Episode Transcript
[00:00:00] Speaker A: If I'm running this business 10 years from now, we're gonna do a whole bunch of other shit because we're relatively product led too. Which way do we go?
[00:00:09] Speaker B: Isn't that the question? We kind of set out from day one and we said, like, these early stage subscription or membership businesses, they need payments, they need authentication, they need a CRM, they need email tools, and they need a help desk. Those are five things that are unequivocally needed to run one of these types of businesses. We said, let's smart smash all that together in a platform. That is what unlocked opportunity for us. And nobody does that. Nobody does that. It's hard to do. It's not easy to do. But that was the key to growing in a big way.
[00:00:40] Speaker A: So what if you decide to bootstrap a company and your competition and really the thing you're building is to smash together Stripe and HubSpot? Well, that's my guest on the show this week. Just Jeff Roberts did exactly that with Aletta, and he's doing great. He's killing it. They're entirely bootstrapped. And this is a really great conversation to talk about kind of why this as a concept. What kind of challenges is he facing? We talk about kind of grading our business and like, hey, how good a business really is this? Why are we kind of where we're at in terms of revenue and profitability and stuff? How much of that outcome is a function of kind of the vessel that we're in and the business and the model and the people that we're serving?
Talk a little bit about kind of AI, of course, and the impact that it's having on all of us and really just kind of get into the mindset of a successful founder, you know, Jeff, someone that I follow on Twitter. We've had a lot of really great conversations, but this is the first time we've actually chatted, and it was really great. I have a new friend for sure, and I hope you enjoy this conversation with Jeff.
So, like, what are. What are you working on right now with Outset? I saw the new website come out like that. That's cool. Is that, like, part of a bigger thing that y'all are working on, or like, what's. Like, what's new today? Not.
[00:01:49] Speaker B: Not so much. We did just launch a new website that we're excited about. We'd had the. The previous version, I guess, for three, almost four years.
So it's just kind of time for a. A refresh, if. If you will. And we. We definitely had some marketing Objectives that we wanted the new site to, to better fulfill.
But what's going on internally with us is every quarter we set aside time to talk amongst our team about both salary increases for the existing team and where we want to invest in the business.
And we're probably in the middle of like the most, I wouldn't say contentious, but rigorous debate, most rigorous debate about what our investments are going to be going into. Q4 and Q1 and Q2.
And the way that I would summarize it is, you know, we're an eight year old bootstrap company.
There are, let's call it five things that we know we want to invest in. And these are not like pie in the sky, you know, these, these, these could work, these could not. These are things we know we should be investing in and we can probably invest in one and a half of them. So we're trying to figure out what that looks like. I would say that the core of the issue, there's sort of two parts of it is I am really the marketing founder. We are a very, very product focused team. There's, there's really six of us. It's four engineers, a designer and myself.
And what that's. Yeah, sounds familiar.
[00:03:30] Speaker A: Yeah.
[00:03:31] Speaker B: What that's meant in practice is I get pulled into all sorts of different areas of the business. I do operations, I do hiring to the extent that we do hiring, not that we do a lot. I do a ton of customer support. And the thing that is always falling by the wayside is marketing. The business has always kind of grown slowly and steadily. It's never been a rocket ship, but it's always grown. Uh, but we're at the point now where we feel really good about the product and we, we want to step on the gas. And the constraint is just time invested in marketing. So we're trying to essentially figure out how to free me up to, to spend a lot more time in marketing. And the big constraint for us is support and technical support specifically.
So within the context of our business, we don't have a dedicated support function that is very much by design. The entire team shares the support workload. But what that's looked like practically over the last five, six years is I try to do all the support that I possibly can so that my technical founders and the other engineers can work on product and keep pushing the product forward as much as possible. I'm. Yeah, I'm sort of guarding them from the support queue to the greatest extent possible. Yeah, so we've got a little bit of money now and we're trying to figure out where do we invest that, do we hire a marketer, do we hire some sort of, you know, junior developer and task them with kind of owning support and, and that kind of thing, or do we add another team member to the team that's someone more experienced in a fractional capacity and expect them to contribute to support? Well, we've got a lot of different opinions on how we solve for that.
[00:05:28] Speaker A: Yeah. Yeah. So you guys are six full time people and maybe a couple contractors or whatnot. Yeah.
[00:05:33] Speaker B: Yep, exactly. Yeah.
[00:05:34] Speaker A: Cool. So. So we're similar. We're eight full time people right now. Yeah. I'm the only marketing or salesperson and I definitely, definitely feel you. The difference being we have two full time support people. Okay. And so, so zero of my time goes to support. Almost zero.
[00:05:52] Speaker B: I envy.
[00:05:52] Speaker A: You know, it's a message. A message in Slack or, you know, our Monday meeting where we kind of chat through stuff. It seems like such an obvious hire. Why not hire for support?
[00:06:02] Speaker B: So there's a few things here. First of all, I think we will hire for support in some capacity, but we, we have this weird organizational model which is a story in and of itself, but it's essentially a flat organization.
We kind of hire the best people we can and let them contribute to the company where they're best able to. Everybody is paid the same, everybody earns equity on the same terms and they're pretty expensive hires. We pay everybody based off of a salary of $210,000 per year and they can choose to work anywhere from one to five days a week.
All of which means each new hire is relatively expensive and relatively senior. We're sort of out to prove that like 20 experienced day players can compete with a, you know, more typical company of 100.
So what that means is, you know, we can hire somebody senior and experienced. You know, we don't have the 210k to offer somebody a full time position for this right now, but we could have somebody come in and do this, you know, two, three days a week. The challenge with doing that is largely people of this experience level and pay rate don't really want to just be owning support.
If we went that route, we can say, okay, we could add another designer to the team or another developer and they can spend part of their time doing support and we get a little more support capacity in that way.
The hallmark of our support, and I think it's a strength in our business, frankly, is if you reach out for support, you're getting someone on the other end who can actually solve your problem. There is no escalation. You're getting an engineer with 20 years of experience who can solve the problem, whatever it might be. And it's very attractive to continue to stick 100% to that model because it resonates with customers and we kind of fix issues the first time.
On the other hand, I completely hear what you're saying, like why don't you just hire somebody to deal with this? And that's where the thought comes from, that we could be hiring somebody that is cheaper, that is a contractor that gives us a lot more capacity, whose job is just to own the support queue and, and free myself and others on the team up from it as much as possible.
It is a departure from what we're doing today, but that may, may very well be the right way to, to solve it.
[00:08:38] Speaker A: Yeah, it's funny, like I want to yell at you right now, just go hire. Okay, so, so a couple things I, I'm very curious about the $210,000 number. Like where'd you get that number? Why is everybody paid the same? Like I get like a senior engineer.
[00:08:51] Speaker B: Yep.
[00:08:52] Speaker A: And you as a founder probably deserve like that kind of money, but like, you know, kind of where'd that number come from? But just some context and I talked to a lot of different companies that hire for support through Tiny Seed and individual companies that I advise and like the kind of good ballpark number in the US for a full time support person salary only. So kind of fully baked at 20% is like 50 grand a year.
[00:09:17] Speaker B: Yeah, that makes sense. I do think, and I hear you every time I have this conversation with someone, they, they yell at me and.
[00:09:25] Speaker A: It'S no, no, I don't want to be, I don't want to be that person. I'm honestly intrigued.
But like to me maybe this is the time for a departure from that role.
[00:09:36] Speaker B: Yeah, it very well may be. That's ultimately what's being discussed. I will say and everyone, Rob Walling has pushed back on me on this. But I would say like we've experimented now and we've sort of proven myself. Right. Our support tends to be very, very technical.
Sort of a blessing and a curse within our business is our product integrates with really any development framework, any website builder, any other technology you want. So there's all these little nuances of how it integrates with, with different website builders and different code bases and whatnot. And it is pretty difficult to just find a person at a fifty thousand dollar salary that can contribute Meaningfully to support and actually solving problems. Don't get me wrong, we have, you know, know, basic tickets where our customers need a refund or, or whatever. There's certainly some of that, but that's not what's eating into our time. It is support where you need at least a junior engineer to really make a dent. I would say no.
[00:10:45] Speaker A: And I mean, surprisingly, we. We have quite a few technical issues. I think it's mostly like our integration with WordPress. Like, people with WordPress do all sorts of things to WordPress that screw up our stuff. And I mean, so our two, our two customer support folks right now, one is also kind of doubling as our QA person and she's writing code and tests and things like that. She's like grown into this role. And so maybe that's kind of a model. It's like find somebody who's intellectually curious and ambitious to kind of grow into that.
The other one is. And he will tell you, like, if he's listening right now, he's not and doesn't want to be, but has leveled himself up enough to where he does kind of what you're doing, which is like, hey, I'm going to knock out this ticket and this ticket and this ticket. But I. No, I can't do that. Ticket.
[00:11:27] Speaker B: Yep.
[00:11:27] Speaker A: So I'll get the information I need, tee it up for the developer so they can spend 10 minutes looking at it instead of 45. Totally. Which is like. Because, like, yeah, we have, we have like a WordPress developer who manages like our plugin and a lot of the technical support there. And he does technical support directly with customers a lot. And like our support folks bring things to the development team every day. Like, that's by far the most talked about topic in Slack is, hey, I got a customer with this thing, or hey, we got this sentry issue, like, blah, blah, blah, blah, blah. Yep. Like, so, so it definitely bounces around in the team a lot, but. But not to me at all.
[00:12:07] Speaker B: That's nice. I, I hope, I hope we get there.
[00:12:10] Speaker A: Yeah, yeah, that'd be a good. Cool, cool. I didn't mean to like, go down that road to like badger you on it too much, but if it's, if it's a discussion internally, like, you know that that is some kind of source of tension. Right. So, like, I hope, I hope you guys are able to resolve that and to where everyone's happy.
[00:12:25] Speaker B: Yeah, it is. And then I, you know, in. In tandem with that. I, I didn't mean to dodge your question on the $210,000 salary, honestly, that is largely plucked out of thin air. We, we said that we wanted to operate this sort of smaller, tight knit team.
We don't want to grow the company large from a headcount perspective. And we said, you know, what is a salary that will attract good, good people? So if, if you work five days a week and it's all for paid compensation, it's $210,000 a year. You also can earn equity for X number of days per week if you want to. So we call it kind of a choose your own adventure compensation model. You sign on and you say, I want to work one day a week for equity and four for pay. And you, you pick what works for you.
And then we revisit that quarterly with the team as, as well too. So as we grow, as we make more money every quarter, we sit down and we say, you know, we grew MRR by X amount. Where do we want to invest? And that investment typically gets split between pay increases for the team if people are looking for pay increases, and then investments in other parts of the business. So yeah, you know, right, right now, that's the ongoing conversation. It's, we've got a lot of people that have been on the team for, for excited about pay increases and we want to give those. But we also recognize we're sort of perpetually overstretched and we need to be doing more marketing. We could use a hand in support whether it, you know, regardless of how we solve for that. So it's, it's very much just like the, the constraints of bootstrapping and you know, picking, picking where those investments go.
[00:14:08] Speaker A: I like it. I like the, the bit of like mix up in culture, in company setup. I think that's, that's cool. It also is cool. It sounds like you guys are going down this path, but not like blindly and not like we're gonna do this no matter what. If, you know, a good reason to do something different comes up, like, totally. I'm sure it sounds like you guys would kind of pivot a bit. Yeah, yeah, I wanted to talk about marketing. I don't want to just ask about like, I want to talk about because like, I have, I have a lot of, I talk a lot about marketing, I think a lot about marketing. I'm the only kind of sales and marketing person on the team full time. We have a couple of contractors that help. Dennis helps with writing. We have someone that helps with SEO. Yeah, we're starting to do some PPC now.
But I kind like just Generally, like I see marketing is really tough these days. Like I see the path we largely have taken was like SEO and written content was like really important. Sure. A little bit of, you know, podcasting and YouTube thrown in there that like, those aren't really driving a lot. SEO's like, it's tough these days. Like we, you know, whatever, we don't have so far to go from here. Like we can't triple our SEO.
You know, blueprint if you will, or footprint. Yeah. And so I guess like the statement that I kind of have and that like a lot of founders I talk to have is like, I want to invest in marketing, but I don't know that like if I go hire this hundred thousand dollar a year person, they're going to even pay for themselves much less. Like way more than that. That, that's definitely how I feel. Which is why like we, we've had marketing people on the team before and we, we had to let them go unfortunately because like they just weren't growing the business that much.
[00:15:50] Speaker B: Yep.
[00:15:51] Speaker A: And now it's just me. And largely things are about the same.
It's just me working more, which like me, maybe what I'm doing doesn't matter either. But I don't know. Like, how do you, how do you see that? Because, because like I have to believe that the business can really grow. You know, we, we didn't grow a ton. We grew about like 10 last year. Sure, I'd love to grow 50%, but I don't know that there's like a person to hire or a thing to do to make that happen.
I don't know. How do you, how do you see it?
[00:16:23] Speaker B: Yeah, there, there's two places my mind immediately goes. One is looking at growth more holistically than just marketing. So yes, marketing is a piece of the puzzle and we'll, we'll get there in a second. But I would, you know, also just be looking at churn rates, add on products, pricing, all those kinds of things as potential levers for growth. I would even go so far to say it's like in, particularly in past roles and fast growing companies, you know, every, every SaaS business goes through this period of growth and then plateaus and then a period of growth and then plateaus. It has almost never been drastic improvements in marketing that have broken through growth plateaus. For me, it has been pricing changes, onboarding, updates, improvements in the user experience of the product.
So I, I probably have more of a tendency than your average marketer to look at those things. If you kind of see that growth has, has slowed. Yeah. And use those as means of rebooting things. On the marketing front, I would definitely just look at this assumption that, like, there isn't that much more room to grow, whether it's SEO or any other channel.
What leads you to believe that you've hit that upper bound and you know, you've. Let's say you have this theory that you've gotten 80% of the juice you can squeeze out of SEO and there's only 20% left. Like what is actually contributing to that feeling?
And you may very well be right. Like there are times you can, you can tell that not just from how it feels in the market, but you can like actually put metrics behind it. And that's just the case.
[00:18:20] Speaker A: Yeah.
[00:18:20] Speaker B: But I've also seen those assumptions be. Be wrong a lot.
At a previous company was called Buildium.
We saw this in particular with, with ppc. And we, we should talk about PPC in a minute because everybody rags on ppc.
[00:18:36] Speaker A: I love ppc. I'd love to make like, I would love nothing more than to make it work.
[00:18:41] Speaker B: Yeah, I, I love PPC too. We're not doing a whole lot at, outside of today, but I have a strong opinion on it in general at that business. One of the co founders was running paid search campaigns to about four or five thousand dollars a month in spending. Came to me, basically said, we've reached the potential of this channel. We have to look elsewhere. Turns out he was wrong. Wasn't any great doing of mine. It was more a great doing of an agency, to be frank. But we ended up spending $120,000 a month, very, very, very profitably. So there was a lot more growth potential there than he thought. And a lot of that just kind of being representative of where these opportunities might lie.
You might look at your paid spend, for example, and say, we've tapped out the opportunity that these very targeted keywords represent. We've done a lot of landing page optimization and all that kind of stuff, and we just can't move the needle. What actually contributed to this building or this company kind of breaking through with pay per click so directly was folding a lot more data into the pay per click model. So previously they were looking at, you know, the, the price of the product that was sold. They were not looking at expansion revenue over time and tying that back to cohorts of pay per click spending. They were not folding in churn data. So basically they had an understanding of the profitability of our pay per click programs that were not as accurate as they could be. And as we made improvements reducing churn, as we got better at selling add on products, there was actually a lot more opportunity for us to spend much more aggressively than we initially thought.
And it, you know, it might not be the case with you, but I, I think that's a good example of just kind of pressure testing some of these assumptions on where you might have hit the ceiling on a growth.
[00:20:42] Speaker A: Yeah, yeah, no, I appreciate that. I mean, I think like for me, SEO specifically, like one I kind of just have, like, it's, it's. Well, it's actually a really challenging kind of mental conundrum. Right. Where, like it's gotten us where we are today, which is like a pretty successful business, I think.
[00:21:02] Speaker B: Yeah.
[00:21:03] Speaker A: But like my own, the own data I have, we've hired several SEO folks recently who are just like, I don't know what to tell you, like, you're doing pretty good, you know, like, yeah, you could maybe tweak this knob over here and maybe you could rank from like 7 to 4 on this one. But, but like we're at that point where it's like we've written all the shit we can write. Pretty much.
[00:21:23] Speaker B: Sure.
[00:21:23] Speaker A: We are, you know, ranking for all the things that we realistically think we can rank for. Like. Sure. Like recently we kind of got hit by an update and so we need to get back there. But like, it's not like we have the next three years of SEO work ahead of us.
[00:21:38] Speaker B: Sure.
[00:21:39] Speaker A: So, so that's like the, the data. The other part is like just like buyer behavior and marketing, like at a conceptual level, I kind of just don't believe in it anymore, you know, like.
[00:21:51] Speaker B: Yep.
[00:21:51] Speaker A: I don't ever go to Google to look for the answer for something anymore.
[00:21:55] Speaker B: Sure.
[00:21:56] Speaker A: And I think you see that with just like search traffic overall going down. Not to mention what happens when you go to Google is like generative AI and then result, like paid results and then Reddit and then maybe your website. Sure.
And so I'll just, I'll just tell you, like the. Aside from paper, aside from pay per click, which like I'd love to talk about, the big organic driver we're seeing is YouTube.
[00:22:24] Speaker B: Okay.
[00:22:24] Speaker A: And that we want, that we want to see. I think it aligns really well with like our product and all of our customers are, you know, on YouTube doing podcasting stuff and are probably big content consumers. But also like, I mean, I have, I just bought like another microphone and we're going to do like all these microphone tests and we're like, we're doing all these video tests and like, we just have so much we can talk about to make probably a pretty successful channel. So, like, that's where I'm investing a lot of my personal time is like, my hypothesis is like, we get a hundred thousand uniques a month on our website. If we get a hundred thousand subscribers to our channel, it'll. It'll do something meaningful to the business.
[00:23:02] Speaker B: Yeah, that super, super interesting.
I am generally very hot on YouTube as well. I would even say, like, at the beginning of 2024, one of the things I was preaching was we need to really invest more heavily in YouTube. Like, YouTube is, you know, one of the biggest search engines in the world. I also very much subscribe to this notion that because video is hard, you know, if you take the time to do it well and compete, there's opportunity there because other people don't want to do that, frankly, at least within the context of our own business. In this ties back to I'm not spending enough time on marketing. We kind of punted on YouTube because it was so time consuming. Like, I got the video set up, I started doing some videos and I was just like, you know what, this is so time consuming. I just don't have time for it. And I've actually kind of done a360 with Outseta. My background is in writing. Like, I went to school and was actually a writing major.
Most of our customer acquisition has come from content marketing and content that I've written myself. But we are actually seeing that that is now being even more beneficial to us. Not from the perspective of SEO, but from the perspective of all that written content is getting eaten up by AI and customers are finding us via AI.
So that was kind of a unexpected benefit of just writing so much all along.
But I would, yeah, I would love if I, if I do manage to solve this support issue to get into YouTube more as well.
[00:24:42] Speaker A: Yeah, no, I mean that that's the only, literally the only reason that like we re engaged our SEO guy and that we have our writer on still is like, yeah, I had a call earlier this week with a pretty big opportunity. Hey, how'd you find out about us? Chat. GPT.
[00:24:57] Speaker B: Tons of that. We're seeing a lot.
[00:24:58] Speaker A: So that's like a 10k a year opportunity. Like there's, you know, there's the writer for the year, you know, so. And you know, we're probably similar to you. Like the point where like the most value probably we have it with written content is just keeping the Shit, we have really good.
[00:25:15] Speaker B: Sure. Yep.
[00:25:16] Speaker A: It's not, you know, hey, we got to go write 200 more articles. It's like, hey, these 30 articles are really important. They got to stay on the first page for sure. Because, you know, ChatGPT is crawling kind of the first page or the first three results, typically, or something. So cool. So let's talk pay per click.
I'm in the Rhodium group. I don't know if you know Rhodium. It's like a microcomfy kind of thing, mostly for kind of, like, acquisition stuff. Chris Yates. And Chris connected me with, like, a PPC guy there, and I was like, hey, I would love to put 20 grand a month into AdWords or Meta or whatever and get 25 grand out a couple months later. He goes, you can't. This guy I was talking to goes, you can't acquire a customer in SaaS for less than $200. I was like, that's rough when we charge 190 bucks a year.
I don't know. Like, is that. Is that your experience? Like, is. Is it that expensive these days?
[00:26:17] Speaker B: I think it varies drastically by the mark, by the market that you're in and how competitive the market that you're in is.
I. I understand the. The sentiment completely. I don't. I don't think the sentiment is incorrect, but if it costs you, you know, 200 to acquire a customer and the lifetime value of the customer is $3,000, who. Who gives a.
So I think, you know, it's.
You've gotta. You. You've got to take the time to track specific cohorts of spending versus the actual lifetime value of those cohorts over time. That is the only way to do this successfully. If you're just looking at cost per click and cost per acquisition and all of that, you're gonna get all false positives or all false negatives.
[00:27:08] Speaker A: How do you track that stuff all the way through? Like, you're using a tool. Are y'all doing that yourself? Like, just to know from this campaign, these came in and paid us this money.
[00:27:18] Speaker B: Yeah, the. The most sophisticated. Like the journey I spoke to earlier before, where we went from 4 or 5,000amonth to 120,000amonth. We were working with an agency.
I. I tell people all the time, if I can give you any referral, like, this is probably the strongest referral I can give in any aspect of sas. It's a company. It's actually based in Rhode Island. Now that. Now that you mentioned you're from Rhode island. Called Working Planet Marketing Group.
And there's a. A guy, his name is Soren, Soren Reheard, who runs it. He is probably the single.
Not probably. He's definitely the single smartest mind that I have ever come across when it comes to paid digital advertising. And he worked with me. I was kind of like the, you know, on the ground marketing director, but he worked with me to scale up those campaigns. And I'm the first one to tell you, like, everything you're told about testing different channels and different messages and different landing pages and all of that, that is a prerequisite for. For doing pay per click successfully. Like, yes, you need to do those things, but it really is. And I know they used a tool called conversion ruler on the back end, but basically any click that turned into a sale, we would continue to track, you know, all the way through their. Their lifetime as a customer, what the actual value of each customer was. And we would tie it back to the initial ad campaign and initial month that the spend was incurred. And that is what unlocked opportunity for us. And nobody does that. Nobody does that. It's hard to do. It's not. It's not easy to do. But that was the key to growing in a big way.
[00:29:07] Speaker A: Yeah, interesting. I know that. Well, someone I've known for a while, they're part of Tiny Seed now, just coincidentally. Keith Perhack and segmetrics. Segmetrics IO. I think they do a bit of this. Like, they'll take and they'll cookie someone on the website and then they'll pipe that information through from stripe. So they take it from AdWords to the website to stripe and kind of track those things. And there's. Yeah, I know that. Like, if we get kind of bigger into paid acquisition, we'll need to have that level of data.
We're currently kind of looking at paid acquisition just for our production services. So, like we do podcast editing, production. It's a bigger ticket. It's like 1500 bucks. So we can be. We can be a little dumb about it and pay 200 bucks. You know, 200 bucks to acquire a customer would be amazing. Like, I do. I do a shit ton of that. Even if it's 500 bucks, you know, we get paid back in the first month.
[00:29:59] Speaker B: Yep, that makes sense.
[00:30:00] Speaker A: So what do you guys look at? I know you. You and I chatted once before. Like, what do you guys think about as far as, like, how position yourself in the market? Because, like, it's a thing we think about a lot. And I'LL just give some context for this. We've seen the bundling and unbundling and now I think rebundling of software in our customers eyes, they're like, whatever, I don't know, they're changing their mind. We're changing mind for them maybe. But I see these tools like HubSpot's the classic example, or Kajabi on the info product side where it's like a CRM and it's a landing page thing and it's email and it's podcasting and it's all this and it's 200 bucks a month or something like that. Or you could go, you know, do webflow and convertkit and blah blah, blah, blah, blah, blah, blah, blah, blah blah. And it all kind of be better in a way, but kind of suck because the data doesn't really talk.
[00:30:53] Speaker B: Yep.
[00:30:54] Speaker A: We're looking at a similar thing with Castos where it's like we're a podcasting platform today. But like, what else do podcasters do? Right. They do social media. They if, you know, if you look at like horizontally or vertically, like vertically they record, they edit, they publish, which is where we are. They do promotion and ads, which we do. Or horizontally, like they do email marketing, they do landing pages, they do email capture, they do social media, all this kind of stuff. Right now we're just in this box. But I look at it and say, we're also 8 years old.
If I'm running this business 10 years from now, we're gonna do a whole bunch of other shit because we're relatively product led too.
Which way do we go?
[00:31:33] Speaker B: Isn't that the question? Yeah, that's a tough one. So outset it is clearly on one side of the spectrum, we're the all in one player in many ways. Outset it is what HubSpot grew into. We kind of set out from day one and we said these early stage subscription or membership businesses, they need payments, they need authentication, they need a CRM, they need email tools and they need a help desk. Those are five things that are unequivocally needed to run one of these types of businesses. We said, let's smash all that together in a platform and build essentially like the Shopify for subscription businesses. That's the origin story of the company. In short, I would tell you, I mean, first of all, HubSpot's a whatever 2 billion dollar company and we're here rubbing our pennies together.
[00:32:30] Speaker A: A little tiny hubs spot maybe.
[00:32:31] Speaker B: Yeah, so, so that, that maybe tells you something in and of itself, but I would, I would tell you that the way that we did it, first of all, it's hard because you've got to build a lot at an early stage to even get to the point where the product is competitive.
What I sort of, how I summarize our journey is it took us two years to even build an MVP, frankly, and really four years to get the product to the point where people were buying it and happy with it and all that kind of stuff. And those two years in between years two and four, what we learned the hard way was we were trying to change developers default behaviors. We were selling to SaaS companies and largely technical founders. And we were saying, you know, your time spent sewing all these systems together isn't where you should be spending your time. You should be spending your time on product. And we learned the hard way that, you know, even if the developer looked me in the eye and said you're right, I know from an intellectual standpoint you're right. Developers just like to build stuff and they have the technical skill set to do it, so they're going to do it anyways.
What really kickstarted our growth in a significant way was we found a similar market in what we call membership sites now where the use case is the same. They need the payments, they need the authentication, they need the CRM, they need the email, etc. But they are less technical founders that just don't have the skill set to assemble all of these tools. So the all in one nature of our product is almost like a prerequisite. It's just frankly something that they need.
Also I think in our case we sell to smaller businesses and the sort of easy to start integrated nature of the tools is more attractive to them. They don't need all of the bells and whistles of say a HubSpot, they need more of the core features. So I think for kind of the customer that we ended up serving, being this all in one type product and positioning ourselves that way and admitting we don't have all the bells and whistles of a HubSpot has actually helped us.
I can't say like that was deliberately the strategy at the outset. That's kind of like where we found our way to, to make the business work. But I think there's something there about the sophistication of the customers and this, you know, the, the stage of the business and the complexity of their needs. It, the further, the further up market you go, I, I think the, the more likely people are to kind of piecemeal stuff together.
[00:35:29] Speaker A: Yeah, Right, right. Yeah. Less, less technical or early on they'll go for an all in one solution. As they get more sophisticated, they want to specialize. Yeah, I mean, I agree, I agree. What do you, so, so what do you guys look at like eight years old, Successful, profitable, growing. What do you, what do you look at? You go like another eight years, like what, what's that going to take?
[00:35:48] Speaker B: Yeah, we, we really said when we set out, the entire reason that we built this particular idea is we said we want to work on something together for 15 years. What's going to be relevant 15 years from now in the, in the, in the tech industry? That like that's a tough question but we basically said companies are going to need payments and CRM and email. Like we don't think those things are going away. So we picked the idea because we thought it was durable.
We certainly, you know, got what we bargained for in terms of biting off something big and substantial. We actually turn 8 years old next, next week and I think the mindset very much remains unchanged. It's like we're going to do this for seven more years. We're going to look up and if we've executed well, we're going to have all sorts of good opportunities.
I do think we are at sort of this, sort of at a natural transit. I don't know if natural is the right word, but we're at a transition point where we've been really like 90% product focused to date and maybe 10% growth focused and we're almost ready to just to flip that.
So that's kind of the name of the game for us. I mean we are, as you said, we've grown well, we're profitable, we're supporting a small team. The business still does not have a ton of margin.
No one's, we pay everybody well, but we're not rolling in money over here by any means.
I think there's also just in tandem with that focus on growth. We're at the point where I want to see this thing grow in a significant way to reward the employees that have worked their butts off for the last five, six, seven years.
I don't have like a end goal per se in mind. I've always liked the idea of can we build a 10 million dollar a year business with 20 employees? I think if we can get to that stage within the next seven years, that, that to me would be a pretty, pretty cool scenario.
[00:37:59] Speaker A: Yeah, yeah. You mentioned margin and like we've, we've been kind of like break even slightly Profitable. You know, of late, I, I don't talk to a bunch of SaaS. Companies that are mega profitable. You got to keep investing in product. You got customer support, you got all this kind of stuff.
[00:38:19] Speaker B: Yep.
[00:38:20] Speaker A: Do you like SaaS as a business model?
[00:38:23] Speaker B: There are, there are pros and cons to it. I do.
People love the story. But I do have a friend. Everyone says SaaS is the best business model. I have a friend that's found a far better business model.
[00:38:35] Speaker A: But mobile homes, mobile home and parks.
[00:38:38] Speaker B: Or we can get into it if you want. But SAS is pretty damn good in the sense that if you're able to build a product with low, relatively low churn, which is a big, which is a big.
[00:38:53] Speaker A: Yeah.
[00:38:53] Speaker B: In and of itself, you know, your, your efforts, your efforts compound and the value of the business is, you know, 5x revenue. There's not a lot of other businesses where you get kind of that valuation and where your effort compounds in the same way.
So I love that aspect of SaaS. And anybody that, you know, points their nose up at that is, is just flat out wrong. I will say that I think SAS is overrated in the sense that at this point it is just so competitive and there's so many talented people in SaaS. So, yeah, if you go back 10 years, just the competition and the quality of the execution needed to be in the top 10% of SaaS companies was so much lower than it is today. It is.
[00:39:46] Speaker A: Yeah.
[00:39:46] Speaker B: You know, you're out there and unless you find some really underserved market that hasn't kind of been discovered from a SaaS perspective yet, it's tough.
[00:39:56] Speaker A: Yeah, I agree. I agree. I got to hear about your friends. I. I have a couple, I have a couple friends that I that have good business. One is, is definitely like mobile home parks. I have a friend that owns several of them down in Florida and they are amazing businesses. Like, I don't know how they are this week after the hurricane. Yep. Actually, most of my friends with really good businesses are in real estate. Another one owns a handful of apartment buildings.
And like, that's a, that's a very large business that, that's super durable. Right. Like that will pass down to their kids and stuff.
[00:40:27] Speaker B: Yeah, I, I'll. I have to skirted a little bit, but I'll give you the gist of it.
My friend is a recruiter and he works placing medical professionals in government facilities that are generally jobs that if you're a medical professional, you don't want.
[00:40:52] Speaker A: So I'm intrigued.
[00:40:54] Speaker B: It's Tough to fill these positions. But because they are government funded and they're tough to fill, the government pays these people enormous sums of money.
And the business model is for every hour that one of these employees works, my friend makes 20% of their paycheck.
So these are often like thousand, two thousand dollar an hour positions and he's got hundreds of these people working at any given time and he's making 20% of their salary. So the, the numbers just work and they beyond work and it's kind of an unsexy, non obvious thing. So he has basically no competition.
[00:41:39] Speaker A: Yeah, so I do think that's a common theme of like really good businesses is they are often unsexy. You know, you, Cody Sanchez kind of thing. I was chatting with Rob Walling. I was in Minnesota a couple weeks ago and was chatting with him about it and he was like the problem, the problem with a lot of SaaS, like new SaaS founders is they all want to be creators. They all want to be, you know, Peter Lovells or whatever or Arvid called, we were talking about him earlier. A good, good friend. Right. Like he's a super good friend. But, but like I think a lot of people want to kind of sexify SaaS. Totally.
[00:42:19] Speaker B: So I'll give you two, two thoughts on that. One is just back to my, my friend's business model, the way that I, the way that I describe it. And Jason Cohen has a great article on like how to expand your thinking and just think much bigger and sort of think of radical ideas. He has a business model that is very much like SaaS in terms of the recurring component, except it recurs hourly instead of monthly. So like if you just take that and say, okay, SaaS is great for all these reasons. It's scalable. Yes. And it recurs monthly. What if something recurred weekly or hourly or minute or every minute. Like that's, that's ultimately why he's making so much money. Yeah. So on, on that I like that's totally accurate. Obviously the company I referenced previously, Buildium was sort of where I cut my teeth in SaaS. It was property management software, which. Property management is like the least sexy industry in the world.
And the origin story, my co founder at outset on now, his name is Dimitri. He started this company, he owned a couple of duplexes in Providence, Rhode island actually. And you know, when he had two tenants, it was easy to figure out who paid rent. And you know, if they had a maintenance request, they picked up the phone and called him. Next thing you know he had 20 tenants and it was tough to keep track of who'd paid rent. And he had his phone ringing constantly with people telling him that the toilet was leaking. So he was a software engineer. He wrote a simple script that allowed his tenants to pay him rent online and streamline maintenance requests. They could sort of like submit a email request for maintenance turned into a $600 million a year business. And that is actually like the thread that I see, especially at microconf. Actually, if you talk to the founders that are actually the successful founders, the threat in them these days tends to be they're serving some obscure industry.
[00:44:15] Speaker A: Yeah.
[00:44:16] Speaker B: And they're, they're not trying to be. Arvid, call.
[00:44:19] Speaker A: Yeah, yeah, Arvid, if you're listening, man, like, love you. Like, he was on a webinar with us this week and talk to him, talk to him a lot. But yeah, I, and I think that, you know, a bit like, you know, for Outside or for Castos, like, we're, we're barking up the wrong tree in that respect. Like, we went for a cool, sexy, you know, product and market and it's more competitive with. It's more competitive in that there's a lot of people and they're really smart. Right. Like, like some of the companies we go up against are really good product and marketing people.
[00:44:51] Speaker B: Where, I mean, man, our, our competitors are Stripe and HubSpot and. Yeah, yeah, companies like that.
[00:44:58] Speaker A: Yeah.
[00:44:59] Speaker B: I'm actually writing an article on this right now.
Like the single. The single biggest lesson I would say I have learned from my outset experience is I made one great decision and one bad decision.
The reason that I ultimately chose to work on this product was the two co founders that I decided to work together with, they're both engineers. They're both as good of engineers as there are out there. I was philosophically aligned with them and I looked at it like I was removing a variable from the equation. I said, I know engineering is not going to be a problem. And having worked in other companies, companies with lesser engineering teams, I had sort of seen the drag that that can create. I said, I know these guys. Whatever we build, they're going to build something great. And ultimately that was like the number one reason I signed on to start out setup. I knew at the time that outset it was not a great business idea. In fact, if you look at our blog, the second post I ever wrote was like, here's all my reservations with this idea. And it's like small market, competitive selling to startups. All these reasons this idea sucks. And this Idea does suck, to be honest with you. It's not a good, it's not a great startup idea. There's a lot of things working against it. We have like managed to make it work and built a viable business around it. But man, if we had picked something else, we could have grown so much faster in markets that were less competitive. And I would say like the, the good decision was yes, team, team matters and engineering team matters, but it can't trump market. Like at the end of the day, the market you choose is as important as anything.
[00:46:47] Speaker A: Yeah, I call it the boat you're in. Right. Like the boat you're in is, is okay. I know we're like running long, but I really want to, I really want to touch on this. I talked to, I talked to Dan Andrews when, when we had our conversation about this and like grade your business. I'm not going to ask you to grade your business, but I think the, the next question after that is important is I think, I think my business is like a B, right? Like blow churn, really cool customers, pretty popular, not growing right now. Podcasting, not growing, but mature, relatively low platform, risk, whatever, Pretty good business. I give it a B.
Why don't I sell it, close it down, whatever and go after an A.
[00:47:28] Speaker B: Sure.
[00:47:29] Speaker A: I ask myself that a lot to be honest, because I'm a pretty smart guy and have built a successful business and if like I don't see this being a 10 million dollar a year company, like maybe it could be a 10. Maybe like 5's pretty realistic, but 10's definitely not. Okay, why don't I shut this down? Why don't you shut outside of down and go do up something that could be a 50 million dollar year business?
[00:47:52] Speaker B: Yeah, that's a great question.
First of all, I do believe that outside it can be a ten million dollar a year business. I, I mean HubSpot is not a great comp because they're playing way up market of us.
[00:48:06] Speaker A: But yeah, and they were early and.
[00:48:08] Speaker B: Yeah, and they were early and all that stuff. But I do still look at it. It's like, you know, they're making billions of dollars a year selling CRM and email and help desk products. Like we can, we can sell 10. I, I do see that as very, very possible.
I think the, the better question is like we are not in an A plus business or business opportunity or market. I'll tell you that right away. Not even close. Why don't you leave and go find it? I think for me it comes down to a couple things. One is my motivation has never been like, let's go find the biggest, most successful thing possible. That like, I'm just not wired that way.
[00:48:53] Speaker A: Yeah.
[00:48:54] Speaker B: Don't get me wrong, I want outside it to be a big success, but, like, it wouldn't make any difference to me if it was 100 million versus 500 million versus 2 billion. Like, I could just care less.
And that part is very clear. The other part, honestly, is not a great answer. And it's a little bit of stubbornness and sunk cost fallacy. And like, I've just already put eight years into this. For better or worse, I'm just gonna stick at it and keep pushing and, and see where we can take it like that. It's not so much that it's my baby and I love it and like, I need to, to nurture it. Although there's some of that too. It is really just kind of like a stubborn streak that I. I know we have something that's pretty good now and we can continue to make it better. And I don't want to throw away or discount that. We've already put a lot of time and effort and hard work into it.
[00:49:55] Speaker A: Yeah, I agree with that. I also, I have a bit of. I have quite a bit of imposter syndrome. And I don't know that I could get back to this point with another opportunity. You see lots of, like, I heard the other day, like, the failure rate on second time founders is 70%. Like, wow. Like, I know the first, you know, first time is 90 plus percent, but like, you don't get that much better the second time.
[00:50:20] Speaker B: Yeah.
[00:50:21] Speaker A: And so I do the kind of bird and the hand is worth two in the bush kind of thing a little bit, like a lot. That's probably the biggest reason. Yeah, that. That's probably like, the biggest reason is like, yeah, it's a pretty good business. Could it be an amazing business if I, you know, pivoted and did something else? I don't, I don't know. The other thing is I'm 44 years old and I don't know, I could go back to day one and do the shit that I did eight years ago.
Like, all this gray hair has cast us most of it. Like, some of it has my kids on it, but yeah, I think I've just passed that point in my career. I think that's their part is like, I'm not 32 years old anymore.
[00:51:00] Speaker B: Yeah, that's a good point.
My co founder Dimitri is a great example of this. You know, he. He started this company building him, he worked at it for 15 years. It was a $600 million exit turned around and started out set up. And he's an infinitely more talented operator, developer, you know, entrepreneur, having had that previous 15 years of experience. But we haven't had anywhere near the type of success that that business had.
You know, again like we've made it work, we, we have a successful enough business. But I think that goes back to a lot of it is market, a lot of it is, you know, he, he started timing.
[00:51:47] Speaker A: Right. It's just harder timing. Yeah.
[00:51:49] Speaker B: There's a lot of factors that, that go into it and I, I also agree with you. I even at this point I'm, I'm 38, I've been in SaaS for 15 years now. It's been the entirety of my career. I love startups genuinely.
I don't have a particular affliction towards SaaS like SaaS is the business model. I know obviously I know how to work within the context of these companies and operate these companies. But my mindset is very much, I'm going to work on outset it for the next seven years. It's going to end up wherever it ends up and I will probably go off and do something different afterwards to be honest with you. Not, not because I don't like it. I, I very much enjoy the work but more so because at that point I will have spent you know, 20, 25 years building SaaS startups and just want to try something new.
[00:52:44] Speaker A: Yeah, yeah. I'll, I'll wrap us up here with one of the few podcasts I actually listen to is John Warrilow. It's Built to Sell mostly just kind of like entrepreneur people talking about their exits. But he has this framework of like your career goes in 10 year cycles.
[00:52:59] Speaker B: Yep.
[00:53:00] Speaker A: And I, that tracks for me. My first 10 years I was in doing something totally different in the medical field. Right. Actually in San Diego, lived there for a while. Now I'm in this phase for eight years. It'll probably be more than 10 years but, but probably not like a lot more actively like in the business maintain. Maybe Castos will go on with me as the owner forever but, but I won't be day to day recording YouTube and managing the team and stuff for, for five more years probably.
And so like I do think that that 10 year mark, there's something about that like there's a, there's something about like a five year mark in a business. You're like, you can, you can build it, you can grow it, you can scale it, you can prep it, and you can sell it. Five years is a pretty good number. We all should have sold years, because that would have been the fucking peak of the market. But. And then there's something else, as a person around 10 years, I think, totally. Which is probably what you're seeing. And your. Your role in outset at 10 years will probably change quite a bit to kind of like that Jason Cohen advisor level or owner level.
[00:53:59] Speaker B: I think it probably will.
I hope it will. And funnily enough, I never, never take calls with investors, really.
But I took one a couple of weeks ago for various reasons. It was just very relevant and someone I was interested in saying hi to. And really the very first thing they said to me is they're like, you're. You're like eight, you know, eight, nine years into this thing now. They're like, you're probably ready to take some money off the table and let someone else operate this business. I was like, that's your angle, isn't it?
[00:54:31] Speaker A: A B.
[00:54:33] Speaker B: That was funny.
[00:54:34] Speaker A: This ain't your first day. That's awesome. All right, buddy, so outside of dot com folks, want to check you guys out. Where's the best place for folks that connect? Otherwise?
[00:54:42] Speaker B: You can find me on Twitter.
My name is Jeff, but I'm a Geoff. So it's at Jeff T. Roberts on Twitter. That's probably the best place. Otherwise.
[00:54:52] Speaker A: Cool. Awesome, buddy. I appreciate it.
[00:54:54] Speaker B: Good chatting with you, Craig. Thanks for having me.
[00:54:56] Speaker A: Yep.
[00:54:57] Speaker B: See ya.
