Speaker 0 00:00:08 Welcome to the rogue startups podcast, where two startup founders are sharing lessons learned and pitfalls to avoid in their online businesses. And now here's Dave and Craig,
Speaker 1 00:00:19 Welcome back to the roads startups podcast. I'm your host Craig Hewitt. This episode I'm joined by Rob walling. I think most folks who listen to this podcast know of Rob from his own podcast startups for the rest of us rubs also the former founder of drip popular email marketing automation platform, and now runs the tiny seed accelerator program. Uh, Rob and I have, podcasted quite a bit, as I mentioned in this episode, um, either on startups for the rest of us or in the tiny seed tales series that he kind of featured cast dose, uh, evolution through the, the batch one of the tiny seed program. In this episode, I chat with Rob a bit about kind of what's going on and what's new with tiny seed. Uh, they're in their second batch and second year of the program now. And like all of us, I think Rob is learning as he's going about what's working.
Speaker 1 00:01:10 What's not what things to look for in companies and what things are really working for those companies. And now he's kind of seeing two of those cohorts. So he's seen batch one. Now he's starting to see batch two. And particularly in the end of this episode, we dig into the things that he's seeing consistently between batch one and batch two companies that is providing for this really kind of hyper hypergrowth scenario. So stay tuned for that, right? Towards the end of the episode, we also talked through a bit of a mental exercise of what if Rob hadn't sold drip. So, you know, drip was a really popular email marketing platform and, and Rob exited it four years ago. I didn't know it's been that long. And for those of you who have listened to the podcast, or while you know that I'm kind of fascinated with this question of like sell or don't sell or lifestyle business, or take funding and all these questions, I think are questions we should always be asking ourselves of like, what, what do I need and what does my business need right now and why?
Speaker 1 00:02:09 And so Rob obviously sold drip four years ago, but, but in this episode I wanted to ask him like, what if he didn't sell drip? What would, what would his options have looked like? And how would he have navigated from the point he was at, which was, you know, a fast growing self-funded sass company to getting to where it was a sustainable kind of situation for him and his lifestyle and the business. And I think that the options there are to take funding or to, or to scale back growth maybe, and make it more of a lifestyle business. And I don't think any of us should think that has a negative connotation because I think there's a lot to be said for running a business for a very long time. But Rob and I talked through a lot of, of that in this episode as well.
Speaker 1 00:02:50 And he has some really interesting insights. So I think we can all learn some of the general lessons that can be applied to us and our businesses and our situations from what he's been through and kind of seeing this in hindsight, four years later, I hope you enjoy this episode with Rob walling. So Rob, it's been a while since you've been on the podcast, but you and I podcast a lot. I feel like I'm on a lot of podcasts or we're on a lot of podcasts together. Um, but it's nice to catch up here. Uh, how are things going for you guys?
Speaker 2 00:03:19 Oh, in general. They're they're pretty good, man. It's nice to chat with you again, we haven't talked in a, in a few weeks. Um, uh, but yeah, the, the COVID, uh, kind of quarantined stuff has eased up. We're in phase three, which for me, you know, Minnesota is means everything is open and essence, like the rest restaurants are open, but it's at reduced capacity and you have to wear a mask unless you're eating. And even like gyms are open, but they have pretty stringent requirements and a lot of businesses are choosing to stay close still, you know, to just to kind of see what happens if we have not had a flare up here in Minneapolis, um, you know, knock on wood at today. I know that there are other places around the country and I was gonna say around the world, but mostly just around the United States that are
Speaker 1 00:04:03 Just Florida, you can say it, man being a Florida native it's okay.
Speaker 2 00:04:07 Isn't it Arizona. I mean, there's just some places that really are having some struggles. Yeah.
Speaker 1 00:04:12 So yeah, yeah, yeah. I mean, so for reference, we're recording this kind of towards the end of June. So yeah. I mean, it's, it's scary to watch on the news. My folks still live in Orlando and they're pretty much back in lockdown now. So it's like, uh, that was for me always like through all this, that was the thing, as I said, if people have to go back and lock down after getting out, they're going to be, I mean, riots, literal riots. And I, yeah. I don't know that we're there yet, but yeah.
Speaker 2 00:04:38 Well, things are going much better for you over in France. Right? You would tell me your kid, like kids, people's kids are back in school and every, it sounds like everything.
Speaker 1 00:04:44 Yeah, man, we're having pretty much everything is quote normal. It feels like the shit we went through in the quarantine is worth it now because we're on the other side for the moment who knows what will happen. But yeah, for the moment, it seems like the quarantine was worth it to get the, you know, the freedoms that we have now. Yeah. Very cool. You know, I, I, I think I was talking privately to somebody, but I'll share on the podcast. Cause people ask me a lot about tiny seed, uh, and what the experience was like. And it's been weird to not be in tiny seat anymore. I just a couple of weeks now that we've kind of wrapped up are the, you know, the first years, um, year, I guess the first cohorts a year, and I'm having a bit of withdrawal from like the connectedness that we had within the group. So it's, it's kind of interesting, but, um, I, I think a lot of people that listen to this show are interested in kind of what's going on with tiny seed. I know you talk about it on startups through the rest of us a fair bit, but I would love to hear how things are going to batch too, and kind of how you and INR and Tracy you're feeling about everything. Like yeah, just love to hear kind of the, the latest
Speaker 2 00:05:49 For sure. And Craig, you will always be you and Caspus will always be part of tiny seed. Maybe you just won't be in an active batch right. For better or worse.
Speaker 2 00:06:00 So you're in, you're in Slack and you're an alum. And you're, you know, I know that, I know that folks in, in batch one are still connected and interacting a bit, even if, you know, there were some mastermind groups that formed and others are probably wants to do together, but, and then I think that it's been really invaluable to be able to pull. I'm not sure this occurred to me at the start, but it's been valuable for as batch two companies come in to be able to say, Oh, you need help with that. Well, yes, we do have a mentor, but we also have a batch one founder who did exactly this eight months ago. So I'm going to give you my, what I told them, you know, cause there was like an example as like hiring a customer success person, like your first customer success person.
Speaker 2 00:06:37 And so I had done a brain dump for someone in batch one, they went off, they hired successfully, they now have a job description. They have their process that they, they took mine from 2015 that I maybe 2014, I did the drip and improved it. And it's more modernized than just a better thing. So it started with me was improved. And now about two members basically able to get advice, you know, about how to, how to do something. So that's been kind of a cool, um, I'm excited effect of it. And that, of course, you know, we always hear about that. Like the YC alums and how they there's a huge network there. See, I went to public school, like I went to public school all the way through college. And so it was being an alum was never a thing for me. But now I'm starting to realize the value of, you know, of going to one of the, like an Ivy league school or something. I never, I think when I was 18, no one in my family, aside from my brother directly older than me had ever graduated from college, extended family, my parents, anything. And so I just kind of went to a college. It was close to home and was not super expensive, but now realizing, Oh yeah, you graduated from Harvard or Stanford. Like the cohort that you're in there. I think, uh, I finally, I I think gets
Speaker 1 00:07:42 Yeah, yeah, yeah, yeah. I spent, I mean, especially graduate school, like I think, you know, that place, you get the TA the last level before you get placed, I think is really where that network comes in yet business school or master's programs or whatever. Yeah.
Speaker 2 00:07:57 Yeah. And like I was saying, you know, and, and you totally see that, hear about that in my Combinator. And now I see, Oh yeah, that's going to be a thing with tiny seed. Like the, the, the batches, you know, the alums and the network of being, you know, saying, Oh, I was part of tiny seed bats, one or batch five or whatever. I think we'll be, it's going to be a big thing.
Speaker 1 00:08:14 Well, I'd love to hear yeah. How, like, how things are going with the second batch and, and, you know, as much as you can share about kind of what you guys have learned or maybe are doing different this time around.
Speaker 2 00:08:24 Yeah, absolutely. So that the second batch was interesting in that the application process was a lot. We improved it, we improved it like the mechanics of it. Cause the first one was very much a, an MVP, a no code slapped together, MVP. That was pretty brittle, I'll say, and it was like a Google spreadsheet with it. You know, it was hard to sift through and hard to rate and do all that. And so we had Tracy research and try to, for those who don't know, Tracy is our program manager for the accelerator and she researched and found a tool that helps with that. So that alone made it a lot more efficient for us. So we started improving our processes. That was cool. The second thing was we, we really didn't have to bang the drum as hard to get more, we got more quality or more companies that were higher quality, further along, more traction, you know, just, just more, I'll say a better fit.
Speaker 2 00:09:17 More investible probably is an interesting way to say it. I think we, it depends on how you count, but around twice as many companies from about give or take the same number of applicants. So it was a very interesting thing. And I think that's one part of our, we honed our messaging a bit, you know, we kind of learned with the first round of like, Oh, well we need, you know, we're really not investing in like direct to consumer or physical credit limit. Let's explicitly. We never said we would, but we had a lot of those in the first, first batch application and we just, we honed it. We kept saying, all right now, it's it really is. SAS is mostly B to B SAS, you know, and, and kinda, kinda got that down. And I also think there's a kind of like building a brand, right?
Speaker 2 00:09:55 It's like you do you do something once. And some people are like, Oh, can this work, will this work? What will the results be? And then you do it once successfully and more people are interested in it. I actually made the analogy to launching MicroComp in 2011 where we couldn't sell enough tickets. We barely sold enough to break even, and it didn't fill the room, but it was the event itself proved itself. So well that first year it had so much buzz that we sold the second event out. It was about not twice as much, but it was, it was a larger event. We sold that out in two weeks. And the third year we did Microsoft, we sold it out in 24 hours. And the fourth year we did it, we sold it out in six minutes and there was no additional effort. You know what I mean? It was still just an email list. And we sent an email and you build this momentum and this brand and this, you know, I think this space so that people, um, it's a, it's a trust, right? Of like, Oh, this works and this is something I want to be part of.
Speaker 1 00:10:48 I wanted to, to shift the, the episode to kind of a, I don't know, maybe it's a hypothetical question, but I think there's a lot of practical mindset and kind of strategic things that we can pull out of this. And, and the email that I sent to you a few weeks ago was, Hey, Rob, I would love to do an episode. That was what if I didn't sell drip? Um, and the idea here is you, your, your kind of life and career would have taken a really different trajectory if you would have kind of kept the company and grown it. And, and I think that that, like what, where you would be today maybe is not as interesting as like, I would love to start around the time when you entertain the idea of, of like selling the business and kind of like what things looked like and, and why you thought, you know, raising money or selling the business or something like that was maybe a good move.
Speaker 1 00:11:44 Like, I think that's a good place to start because I think, and this is a really long preamble to this question, but I think that the thing that kind triggered this in my mind was the episode that you and Jordan did recently talking about when you get past this traction and like growth to like break out growth. Like when you get into that phase, it seems like, and we're not there, but it seems like a lot of things change in your business with how you operate and how you grow. And, and I guess that's the start question is like, is that like being in that phase of the business? Is that really what kind of brought some of this decision to do something different with the business on?
Speaker 2 00:12:24 Yeah, I think it did because as the business changes, you just have to constantly be evaluating, you know, what, what does the business need now? And I'm actually pulling up, I forget what I named all the stages and I'm pulling that up now. Yeah. I guess stage four was like escape velocity. And that was from about 20 K of MRR up to like 83,000 of MRR. And then scale was 80, around 80 to 200 K and is a give or take, I mean, Jordan and I were, you know, these are loose numbers. It depends on how fast you grow and all that. And then company building, we put after, you know, about 200 K MRR and at each of those stages, you just need something so different. And with, with drip, when we hit around, like, so, so drip was funded with revenue that I was pulling out our profit.
Speaker 2 00:13:12 I was pulling out a hit tail and I want to put in about 150 to 200 K into the, into the business because it was just so competitive to get it started. I had bootstrapped, well, I bootstrapped all this stuff, but a lot of the businesses I had started earlier, I'd started with so much less funding. And this in essence was self-funding drip in a really hyper competitive space, but we hit a point pretty quick. And it was in the 30, 40, 50 K MRR range where growth started accelerating faster and faster. And we were, I was, we were pretty severely hampered by, by money. Like more funds would have been able to allow us to probably hire faster was probably the number one thing, because I was hiring quite slow as hiring to revenue, you know, cause once we hit break, even I was like, man, I don't want to dig back into my personal savings to fund this more.
Speaker 2 00:14:02 And I want, this is a viable business. It's obviously successful, but it was, it was, it was tough. And like one of the, you know, some of the hard parts are like, you can only hire junior people because we didn't, I didn't have the patience to wait three months to have enough money to hire it a senior, whatever. So I would wait two months of growth and then I'd hire like a junior to mid level, but then we'd have to kind of train them up. And yeah, so there was that and there was, um, I'm trying to even think like Amazon servers, we could have, you know, our hosting bill, I had to pay way too close attention to that. And we had a ton of competition and people were growing quickly. Oh, was even like, like ad spend. Like I couldn't spend as much on ads or on marketing as I would've liked because we just didn't have that leeway.
Speaker 1 00:14:44 So you guys were, you know, at this kind of million dollars ARR give or take, right. And, and even it was not enough to kind of fuel the resources that you needed in the business to continue growing on that path. Is that right?
Speaker 2 00:15:00 Yeah. I mean, it was, it was enough. Like we were growing fast and we would have continued. It was, we would just we'd grow for a month or two and then we'd hire and go back to breakeven. We'd grow from one, three to three higher breakeven. And I was like, man, I could really use like three or four hires right now to scale this thing up or I could really use, um, yeah, th the funds I'll tell you the other thing. I mean, it's related, but I didn't hire. We were at like 10 people when we got acquired. I didn't hire any like internal, like non-revenue focused people and like developers, I consider they're building the product. That's going to generate revenue, customer success, sales, all that's going to generate revenue and support is going to keep customers around, which, you know, these aren't direct revenue connection, but they're all product based things.
Speaker 2 00:15:49 We had no internal, we had no HR ops, you know, office manager is what they used to be called. But, and so I was doing all of that. And that's the other thing is that was kind of a, it was a mistake, but I, and I knew it at the time, but I felt like I don't want to spend the time right now to hire someone and the money on this role when I really want another developer or I really want another customer success salesperson that will generate more money and then I'll fix this later. And it was, it took a toll on me as a result because I wound up doing, I don't know if you've seen Jason, Cohen's talk on, he had a talk about burnout, but he's like, you know, as founders, we can do a ton of things. You know, this is big circle, but like a bunch of these you don't like to do and they will lead to burnout, you know? So you have the Venn diagram, that thing of like, what do you actually like to do? You know? And then, and that's where I found myself was like, this isn't as fun as I, this isn't as fun as the past businesses I've built, you know, and it's growing really fast and it should be exciting, but it's actually very draining. And I found myself being tired and depressed, depressed all the time.
Speaker 1 00:16:54 Interesting. I know you've said before, like that, that you never like regretted selling, do you and answering, I guess it kind of has to be yes. But do you ever think about that in the lens of, if you would have kind of managed the growth of the business and the people on the team to where you didn't burn out, that your considerations around selling would have been different?
Speaker 2 00:17:16 You know, I I've thought about it a little bit. There were more factors. The answer is, I'm not sure. Yeah. It's hard to know. I mean, there were more factors than just, Oh, I'm burned out. I need to sell the business. It really was. I had worked, I felt under diversified. I had worked since 2000 and really about two. So yeah, this was, I'll put dates into perspective. This was like 15 years into my career. And I had pumped every extra consulting dollar, everything that was not in our house or in our cars, was in all these businesses. And I had this diversified portfolio in 2009 and then I just kept going. I kept pushing more and more chips into smaller, a smaller and smaller pile. And that became drift. And pretty soon it was like, okay, so now I have a podcast with Mike and Microsoft and drip and all of my net worth, except from aside from like, you know, some retirement savings is literally stacked in this business that if I sold it it's enough money to that.
Speaker 2 00:18:13 I don't have to work again, but it made me nervous. It made me nervous, especially with, you know, there are things, I mean, when you're running an ESP, it's like spammer, like Russian spammers get in one night and they send things and it burns all your black, all your IPS and they all get blacklisted and then send grid or your other provider calls and says, Oh, we're going to shut down your account. And you think to yourself, wow, this could lit, could it never did. This could go to zero tomorrow in a big way or the competition. I mean, I don't need to list off the number of ESPs you and I could probably name 15 off the top of our head and there were hundreds more. And I was like, well, what if, what if these guys take my market share? What if we can't keep up?
Speaker 2 00:18:50 What if, you know, what, if the servers go down, what if we can't scale this thing, which eventually we did run into scaling issues after we sold. And it would have been really, really hard to overcome those, I think without either a lot of money to hire developers or as, you know, after we sold, they of course had venture capital and were able to fix them. So there were other factors than just, you know, not enjoying the job today. And I did enjoy, it's not like I didn't enjoy that thing the whole time. Maybe it was two and a half years from like when Derek and I started it to when I got the first email about not really the first, but it was the first kind of viable email of like, Hey, we want to acquire you. And then it was another year, 12, 13 months after that, you know, till assaults, it was about three and a half years in. And I'm not saying I was, it was, I think part of the part, you know, when I think when I think back, you know, your memory is fuzzy. Like part of it is that I was dealing with an acquisition during the last six months. And so I was burning out even more. And so that kind of taints my, my memory of things. Cause I know that there were times in 2015 that were just fine, but it was, it was on and off. So yeah, there were definitely more factors than just not enjoying it.
Speaker 1 00:19:59 Yeah. I guess kind of going back to my original thought around this and I'm sorry, I got us derailed a little bit there, but like what if you didn't sell? Right. So the options are to sell, to raise a bunch of money, uh, and, and kind of in that way fund the trajectory of growth that you want, or, you know, kind of flip it back to a bootstrap lifestyle business and not in a negative way. Like it's not a negative connotation. What do you think those paths could have looked like? Um, because I, and the reason I ask is I think there's probably people out there who are at this point of saying like, Hmm it's, it's about time to do something with this. Right. And you have like these three options. One is just kind of let it run. One is to raise a bunch of, and really try to go for something big. And the other is, you know, I probably need to start aligning with somebody to get acquired or partner or merge or whatever.
Speaker 2 00:20:56 Yeah. And that's the interesting thing about acquisitions, what I had heard. And I, I don't assume this is true. I don't know is that, Hey, once you get, there's kind of this window to sell your business where there's acquirers like, like a lead pages where they can pay X, millions of dollars, but if you double or triple in size, the multiple, they can no longer afford you. And so I heard there was this Valley that once you crossed it, you had to get to the other side now. So then you're, it's like, okay, we gotta do this for another two, three, four years to get to the other side where now people have the money. So that was another, actually another factor that I wanted to throw in. So given that we did, you know, you basically said, keep bootstrapping, raise money, sell, right? Those are the options.
Speaker 2 00:21:37 So I did sell, so we probably don't need to talk to you that one, I think the bootstrapping route would have, I would have had to figure out, you know, how to hire an ops person because I was doing too much crap that I didn't want to do. And too stressed out all the time. And it's that one's tough to think about because I was already of the mindset. By the time we started getting emails, Hey, we want to acquire you. We'd already talked several times about raising a, an angel round and, you know, I don't know what the valuation could have been and probably I'm guessing 10, I don't know, 10 or 15 million based on our revenue and, you know, could have raised whatever a million bucks. Now, the thing, the thing that I kept struggling with that was, I didn't, I didn't want to raise venture capital because that, isn't the, I don't think that's the route.
Speaker 2 00:22:23 Any of us in this community really are that interested in. Um, and I didn't want to saddle myself to needing to exit at a a hundred million or whatever, whatever it ends up being. So it really was like looking to get an angel round and it, and it was, it was going to be more of the kind of customer.io model, right? The fund strap model that I used to talk about a lot. And they were the first one that I said do that in 2014. And maybe they didn't 2013 and just started talking, I heard about it in 2014. And that was the, that was really what I was exploring. But I gotta be honest. I didn't, it's laughable today for me to say this, but like, I didn't really know how to do that very well. And it felt like a ton of work and it felt like complexity, more complexity than I would have liked.
Speaker 2 00:23:05 In retrospect, I actually think I could have emailed the people in my network, you know, the former Microcom speaker, just the people that I know, the founders and the whatevers, and probably raise that round pretty quickly with knowing, knowing what I know now, I think it wouldn't have been that hard to do and integrase in half a million to a million bucks at that point would have alleviated so, so much stress. And, you know, once we, because once we got acquired, then we had a lot of money in the business, right. Because LeePages had raised 38 million in venture and I saw the difference that made. So now looking back, I think, huh, I actually do see how, how I would have done things. And maybe that's with the, with the, the virtue of hindsight, because once we got in lead pages, I can hold, they do this stuff so differently. Like they hire senior people and they have a full time recruiter on staff so that, you know, the developer managers don't have to do that. And that, you know, they have specialists instead of these generalists and on and on and on, they just did stuff so differently than what we were doing. And they do it for a reason.
Speaker 1 00:24:07 Yeah. It's, it's, it's interesting, man. I mean, something that I've seen you talking about at the very beginning, kind of self-funding with, you know, a significant amount of money to really get off the ground. And I think we hear this from other people, you know, Oh, I don't pull, I didn't pull any money out of the business or I didn't pay myself until we were at, you know, 30 K MRR or something like that. And that like, to me, that, or, or like, like I did, like, we re I didn't take a salary from Castillo's for the first year, probably because he had podcast motor running on the side or consultants or whatever. And I think a lot of people who are just starting out think like I'm gonna like, honestly bootstrap this thing and not take money from somewhere else. And that's a fallacy because I mean, the money has to come from somewhere.
Speaker 1 00:24:54 You can't just decide today. I'm going to start his ass and make any money in the first year, at least. And I think two years before you really are getting somewhere. And, and I do think that as you get bigger, it, it kind of comes around again to say like, okay, we're at this point, you know, 30, 50, a hundred K or whatever to get to that next point, something else has to change is just what I'm hearing from kind of being in the spaces like, yeah, what got me here, isn't going to get me there, like to that big next level. Um, is that kinda what you're saying?
Speaker 2 00:25:29 Yeah, I think so. I mean, I wouldn't say across the board, obviously we see companies bootstrap to, we can name five examples of companies that bootstrap to 20 million or a hundred million or more in revenue. So it's definitely possible. I do think it needs a certain confluence of events. I talked about hard work, luck and skill. I do think there, yeah, there's definitely skill involved and there's definitely a lot of hard work, but I also think there's a notch of luck in there that maybe people don't see if they're not on the inside too, to become a base camp or a MailChimp, you know? Yeah. So, yeah, I think I, and I, and then there's also this whole other type of app. Like I had hit tail at one point doing 30 K MRR. And it was just me and a couple of contractors. Well, that thing threw off cash, like ridiculous, you know, 25 grand a month in like net profit or something.
Speaker 2 00:26:11 So there are apps like that. So don't think that in order to grow that you have to take it, you know, raise funding or maybe, you know, that I don't hit tail really wasn't going to become a next level app, right. The space just wasn't, wasn't that big, the need for it. Wasn't that big. But if you are in a pretty hyper competitive space or a space that is growing quickly and your app is growing quickly, then there does come a time where, where your growth will be hindered by the lack of available capital. It's just a fact. And you will have to decide if you are interested, you know, in capturing that growth and that's really it. And if you do, then you want to raise some money and pump that into, into growth. This is not raising to build a social network. You know, this is not raising before you have a product, that's a huge gamble.
Speaker 2 00:26:59 This is raising it on a, B two B SaaS app. That's, let's say doing half a million or a million a year where you probably have several proven acquisition channels. And it is literally like pumping $1 into a slot machine and getting a dollar 50 or $2 back every crank of the handle. That's how I think about a SAS at that point. It's so predictable and so repeatable. And if you're not there and you're, and you're kind of fumbling along well, then personally, I wouldn't do it at that point. Right. It's when you're still trying to find those channels, you know, I would say, well, you haven't reached escape philosophy yet. And so don't, don't raise, but yeah, that's, that's I guess how I think about it.
Speaker 1 00:27:35 Yeah. It's interesting. You know, again, like people email me or tweet at me about, about tiny seed and asking you, Hey, do you know, should I join her? I'm doing this. What do you think? And I say like, there, there were people in batch, one that were kind of like pre-product or pre-revenue. And to me, yeah, that's, that's quite a different risk profile to like, take money, join this accelerator, quit your job, go do this thing before, you know, really, if you have something than, you know, kind of like where we were and some other companies where like, we have something this will help us accelerate that growth. It's a little more certain sure. We probably gave up relatively more than the person that I want to see it, it had nothing to lose, but had kind of less to lose. Like the, the amount of kind of equity we gave up is different than somebody who, whose, you know, pre-product and pre-revenue. But, um, yeah, that, that kind of fit my risk appetite more. Um, I think taking money before you are really off the ground is, um, is kind of a gamble, I guess.
Speaker 2 00:28:36 Yeah. It's a different approach. And I, I will say that, like the amount of money I was talking about raising for drip, half a million to a million is very different than an accelerator, you know, raising a hundred, 120, for sure. But to your point, yeah, you're right. There is
Speaker 1 00:28:49 So playing little league over here.
Speaker 2 00:28:51 I know. Totally. But, um, yeah, and that's, that's the thing like in batch two, we don't, you know, we don't didn't have any pre-revenue companies and just pre pre-revenue is just so much harder and it always takes so much longer, even if you're a second time founder, I think all of the pre-revenue companies in batch. Yeah. They all were, uh, second or third time founders. Most of them with exits actually, you know, so that was in those cases, we were betting on founders rather than, you know, than the product, but, but you're right. It takes a long time to get there. And it's like, I want to, and I want to be clear too. I've been saying this stance since, like, since I wrote my book in 2009, so it's not like, Oh, I ran tiny seed. Now I'm suddenly suggesting bootstrapper should raise money. No, 2009, 2010. I was like, Hey, there comes a time where you should at least consider it, you know? And, and it's not the right path for everybody. But, um, I do know that it fixes a lot of things, even there's the, the don't knows the unknowns that you don't know and there's funding and fixed shocking amounts of those things.
Speaker 1 00:29:52 Hmm. Hmm. Yeah. I'd love to kind of close out and I'm going to put you on the spot big time here. Cause I would guess you haven't thought about this too much, but after seeing, you know, 10, nine, 10 companies go through a batch, one of tiny seed and now seeing these other, what is it, nine or 10 companies in batch two 13, 13 immigrations, 13 companies in batch two. I know you've talked about like pattern matching, like the things that people struggle with and people that companies are successful with. Um, I would love to see like with the advent of vetch too, and what you know of those companies so far, some things that you can generalize that you're seeing that is really working well.
Speaker 2 00:30:32 Hmm. Yeah. That's a good question to shift or yup. Yeah. Well like the biggest lever of all, and it's what we did. We're doing something slightly different with batch two, where we're we saw that the things people were struggling with in batch one, and we're kind of taking a 30 minute slide deck and saying like, this is kind of our stance or at least our recommendation on how you should think about this. And so we've picked some topics that were pretty common, uh, with across back to one and batch two, actually, as we had conversations. Um, so like the big lever is pricing, right? So what's working is when what's not working, is when people price too low or the value metric is off or they don't tear it correctly, or they don't charge a lot to their enterprise customers. And what does work is when they fix all those things and you're, you can double your growth, triple your growth, literally by changing a number on your website.
Speaker 2 00:31:21 You know, so, Hey, my cheapest plan was 19 and suddenly it's 99 and I got the same number of conversions and we are seeing, I'm seeing stuff like that. So pricing's a huge lever. There's kind of two types of companies. There's a very generalization, it's a binary look at it, but like, you know, there's, there's the high volume, low touch, uh, lower cost SAS apps, like, like, can I put castoffs in that, in that, um, but right where it's $19 a month entry level. And then there are the, uh, you know, higher priced enterprise sales, long sales cycles, but you don't need to last land, very many customers to grow quickly. And that's like in batch one there re MB is <inaudible> dot com where I think the lowest prices are like 500 bucks a month. And so you only need two customers a month, you know, two new customers a month in order to match 500.
Speaker 2 00:32:13 Is that right? No. Fifth, I'm sorry. 50 new customers, uh, of Castillo's went to match the MRR. So you need a very much wider funnel and re MB just has those long sales cycles. So they need a lot of people come through the pipeline. It's all very high touch and they're doing contracts that the companies that I'm seeing growing the fastest have both, they have this really wide funnel and a lot of exposure and thousands of customers paying them, not very much money, but then they have these the same on the, you know, on the flip side, they also have enterprise customers saying, Oh, we need this tool too. And they get charged, you know, 10 times 150, a hundred times more than the entry level folks. Yeah. But they have both an enterprise, um, funnel and a low touch funnel. And I, yeah, I don't want to, there are several in batch two.
Speaker 2 00:33:03 Um, and I'm trying to even think of like, like an example of like, whoo, do you remember Woohoo, w UFO was a Y Combinator company. It was like, kind of like Typeform before type, form something that like you can build forms and stuff. When they sold. One of the founders said it was some like, don't quote me on the number, but it was like 85. Like they were 10 bucks a month, 20 bucks a month freemium that whole thing. Right. But they said, yeah, 85% of our revenue came from like the T like the biggest 10% of our customers that was where their, all their revenue came from the vast majority. And because they had that dual funnel that I'm talking about, you know, where you have the high touch and low touch mixed. It's really interesting. So that's something that, and, you know, we saw that at drip too, right?
Speaker 2 00:33:45 I mean, I guess our bottom end was 49 for awhile. And then were, you only have a $1 plan, the free plan and all that. But then we had customers coming and saying, Hey, I have a million subscribers literally, and I'm going to pay you however much. That is a thousand a month. And those really started moving the needle. The more of those we got. And so while we still had 300 trials, 500 trials, a thousand trials a month, whatever the numbers were at the time, they were both kind of growing in tandem. And without the enterprise, the growth wouldn't have been, been as fast. So, sorry. That was a longer one
Speaker 1 00:34:15 With respect to no, that's super interesting. Like I'm fascinated, um, from a pricing and like value metric perspective are the companies in batch to, uh, doing different things or kind of like engineering, the, that kind of bar bell. Right. So where you have like a bunch of people paying you $20 a month and you have some fueled venue, $500 a month, did they have to rearrange, you know, a, an enterprise offering or figure out how to, how to price it? You know, is it like per seat or per whatever license, right. I mean, but you know what, like yeah. Are they doing things to engineer that? Or is it just kind of serendipity happening? No. Right.
Speaker 2 00:34:54 Typically you get approached by an enterprise customer and they look at your current pricing and they say, Oh, we're insert name of fortune. They'll say target, because they're right here in Minneapolis. Um, and target approaches you and says, Hey, I want to buy, you know, your SAS app. And it looks like we should pay $99 a month. Well, that's no, no, they should not be paying $99 a month. There, there are things they're are going to need like custom contracts and they might need single sign on. There are these really common things that these enterprises need. We want single sign on custom contracts. Um, we want to be able to invoice with POS. We want to have integration with, you know, Salesforce or with big ERP system. Like any of these things, the moment that these be trigger words in your head of like, they should pay 50 times what our normal customers do, because it's going to be a six month sales cycle.
Speaker 2 00:35:44 There's going to be security audits. I may need a, uh, some type of ISO certification. I'm going to need to go through procurement instantly. That's why they should pay more. It's not, you're not ripping them off. It literally is a pain. It's that much more of a pain in the ass. It's the pain in the ass, a premium to deal with larger companies and they can't afford it and they will get the value out of it, you know? So oftentimes that's what it is. So you do engineer it, but usually, you know, usually, I mean, there's, there's, there's examples of this, like, look at Tupelo, uh, Ben Orenstein company, like look at their pricing. They basically have, I think it's 25 bucks per, you know, per seat or the moment you want single sign on custom stuff. A lot of the stuff I just named, which we're seeing in the, in the bachelor as well, then it's, you know, it's double the price or something like that. And frankly, it should probably be more than that. Um, but you know, it is what I guess if they had, but it's also perceived. So that actually,
Speaker 1 00:36:36 Yeah, yeah. I mean, that was something that I was, was kind of trying to get at and think about is like, are, are these big ticket customers, like you mentioned, like at trip a million subscribers, like that's just usage based, you know, or Tupelo this per seat. Like for us, I guess it would be like downloads or bandwidth or something like that is like, I think about all this as kind of usage based plus all of that stuff. Right? Like the single sign on an ISO and all that. So, so is that kind of, it is that like, if you want to be in this bucket, if you're a heavy user, you get all, we will give you all of this stuff and you'll pay a premium for it. That is that kind of the recipe.
Speaker 2 00:37:14 Yeah, pretty much. I mean, you just need to call us on the right hand side, that has a few things that you don't include in any of your other tiers. And like you're saying usage, usage based or value metric, those are equivalent things, right? You have a metric where they get more value like subscribers, you know, or, or podcast downloads that will go up linearly often. But if you, yeah, once there are certain features that, that people need that implies, you know, they're a different type of, um, different type of consumer. I mean, an example in podcasting is like, there are, I'm sure with Casto you have people doing like fly fishing podcasts, you know, or comic book podcasts or whatever. And they are super price sensitive because it's a hobby and they probably will never make money from it. So to them, 10, 20 bucks a month is actually a substantial investment.
Speaker 2 00:37:58 Then there's, you let's say you and I, you know, start up for the rest of us, tiny details, um, rogue startups, and, and your audience podcast, like 20 bucks is nothing. So for, for us. So like, would I be willing to pay 50 to a hundred dollars for my podcast hosting? As long as I got more stuff out of it features mostly yeah. Or bandwidth or whatever. Yeah. I would. I mean, that's where my price sensitivity goes. And then if Gimlet media approached you, what should they pay 50 or a hundred? No, they should pay you a thousand or 5,000 or some substantially higher number and a lot of companies. So there's three, those are just three buckets and every business will have three buckets. That's that thought exercise you go through is like, I should at least have two buckets, but oftentimes there's like three or four.
Speaker 2 00:38:41 And that's where you have the hobbyist plan and the pro plan and the enterprise plan, you know, they're pretty, they almost named themselves because you and I are pros, you know, where maybe it's hobbyist business and enterprise or something like that. But it, once you understand your business and you, you see how people are using it, um, it does become easier. It's, it's not a custom thought process each time, if that makes sense. Yeah. Yeah, no, for sure. We, we've kind of backed into that with, you know, a couple of people that, uh, are really have really heavy usage and you have to have hundreds of thousands of listens a month and we get them on the phone pretty quick. After that happens for a month, then you say, yo, you know, we have acceptable terms or acceptable use terms in our terms and conditions.
Speaker 2 00:39:24 And like, this is just not acceptable. Like this is not normal. Um, and we have, we have conversations. We've had it, I don't know, a dozen times and every time they're like, yeah, I've been waiting for this call. Totally, absolutely happy to pay, you know, pretty much whatever. And we've, we've got a couple of different, you know, kind of relative prices on those, but the other conversation always goes really smooth. It's amazing. Yeah. So much we should advertise it more, I guess, you know, and they're all huge, huge businesses or podcast networks or whatever, to where 500 bucks a month is, you know, for the biggest top of funnel marketing asset they have is nothing, you know, not that big. And they have different, they probably have some different needs too. They could probably use like multi-user login and mold and, and roles. So that like a producer has a different role than an editor then, then the talent.
Speaker 2 00:40:16 And, you know, and you would never build that for your fly fishing guy and say our fly fishing podcast. Right. So that's the kind of thinking that goes into it. It's like, yeah, what do they really need? And oftentimes the good news is they'll probably tell you, you know, the tell you which helps. Yup, yup. Yup. Cool, man, this is a lot of fun to catch up. Um, you know, folks who want to check out the podcast, obviously startups for the rest of us.com, Rob, on Twitter, you are, I'm at Rob walling. And if folks are interested, if you don't mind me mentioning this seed yeah. Tiny seed, you know, where we invest in, um, B2B SAS companies and we are currently raising our second fund. And so if you are an accredited investor and you're interested in like diversifying some funds across a lot of high quality, you know, B2B, SAS companies, much like Casto. So, you know, you can
[email protected]. Uh, you can head to <inaudible> dot com slash invest. If you're interested in finding out more about what that looks like. Awesome. A lot of fun, Rob. Thanks. Absolutely, man. My pleasure. Thanks for having me on.
Speaker 0 00:41:21 Thanks for listening to another episode of rogue startups. If you haven't already head over to iTunes and leave a rating and review for the show for show notes from each episode and a few extra resources to help you along your journey, head over to rogue startups.com to learn more.
