Here, I'll save you the read. The keys to success are:
- "Make sure you build something people will pay you for"
- "Make the Value of Your Product Really Obvious"
- Hire good people but not too early
- "Be Relentless in Your Focus"
And in case you are interested (like I am) in hearing how entrepreneurs honestly evaluate mistakes so that we all may learn from them, this company only made two mistakes worth noting in their history:
- Not enough PR made it hard to hire early on (but they wouldn't do anything differently)
- Leaving out almond butter is how you get raccoons
This is the kind of "we're amazing at all the generic things and the only mistakes we made are humblebrags that aren't mistakes and irrelevant anecdotes" puff tech journalism that gives this industry such a bad name.
+ Get Leads Without Spending Money: The most interesting learning for me was the idea to focus on getting "free" leads. Basically, the founders of this company figured out how to showcase one of Shopify's advanced APIs to such a degree that Shopify promoted the startups product. It's a "puff" observation on one level, but this old school "biz dev" approach to marketing a nice counterpoint to all the growth hack BS about fine-tuning Adwords spend.
+ Don't make your first hire until you're at $1M ARR: Another simple observation, but scale is important. If these two guys can run a business for two years and get to $1M, why do most funded startups need 5-10 people prior to product market fit?
It may not be your taste, but these are lessons that are rarely taught.
Equity is not everything. There are bootstrapped startups that have outstanding work culture with people really aiming high, where 100% equity is in owner's hands. Equity often is overadvertised. I would take good pay over equity as a father for example.
Maybe, maybe not. But you can still find pretty kick ass employees by somewhat spreading the wealth around. Make sure they have a great office and they're well taken care of. Perhaps have a bonus pool. Offer flexibility. Etc.
It might not matter much in the valley, where every startup does it, but it will if you're building a business in say, Europe.
I personally don't believe that just because you retain most equity as a founder in a "lifestyle business" you can't find equally and/or better employees. You just have to focus on different things. It's just a different game (organic, slower growth, longer term), and you probably don't want to be handing out equity to people if you run a profitable bootstrapped business.
I think the context matters. If the employee(s) in question have meaningful equity and authority in the business then it's a reasonable comment.
If they're just salaried employees, even with some token paper lottery ticket style equity options, it's absolutely ridiculous to expect them to have the same passion and commitment as the founders.
The $1M ARR is about the point that I'm at today with my startup. It's three founders which own 90% equity, and 3 small investors which own the other 10% split between them. We managed to build it up with relatively small capital investment from the founders, but in our industry there is no getting away with not hiring any employees for a long time, as it's not simply SaaS, but SaaS + "services" (services meaning doing a portion of the work for our clients within our software rather than them hiring people to do it themselves).
Our software is B2B, and the sales cycle is frustratingly drawn out and expensive with demos, in person meetings, etc. That was something I hoped we could get away from when we started, but seeing the sales cycle first hand, I can't see a way to make it much cheaper while still growing. The people at these large companies which make the decisions really like in-person meetings, and if your competitors are willing to and you aren't...not a good way to try and save money. The up side to that, is each customer brings in a lot of revenue. We've noticed that a sale can take anywhere from 6 months to 1 year to go through.
I wouldn't change anything about the slow growth we went for rather than trying to ramp up and get as many clients as possible as quickly as possible. It let us focus on the product a lot more, and make it efficient for our users (and thus our internal employees providing the "service" portion of our product). We'll continue slowly adding clients as we build out our product more, we want to keep customer satisfaction high so we don't want to spread ourselves too thin.
Thanks for this! I've got an idea for a financial data B2B business that I am going to go full-time on later this year.
The idea of a long drawn out sales cycle worries me as I'm only looking at an initial product with a $10k p.a. price point. With that I can't necessarily afford to have sales people out in the field so they would have to be in-house. I imagine clients would want demos etc. so mostly Webex
Yeah, that's actually the same general space my business is in. We do Trade Promotion Management for manufacturers, which means managing their "contracts" and "claims (rebates)", and ensuring that they don't pay out more money than is actually owed.
Our price point is considerably higher than yours, and requires buy-in from every level at these companies for them to go for our product. We don't have a dedicated sales person at this point, but that is a good portion of what one of the three founders spends his time on.
We were initially trying to position our product at a much cheaper price point for just the software with us providing none of the "service" side of things, to market to smaller customers which are currently managing everything with Excel, but we found after talking to these companies that they are just as much of a pain to try and sell to as the bigger guys, and required just about as much effort, even if the revenue it would bring in was just a fraction of what a bigger client would bring in. That caused us to refocus on targeting the larger customers for now at least.
We use Webex heavily for demos and everything, but with a sales cycle stretching into a year, every single client we've got has taken us going out there for at least one in-person demo with the higher ups, and an in-person training for their users after the sale. It adds up, but for a very complicated software that they tightly integrate into their business, it's necessary for them to feel all warm and fuzzy, have a face to a name, and feel like they are not going to be left high and dry if they have any issues. The effort put in during, and after the sale is really necessary to ensure all those points are hit.
There's a pretty natural hole in the market, between the "minnows" and "whales". Either your service skirts under the "needs review and approval" limit and you can get by with casting a wide net, or it's a serious purchase that needs to pay for the sales team that proves that it's a good idea for them.
Also relevant: your first customer is going to be the hardest to get. There's a "whoops, I'm accidentally a consulting shop" trap here, but getting the customer first and productizing the solution you make for them might be a good approach.
If you haven't noticed, there's been about 5-10 of these companies pop up lately and explode in popularity. ConvertKit went from 0 to 5k in MRR over 2 years, then from 5k to 200k over the next 2 years. A rising tide raises all boats. So I assume the article is about getting in early on a massively growing industry. As someone who has been fortunate in this very way, trust me when I say that you really can't overemphasize the importance of this. Unfortunately it may or may not require being able to predict the future, so your mileage may vary.
more intelligent email marketing flow/autoresponder providers/SAAS -- Drip, Klaviyo, ConvertKit, Customer.io etc have ALL grown hugely over the past few years. If you bootstrapped a half-decent business in this space you probably became successful.
Yeah, right now it is all about email marketing automation. Few years ago, the hot space was project management software and before that it was bug tracking software. Get your timing right and you are golden, start too early or too late and you will be in a tough space.
Thanks for the explanation. My guess is it takes effort to find a good niche/space to start a business. Many a times people never know if a space will be successful a few years later.
I enjoy articles that talk about success and how people/companies got there but I have gotten tired of reading the gospel. Instead of prescribing to me how to be a success just share what you did.
Yeah I mean if you just define your first few employees as "founders" instead, you can have 100 founders and make a million and then hire employee #1 right?
- "Make sure you build something people will pay you for"
- "Make the Value of Your Product Really Obvious"
- Hire good people but not too early
- "Be Relentless in Your Focus"
And in case you are interested (like I am) in hearing how entrepreneurs honestly evaluate mistakes so that we all may learn from them, this company only made two mistakes worth noting in their history:
- Not enough PR made it hard to hire early on (but they wouldn't do anything differently)
- Leaving out almond butter is how you get raccoons
This is the kind of "we're amazing at all the generic things and the only mistakes we made are humblebrags that aren't mistakes and irrelevant anecdotes" puff tech journalism that gives this industry such a bad name.