just be honest enough and prompt with whoever your advertisers are and say, “Here’s what we’ve got for subscribers, here’s what our open rate is, and here’s what we believe our reach and impact is for you as an advertiser,” because if you aren’t doing justice to your advertisers, then they’re not going to come back. And that’s actually what you want? It’s hard enough to land an advertiser or a sponsor for your podcast or your email list or what have you. Don’t destroy your trust as well, because if you do, they won’t come back.
Reality is, the money that you get from any one email or podcast or whatever sponsorship, it’s not going to even compare to the trust that you lose and the potential revenue that you lose from them talking to other people and say, “Yeah, these guys screwed us.”
Rob: I think those are all good sentiments, Mike. I think that’s exactly what I’m going to say about re-engagement and if you search for Drip Workflow Re-engagement, there’s a one-click blueprint that is a fully-built out workflow. With one click, you can install it into your account. I believe it was designed by Anna way back in the day and it’s really good at re-engaging people. You can obviously add more emails to it or whatever.
We ran this on the Drip list, let’s say, it’s got to be 2015, because over time, open rates go down and down and we probably hit 25%. I was, “You know? I like to keep above 30%,” because it does. The lower your engagement rates, it will put you in the promotions tab. Sometimes it will get you in spam, but mostly it can impact your sending domain reputation as well, not the IP address that you send through.
This is a little bit of a tangent but we actually have customers come to us from MailChimp or Infusionsoft, and they would say, “Well, their deliverability wasn’t very good,” and I was always like, “That’s a little bit of a red flag. I know MailChimp’s deliverability is quite good.” It turns out the IP addresses stay with Infusionsoft and MailChimp but the domain you’re using, your ‘from address’ in essence, if you’ve kind of burned that domain by having really crappy open rates, then no matter where you go now with that domain, there is going to be a ding against you in the blacklist. That’s the real struggle. Once you lose that, it’s like bad credit. If your credit score drops, it takes a long, long time to get that back.
All that to say, I like to keep my open rates up. I mean we have customers come in with 3%, 5% open rates and they were trying to juice the numbers thing. My list is 100,000 people. But literally, there is 3000 or 4000 that would open emails and it was nuts. Eventually, you do have to intervene because if you’re on shared IPs, that can negatively impact other customers and such.
All that to say the re-engagement thing, I tried it and it had re-engagements for people who aren’t opening emails already, they’re very, very unlikely to open any additional emails. I remember the results were trivial and almost not worth doing. But you should totally try it and track it because you see in the workflow how many people get to certain steps, and you can just run the numbers.
I’m going to put in all 6000 or I guess not 6000 are unengaged. It’s only 4200 are unengaged. See how many get down to the bottom and re-engage. It tends to be, if I remember correctly, it’s between 5% and 10%. If that’s worth doing to you, then do it. Dump them on the workflow and when it gets to the bottom, poof, you just unsubscribe by default after a certain delay if they haven’t clicked anything. It’s really easy to do.
I agree with you, Mike. I don’t think you need to prune down only the 1200 who are opening—that’s ridiculous—but if someone hasn’t opened 10 of your last emails, very, very, very unlikely they’re going to open any email ever. I like more—thinking about it—if you’re going to do advertisers, instead of saying, “We have an email list of 6000,” you could say, “We have an email list of 4500,” if it does mean that’s what it is after your pruned. “We have an email list of 4500 and our engagement rates are 35% or 40%,” because that’s what will happen. It will send those numbers up.
If you’re talking to prospective advertisers, tell them that, “If you’re looking at other places to advertise, ask what their open rates are like.” Specifically, start pointing this out. I think people should pay more attention to this personally just across the board. If I were going to advertise on any site and they give me an email this size, first thing I would do is I would say, “Show me your open rates. I want to see a screenshot of your MailChimp account. I need you to prove to me that your engagement is not crap,” because again, I just seen too many people with 10%-15% open rates who say, again they have a list of 100,000 but that list might as well be 15,000 or 20,000 person list. It’s just not worth it.
I agree with you, Mike, I think that the results are going to carry the day. I would absolutely prune it. I wouldn’t prune all 70%. That’s not how it works. You kind of go into Drip or whatever email tool is and say, “We’ll have to open the last, what feels comfortable, 10, 12 emails, 15,” you can beyond that, it’s ridiculous. I mean, it’s just too big of a number that they’re never coming back. That would be my opinion on that.
Mike: Well, looks like we’re out of time. I think we’re going to wrap today’s episode up. If you have a question for us, you can call into our voicemail number 1-888-801-9690 or you can email it to us at email@example.com. Our theme music is an excerpt from We’re Outta Control by MoOt, used under creative commons. Subscribe to us on iTunes by searching for startups and visit startupsfortherestofus.com for a full transcript to each episode. Thanks for listening and we’ll see you next time.
In this episode of Startups For The Rest Of Us, Rob and Mike answer a number of listener questions. The topics in this episode include GDPR, SaaS pricing, sponsoring events as a marketing strategy and subscription box companies.
Items mentioned in this episode:
- Crated with Love
- Bigfoot Capital Solutions
- Angel List
Rob: In this episode of Startups for the Rest of Us, Mike and I talk about SaaS pricing, sponsoring events as a SaaS marketing strategy, subscription box approaches, and even revisit GDPR once again, and we answer more listener questions. This is Startups for the Rest of Us Episode 390.
Welcome to Startups for the Rest of Us–the podcast that helps developers, designers, and entrepreneurs be awesome at building, launching, and growing software products, whether you’ve built your first product or you’re just thinking about it, or even your second, or third. I’m Rob.
Mike: And I’m Mike.
Rob: We’re here to share our experiences to help you avoid the same mistakes we’ve made. What is the word this week, sir?
Mike: No, I doubt it. I learned that back in 2011 not to do that.
Rob: You’re pacing yourself these days especially because it’s four days for us now which is definitely a bigger deal because we have obviously growth for two days and starter.
Mike: Definitely. I head out on Friday so I’m there from Friday to Friday. It’s not just four days, it’s seven days.
Rob: Dude, that is a long time to be in Vegas.
Mike: I know.
Rob: Drink a lot of water, go to bed early, use chapstick. All the things we said last week on the episode, you’re going to really want to double down on those.
Mike: Yeah, last week’s episode was sort of a reminder for me like, “Hey, these are all the things to make sure you remember to do it just so you can fix yourself.”
Rob: Yup. I’m in Vegas one day less than you are and I will be thanking my lucky stars. After about three or four days in Vegas, man, I’m done.
Mike: Yeah. I considered staying until Saturday but I decided against it.
Rob: That would be a tough call. My grandma used to live in Vegas and so we would visit her couple of times a year. I’ve been to Vegas 30, 40 times. I live in California so it’s a super quick hop from Oakland Airport. Yeah, they would always be 2-3 day trip and it was a perfect amount of time, it was like, “Oh yeah, that’s what this place is like—” Then by the time you’re three days in you’re like, “Oh yeah, that’s what this place is like.”
For me, I just came back from a two night, almost three day retreat, it’s the longest retreat I’ve taken in quite some time. I was trying to think, because I took like a one day last year and then in 2016 I took three days and got away but I got strepthrough so it wasn’t exactly a restful retreat, it’s more like recovery. But I really enjoyed it. I drove 2 ½ hours North up to Duluth, Minnesota which is right on the southern tip of Lake Superior. Lake Superior is so big you can’t see the other side. Aside from there being no waves, it kind of feels a little bit like the ocean because there’s no beaches as well, no planes flying over with the little banner saying rent the surfboards and stuff.
But I thought about a lot of different things, probably stuff that I’ll talk about in the coming weeks and months on the podcast. But a good reminder, if you haven’t taken your retreat for 2018, check out The Zen Founder Guide to Founders Retreat, go to zenfounder.com, and Sherry wrote like a 30-page guide that I use religiously, has all the questions, and all the things you should be thinking about if you go on a founder retreat.
Mike: Awesome. What’s the word for this week?
Rob: We’re answering some more listener questions, they keep trickling in at an even pace which is really nice, allows us to do these Q&A episodes pretty frequently. The subject line of this email is, “Loved episode 384, GDPR. I’m Chris Duke. I’ve been listening for a while in my walks through town. This is the first time I probably laughed and shouted out loud. I try not to use the word stupid very much but it is hard these days and GDPR is one of those things that brings it to mind. Not the basic idea, it’s good to make those of us in technology business think about protecting data but the people who think of things like GDPR completely clueless and I have no business coming up with the regulation on something they don’t understand.
I keep thinking about one example, MailChimp. If I tell them to forget me, does that mean they have to forever take my email off of every list? What if removing my data from an application breaks something in the app or someone else that I willingly given permission, has used my email, it’s called referential integrity. Thanks for talking about this, guys. We’ve already written a sequel script to delete data in my SaaS app, we used it as part of our development and testing. That and some clarity on our terms is about it for me. Keep up the great work.” I know the answer to this one, do you know?
Mike: Didn’t we talk about it last week or the week before where the forget me is on a per-provider basis? Let’s say you and somebody else are my customer and people have data for both of them. If they tell you to delete it, the other person does not have to. The person has to go to each of the individuals and it has to do with who’s the data provider and who’s the data processor.
Rob: In the case of MailChimp, If you emailed MailChimp and said, “My email is on a bunch of your customer’s email lists, forget me,” MailChimp would say, “You have to contact the MailChimp customers.” We can’t delete it out of their account or we’re not required to, I guess. Now if you went to meet MailChimp and said, “Remove me from your list and forget me,” obviously they could do that from their own list that they own, but that’s exactly right.
Mike: I still don’t think that it answers the question of how do you remember that you deleted somebody.
Rob: That’s right. Yeah, if they sign up again, I don’t think you’re supposed to block or I don’t think you’re required to block them. Because like you said, you have to keep their email if you are not going to allow them to sign up again.
Mike: The other thing I’ve wondered about is if you could just anonymize their data so it’s no longer personally identifiable and you just overwrite the IP addresses with all zeros or all ones or something like that.
Rob: I think that’s a realistic approach the people should evaluate because in complex systems, you don’t delete stuff. As a rule, you don’t delete rows from database tables especially as you get larger and more complicated. As a listener out there, if you’re thinking about this, just changing their email to firstname.lastname@example.org to email@example.com, like you said overwriting their IP with blank stuff and having some probably on a flag or whatever that this is anonymized but I do think that’s an interesting approach.
Mike: No, I don’t even think it says that it’s just an interesting approach, like in certain business situations you almost have to do that because it’s not even just about deleting the data, it’s about knowing historically how different things that you’ve done turned out. Like if you go in and you have to delete a bunch of data for all these people that came in and visit your website for example on a certain month, it skews all of your reporting for all those months so you can’t really see how things went or what happens during that time. All of your decision making moving forward is completely screwed up, you can’t delete it, you have to just anonymize it and be done with it.
Rob: Cool. Thanks for the question, Chris. I hope that was helpful. Our next question is from Kenneth. He says, “Hey guys, as always, love your podcast, been a fan for a few years since I read Rob’s book, Start Small, Stay Small in 2011. Rob’s book was a huge inspiration for me. However, I realized it’s been almost a decade or about eight years to be exact since he wrote it. Obviously many things have changed since then in the internet, it’s totally a different world today.
My question, if Rob were to update or rewrite the book in 2018, what would he change? Would he remove chapters, focus more on certain points include new topics, etc.? That’s about it. Thanks for all the resources, podcast stories, etc., that you guys have openly shared. Been a constant inspiration for me and hopefully one day I’ll be able to share my own story on how much you guys have impacted my life. Best regards, Ken.”
Mike: I think I know the answer to this, you’d rename it to Start Small and Get Big.
Rob: I don’t think I would.
Rob: No. Because that’s the thing. Obviously that’s what I wound up doing when I was starting small and then going into something much bigger than I had originally intended. But I still think there is a really good case to be made for doing this kind of micro SaaS or micropreneur approach where you just have a lifestyle business and you never need to worry about all the headaches that I dealt with starting in 2013 of growing this company larger. It obviously came with rewards as well but I also think it’s a totally viable approach to start small and stay small. I wouldn’t presume just because I did something that everyone should. You know what I’m saying? I think it’s totally legit that startup business make low six figures and if you’re happy with that, man, that’s a great life.
Mike: I was just pointing out that it should have been renamed to Start Small and Get Big just because on your website where’d you go to sign up for your newsletter, it says exactly that. And then there’s also that in the Drip widget where you can sign up for the newsletter.
Rob: Yeah. Which I did that once Drip started getting big. I realized I’m not just talking about staying small anymore, isn’t even that appropriate. I need to rename that headline anyway. I’ve kind of neglected that unfortunately. That’s on my personal website at robwalling.com.
This question is interesting. I’ve thought about it a bit over the years. To be honest, I had not opened my book, I mean it’s been five years since I went back and looked at it all, maybe more. This forced me to go back and take a copy and flip through it. What I’ve realized is that so many of the concepts are still 100% valid today, it’s some of the tactics that are not. I go really deep. I thought it was like half the book where I deep-dive and then like break out, I forget micro-niche finder, or market samurai, and I click this button, and I have screenshot, almost like it’s some web tutorial but it’s only 5 or 10 pages of the book is that and that’s the part that I would remove because that part changed so fast. It was like probably less than 18 months after it’s published, a bunch of those links and screenshots were just invalidated. Realizing that it’s a book and it’s not a living, breathing online course that I can edit easily, that is part of it that I would pull out.
I would still talk about niching down, I have a lot of concepts in there to still hold but I would remove some of the tactics that—and again it wouldn’t be a huge chunk of them, it would be a small part of the book—but there’s tons of stuff about outsourcing and hiring VAs, the mindset, and product last, market first. All that stuff I still hold true.
I was trying to think of anything else that I would add today, certainly there are marketing channels I didn’t even cover like Facebook ads that are probably mentioned. I would double down. I had a whole section of building your email list, I would probably expand that given how much more powerful I believe email is today and how much more I know about it.
I wrote the book in 2010 in essence, you can say I’ve learned quite a bit about it in eight years so there are parts that I would expand. I have butted this around obviously for years and I get talked about every since I started going even slightly how the data I was going to do an updated version or second edition, I toyed around, I talked to a couple of publishers, talked about doing a little more of a mainstream release. It’s still in the back of my mind somewhere to go back and revise it.
Flipping through the book made me realize I always thought that’s going to be too much effort, it’s going to take a tremendous amount of time, might as well write a new book, but that’s not the case. It wouldn’t be near the effort of writing a new book. As I flipped through it I was like, “Oh, this stuff’s still really good content that’s applicable.”
What do you think? You think I should go back and redo it?
Mike: I think that there’s definitely room for a second edition. It really depends on whether or not you want to go through and have a second edition versus writing a new book. Obviously if you write a new book, it’s going to be a different topic of some kind. But whereas if you’re simply revising the current book, it’s obviously a lot less work and you could probably bang that out in like a couple of weeks. It’s not like it’s that much effort, I don’t think, because really you’re just cutting out a bunch of pages where it’s hyper-specific, and the tools themselves or the URLs have changed, or maybe you replace the tools or you drop the pages entirely, and there is probably a few things that you left out that you want to add, maybe stories that you’ve shared over the years that resonated that with people that never just made it into the book or better examples you have of different things. I think that with the book itself you’re mostly concentrated on your own experiences. I doubt you’d go into sharing things that you’ve heard from other people but like specific examples from other people but I don’t know. It’s a toss up, I guess.
Rob: I think that’s a good point. As you were talking, I realized that was the one other thing that I felt was a bit dated with the examples I used. I used a lot of my own examples because there was really no one else that I knew. It was like Patrick McKenzie, Ruben from Bidsketch, Harry and Ted from Moraware. Then I used a bunch of the sites that I owned in Basecamp. It’s like there just wasn’t that much going on in 2010 when I was reading this in terms of the bootstrapping and the Micro-SaaS in the micropreneur space. Now I have dozens if not hundreds of examples. That’s where I could really beef it up.
I don’t know if I would go so far as to interview people or you and I just know the stories of so many people who have taken this approach, whether they’re Founder Cafe lifetime members, or they’ve come to MicroConf, or they listen to the podcast, or they’ve read one of our books, we just have that knowledge so much more. There’s so much more of a community than there is today. Now I’m kind of fired up about it as you’re talking about it.
It would be almost fun to go back and see, because you’re right if I write another book, it can’t be on that same topic and I wouldn’t even have the interest to really focus on that exact same topic today. But rewriting it and just making it better is actually something that I think would be interesting. Thanks for the question, Ken. I’ll definitely keep noodling on it and see if it leads anywhere.
Our next question is a question about SaaS pricing. It’s from François at cloudforecaste.io. He sent us a couple of questions I think. He says, “I’m reaching out to you again because we’re trying to figure out our pricing model for a new feature. Here’s my question, cloudforecaste.io is currently helping our clients monitor their AWS cost and we are now working on a new feature to help them save money.
The new feature will tell them how they can easily save money by fixing naive mistakes, unused resources, reserved instances, etc. on a weekly basis. We have a hard time figuring out the pricing since the first email is much more valuable because there’s a lot of potential optimization then the email in the third month, or the fourth month, or whenever. The first one’s going to have a lot of value.
The value also depend on the size of their AWS account. Here are a few ideas we have in mind, first one is a percentage based monthly price based on their overall spend. Second one is a flat-monthly price based on their overall spend. Third one is an expensive first email followed by a low flat-monthly price. The fourth one is remove the weekly cadence offered as a stand-alone product, and charge a percentage of what they can potentially save. Looking forward to hearing your thoughts on this. Thanks for the podcast.” What do you think, sir?
Mike: I think this is a really interesting question just because there are situations where people can really undervalue what a piece of software can provide for them. I can definitely see, there is an analogy for this situation which I saw, I think it was an online tool where you could go and somebody would basically build an example of how to use as your services or something like that and they were letting you put in your email address and find out if it had been hacked across hundreds of millions of records. It was coming back too quickly. People did not believe the results that they were getting because it came back so fast. They ended up inserting some artificial delays into it to make it appear like it was doing more work than it actually was.
I’ve heard similar examples in other places as well from different people doing different things and this seems to me like that’s one of those situations where people may look at that and say, “Oh, your software is doing this but I don’t value it as much even though I’m on paper saving a heck of a lot of money.” I wonder if the solution to this would not be to price it like as a stand-alone thing but to price it as, “Hey, here’s a service that we offer and it’s X thousand dollars or a percentage of whatever the monthly prices that’s saved,” and you offered it as such as a service, not as something you can just go in and automatically get this report that shows you all this information. That way gives the impression that you’re doing all this extra work and analysis.
The reality is most of it’s automatically generated but it’s based on all the work that you have done already. Then the ongoing monthly reports could be some flat-monthly price that is related to their overall spend to kind of help them save money. Because that first email, I totally agree that if you’re saving them a heck a lot of money up front, then trying to go down the path of having a SaaS pricing model that is variable in some way that reflects the value that you’re providing to them is really not going to work very well. I think that positioning it as a service as opposed to like, “Hey, here’s this off-the-shelf thing that you can buy that the software will do everything for you, that’s probably the approach I’d at least look at and test it out with a few people first.
Rob: You’re saying like present it as, “Hey, we do this manually type thing,” maybe not coming out and saying that but like, “This is a valuable service the we offer,” and don’t imply that software is doing all of it.
Mike: No. I wouldn’t say that, I would say that it is not something that you can go in, you can just click a few buttons, and automatically get the report. You have to talk to somebody in order to get it.
Rob: I see. Yeah.
Mike: Yeah. That way you can look at that and you could almost give them a ballpark estimate or price based on what you’re seeing from the stats and say, “Hey, this is the price that we have for this and we think that you’re going to save probably in this neighborhood.” You could give them a range like they’re going to save $10,000-$20,000 a month. You can tell them that and you say, “This is going to be $5,000 and just ballpark looking at what you’ve got, this is what we think you will save.” Then when you give them the actual report, it will show them exactly the steps they need to do that will both give them $17,000 a month in savings.
Rob: Yeah, that makes sense. I think that’s a pretty good approach, actually. I’m kind of torn on a couple things, I think the percentage based on how much they spend, it’s very logical, I’m curious to see what customers think of that. I guess it all depends on what the percentage is. I guess it makes a lot of sense, you can tell I’m torn on it. I like that you have better flat pricing but I actually do think the percentage could make a lot of sense because when we were tiny, and bootstrapped, and AWS bill was $5000 a month and if you said it was 1%—that’s $50 a month—that would probably have been a no brainer for me. Then of course once you’re doing $30 or $40 a month it is worth more, and at $300, $400 a month kind of feels equivalent. That’s probably what I would lean towards as this percentage.
I think trying to make the first email more expensive, I think it’s kind of a tough call. I don’t think I would go that way. But I would consider making this kind of an annual only thing that you give, they can get a sample email or they can get the first 20% of what the email looks like. You give them some information to prove that it does something.
Then like you said, they have to talk to someone in order to get this and it’s relatively high-priced and you do annual. The challenge with annual is their spending’s going to go up and down over the years, so how do you build a whole year when metered in a sense, with that you can either do it on a credit-based system or you can bill them where they are today and then bill them just the incremental each month, if they’re up or down you can keep it there.
I think this is an interesting thing with their two data the points in essence and I think talking to either existing customers or prospects is going to be your next step to basically say, “We’re going to do it based on a percentage and it’s going to be quarterly only or it’s going to be annual only. Do you want to sign up?” That, you are going to see if the rubber meets the road at that point.
Our next question is about sponsoring events as a SaaS marketing strategy. This is from Ed Freyfogle who is a speaker at this year’s MicroConf Europe. He says, “Given that you’ve run many events, I’m wondering what you think of sponsoring events as a marketing strategy? Particularly, I’d love to hear any tangible tips or best practices you’ve seen from sponsors as a way to make the most out of an event in terms of general brand building, but also specifically winning new customers.” What do you think, Mike?
Mike: Obviously, I run the sponsorship side of MicroConf so I have a lot of thoughts on this and I’ll try to keep them briefer than I would if we were doing an entire episode on it. When you’re looking to sponsor events, the thing I would keep in mind is that before you even try to figure out which events you’re going to be sponsoring, figure out what your goal is.
If your goal is to build brand awareness, then make sure that you know that in advance. You don’t try to do things that go outside of building brand awareness. That would include going to events or conferences where it’s not the right audience for building brands, like if you’re selling a marketing tool, going to a developer’s conference, obviously like there’s probably a little bit of crossover if you’re going for entrepreneurs but you don’t want to just build brand awareness with developers if they’re not the ones making the decisions. Because if you’re trying to get customers, you want to be able to get in touch with the decision makers, not the people who are at the other end of it, like the bottom layer of the organization.
The other thing I think to keep in mind is that when you are talking to people at a conference or an event, how close are you to the decision maker? How many hops are you going to have to make between the person that you talk to and the rest of the team or the people who actually make the decision? Because you may be able to run into the people who would use your products but they don’t necessarily care.
For example if you sell transactional email service of some kind and you go to a developer’s conference, those developers may not actually care about deliverability rates. The marketers would, but they’re not the ones that you are talking to. You’re going to have to convince the developer to give you an introduction to the marketer or whoever the VP of sales is that is going to say, “Hey, this deliverability is important to me and we should possibly switch providers in order to get better deliverability.” Those are the types of things that I would think of to start off with, and then beyond that, you want to stand out from the other sponsors.
If you have an opportunity to customize whatever it is that you are doing, whether it’s a specific giveaway to the audience or you are trying to drive traffic or drive conversations with people, figure out ways to do that so you might do like up Q&A session that is informal either during lunch, or after the conference, or during one evening event, something along those lines. If you do give away, you can provide people with that giveaway as a link and then you capture their email address.
The other thing is make sure that when you attend these events, if you try to sponsor an event from afar, it’s probably not going to get nearly the level of engagement or awareness that you’re looking for so make sure that you have business cards to hand out and make sure that you collect business cards or contact information from people while you’re there. Then once you’ve done that, absolutely make sure that you follow up with those people to take it to whatever the next logical step happens to be, whether it’s to having other conversation, or to get on a demo, or to just discuss what sorts of things you’re doing.
The last piece of advice I’d say is to make sure that if you can lead things in that direction to get to a promise of a future conversation and not suck up somebody’s time at the conference, that’s also not a bad thing.
Rob: Awesome, yeah. I’m actually going to leave it there because I feel like you have so much more experience dealing with this topic. I think that was a pretty good little primer there. We’ll probably do a whole episode on that, huh?
Rob: Our next question is a subscription box company asking about technical issues and funding. It’s from Tyler Turk at cratedwithlove.com. He says, “I’m a Fresno-based startup and I have a question for you. I own a subscription box company. I found the company with my wife while attending Fresno State in 2015. In our first three years we’ve accumulated over $500,000 in revenue. I’ve been pretty much on my own from a business perspective doing all the ideation, curation, and even packing and shipping. My wife helps occasionally.”
They’re a monthly box subscription company obviously and it looks like they’re kind of date night boxes. You would buy it and then there’s activities and stuff for you to do with your significant other. Our biggest weakness right now is our technology and product market fit. We have a large amount of subscribers that have been with us for two years or more and the average active subscriber stays about eight months. But our churn is higher than we’d like. I know where the holes are in our website but I lack the technical skills to fix them.
In addition, I think the future of our company is more digital but I’m having a hard time figuring out how I pitch the future technology based on the data from the physical products we sell now, especially since the biggest needs are technical. I feel like I’m in a vicious circle where I won’t be able to raise money I need to scale until I fix our churn problem, but I can’t fix our churn problem until I get funds to fix the technical problems. I have two questions, is a startup from a smaller market with no relative experience in fundraising or network in larger markets, where should I start? Second, how do I transition from a product-based company to a tech company or a hybrid of both using the data I have now to support our pitch?” Do you have thoughts on either of those?
Mike: With these two questions, just before I answer them, I do want to kind of at least comment on one thing. Tyler said that he has a large number of subscribers that have been there for two or more years and the average subscribers stays about eight months but the churn is higher than they’d like.
I’m not sure exactly what the problem is on the website that would have any bearing on that. I’ll say an open question that I might have on that. If you’re sending those emails to them and they are making purchases and sticking around for a while, what is it about the website that would make them go away? Are things fundamentally broken which are causing people to drop through the cracks or is there something wrong with your email provider? I’m just kind of curious about what that is.
But neglecting that, going back to the two questions, the first one which was as someone who have no experience with fundraising or network some larger markets, how should I start? Coincidentally, one of our sponsors from MicroConf this year is called Bigfoot Capital. They provide funding for subscription-based businesses. I think that they’re focused mainly on SaaS businesses but this is a subscription business so it might fall under their wheelhouse, you can go check them out at bigfootcap.com.
Basically what they do is they look at your financials and they have a wide variety of people that they have provided funding to and they give you a loan. That loan is whatever percentage but it’s going to be based on the risk that they see, and you’re probably going to have a much better chance or opportunity of getting a loan to address some of the technical challenges that you have from somebody like that than you would from a traditional bank who has absolutely no understanding of online businesses. They just don’t get it.
He asks with $500,000 revenue over 3 years, they may be able to do something but my guess is that they just do not understand. I would look for some sort of private funding like that. I don’t know about fundraising—Rob, you could probably speak to them.
The second question he has is, “How do I transition from a product-based company to a tech company or a hybrid of both using the data I have now to support our pitch?” I think we’re going to have to make some assumptions here because I don’t really understand what you are specifically intending by that. But my assumption is that what you’re trying to do is take your current offerings that you probably sent to people physically through the mail, whether it’s worksheets, or PDFs that you deliver digitally, basically make them into online worksheets that you can fill out on the website and share them, or through your app, or something along those lines.
With that in mind, I think that you need to test some of these things out and get information from the subscribers that you currently have now. Can you get hard data that really says, “Hey, this is why I left, and it has to do with like the convenience factor.” Because I think that if you try to look at this as a way to simply cut costs, like if you’re suffering from a problem were your cost of goods sold is too high and you’re trying to cut into that, I don’t know if going down the road of automated things and putting all this technical stuff in place is going to really change that because developers are going to be expensive to build all custom stuff for that. I think that you’re really just going to end up burning a hole in your pocket to try and build that stuff.
In the meantime you’re still paying those current costs for the goods that you’re selling. Later on, you’re still going to need to have ongoing updates, and maintenance, and things like that. There’s always going to be a subset of people who do not want to switch from the physical stuff that they are already getting, so then you have to make some decisions about do you cut those people off and abandon them, or do you try to move them over and say, “Look, if you don’t move, we really can’t do anything for you,” or you just force them. Those are the things that I would have to say about that. Rob, what are your thoughts on this?
Rob: Yeah. I would definitely agree on the second part about trying to move into software I think is a great long term play but I would not do that without funding if you’re not technical because it’s just going to be really expensive and you’re going to get more bang for your buck if you take whatever earnings you have and put them essentially back into the business.
I do agree that this is the kind of business where funding is actually kind of meted like physical goods are just really time consuming and really expensive. At a certain point you’re going to need a small warehouse, you’re going to need to pay rent, and the margin on physical goods obviously is nothing like software. This is one of those cases where I think, especially since you have some traction—because if you look at an 8 month lifetime is 12%, 12.5% churn and that’s not terrible. You want to improve upon that, obviously, and it sounds like you have some ideas on how to do it but there are companies raising funding that are pre-revenue in let’s say the $1-$3 million dollar range. If there’s like a proven founder, they can raise $4 million or $5 million pre-revenue. If they’re in Y Combinator, they can raise $10 million or whatever.
The fact that you have revenue, and you have some type of numbers, and you have a business model, and you’ve shown the hustle over three years, it’s a big plus. For angel investors, I’m not saying it’s going to be a slam dunk, it would be great if you had a network but if you raise $250,000, I would say you’re not raising enough. I think you probably need to raise half a million. I mean you really need to look at what you want to do with the money. If you want to do a series A later, then you have to think, “I want this money to last about 12 to 18 months.” If you never want to raise a series A and you want this to get you growth and then take you to the profitability, that I think somewhere between $250,000 and $500,000 is a decent number.
In a couple of ways, I would get on AngelList, angel.co, I would try to connect with either local investors because there is money to be had, I know it’s crazy but there’s money, to be had in the Central Valley of California. It’s lot of farmland but there are a lot of people who’ve made money and want to invest especially in local startups.
Since I happen to have the hometown advantage of having lived there, industries downtown, that’s the tech hub for really Fresno and the Central Valley, that’s why I would somehow get on their radar, they have pitch competitions every once in awhile, I attended one when I still lived there and there were three or four startups that pitched. With your story, I really do think that you could hustle and raise the money. You’ve already shown that you have the hustle to see this business through for three years on your own and sort of me raising funding is not actually going to be that difficult for someone with the focus and the kind of the grip that you’ve shown already.
That really would be my next move if I were on your shoes is to go out and again I would raise an angel round. I would probably stay away from institutional money where it’s someone investing in someone else’s money because they want quite a bit of control and there’s complications with that but it certainly is interesting and a vortuitous place to find yourself in.
Really nice work on this, man. You’ve done something that not many people can do, A, getting in business to last for three years and essentially I guess break even or be profitable, and B, to do it with physical products. Good for you. Thanks for the question, Tyler. I wish you the best of luck moving forward.
Mike: Are we all set for today?
Rob: We are, that will do it.
Mike: If you have a question for us, you can call it into our voicemail number at 1-888-801-9690 or you can email to us at firstname.lastname@example.org.
Our theme music is an excerpt from We’re Outta Control by MoOt used under Creative Commons. Subscribe to us in iTunes by searching for Startups and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening and we’ll see you next time.
In this episode of Startups For The Rest Of Us, Rob and Mike continue their discussion on GDPR and get additional insight from a listener. They also talk about why to strive for higher price points.
Items mentioned in this episode:
In this episode of Startups For The Rest Of Us, Rob and Mike talk about GDPR, preparing to be acquired, and technical debt. With the regulations of GDPR coming into effect, the guys discuss how it will affect small businesses and what you should do. Also an in depth discussion on things to have in order before you get acquired.
Items mentioned in this episode:
- Mike’s Indie Hackers Article
- Mike’s Interview on Product People
- Sherry Walling Interview on Mixergy
- FemtoConf Recap
Rob: In this episode of Startups For The Rest Of Us, Mike and I talked about GDPR, preparing to be acquired, technical debt and we answered more listener questions. This is Startups For The Rest Of Us episode 385.
Welcome to Startups For The Rest Of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at building, launching and growing software products whether you built your first product or you’re just thinking about it. I’m Rob.
Mike: And I’m Mike.
Rob: We’re here to share our experiences to help you avoid the same mistakes we’ve made. What is our word this week, sir?
Mike: Why is it in Zencastr it says Chronomustard?
Rob: Chronomustard, that’s my name this week. I think that’s gonna confuse our editor. I’m trying a new thing, creativity. I’m trying to enter a different name each week just to see if I can make you laugh.
Mike: They usually do make me laugh, I appreciate that.
Rob: For sure. What’s going on this week?
Mike: I did a demo yesterday for a customer who’s looking at switching over from a competitor and they have a bunch of different users for the product that are in the competitor. When I went through and was doing the demo, afterwards he’s just like, “Wow this is way more advanced than what we’re currently using.” I’m just thinking to myself, “Is that a good thing or a bad thing?” Apparently it was a good thing.
They were looking through and signing up for it. Next week they’re gonna reach internally. Hopefully they’ll turn into a fairly large customer for Bluetick.
Rob: It’s always good to get off a demo and get that feeling that you’re gonna be making more money, it’s always worth it.
Mike: What was really interesting to me was just the fact that they had said how advanced it was in relation to this competitor because the impression that I get from their website and all the things that it seems like it does is that it’s probably more advanced than Bluetick but I got the distinct feeling that that was not the case.
I knew that they were having problems with it but I wasn’t clear until the phone call and exactly what those problems were and how they were dealing with them and what they were looking to do.
Rob: That’s awesome, man. Do you have any avenue if you sign this guys up that you’re able to find more customers like them?
Mike: I do but I think it’s gonna be more word of mouth relationship than anything else. This one came through a personal relationship so it’s not as if they came in through a marketing channel or anything like that. I knew who the person was and contact them and went from there.
Rob: You could also think about going to build with your Datanyze. Since they are using this competitor pulling down the list to people who are using the competitor doing the cold email thing, we talked a little bit about that last week. It’s obviously time consuming but that can be an interesting avenue if you do know that you are better than a specific competitor.
Rob: Probably be worth a few minutes. You have been busy, man. I was pleased to see an article on Indie Hackers, Starting and Growing a Conference for Internet Entrepreneurs, got quite a few upvotes. You said you spent several hours doing this, it’s one of the most in depth Indie Hackers Q and A I had seen.
Mike: I spent a lot of time on that, probably close to a day and a half to two days. I threw in the word because I was curious since how long it actually was, it came in at 6000 words.
Rob: It’s like a book chapter or two. It has screenshots and everything, you did a really good job. If folks are interested in hearing about the history of MicroConf, what it was like starting it, how it runs today. There’s just a ton of insight stuff, although some of it is projected revenue, I think you gave this year. Some years don’t include MicroConf Europe, it’s not all exact but there are graphs and everything that I think that Indie Hackers folks put together.
Mike: They took the attendance numbers and extrapolated with the revenue was from those numbers. It’s off a little bit but it’s not really that big deal, it’s more of the trajectory, I think, that’s important to see.
Rob: It doesn’t include sponsorships and all which are big chunk. It’s fun for me to read because I could be like, “Oh yeah.” I was nodding along like, “I remember that. I can’t believe Mike remembers this.” You are pulling stuff out, all the anecdotes that I had long forgotten.
Mike: Some of the things I had to go back. I looked through my email to see when it was that we first started talking about MicroConf and I traced it back to the exact day which I don’t know if we talked about. We had a name for it before then and we were talking about it separately and just calling it a conference or we had the name and we picked it on the day and went from there.
I don’t remember how long we talked about it before we decided to register the domain name and start looking forward or if it was just like spare the moment thing.
Rob: I remember being very spur of the moment. It just made sense, it was like, “Why don’t we just do that?” That’s cool. There’s a lot of engagement, a lot of really good comments and in depth discussion going on and 36 upvotes, I get the feeling that’s quite a few for most articles. Anyways, if you’re interested in hearing that story, we’ll link it up in the show notes but you can obviously go to indiehackers.com and give it a search. You also went on Justin Jackson’s podcast, MegaMaker. It was a couple weeks ago.
Mike: I think that was last week as well. We recorded it and then it went live either later that day or the very next day. It was all about MicroConf itself and what Starter Edition was about. We’ve announced that Justin Jackson is going to be emcee for Starter Edition.
We did that last year, Starter Edition as well, with Jordan Gal from CartHook. He was the emcee for that, we basically turned over the reins to him and let him run the show at Starter Edition which was really cool because it’s nice to be able to sit back a little bit and enjoy the conference a little bit more. I don’t know how you feel about that but it’s nice to let somebody else take the reins for a little while.
Rob: That was something that Zander, our conference coordinator, encouraged us to do because since Growth and Starter are back to back, we’d be solo energy by the fourth day of trying to emcee and run the conference that I think he knew that it would just wouldn’t come off as well as it could. Jordan certainly knocked it out the park as the emcee that was really, really good and to give them their style up there on stage is fun.
You know, with Starter, Justin is such a good fit for it because that is really the crowd that he is talking to everyday and interacting with so he knows that crowd perhaps these days, you know better than I do in all honesty. It was years ago that I was really knee deep in all of the transitioning from developer to marketer and talking about all that stuff. He just has his finger on the pulse of that. I think he’s a good fit to emcee. This year he’s also doing a talk which is cool.
Mike: How about you, what have you been up to?
Rob: I’ve just been working, kicking back a little bit. I have a spring break coming in a week or two. We are heading down to Florida, starting to warm up in Minneapolis but still in the 30s and we wanna get some sun. It’s an easy flight down to Miami and we rented up Big Ol’ Airbnb off of 80 and we’re looking forward to that.
I was enjoying, I don’t know if you’ve heard it but Sherry was on Mixergy. It’s actually her second time on Mixergy. Her first time, it was when she interviewed Andrew Warner and put it on ZenFounder and he simulcast that basically onto Mixergy. But this time it’s called Keeping Your Feet Together As A Founder and it’s Andrew Warner interviewing Sherry about the book and about the stuff she’s doing in the entrepreneurial communities. It’s really a pretty intense interview but it’s really good. Have you had the chance to listen to it?
Mike: I have not, no. I don’t get a chance to listen to Mixergy too often. I’m actually about two months behind on most of my podcast at the moment anyway.
Rob: I listen to select Mixergy interviews just because there’s a lot of them and they are long but this is one that obviously I jumped on, I just wanted to hear the content. It’s a good one, we’ll link it up in the show notes but you can obviously search for Sherry Walling Mixergy and find that in Google.
Mike: Awesome. What are we talking about today?
Rob: We’re gonna answer a bunch of listener questions and see how many we get through. It was cool, we were down to one listener question. When we announced it on the show, I think we’re up to 12 or 15 now and so we can hammer through. I feel like this cadence every other week answering these questions has become something that I’ve enjoyed and I’ve gotten positive feedback about it.
Voicemails are even better because it shows people that there are all these different people with different businesses listening to the show. You and I know we have tens of thousands of listeners but as a listener, you don’t know that. It would be hard to know or understand your fellow listeners and your fellow entrepreneurs doing it. I have enjoyed this and I think we’ll keep doing it as long as the questions keep coming in.
Our first question today is for me, it’s actually from a guy, Louis. He said, “The question I have is what would Rob wished he had prepared in advance in going through the process of selling Drip? Imagine there might be things like intellectual property who may have purchased the use with his own name but now need to be transferred to the company, manuals and processes, bank issues such as PayPal not being able to transfer, etc. The list could be endless, maybe a good topic for a book.”
I’ve actually thought about this. There are two thing I wanted to say here. The first is I’m gonna make an announcement but not really an announcement, Mike, I haven’t even told you this. I’ve started writing what I think may become a book. That’s the exact right response. I don’t know if it will yet. My goal for this year is not to tackle any big new projects.
There’s a lot to tell, there’s a lot of story that has happened since the last book I wrote. Maybe it’ll just be about Drip and the trials and tribulations, the last year of personal finance hell and being unable to fund the business and then the year of the acquisition and then the year of moving. As I started thinking about it, I was like, “Isn’t this interesting enough? Will anyone care?”
I sat down with a notebook and I just wrote out what were the most stressful parts of my life both personally and professionally since 2011 in essence. The list was crazy long. Each of them just shaped into this narrative and they link together in this very interesting way. Even if I were to write about acquiring HitTail and not use it in the book, it’s still […] for me to write about the process of growing it and then selling it. There’s a bunch of stress that went along with that sale.
I started just thinking about all the stuff that happened growing Drip. I made this big list, when I looked at it I feel like it’s interesting enough, at least worth sitting down and hacking some stuff out. I had like three pages of just bulleted list. About a week and a half ago, I just sat down one evening, I started doing it on a weekend. It’s kind of writing itself because it’s a narrative. I’m pulling out actionable things but I’m trying to get the grit of what it was actually like.
I have emails, I have Voxers, I have all this, I have my MicroConf talk from last year talking about the sale and my thought process, I started to listen to that and transcribing pieces of it. It’s cool in this day and age, all the digital elements that we have because I can’t remember exact dates but Gmail sure doesn’t forget. It remembers the exact date of this email that I sent to Derrick about this topic.
I’ve literally just been doing it on the side almost as a journal but trying to be very honest about everything, trying not to sugarcoat things. I’m about 7000 words in and it has just poured out of me, it’s all out of order, I just picked the next thing on the list that I think, “Man, I really wanna write about that today,” and I’m cranking it out.
I don’t know if it will be a book, I don’t know if I will ever release it but it’s something that I think could have the potential to be that. It’s always funny, when I got this question I started thinking, “Maybe that should be a piece of this.” Because I don’t just want it to be a narrative, I actually want it to be in typical or a podcast style and MicroConf style. I want it to have lessons that people can take away.
Whether they’re acquired or not, even just the growing part of it, the mistakes that they can avoid that I made or smart decisions that we made that I feel like people can learn from.
Mike: There are two pieces of that because there are people who would read that just because they know who you are or they’ve seen you speak and they just want the inside baseballs so to speak. They’re interested in the story, I totally hear what you’re saying about having the lessons but I think you could do both where you’ve got the story itself and then after each chapter or after each section you have a list of things that you personally pull out and be like, “Here are the lessons that you could take away from this, here’s the story piece of it and then here’s the lessons that go with each of these.”
Some of them may not have any lessons at all, it’s just something happened and you got lucky or unlucky and you just had to deal with the consequences or fallout. There may not have been anything that you could do about it. Maybe that’s the lessons, you can’t plan for everything but I think that it’s still going to be interesting to a lot of people.
Rob: I appreciate that. I kind of think of it as I think of any MicroConf talk I’ve ever given or at least the best talks that I’ve given tend to be a story, like a hero’s journey and then pulling out super actionable tactical things. That’s how I’m envisioning it. I’ve read only a couple books like that, I like it because it’s different, it’s not just a narrative. I want them to be not obvious takeaways, it’s not like work hard and persevere and you will make it. It’s not stupid stuff like that.
I realized that I think I’m telling myself that I don’t know if it’ll be a book so that I don’t feel in pressure or anxiety. I don’t want to feel forced to write it, I don’t want the writing to feel forced. I’m telling myself no one will ever read this because I wanna tell the story honestly, because there’s obviously a lot that went on that no one else knows that was very internal, that was between Derrick and I or between Clay and I or whatever.
Eventually, I’m sure I’ll have to edit some of that out but I’m trying to get it all out and then evaluate, is this worth doing? Maybe it’s an ebook or maybe it’s a series of blog posts that I’ll release or maybe it’s an audiobook, I don’t even know. It’s an interesting project. Hopefully it’ll turn into something.
Mike: Man, if it doesn’t, you did it for yourself and that’s not a big deal either. There’s something to be said for just doing things for yourself once in a while.
Rob: Exactly. That’s what I said, it’s like what’s the worst that can happen, I should just write this out. If nothing else, my kids can read it someday or something.
Mike: All of these aside and back to the question, are there any top level things that you can take away that you wish you had done that were probably a major things that you either overlooked or hadn’t thought about upfront that needed to be transferred or you wish you had done?
Rob: The prep work that I think everyone should do that you don’t think about is it’s far more mental prep work than anything else. I listened to the book Built to Sell three or four times, I listened to Finish Big multiple times, I did a lot of journaling, I did a lot of thinking. You have to know what your deal breakers are, you have to know probably what your drop dead price is. There’s a bunch of stuff that you need to think about and that it the prep work that I would focus on. I’ll just put that out there, first and foremost spend more time doing that.
The examples that the guy brought up, the guy who answered the question, most of these were not an issue. He brought up intellectual property, I had already transferred all of that into an LLC. If I hadn’t done that, it would’ve been disastrous, it would’ve been a huge pain in the ass.
One big thing that I do think you need to think about as you’re building your companies to have a clean IP, meaning that all of your contractors who touch your code, all of your employees who touch your code, you need to have them sign in their employee agreement, it should say, “Everything I do, the company owns.” I had that, I had only missed one contractor. I went back and asked him nicely, we still have a good relationship and everything was fine.
Had I not had that, it would’ve been really tough because when we went through the acquisition, they needed that. This funded company is not going to pay a premium for my startup if there are IP holes that someone could come back later and sue them or ask for ownership with the code or whatever. It’s not something you think about when you’re two, four or five person startup but it’s something that you should definitely have.
I signed to the same employee agreement, and Derrick signed, even us cofounders. We had to have agreements that basically Drip, the S Corp that owned everything own everything, that Derrick and I couldn’t walk away with that. That’s one thing I would think about.
The guy mentioned manuals and processes, that was not an issue because we were an eight person team and they’re acquiring the team. They weren’t looking to automate everything. I think if the team was walking away, yes they would want manuals and processes to hand off to the next team but there was zero questions about that. There were more questions about what our vacation policy and HR staff and employment agreements looks like than anything like that.
In terms of bank issues, they didn’t acquire the company, if you think about it. They acquired all the assets of the company and that’s typically how it’s done because they don’t want any of the liabilities. They left an S Corp that Derrick and I still own the same amount that we’ve always owned, they just bought all the internal assets of it including the code and the goodwill and the recurring revenue and employment agreements and all that stuff.
As a result, the corp still owns the bank account, they didn’t acquire any of that stuff. Thankfully we never had to setup a PayPal account or anything like that. Same thing with domain names, we just transferred them over. They were all in the GoDaddy account and we transferred them over to their GoDaddy account.
The only other thing I could think of as I was going through this list that I think would be interesting to think about it they ask for, this is typical, the standard due diligence stuff, all corporate documentation, your articles of incorporation, every single amendment you’ve ever made to them, everything. Have that all in one place because going out and finding it and scanning it is a pain in the ass.
Having record keeping doesn’t seem like a big deal when you’re a three person startup or when you’re a solo founder. But if you’re ever planning being acquired, you probably want all of this stuff somewhere so it doesn’t take you weeks to put these docs together.
The next thing is having really solid books, basically having income statements for every month. For me it was literally just a Google Doc with revenue, expenses and that kind of stuff. I also had Xero, the accounting software that they could look at. When they were asking for high level numbers, top line revenue and that kind of stuff, I was sending them Google Docs.
They’re gonna ask every single service you use, what’s every SaaS app that you pay for? Hopefully they’re all on a credit card, you could just go to credit card, that’s what I did and just started listing those out. Copies of leases and every contract you’ve ever signed for every service. Transferring the Stripe account did happen because all the subscriptions were in there.
That’s the high level overview, I think it’s something that I hadn’t thought about. When there’s a technology transfer, you think more about, “Boy, the tech has to be good and has to be automated and you want processes in place.” When it’s a company acquisition, it can be different. When people bought HitTail just as a product, they didn’t ask for articles of incorporation because they weren’t buying the team, it wasn’t a strategic acquisition. Those are my high level thoughts.
Mike: I hadn’t realized that they did not acquire the entire company itself and they were just acquiring the assets from the company. That’s the way that my wife had purchased the fitness studio that was in town. She didn’t acquire the business, she acquired the assets of the business.
I was very clear to her about just because the records of the business were obviously a little screwy and the person who own the business before couldn’t really explain certain things and was a little cagey about certain pieces of it where I’m just like, “Do not acquire the business.” Because let’s say she’s got a car, for example, that is owned by the business, if you acquire the business, you’re also acquiring the debts that go with it and any liens or anything else that goes with it. You will be on the hook for those things. If you don’t know about it, it doesn’t matter, you still have acquired them which may suck.
Rob: If you buy the company, you acquire the assets and all liabilities. That’s why almost without exception, anyone who knows what they’re doing, when they buy a “company” they’re just buying the assets of the business, that’s the standard. When Facebook bought Instagram, you can bet, their lawyers did not buy the Instagram LLC or C Corp. They bought just the assets of it.
As a result, you have to then list out what all the assets are which is interesting because you have to list out your code and the database and this, it’s just a big long list of stuff.
Mike: With my wife, there was a tax bill that ended up coming in. It was sent to her and she’s like, “No, this isn’t me because I didn’t acquire the business.” There was stuff that came up afterwards that had she’d acquired it, she would’ve been stuck with it and there is nothing she would’ve been able to do.
The other thing I find interesting is that when I worked for Pedestal Software and they got acquired by Altiris, the Altiris acquisition team came in and they handed us, all the employees, these documents that we had to sign that were basically more or less a copy of what our previous agreement with Pedestal had been for all the IP rights and signing them over to Pedestal but it was their version of it.
We’d already signed all the stuff but they said, “Yes that’s fine and everything looks good but you also have to sign these.” I think maybe there are updated ways of covering additional holes or something like that, I’m not sure.
Rob: I guess our agreements were perhaps good enough for their lawyers, they probably looked at them and said, “This covers everything.” Because it was recent, it was within the last year or something and everyone had signed. I broke everything out, Numa Group which is my umbrella LLC that owns a bunch of stuff, it owned Drip until maybe 9 or 10 months before it was acquired.
I was already in the process of ripping it out of Numa Group because that was when Derrick was taking some equity in the company and he essentially became cofounder. I was already in that process which was painful and agonizing and took five months and more money than it should have. Drip was already in an S Corp. I was very, very thankful for that because if it did not, then it would’ve been a fiasco to try it doing during the negotiation and the acquisition process.
When that all happened, I basically fired all of us from Numa Group, we all got new jobs with Drip, S Corp, Drip Incorporated. We all signed agreements at that point again even though some of us already signed up with Numa Group. Then, essentially when Leadpages acquired us, we all got fired from Drip Incorporated and all got new employment agreements with Leadpages.
I think they probably had some IP stuff in their employment agreement as well which is fine because then anything you do for them they own but they didn’t have a specific additional stuff we had to sign.
Mike: I wonder if it maybe it was because Altiris was a public company and they had additional things that they had to cover themselves, I don’t know.
Rob: I can see that, it makes sense. Thanks for the question, guy. I hope that was helpful. Our next question is actually not a question, it’s some kudos for us and it’s a voicemail.
“I just listened to episode 838 with the questions. It was great to have that interactive […] podcast, I just wanna give you guys some feedback, a long time listener. My name is Chris. I really enjoyed the episode, just hearing those questions and getting some more of your perspectives and your background and experience. […]. Take care, guys. Thank you again. Keep up the good work.”
Awesome. Thanks for calling, Chris. I wanted to play that because it’s good to hear feedback and folk’s opinion. He said episode 838 but I think he meant 383 which was just another one of these Q and A episodes. I specifically mentioned in that one that I like doing them more often and that I like getting voicemails because it shows it has the interaction. Thanks for that, man. I’m always happy to hear from folks.
Our next question is from Mr. Andrew Connell about GDPR. “Hey Rob and Mike, this is Andrew Connell from Voitanos, that’s voitanos.io. I do online training and I do it for everybody around the world or developers around the world. With the coming effectiveness of the GDPR for data privacy and personal privacy data at Europe, I’m curious if you guys can comment a little bit, of course not being lawyers, I’m not a lawyer either. I just think about what kinds of things developers really need to be paying attention to? What kinds of things you need to be careful of?
I’m asking these guys because it’s also very much in the way of how we’ve all be listeners of your show worked on doing email based marketing and collecting email addresses and potentially phone numbers and other information about users. What kinds of things you need to think about, I’ve seen things about privacy statements that you need to have on your site, how you’re collecting the data, what talent is being used, how you’re protecting it, all those kinds of things.
I’m just curious, what things do you really need to be paying attention to? There’s probably the gold standard but also what’s the standard that you can do where you’re at least defensible. Maybe you’re collecting data and the user finds out, they decided they no longer wanna be tracked by you. Can you just go back to them and say, ‘Yes I track you by your email address. Here’s all the information I have about you. If you want me to delete you, I can delete you.’ I’m just curious, do you guys have some comment there or maybe even have somebody who is a lawyer who can jump on the show and maybe comment? Thanks a lot. I love the show. See you guys in Vegas.”
The riveting conversation topic of GDPR.
Rob: Everyone is thinking about it so it’s important, it’s just such a fiasco. I’m gonna use the word stupid a lot in this conversation insight. Big parts of it, I think, are really dumb. There’s a 250 page doc or whatever and Brandon, our senior director product, went through the entire thing.
The end result is gonna wind up being something like we have to rewrite a bunch of internal policies and we’re gonna add a checkbox to a form for our users. That’s very similar to what MailChimp is doing and Active Campaign, all the ESPs. I’ll stop there and circle back because I’ve been talking a lot this episode. I know that you saw a talk at FemtoConf about it and I’m sure you have other thoughts on this.
Again couching it that we aren’t lawyers, we are not giving personal advice to anyone and certainly don’t have an exhaustive understanding of this but this is just our general thoughts on what we feel like folks might wanna do for GDPR.
Mike: The talk that I saw on FemtoConf, there’s a linkable posted in the show notes from Aleth, she’s the one who gave the talk. There’s a link to an overview of her talk as a recap from Christoph. He runs FemtoConf with Benedikt. You can go out there, there’s an overview of it but I’ll say it glosses over certain details that she talked about specifically.
With GDPR, the thing that you really have to make sure that you’re aware of is that if you touched the data in any way, shape or form, you’re on the hook for it. You have to make sure that you are both protecting it and if you are able to personally identify somebody, that you are complying to those GDPR policies.
If you have metadata about somebody, like custom fields or something like that, that’s not considered personally identifiable information but there are certain pieces that are. For example, an email address would be personally identifiable, an IP address would be personally identifiable, first name, last name, address, those kinds of things.
Rob: How is an IP address personally identifiable? That’s stupid. It’s not personally identifiable because IP address, a, can change constantly, b, you could have a single IP address for 100 people at a company, there’s so many ways that that’s not. I will stop.
Mike: You just have to be careful about what it is that you’re doing with that data. A couple of big things that I’ve seen that you have to really pay attention to if you’re selling stuff is that one, people have to be able to request a copy of all of the data that is associated with them.
If you’re running a SaaS app and it’s collecting the information, let’s say it’s Drip ESP, your customers are gathering information based on that email address, the person who owns that email address has to be able to come in and say, “Show me everything that you collected about me.” You have to provide them with the mechanism to give them that data dump. I’ve seen this recently, Facebook is doing this, Twitter is doing this.
You can go and you can request a download of all the information that Facebook has on you, the same thing with Twitter, you can get a download of it. I haven’t done that with mine yet but my understanding is that it is absurd and I’ve seen the amount that Facebook has on you, for example. There’s obviously backlash in the news right now about the amount of data and how personal it can be in certain cases. That’s something you have to pay attention to when you’re trying to comply to these, you need to give that to somebody.
Rob: Here’s what I would say, if you’re a developer, you don’t have to have an automated way. They can email you and you can go run a sequel query. I would not go and build something consul or anything especially it’s a small company. You know that you can do stuff agile and just do it when it happens, do it just in time, whatever.
They can also request that you have to delete everything, then at that point, the first time, it’s gonna be a pain in the butt but you’re gonna write that sequel query to delete it out, it probably gonna break something then you’re gonna fix it and then the next time you’ll have the same query. That’s how I would think about it. If you’re Facebook, that’s not gonna work because it’s not scalable. The odds of you getting a request when you have 1000 users or 5000 users, it’s pretty low.
Mike: The downside of that, though—I was just about to mention that—with deleting the information because you do have to comply to the right to be forgotten clauses.
Rob: Which is the stupidest thing I’ve ever heard.
Mike: I think you said it in the middle of the other comment as well, we’ll say it’s three. The right to be forgotten says that somebody can say, “Completely forget about me.” The problem I have with this is that where do you draw the line for that? I know that there’s a timeline that you have in which you can say, “We’ll get this taken care of.” You have a certain amount of time or this 14 days or 30 days to get rid of the data.
The question I have in my mind is that yes, I understand that that applies to backups but does that mean you have to go into your backups or you are only allowed to basically hold 30 days worth of backups? For the sake of arguments, say that it’s 30 days, is that all you’re allowed to maintain because that seems scary.
Rob: That’s why this is insane. It’s a legislation, it’s government getting involved in something that technically is a bad choice for a company or a bad choice for a business. We know as IT people, as developers, as professionals, as DBAs, you wanna have weekly backups or monthly backups for literally years probably. It’s not so you can hoard and use a bunch of information, it’s so if stuff goes sideways at some point and you realized you have this big error, you always go back, it’s a safety mechanism.
Mike: The other thing that bugs me about this is the right to be forgotten. I get the intent and I understand it but let’s say that somebody comes to you and says, “Rob, I want Drip to forget about Mike Taber.” What happens in three days if my contact information makes it back into Drip? How do you prevent my information from going back into the system without knowing who I am and keeping track of that? That’s a total chicken and egg problem.
Rob: None of that, as far as we’ve seen, is in GDPR. That isn’t addressed. The example is you say you want the right to be forgotten, you sign up for Rob Walling’s newsletter and you, Mike Taber, say, “I want to be pulled out of there.” You’re pulled out. What if you’re in 10 of our other customer’s accounts, are you only forgotten out of that one account? Are you forgotten out of everyone? It’s not specified.
Like you said, what if you then go to sign up to a new newsletter tomorrow and XYZ person is also hosting on Drip. There are so many edgy cases. The problem is every version is gonna be this much of a pain in the ass. If they do V2 in a year, think of how many personal hours and how many dollars have been pissed away by companies that would otherwise have been productive building products, doing interesting things, creating jobs.
Marketing alone on the Drip team which is not a huge app, we’ve wasted hundreds of hours and thousands, if not tens of thousands, on legal fees just having our lawyer’s advice and stuff. That sucks, that’s money that could’ve actually been productive and instead it’s sitting here dealing with what essentially is legislation.
Another issue I have is that in the US, they often will pass things, they’ll pass laws like this but they will exempt small businesses. If you’re 25 employees or less, you don’t have to comply to certain things. They do that because they don’t wanna put an undo burden on small companies because small companies are the ones that don’t have the budget, that don’t have the analysis council and that don’t have the bandwidth to handle a 250 page doc that’s completely opaque and everyone is confused about and freaking out. I think there should be an exception.
Isn’t this really meant to be for Google and Facebook and Apple and Fortune 1000 or Fortune 5000 Companies. How much do they care about these tiny little 3 person, 5 person, 10 person companies. They’re just trying to run a business, they’re just trying to make a living. That’s where I think they overlooked having some kind of exemption for small businesses.
Mike: There are certain pieces of it that are exempt; there’s the security officer, a dedicated security officer. Stuff like that, I believe is exempt. If you’re a small business below a certain size, you don’t have to have that. But the reality, at the end of the day is if you’re a single owner, that’s you anyway. It almost doesn’t matter. I totally agree, they’ve overreached is really what it comes down to. It doesn’t makes sense for much smaller businesses to try and have to comply to that.
Rob: Again, you and I agree, we understand the spirit of what they are trying to do. I don’t disagree with any of that, I disagree with the amount of burden that they’re placing on all the small businesses. Everyone is talking about this right now. It’s a waste of everyone’s time. When I say everyone, in our circles, in the startup circles. Yes, Facebook should worry about it but it’s so much wasted bandwidth.
Rob: I have not come across that, I don’t know about that. That’s an interesting piece.
Mike: Let me give you an example, if on your website you have Google Analytics, a Facebook Pixel, and a Drip Widget for example, somebody can come and say, “I don’t want you to track me using Facebook Pixels but the other things are okay, just not that.”
Rob: I had a guy who read all 250 pages of it and that is not on our list. I would look to see if perhaps there’s an exemption or there’s something in there that says you can otherwise not do that because, again, I haven’t heard anyone else talk about that.
Mike: The thing is there’s a piece that revolves whether or not you’re a data processor or a data controller. That’s the part that revolves on it. You mentioned earlier that there’s a question in your mind about whether or not if somebody is asked to be forgotten, is it just for that one account or is it for all them? My understanding is it’s all of them.
They could go to Facebook, you don’t have control over but they could go to Facebook and say, “Opt me out of everything, don’t track me. Forget me completely.” That has a trickle down effect on you running Drip because if you guys use the Facebook Pixel to track people, then you can’t track me, for example. Facebook essentially blocked it. Again it goes back to how do you keep track of that unless you know who the person is to not track them.
Rob: To be honest, I asked someone who I know is familiar with GDPR and had spent some time looking at it. He runs a small business, less than 10 employees. I was saying, “What are you actually gonna do here?” He said he is gonna handle things as they come in in terms of the request, in terms of deleting and in terms of giving a report of what they know.
He is seriously considering not creating all the documents because they basically say you have to have these 10 policies or 12 policies, all this internal documentation you’re supposed to have, processes to do this. He was going to say that his company is compliant with the spirit of GDPR and we’ll live up to the request but they do not have all of those policies in place.
It was like some verbiage of we believe in the spirit of it, we will comply as needed type of thing with the thought in mind that he’s not in Europe so he’s not European business so it would be very unlikely that the EU is gonna reach across the pond and come and try to take some little 10 person company out. Like I was saying, this is really more intended, my understanding is more intended for these larger companies.
A checkbox and them checking a checkbox is gonna make a difference, it’s like agreeing to a ULA, user license agreement with Apple, no one reads those things. You’re gonna put a checkbox with the link and it’s just gonna become this route thing that everyone does. It’s not gonna change anything but that is what it says technically. Consider if you’re asking for keeping your customer’s customers data somewhere, it gets more complicated.
In Andrew’s case, he runs online training. He has an online training, video training, people can sign in. He’s not collecting his customer’s customers data so it’s very much more simplified. I would consider a just in time or a simplified approach if I were in his shoes. How about you, Mike? You wanna talk about how every aspect of your business is not gonna comply and open yourself up towards the EU?
Mike: That’s the interesting thing is that for businesses that are not based in Europe, they don’t have the jurisdiction to force you to do any of that anyway. There’s literally nothing that they can do, they can’t sue you and say, “You are not complying to this.”
Rob: They could sue you in US court, they could. The EU could file a sue in Massachusetts court. You would have to fight it out, you would have to settle or you would have to fight. The odds of that happening, though, for you are almost non existent.
Mike: The thing is there’s a difference between them filing suit versus them having jurisdiction over. The sucky part would be you’re gonna have to comply to it just to make that lawsuit go away or you’re gonna have to fight it which you’ll win if you fight but you’re gonna incur a ton of legal fees over the course of doing that because they don’t have the jurisdiction and that’s what the court would rule.
I certainly wouldn’t recommend trying to fight it yourself and be your own lawyer there. I’m sure that somebody probably is skilled enough to be able to do that but I wouldn’t wanna be that person, I wouldn’t wanna risk it.
Rob: Here’s another option I heard someone throw out. They said EU customers are less than 10% of my business, I’m gonna reject, not allow EU customers anymore because I don’t have the bandwidth to do it. That’s what someone told me, that was really interesting. That’s a super bummer but at some point you have to throw your hands up and you gotta do IP detection or you just ask, “Are you in the EU, yes or no?” If they say yes, during the signup, you just say, “Sorry we can’t support you through the GDPR.” It’s pretty fascinating, I hope it does not come to that but I can imagine some businesses that’s just going to be easier and simpler to do that.
Mike: I’ve heard some people tried to, I think it came up at MicroConf Europe this past year about the legislation. There is someone there I met who was basically basing his higher business idea off of the idea that there were going to be US based businesses who aren’t going to comply to GDPR and they were gonna say. “You can use our service and you will be compliant.” I disagree that that’s a great business idea because all they have to do is comply and then suddenly your whole business value proposition goes off the window.
Rob: Obviously it’s complicated but I do think there’s a pragmatic way to approach this. As with any legislation, it will iron itself out, it will be more understood. You can watch companies like MailChimp or Drip Leadpages or whatever, GitHub, or Slack and watch how they handle it and then evaluate, “Do I need to do some other things?” You can also read that 250 pages doc and try to sort it out.
I don’t think it’s as bad as people make it out, I’m hoping it’s not gonna be that way. I do think if you’re in the EU, there is definitely more of a cause for concern if you’re running a business. Thanks for the question, Andrew. I think that was super helpful and a timely topic to discuss.
Mike: I think with that question, we’ll wrap things up for the day. If you have a question for us, you can call it into our voicemail number at 1-888-801-9690 or you can email it to us at email@example.com. Our theme music is an excerpt from We’re Outta Control by MoOt used under Creative Commons. Subscribe to us in iTunes by searching for Startups. Visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening. We’ll see you next time.