By Geoff Roberts 9 min read
Handling objections is something that has always been part of a salesperson’s job. The ability to overcome the most common objections that you hear about your product or service can make or break your company; particularly if you’re a start-up.
I’ve been marketing and selling a paid version of Outseta to potential customers for a year now and I’ve spoken with close to 1000 SaaS start-ups in the process. This post serves two purposes:
To share 5 specific, actionable tips to help you better handle your start-up’s objections
To highlight our approach by directly addressing the most common objections that I’ve heard about Outseta
Let’s start at the top.
5 Tips For Handling Your Start-up’s Objections
Here are some hard gleaned tips on how to best handle objections from your start-up’s potential customers.
#1 - Beware of argumentative language
Early on I found myself writing in email and saying during product demos, “I would argue that…”
I wasn’t trying to be argumentative or combative - at all - I was just trying to advocate for a different point of view. While that’s the case, using phrases like this can subconsciously create a sense of conflict that’s unnecessary - there’s no need to position your point that way.
When I first drafted one of the answers to our objections that you’ll read below, I wrote, “I would argue that this list is exactly what start-ups don’t need at an early stage.”
“This list is exactly what start-ups don’t need at an early stage,” loses that argumentative context, however slight, with the added bonus of coming across as more factual, direct, and confident.
#2 - Talk about your strengths, not your competitors’ weaknesses
Your product will almost always be evaluated alongside competitive products, so it’s only natural that you’ll field questions from prospects about how your product stacks up versus the competition. And if you’re in any reasonably competitive market, there will always be instances where your competitors offer features or functionality that you don’t or that’s better suited to the prospect you’re speaking with.
When handling objections about your product versus your competitors’, my advice is essentially don’t go there. Your competitors’ product offerings are probably changing quickly, much like your own, and staying up to date on exactly what each competitor offers is probably not the best use of your time if you’re working in an early stage start-up. Instead, focus on what you do know - your product and company’s strengths - and emphasize why those strengths are important to solving your prospect’s challenges.
#3 - Acknowledge legitimate concerns as legitimate concerns - step into your prospect’s shoes - and ask what would alleviate their concerns
Remember that prospects are people. If they’re looking to make any decent sized investment in a product or service, chances are they’re responsible for that decision. If you’re selling a B2B product it most likely impacts their job, their life, and their chances of a promotion. They should have objections!
Once you talk to enough potential buyers, you’ll quickly learn what the most common and legitimate objections to your product are - acknowledging them and showing a little empathy and understanding of your prospect’s concerns goes a long way.
But far too many companies stop short of one critical step - be sure to ask the prospect what would alleviate their concerns. Oftentimes the objection is something you can’t immediately do anything about, but sometimes prospects can surface ideas themselves that make them feel more comfortable moving forward. You never know unless you ask.
#4 - Encourage them to challenge the status quo - start-ups don’t win by doing what everyone else does
The proliferation of business advice and content on social media and the web has created a copy-cat society in the business world, one where companies flock to replicate the latest best practices. But if everybody’s doing the same thing, no one is innovating towards gaining a competitive advantage. Just because one strategy or way of doing things is widely adopted doesn’t necessarily make it the best.
That’s what start-ups are all about! Don’t be afraid to point that out and encourage your prospect to challenge the status quo, politely.
#5 - Recognize not everyone is an early adopter - leave the door open for later
Working with an early stage start-up in any industry typically comes with a greater degree of risk than working with a more established company - we’ve all heard the old adage, “Nobody ever got fired for buying IBM.” And that’s totally OK - not every prospect is going to be comfortable being an early adopter of your product or service.
Early adopters are a special breed so when you find them, treat them like gold. And for those that aren’t quite ready to take a leap on your start-up, make sure to leave things on good terms and let them know that your door is always open. You might be surprised who comes knocking a year or two down the road.
How We Handle Outseta’s Most Common Objections
With these tips under our belt, let’s look at how we’ve applied them to handling the most common objections we’ve heard about Outseta.
Outseta sounds great. But how do I know you’ll stay in business?
This is a classic objection that every start-up company must face. At Outseta we’re asking our customers to trust us with mission critical aspects of their business - their CRM records, their billing system, etc - so this is a very valid concern.
We’ve specifically built our business with painstaking transparency to help alleviate this concern. Everything from our business structure to how we make financial decisions has been designed for longevity. Ultimately, most start-up SaaS companies go out of business for one of two reasons.
They couldn’t find any traction for their idea and were never able to acquire paying customers. After a year or two the founders burn out or lose interest and shut down.
They run out of money - maybe they raised venture capital or angel funding - but their burn rate outpaced revenue growth and unable to make payroll they’re forced to shut their doors.
At Outseta we’ve done everything possible to insulate ourselves from these circumstances. First, our product competes in very mature markets like CRM, subscription billing, and email marketing - these categories represent known, validated needs of the companies we serve. The market for our product already exists.
Second, we have very specifically chosen to bootstrap Outseta and minimize all expenditures related to the business aside from our own time. Our growth is funded by our own revenue by design, rather than by investors. Our founding team is self-sustaining financially, meaning from day one we haven’t been relying on Outseta to pay us the salaries that we need to cover our living expenses.
For most SaaS start-ups salaries are by far their biggest expense - often 50% to 80% of total expenses - so this is a huge advantage and puts us in a scenario where it’s highly unlikely that we’ll go out of business for financial reasons. We’re in this for the long haul!
I’ll be sacrificing some functionality by using Outseta instead of building a tech stack of more specialized software tools. Why would I do that?
Yes, you will be sacrificing some functionality. No doubt. But for an early stage company, that’s actually a very good thing. Hear me out.
Let’s start by look at a report put together by another SaaS company, Blissfully. They’ve built a SaaS product to help you manage all of your different SaaS products, which I raise because their business relies on companies using a slew of specialized software tools. Yet in their Guide To SaaS Management they cite the problems associated with using a slew of SaaS tools as…
Human resources and finance challenges
This list is exactly what start-ups don’t need at an early stage. We all like to buy stuff. We all want more. We all live in a world that celebrates excess where nobody wants to feel like they’re missing out on anything. You want all the bells and whistles, I get it.
But is that what your start-up actually needs? When was the last time you used the seat warmer for the middle seat in the back row of your SUV?
When you piece together your tech stack at an early stage, you end up with a bunch of tools that are only fractionally used. There’s a core function or process that each tool supports and is used for, as well as a whole bunch of excess features that remain untouched. Mailchimp offers over 100 email templates - how many are you actually going to use?
This fractional use phenomenon makes logical sense when you consider what SaaS companies typically do as they grow or take on outside funding.
They build a bunch of new features to help them go “up-market” so they can sell bigger deals to bigger customers. So those extra features aren’t meant for you as a start-up anyways.
They build a bunch of new features to help them move into new markets. So those extra features aren’t really meant for you either.
They build lots of integrations with other complementary tools. You might use a few of them, but most of them won’t pertain to you.
We’re neither going up-market nor building integrations because our software tools have been built together from day one. So are those extra features really doing anything for you other than driving up the price tag? Is the price, integration, maintenance, and aforementioned problems with a slew of more specialized solutions really “worth it,” or do you just want to know that those extra features are there?
Most importantly, whatever software tools you use are ultimately designed to support one of the processes involved in running your company. You need software to manage your sales pipeline. You need software to charge your customers and to help field customer service requests. These are core needs that are undeniable and important to fulfill.
But is it the software you’re using, with all the bells and whistles, that’s going to dictate whether or not your start-up is successful? Absolutely not. The start-up game is about staying alive long enough to win. You need to design and build a product that people actually need. You need sales people who can handle objections. You need to hire a great team.
The bells and whistles of your software products is not what’s holding you back, especially in an early stage company. Having more time to focus on the aspects of your company that really matter is what will dictate your success.
Won’t I outgrow Outseta? What do I do when that happens?
You betcha you will - in fact, we’re hoping you do! We’re not going up-market - we’re here to serve you better than anyone else can now. We’ve seen companies grow from nothing to $5M-$6M in annual revenue using software tools like Outseta - that’s the journey we want to ride along with you for.
Our founding team worked together previously at Buildium, a company that’s made the INC 5000 list of America’s fastest growing private companies 7 consecutive years. You know how long it took Buildium to go from $0 to $5M in annual revenue?
The point is even if everything goes well and you grow fast you’ll be using Outseta for a long time; all the while reaping the benefits of predictable, low financial overhead that companies swimming up-market can’t promise you.
When you do get to that point, we’ll be in your corner high-fiving with you and you’ll also have a major advantage when switching to new software tools…
Because all of Outseta’s tools are fully integrated from the get-go, we have one master database that includes all of your data - every CRM record, billing interaction, email exchange, customer support ticket, or live chat conversation that you’ve had. You own that data, not us, and we can easily export it for you so it’s not lost.
Try doing that when you’re changing from using 5 to 10 different software tools. That’s… well that’s SaaS chaos!
By Geoff Roberts 3 min read
The home stretch of 2018 is upon us and it’s been an exciting year at Outseta. We began charging users for the first time in January and the evolution of our product since that time has been remarkable to see. Here’s what we’ve been up to since our last company update.
New Feature! Live Chat
Live chat tools have been a big deal as of late - companies like Intercom and Drift, Hubspot and Zendesk - they’ve all gotten into the mix. While Outseta has long offered various customer communication tools - email marketing, a customer support ticketing system, and knowledge base functionality - this means of engaging with prospects and customers had been missing from our platform.
We’re psyched to announce that we now offer live chat to all Outseta customers - it can easily be installed on your website or within your product. A few specific advantages of our live chat offering…
Live chat tools have become very expensive almost overnight. With Outseta live chat, you can have as many users and conversations as you want for one set price. Your company will grow, but your bill won’t.
Because our live chat tool is built from the ground up as part of the same platform as Outseta CRM and our other customer communication tools, chat history is automatically recorded on CRM records. No integration necessary.
Live chat also represents an exciting milestone for us - it’s the last “core” piece of functionality that we plan to add to the Outseta platform. Going forward, you’ll see us taking each of our primary features deeper but we won’t be adding any new core features. We’ve got the functionality SaaS start-ups need to launch and scale covered.
You can read more about Outseta live chat here.
Update! Paid Advertising Experiment Results
Earlier this year we set off to run some experiments with paid customer acquisition channels. Our September company update detailed some initial results when we experimented with Linkedin advertising. Since that time, experimented with both Twitter advertising and Google Ads.
As you may recall, with all of our paid acquisition experiments we’ve needed to think outside the box a bit because our product competes against better funded competitors in extremely competitive categories. One audience we’ve decided to target is attendees of MicroConf, which is a conference specifically for self-funded software entrepreneurs.
Twitter offers marketers some pretty unique targeting abilities; in this case we chose to target ads to people who follow @MicroConf on Twitter. You can also target ads to people who use a specific hashtag (like #MicroConf for example). As such, we ran this ad to followers of @MicroConf.
The ad landed visitors on a landing page we designed specifically for this audience. Here are the results of that experiment.
Ad spend: $254.88
Clicks: 48 clicks
Account sign-ups: 2
Cost per account: $127.44
We also experimented with Google Ads (formerly called Google Adwords). This experiment was different because instead of targeting a specific audience based on demographic factors like we did with Linkedin or Twitter, this time we were targeting people who searched for specific search queries.
We conducted keyword research to identify search queries that were highly relevant to our product but had low search volume and low competition (to keep costs down). Here are the keywords we targeted and a few examples of what the ads looked like.
“Best platform for startup” and “Best free tools for startups”
“Subscriber management” and “Recurring credit card billing”
Here are the results of this experiment:
Ad Spend: $506
Account sign-ups: 27
Cost per account: $18.74
Having now experimented with Linkedin, Twitter, and Google ads we now have a decent baseline - at least some early understanding - of the opportunity each of these channels represents to our business. These initial results will at least be helpful in informing any future spending on paid digital advertising.
That’s all for this month. Thanks as always for following along.
-Geoff, Dave, Dimitris, & James
By Geoff Roberts 9 min read
If you’ve been hanging out anywhere near B2B marketing circles the past few years, you couldn’t possibly have missed it - live chat, modern messaging apps, conversational marketing - call it what you will.
It’s a space that’s on fire in 2018.
Fueled by companies like Intercom and Drift, the live chat battleground has become the new darling of the marketing technology world with countless start-ups and established companies from Hubspot to Zendesk jumping into the ring.
Live chat tools come with the promise of completely changing your approach to marketing, of revolutionizing the way you deliver customer support, and there’s even companies like Swayed that are building live chat tools with the goal of replacing sales reps altogether.
The rise of live chat is a good thing for B2B buyers and B2B sellers - it’s a direct response to the way people have increasingly chosen to communicate over the past few decades. From AOL Instant Messenger, to texting, to HipChat and Slack, chat based tools are the new normal and it’s a good thing that this is finally being translated into the B2B world.
But the good almost always comes with some challenges, particularly for the end consumer. I remember sitting at my desk back in 2010, just knowing I needed a marketing automation platform and trying to make sense of the differences between Hubspot and Marketo. Both were making a lot of noise online. Their sales reps were slick and convincing. And somewhere in the midst of all those shiny features I still found myself wondering…
“How exactly am I going to use this product in the course of my day to day job?”
Today’s buyers face similar challenges; there is a deafening amount of noise in this space at the moment. This post is for start-up companies who are thinking about live chat, trying to figure out how this channel fits into their technology stack and how it can be best leveraged at their company. My aim is to surface some sensible and often neglected truths about live chat so that you can see through the hype and make smarter decisions about how you can best leverage live chat at your start-up.
Live chat products are not new
Marketing technology vendors are notorious for creating hype; a bi-product of these companies competing for the attention of buyers alongside nearly 6,000 other companies. Pile on the growth expectations that come with the amount of venture capital that’s been poured into this space (Intercom and Drift alone have raised a collective $347M to date), and next thing you know live chat tools are being presented as something new.
Point blank, they’re not. So what is new?
First, the user adoption of these technologies has continued to grow; this market has long been sizable, but it’s continuing to expand. Second, the aforementioned VC dollars that have been poured into this space have cranked up the volume and noise around all things live chat.
A few examples to prove my point - LivePerson was founded in 1995 and IPOed just 5 years later in April of 2000. LiveChat Software has 21,000 customers and was founded back in 2002. SnapEngage was founded in 2008, and Olark was founded in 2009. Heck, software review site Capterra has over 238 live chat products listed on their site.
The point is, this means of engaging with customers whether it’s on your website, in your app, in a sales context or a customer support context; it’s been around for quite a while already. These tools are now more commonplace, but one could very easily argue that this was simply an underutilized means of engaging with prospects and customers previously.
Beware the vendor who sells you the hype; seek out the companies that will spend their time educating you on how to make the most of this channel. You have many, many good options to consider.
Live chat is notorious for creating lousy customer experiences
In order for live chat tools to really provide value - to become that engaging channel where website or product visitors can go to get truly personalized, on-demand answers to their questions - someone needs to be available.
The truth of the matter is staffing live chat appropriately is very similar to staffing a call center appropriately - it’s just not very sexy to say that. If nobody’s there to pick up the phone when you call in for help and you’re put on hold for hours on end, it turns what could have been a positive interaction into a really negative one. Frustration boils, patience is lost, and people move on.
We’ve all been there with live chat too - you ask a question, you get radio silence. Or worse yet, you get an autoresponder asking you for your email address. That’s the equivalent of walking into a brick-and-mortar store where there’s no one available to check you out, but there’s a sign-up form at the checkout register so you can sign-up to receive the store’s catalog in the mail.
This challenge is particularly tough to solve for start-up companies; while bigger companies likely have dedicated support or sales staff whose primary responsibility is to monitor incoming chat sessions, most start-ups don’t. Even with desktop notifications of incoming chats enabled, start-up founders are often trying to juggle responding to chat messages with their other responsibilities. If you’re in the midst of writing code, or conducting a product demo, or meeting a potential hire for coffee that incoming chat message is going to get put off.
Next thing you know you’ve turned off another prospect.
Think long and hard about whether you can truly staff live chat appropriately as a start-up company. It’s totally OK to say “not now” to live chat; maybe asking site visitors to submit a support ticket with the promise of a response in 24 hours is more appropriate for your stage. Whether you decide to leverage live chat or not, expectation setting with visitors is key - don’t be afraid to use live chat away messages liberally if they help you set expectations appropriately and avoid turning off site visitors in the process.
Bots are the very definition of providing impersonal service
As you read the previous paragraph about the challenges of staffing live chat appropriately, I could almost hear you calling out, “But there’s a solution to this problem! It’s bots!”
To which I say, please, beware of the bot.
If you’re bot aware of what I’m talking a-bot, bots are essentially autoresponder tools that use natural language processing to understand some aspect of what they’ve been asked through a live chat interaction. They then use this understanding of what they were asked to surface useful content that answers the question or routes the conversation to an appropriate person if someone is available.
You know what bots sound like to me? A phone tree. “Say one for sales, two for support.” This workflow isn’t new, it’s just wrapped in shiny new technology and packaging.
If we’re being honest with ourselves, I’d argue this similarity is undeniable. What many live chat vendors really don’t want you to know is that bots represent cool new technology that helps them attract software developers who are interested in working with these technologies.
I know, I know, I’m being particularly hard on the bot. In the vain of fairness, I’ll say this; there’s a reason so many companies are employing them. They can help route conversations appropriately. They can be available when a real person is not. They can accelerate sales cycles. All good things.
But the crux of my argument is the bot doesn’t really serve the customer, it serves the company employing the bot. If you truly believe in being customer centric, in putting the customer first, is routing someone’s question to a bot really the best way to deliver a delightful experience?
I would argue that it’s not.
Nobody has ever really wanted to chat with a bot, so if world class service is your objective have someone available whether it be by phone, via email, a live chat tool, or any other means of communication. If you think about it, there couldn’t be anything less personal than talking to a bot, could there?
You must contextualize your greeting messages to the content of your web pages
This final point is so often overlooked in the context of live chat discussions, it’s absolutely dizzying to me. Most live chat tools provide users with ability to prompt new website or app visitors with a greeting message (a proactive strategy designed to start conversations), or allow the visitor to initiate a conversation by clicking on a live chat icon, usually in the bottom right hand corner of their screen (more of a reactive strategy).
There’s a time and place for both.
What I see entirely too often is companies choosing the proactive path, but popping up the exact same greeting message on all of their website pages.
Home page: “Hi there, I’m here if you need any help. Please enter your email address in case we get disconnected.”
Features page: “Hi there, I’m here if you need any help. Please enter your email address in case we get disconnected.”
Pricing page: “Hi there, I’m here if you need any help. Please enter your email address in case we get disconnected.”
Again, this quickly becomes a nuisance and next thing you know your live chat tool is actually driving up your website’s bounce rate.
The good new is there’s an easy answer here - contextualize your live chat tool’s greeting messages to the content of the web page on which the message will display. If you have a website page that talks about email marketing, prompt site visitors by asking them a question about what they’re doing to increase their email open rates. If you have a web page that details all of the features of your company’s billing solution, ask site visitors how they’re charging their customers today.
In all of my experimentation with live chat tools, nothing has increased conversations or the value of the tool in general more than crafting custom greeting messages that fit the context of the page’s content.
For today’s buyers, there’s one problem that’s unfortunately prevalent; many live chat tools require you to upgrade to a higher pricing tier that’s unaccessible to start-ups in order to use custom page-specific greeting messages.
Unlocking “advanced” functionality in higher pricing tiers is the norm in the marketing technology world, and it’s very much a logical pricing strategy. But when vendors hide core functionality that’s really a must-have in order to have success with their products behind a massive price tag? That’s evidence of a growth-at-all-costs mindset and it’s ultimately the end consumer who loses.
Live chat is an increasingly in-demand means of engaging in the B2B world and can be really effective in helping companies communicate with their customers and prospects in real-time, on their terms. But like any new software trend, make sure you’re not blindly following the masses like a lemming off of a cliff. It takes careful consideration of your availability and your ability to contextualize your live chat experiences to deliver truly positive and personalized conversations that delight your customers.
Last year Clement Vouillon of Point Nine Capital wrote an article entitled The Rise of the Non “VC compatible” SaaS Companies. It made the rounds in tech circles online. And it expressed a growing sentiment in the world of SaaS start-ups; for the majority of SaaS founders the traditional VC model is a clusterfuck that makes very little sense.
Fast forward 18 months, and the article looks downright prophetic.
In recent months some of the most well known names in tech have announced that they’ve decided to buy out their investors. First it was Wistia, followed shortly thereafter by Buffer; both buyouts a sort of declaration of independence that gave both companies back the ability to build their businesses on their own terms.
Rand Fishkin of Moz poured his heart and frustrations into his book Lost and Founder, then began building SparkToro taking a drastically different approach than he did in building Moz. Investment funds like Indie.VC have turned from a little known “isn’t it cute what they’re doing” blip on your Twitter feed to a highly regarded fund with an extremely passionate following.
If you’re reading this post, this probably isn’t news to you.
I’ll be the first to admit that all of the above resonates with me - I think more companies looking to stay independent and operate on their own terms is, generally, a good thing. But that said, the dialogue around the “VC compatibility” issue has quickly become very much divisive and polarizing.
Venture capital is not inherently bad or the manifestation of greed and commitments to impossible-to-deliver growth. And the companies choosing the independent path are not all hipster led lifestyle businesses choosing nobility over bankroll and operating with a chip on their shoulders.
The fact of the matter is there are countless ways that you can choose to build your business, and even amongst this new flock of independent SaaS companies there are significant, deliberate differences in the approaches these companies have taken.
This post will look at two more established companies - Wistia and Buffer - and two newer start-ups - Outseta (my start-up) and SparkToro - taking a closer look at the pros and cons of the unique decisions each company has made on their road to independent growth.
TWO ESTABLISHED COMPANIES CHANGE COURSE
Don't fret, we just bought out our investors and took on some debt
$650,000 from angel investors in 2008
$775,000 from angel investors in 2010
$17.3M in debt from Accel-KKR in November 2017
Wistia, a Cambridge, MA based video hosting company, made waves throughout the SaaS world this July when they formally announced that they had taken on $17.3M in debt to buy out their investors.
The company had for a few years prior followed a growth-first path, hiring aggressively and prioritizing projects designed to make an immediate impact on their growth rate. This newfound focus created cultural issues within the company, saw the company’s monthly burn rate dramatically increase, and did little to accelerate growth. At the end of the day, “We broke pretty much everything,” says CEO Chris Savage. Perhaps worse yet, long tenured employees of the company began leaving, saying the new focus on growth “didn’t feel Wistia.”
Wistia is certainly not the first tech company to suffer from over-scaling, but their story is both unique and illuminating for a number of reasons.
First, Wistia had for years taken a long-term approach to growth. They had built a highly profitable business that was generally adored by its customers. They had been very deliberate about not raising too much money, and to date the company has only raised a total of $1.4M. Their first round of Angel investment in 2008 had not been a round for the sake of raising a round, or funds really even earmarked to invest heavily in growth. Founders Chris Savage and Brendan Schwartz only raised money when after two years, “we admitted to ourselves we needed some help from folks with more experience than us.”
Despite taking this carefully considered, only-what-we-need approach to growth they began hearing advice and a narrative that you’d be hard-pressed to find anywhere outside of the traditional Silicon Valley tech bubble.
“As we grew the company and began sharing our story, we kept hearing the same counterintuitive advice from other entrepreneurs — Wistia was too profitable. We weren’t spending enough on growth, thereby limiting our opportunity.”
While I’m all for reinvesting in growth, it’s hard not to chuckle when you hear that a business is too profitable. In a for-profit business, isn’t making profit the objective? The idea of temporarily jacking up your annual growth rates so you can sell your business at a high valuation multiple is really a much more sideways approach to growth if you take off your tech blinders for a minute and use your head.
But after a few years of more aggressively chasing growth and realizing that they were no longer having much fun, Wistia’s Founders decided something had to change. If they were to get back to growing Wistia on their own terms, some serious challenges lay ahead.
They needed to provide a return to their angel investors
They needed to provide return to their employees
With no intention of selling their business, they needed to replace their stock option plan
They didn’t have enough cash on hand to buy back stock, so they had to raise money
They had to raise debt which increased their ownership in Wistia, but also their risk
The solution to the problem that gave Wistia back the right to grow on their own terms came in the form of taking on $17.3M in debt from Accel-KKR in November 2017, an enormously difficult decision that has since been generally and rightly lauded in tech circles.
“We felt confident that the profitability constraints the debt imposed would be healthy for the business. Spending or hiring ahead of budget to try to juice growth weren’t options in this model and we’d be forced to grow the way we wanted to: sustainably, with a focus on creative, long-term solutions for our customers and team,” said Savage.
As one of Wistia’s very early customers, I watched the company grow up from afar and had heard bits and pieces of this story from those both inside and outside of the company. But as I reflect on this story, there’s three things that stick out in my mind that I admire.
Wistia’s Founders made the decision to take on debt after they received an offer to sell their company outright. It was a large enough sum of money to change their lives, and their family’s lives, forever. Not many people choose to walk away from a pot of gold. Especially when you’re taking on $17.3M of debt in a business with an annual run rate of $32M.
In raising debt, the company chose to provide a return to both their investors and their employees. It was the right thing to do, but this is exceedingly rare.
Ultimately one of the major reasons Wistia chose to raise debt was so that they could get back to taking long-term, creative risks that had been hadn’t been prioritized when they were pursuing growth more aggressively. While taking creative risks may not be what’s most important to your tech company, it’s one of Wistia’s four core values and is deeply important to them. I applaud them for “knowing thyself” and serving their values above all else.
Curious how he felt reflecting on the decision to raise angel money - a decision that ultimately resulted in Wistia needing to take on $17M in debt - I asked Wistia Co-founder and CTO Brendan Schwartz if he’d do anything differently.
“That money brought us two phenomenal teammates, a really helpful mentor who's still on our board, and lots of connections and help from investors. I'm quite confident we would not be as successful without raising that money initially,” said Schwartz. “The only thing I think we would have done differently in retrospect would be to structure the deal with some kind of payback terms similar to what Bryce has been doing with Indie.vc. I think that's a great way to preserve optionality - you can pursue the venture track or you can aim for profitability, pay back your investors, and maintain full control over your business.”
$120,000 through AngelPad start-up accelerator in August 2011
$330,000 seed round in December 2011
$3.5M series A round in December 2014 (60% was from Collaborative Fund)
Bought out main series A investors (representing $2.3M of $3.5M raised) in July 2018
Just a few short months after Wistia’s announcement another household name in tech circles, Buffer, announced that they were also buying out their investors. While they didn’t need to take on any debt to buy out their investors - let alone $17.3M worth - their story is uniquely turbulent in a number of ways.
Buffer began as very much a darling child of the tech world - they had everything going for them. After raising a total of $450,000 in 2011, Buffer would raise a Series A round of $3.5M in 2014 - 60% of which came from Collaborative Fund.
Buffer was so hot at the time - revenues were growing 150% per year - that the terms they got for their Series A were insanely good. They were doing $4.6M of revenue at the time and the business was valued at $60M - a valuation multiple of 13x revenues. The $3.5M they raised only required them giving up a 6.2% equity stake in the company… and no board seat. The company even took $2.5M of the $3.5M and paid it out to the Founders and early team members.
Without question, Buffer was flying high.
After the Series A, Buffer fell into a similar trap to Wistia - they hired too quickly, specifically to accelerate product development. Shortly thereafter Co-founder and CEO Joel Gascoigne and team had to make the tough decision to layoff a number of Buffer employees to regain financial control of the business. Morale took one on the chin.
Shaken by this experience and unwilling to compromise on many aspects of his company’s unique culture (open salaries, fully-remote team) that he viewed as Buffer’s secret sauce, Joel began articulating a vision for the company that accepted a slower, more deliberate growth rate. This vision was not aligned with his investors, or his Co-founder and CTO, both of whom would leave the company.
As tensions with his Series A investors increased, the fine print on the Series A term sheet surfaced some additional challenges if Buffer sought to control its own growth trajectory.
They needed to provide a return to their investors
They had to layoff employees after hiring too aggressively
They could not provide liquidity to employees or seed investors without majority support from Series A investors. They had to buy them out first.
Their Series A term sheet provided downside protection for Series A investors, who had the right to claim a guaranteed 9% annual interest on their investment at any point 5 years after the initial investment.
Communication soon broke down with Collaborative Fund and Joel found himself in a meeting where he was being asked if he would step down as CEO of Buffer if he could not afford the 9% annual interest his investors were entitled to after 5 years. If Joel was not willing to pursue growth that was in alignment with his investor’s expectations, he could be squeezed out of his company altogether.
Luckily for Buffer, the layoffs and slowed emphasis on growth had helped Joel regain control of the company and start operating profitably again; so much so that he was putting $400,000-$500,000 of profit away in the bank each month. Buffer spent $3.3M - about half of the cash they had in the bank - to buy out their main VC investors (who had kicked in $2.3M of the $3.5M Series A investment). Those that chose not to accept the buyout proved to be comfortable with Joel’s decision to grow the company at a slower, more organic rate moving forward.
While Buffer’s path to independence did not require walking away from a pot of gold and taking on a large amount of debt, the company’s path was both turbulent and admirable in its own right. Laying off employees, watching your relationship with investors who believed in you sour, losing a Co-founder and a CTO, and having it suggested that you might be squeezed out of the company you’ve spent the last 7-8 years of your life building is all agonizing stuff that will keep you up at night.
To make matters worse, when you “had it all” previously these things are even harder for your team and employees to understand. Said Gascoigne, “Whereas in the past we’d had it all and achieved growth alongside creating a unique culture with a fully remote team and high levels of transparency, it now started to feel like we had to choose between those things. It was suggested that some of the fundamentals that I had come to value could be removed to create a productivity environment that would increase the growth rate.”
Another takeaway for me from Buffer’s story is how easy it is for Founders and investors to become misaligned, even when both sides have good intentions. When Buffer set out to raise their Series A, they knew they were raising an “atypical round” in terms of the round’s size, not turning over a board seat, and only giving up a small stake in their company.
Collaborative Fund, who looks to make investments that are “better for the world” and “pushing the world forward,” was open to this structure granted some downside protection. Said Gascoigne, “We shared openly that we may not want to raise further funding, sell the company, or IPO. We were transparent that we wanted to be able to keep questioning the way things are done. Specifically, we communicated that we wanted the option to be able to give a return via distributions, not an exit.”
The point is these conversations were on the table from the get-go and from afar this looks like a situation where neither the Founder nor the investor meant any ill-will or malice. But while stashing away $400,000-$500,000 of profit per month and accepting a slower growth rate made a lot of sense to Joel, it certainly didn’t jive with the expectations of his lead investor; previous conversations had or not.
Ultimately what I appreciate most about Buffer’s story is similar to what I appreciate about Wistia’s.
Buffer chose to pay out $2.5M of the $3.5M they raised in their Series A to their Founders and early team. I applaud the decision to pay out those who were responsible for the company’s early successes and the company’s ability to raise that round in the first place.
While Wistia wasn’t going to sacrifice their ability to take creative risks, Joel wasn’t going to compromise the remote workforce and highly transparent culture that he’d built at Buffer. In fact, he saw these aspects of the company as largely responsible for their successes. I admire his recognition of this part of their culture as a strategic advantage and something that he would absolutely not compromise on.
TWO NEW COMPANIES PLOT THEIR COURSE
Our start-up structures are new and daring, we distribute wealth through profit sharing
Sparktoro, a Seattle based company that’s building a “search engine for audience intelligence,” is a product of Rand Fishkin (formerly Co-founder of Moz) and his Co-founder Casey Henry.
$1.3mm from 35 angel investors in June 2018
When Rand Fishkin made the decision to start building his next company after Moz, he came out of the gates swinging with his book Lost and Founder followed shortly thereafter by a very atypical funding round.
The traditional VC model was not a fit for his new business, and he wasn’t afraid to say it. He’s hell-bent on showing that there are alternative paths for Founders who want to retain the right to grow their company on their terms.
Rand and Casey chose a corporate structure and investment terms that are a departure from the norm - the company is a LLC and can pay dividends to employees and investors when the company does well. The company has the option to pay profits out to investors or choose to invest profits back into the company’s growth. On the surface, this structure looks similar to the deal Basecamp made when they took investment from Amazon.com CEO Jeff Bezos - a no control stake in a LLC that has now returned (via profit sharing) more than 5 times the amount Bezos initially invested.
The structure is also specifically designed to hold the Founders accountable; neither Casey nor Rad can take any profit or raise their salaries above the market average for Seattle until they have returned all invested capital to their investors.
Changes to this structure require that 80%+ of outstanding units (think of these as stock options) vote for the suggested change. If the company is sold, investors get to greater amount between the amount they invested or the worth of their outstanding units.
They wanted the ability to stay independent and profitable vs. seeking an exit or IPO
They wanted the ability pay out invested capital as dividends when the company did well
The Founders had different financial situations and didn’t want to wait to start working on SparkToro full-time
SparkToro’s path is most interesting to me because the decisions they made were very much intentional and deliberate. While Wistia and Buffer had existing investors and lots of success before they were faced with the financial restructuring of their businesses, if they wanted to plot their own independent course their hands were somewhat tied and they had to figure out how to best make that happen. Casey and Rand were starting with a perfectly blank slate.
The first thing that I like about what they did is they made a deliberate effort to highlight their new course in the hopes that others can follow or at least derive some inspiration from the decisions they made. This is evident in their one page term sheet, their investor prospectus, and even their mention of using tools like Carta to distribute units. All of this is helpful fodder and they took the time to make these documents clean, understandable, and generally as useful to others as possible.
But what’s really most interesting to me about SparkToro’s path was that behind the term sheets, financial figures, and equity structures they took the time to share the human element behind some of their decisions.
They could have bootstrapped the business, but they decided not to because that wasn’t an option for Casey’s family or financial situation. Rand had previously funded Moz in the early days via consulting revenue, and was well aware of the hidden costs and tradeoffs that come with bootstrapping.
And let’s face it - between Moz’s success and Rand’s standing in the worlds of marketing and VC-backed technology companies, money wasn’t only available but it was available on their terms. They got a decent valuation with very little traction and were able to add a number of key investors with a vested interest in their business without giving them voting rights.
While this scenario is exceedingly rare, it definitely removes the majority of the drawbacks often associated with raising money. While SparkToro did give up a good amount of equity, the only other real downside in this scenario is adding some complexity around reporting and legal costs earlier on than they might otherwise have. And while their investors don’t have voting rights, they still represent stakeholders that need to be considered in future decision making.
With these realities on the table, I appreciate the deliberately frugal approach and agreements Rand and Casey made regarding how their funding would be spent. By agreeing to take market level salaries and not allowing themselves to raise their salaries or dip into any profits themselves until all capital is returned to their investors, they’re demonstrating self-imposed financial constraints that show investors they’re being responsible and judicious with their investment dollars.
It was also cool to see the one area where they admittedly splurged - high quality health insurance through WTIA. They weren’t afraid to call out their needs in this area or compromise and put their families at risk by skimping on their healthcare until a later stage. Personally, I was not aware of programs like these and while WTIA’s program only serves the state of Washington, this set me on a course to exploring options like this for California residents (where I live).
All of which brings us to my start-up, Outseta, a fully remote team that’s building a suite of software tools specifically for early stage SaaS start-ups. We’ve been in business since late 2016, and since the get-go have been building our own intentionally independent path. Like SparkToro, we also open sourced our operating agreement in the hope that it would be helpful to others considering a similar path.
My Co-founder, Dimitris, also Co-founded Buildium, where we met. Buildium (founded in 2004) was set up as a LLC with a membership units plan to help drive employee retention and deliver financial rewards to employees in the case of a liquidity event. It was certainly one of the few SaaS start-ups I was aware of with this structure at the time. Buildium bootstrapped for its first 8 years, well past $5mm in revenue, before eventually raising money to keep accelerating growth. The path we’ve chosen at Outseta certainly reflects this past experience, but with some notable changes.
We wanted the ability to stay independent permanently and have all employees reap financial benefits when the company does well via profit sharing rather than pursuing an exit that makes a small number of shareholders wealthy
We wanted to to embrace self-management, a structure that rewards autonomy and focuses on rewarding employees for their contributions to the company rather than their positional authority or job title
We knew we’d be bootstrapping against heavily venture-backed competitors in a particularly competitive market
Our founders have very different financial situations, which we knew would predicate us taking a long term approach to building the company
The first thing that I’ll note is that by deliberately choosing to bootstrap in such a competitive market, we knew that we had to take a very long term approach to building Outseta. We have and are continuing to ramp up the amount of time we spend on the company - Dimitris is still involved with Buildium as a board member, and my Co-founder Dave and I both continue to take on some consulting work.
There’s obviously a trade-off here, one that was questioned recently when I was interviewed by Nathan Latka on his podcast. “If you’re so confident in what you’re building, why don’t you go all-in?” he asked. In short, our answer is…
We’re building a product with key functionalities - CRM, subscription billing, and customer communication tools (email, live chat, help desk) - that don’t need to be “validated.” These are established categories and known needs of the companies we serve - there’s no “first mover” advantage in this market and there are already players of all shapes and sizes.
Like Wistia, we think that needing to operate within the constraints of our own profitability is actually a good thing and will keep us financially disciplined.
I would argue that the path we’ve chosen is much more “all-in” than building the company using someone else’s money. We’re putting ourselves, our own time, and our own money on the line.
Perhaps most importantly, I’d say our ability to take this long term approach is only possible because of the relationships our founding team has with one another. I worked with Dimitris for 5 years previously at Buildium, Dave and Dimitris worked together previously at Sapient. In addition to the prior working relationships, there are friendships. While that creates challenges of its own, what it’s meant for us is a high degree of confidence and philosophical alignment in how we want to build Outseta.
Secondarily, it’s really important for us to share Outseta’s financial successes with our team without requiring an exit event. As such, all employees at Outseta are eligible to participate in profit sharing once they’ve been with the company for one year. We also issue membership units (like stock options) to employees and offer a buyback program so that if an employee gets a great opportunity elsewhere they can take it and still cash in on the value of their units. This program pays back employees based on the number of membership units they hold and the valuation of the company, which we calculate as 2X the past year’s revenues.
Finally, as Rand and Casey did it’s worth acknowledging that our founding team has different family and financial situations. This is certainly a potential source of misalignment, but at the same time it’s a reality that’s forced us to consider how we wish to structure and operate Outseta that much more.
Since day one, every hour spent working on Outseta has been tracked and everybody is earning sweat equity in the business commensurate with their time invested in the company. The plan, absolutely, is for us all to go full-time when we have the revenues to support our own salaries.
In the meantime, I have all the “normal” financial challenges that you might expect; I have a mortgage payment each month, school loans to pay off, and a fiance who wants to remodel our bathroom. On top of that, I simply need to “keep the lights on” as well as pay for my own health insurance. All of the above is without question stressful, especially when you look at friends with big-salaried corporate jobs and growing 401ks.
My advice for anyone considering bootstrapping that doesn’t have financial freedom is this; don’t fall into the trap of viewing bootstrapping as this noble endeavor that’s going to impose some short term limitations. Manage your burn rate obsessively, and create a plan to keep yourself financially afloat for 3 or 4 years.
I’m coming up on two years now making about a 50% salary without any benefits. I’m 32 years old and generally healthy, so I opted for a “good enough” health insurance policy that really just provides coverage were anything bad to happen to me health-wise - it costs about $280 month through Covered California.
Bootstrapping for 3 months is very different than bootstrapping for 3 years, so do some soul searching ahead of time to figure out if this is feasible for you.
Wistia and Buffer are two very admirable companies that have done well for themselves already. Outseta and SparkToro are really just getting started. But while all of these companies have made very different decisions to get to where they are today, they all share a common belief - that the right to grow your business at a more organic, deliberate pace can actually be one of the biggest advantages to long term revenue growth that’s out there.
If you’re considering a similar path I hope this provided some inspiration, and I’d love to hear about your company’s path via a comment below.
By Geoff Roberts 5 min read
With some vacation time now in our rearview we’re heading towards the home stretch of 2018, making it the perfect time to fill you in on what we’ve been up to at Outseta since our July company update. Here’s the latest and what’s to come.
We now support Stripe as a payment gateway
When we launched our subscription billing and management functionality, we initially partnered with Forte Payment Systems as our payment gateway. We did this because it allowed us to offer the best possible pricing to our customers, but Forte can only support processing payments in the United States and Canada.
We’ve received quite a bit of interest in Outseta from international customers and companies domestically that sell internationally. As a result, adding Stripe as a payment gateway very quickly became the most requested feature from our users.
We’re happy to say that we now offer Stripe as a payment gateway. While many early stage SaaS companies just think “I’ll use Stripe!” when considering their billing needs, they very quickly realize that they need to build quite a bit of other “scaffolding” around Stripe - subscription management functionality and logic to handle upgrades, downgrades, and cancellations being a few examples. We’ve built this functionality already so our customers don’t need to and we’re eating the $.30 per transaction fee that Stripe charges as well.
You can learn more about our subscription management and billing tools here.
API support for partial CRM record updates
When we rolled out the first version of our REST API, if you wanted to update one of your CRM records the API would resubmit all data on that record. This wasn’t ideal for companies using multi-step onboarding processes or forms, because if a user abandoned the form or onboarding sequence prior to completing it the data that they had entered would not be captured and they would essentially lose out on a (partial) lead. We’ve updated our API to now support partial updates to CRM records to better support these workflows.
Shout out to Callum at TapTapGo for this feedback!
Paid advertising experiments
Our go-to-market strategy to date has consisted primarily of launching on Product Hunt, email prospecting, and content marketing - essentially free tactics focused on building our our audience and stirring up some initial customers. As our product matured, we got to the point where we decided it was worth experimenting with some paid advertising moving into Q3.
The goal of these efforts is to test the waters and see where opportunities to acquire customers with paid advertising may lie, while being very judicious about limiting expenditures. Here’s what we’ve done so far.
Because our product competes in a number of hyper competitive categories, we need to stay away from keywords like CRM, subscription billing, and email marketing. While these keywords are accurate descriptors of what we offer, there’s simply too much competition on these keywords; we’re priced out.
As a result, we’re looking for creative ways to cost effectively tap into search intent from people who would likely be interested in our product. That means we’re primarily targeting keywords that have low search volume and low competition, but still represent highly relevant traffic. A few examples of keywords we’re bidding on…
MicroConf - MicroConf is a conference for self-funded software entrepreneurs; there couldn’t be a group of people that’s a better fit for Outseta. While this audience is not searching for software when they search for MicroConf, we’re using some interesting ad copy to lure them in to a landing page we built specifically to address this audience: https://www.outseta.com/microconf.
Indie.VC - Indie.VC is a venture capital firm that invests in companies that focus on selling their product at a profit from day one. Again, our approach at Outseta likely resonates with this audience and companies that are truly focused on profitability from an early stage are attracted to our pricing model.
Best platform for startups - A long-tail keyword that’s relevant and has low competition.
Because these keywords all have low search volume it’s going to take several months to get a good sense of how effective these campaigns will be; we don’t have any results worth sharing just yet. But we’re getting clicks, quite cost effectively.
Linkedin Direct Sponsored Content
A more aggressive experiment that we ran was throwing $500 at Linkedin advertising. We did this because we know founders of SaaS companies tend to be active on Linkedin and we can easily target the right buyer persona using targeting criteria like…
Industry: Computer Software
Title: CEO, Founder, Co-Founder
Company Size: 1-10
You get the idea. For the $500 budget, these ads generated:
3,018 impressions (the number of times the ad was shown)
80 clicks (landing visitors on our website - $6.25 per click)
3 Outseta accounts created ($166.66 per account)
Ultimately the success of these campaigns will be assessed by revenue created and there’s lots of room for landing page optimization - we sent people who clicked on the ads to our home page this time around. But this experiment gave us some useful benchmarks in terms of how our ads would be responded to, which messages resonated, and how cost effectively we can drive visitors to our website (and create account sign-ups) using Linkedin.
Sales Pitch, Take Two
You may remember from previous updates that we decided to put a page called "Sales Pitch" in the primary navigation on our website. We don't want to come off to prospects as "salesy," and instead want to readily surface any materials that will help them decide if Outseta is right for their business.
Our original sales pitch hit hard on the importance of start-ups saving time evaluating, integrating, and maintaining software tools. But we started hearing from our users that that was only part of the story; they were realizing other benefits as well. As a result, we updated our sales pitch page pretty dramatically to give a more complete picture of the benefits of working with Outseta. The retooled page better represents our pie-in-the-sky vision of the benefits all Outseta customers will realize.
You can check it out here: https://www.outseta.com/sales-pitch/.
We’re hard at work on what the next major feature that will be added to the Outseta platform - it’s one we’re particularly excited about, and the next time you hear from us it should be ready for action. At that stage we’ll transition from building new, primary pieces of functionality to going deeper on each of the core features of our product.
Thanks for following along!
-Dimitris, Dave, Geoff, & James
By Geoff Roberts 5 min read
It’s been a couple of months since our last Outseta Company update, so we figured we’d hit you with one before you’re all lounging by the lake/beach/pool for the 4th of July. Here’s what we’ve been up to since April.
New Navigation UI and Global Search
Since James Lavine joined our team, he’s been focusing on improvements to our user interface. These changes are perhaps most evident in our new navigation, where you’ll see CRM, Marketing, Support, and Billing tools running down the left hand side of the screen. We’ve also added search functionality at the top of the screen, so you can locate People, Accounts, or Deals that much more quickly.
We’ve rolled out a new onboarding process to make it easier for customers to get started off on the right foot. You can see the new onboarding workflow for yourself either by creating a free account and walking through the account setup steps (complete with jokes about canned meats), or by clicking through this InvisionApp prototype.
We also added a “Getting Started” checklist once you complete the initial account setup steps along with some calls-to-action to complete the most common onboarding actions.
Other Quick Hits
A few other noteworthy enhancements; you can now accept Amex payments, merge email lists, and look at drip email campaign performance statistics on both an aggregate and email-by- email basis.
We recently pow-wowed to set goals for Q3 and came away with two primary product priorities that we'll be working on this summer. The first is allowing Outseta customers to process payments through Stripe in addition to Forte Payment Systems, our existing payment gateway. We've had some inbound interest from international customers, and offering Stripe will help us better support them.
The second major product priority is adding live chat functionality, both for use on your website and inside your application. Live chat is commonly used in both the context of sales and support, and adding this feature will help bring us closer to feature parity with the more established players in this space who are increasingly being dragged upmarket. This is one example of additional value we are delivering to our users, without any increase in price; the goal here is make the decision to use Outseta a no-brainer for an early stage subscription business.
What we’ve done so far
After launching our MVP on January 1, we made a deliberate decision to think long term and fight the urge to start pursuing growth aggressively. It was more important for us to start working with a small number of customers to validate what we’ve already built and incorporate their feedback into the product. So far we’re happy to say that customer retention is at 100%, which was our primary goal as a company.
In addition to things like launching on Product Hunt and growing our organic website traffic via content marketing, the vast majority of effort towards landing those early customers has been focused on email prospecting. Some quick stats on this front.
Companies contacted: 329
Companies that engaged with us: 120 (36.5%)
Product demos: 24 (7.3%)
All of this outreach was 100% “cold,” sourcing leads from sites like AngelList, Product Hunt, Betalist, and GetProspect. You can read more about our approach to email prospecting here.
As we move into the second half of the year, we have a much more mature product and are going to look to test some paid acquisition channels - primarily via Facebook and Google Adwords.
Our prospecting efforts have given us a significant and highly targeted list that we can use in Facebook to build a look-a-like audience and expand our reach to new buyers of the same persona.
We’re going to focus our Adword experiments in two areas - one is targeting software buyers specifically at small, self-funded SaaS companies. The other will try to intercept search intent for relevant keywords that have a low search volume, but also low competition. We’ll provide an update of the success of these experiments later this year.
Other Company News
As you may recall from our operating agreement, we've made a deliberate decision to embrace remote work. We think it's a significant competitive advantage both in terms of recruiting and in terms of employee retention. So catch this...
On a normal day, I work in San Diego, CA. James works in Portland, ME. Dimitris and Dave work in Boston, MA. So if I hopped on my sleigh and rode to pick up James in Maine, then we roared down to Boston to pick up Dimitris and Dave, chipped the ice off our windshield and headed to San Diego for an afternoon surf we'd cover about 6,296 miles.
This summer we're stretching that net quite a bit. At various points this summer, Dave will be working from Oahu, Hawaii. Dimitris will be in Athens and Varkiza, Greece. Geoff will be in Sifnos, Greece before joining Dimitris in Varkiza. And James will be in Nairobi, Kenya.
So if Dave jetpacked from Hawaii to Greece to meet Dimitris and Geoff for our weekly team meeting, before shooting down to Nairobi to swoop up James, then we all continued on our way back to Hawaii for some R&R, we'd cover about...
We hope you don't do that - it's summer, it's hot, and we hope you enjoy your 4th of July wherever you are!
-Dimitris, Dave, Geoff, & James
By Geoff Roberts 12 min read
I read an article recently on ESPN after the Boston Celtics took a 2-0 lead in the NBA’s Eastern Conference Finals about LeBron James’ Cleveland Cavaliers and the organizational fatigue the Cavs are currently experiencing. The Cavs have recently made several deeps runs into the postseason, resulting in longer than normal seasons. Media scrutiny has been relentless. Players and coaches have come and gone. And off-court distractions have been plentiful as LeBron and Co chase a nearly impossible dream of trying win championship after championship in LeBron’s pursuit to match Michael Jordan’s 6 NBA championships.
The article got me thinking about a different sort of fatigue that I’ve been feeling in my own career and industry; the world of venture capital backed marketing technology start-ups. I’ve known that this feeling has been there for a while now, the embers smoldering, but more recently the feeling has really started to burn in earnest. I call this feeling marketing technology vendor fatigue.
Marketing fatigue has been written about before, but to me the issue is much deeper than the volume of marketing messages we must sift through or the plethora of technology decisions modern CMOs must make. I want to talk about false narratives, next to impossible growth goals, and the underlying root causes of this issue.
For me, marketing technology vendor fatigue is caused by being repeatedly bombarded by marketing technology vendors with messages and content telling me that I have it all wrong – there’s a new way to do marketing, the next-generation way, it’s going to transform everything, and I better get onboard!
In short, 99% of the time this is complete bullshit. To make matters worse, the world of VC backed marketing technology start-ups is relatively small and very much an echo chamber, resulting in marketers like myself being hit over the head with these largely false messages over, and over, and over. On Facebook. On LinkedIn. Via email. At conferences. And every… single… other… channel.
Ultimately I’m writing this article for a few reasons, which I’d like to state up front:
First and foremost, I’ve found by talking to other marketers that I’m definitely not the only person that feels this way. Which provides an opportunity for martech companies to better understand their buyers and show a bit more self-awareness in their own marketing strategies.
Second, there are very clear and logical reasons why this occurs. I’d like to inspect those.
Most importantly, because this comes with an opportunity cost that is often at odds with what’s actually best for customers.
Let’s dive in.
Defining marketing technology vendor fatigue
First, let’s start with a definition.
marketing technology vendor fatigue - The feeling that results from being relentlessly bombarded by messages from marketing technology vendors telling you that their tools represent a new, transformative, or revolutionary way of doing marketing when their technology very clearly supports a time-tested fundamental of marketing or a pre-existing marketing channel. Most often repackaged ideas, concepts, or strategies; hype.
While that may sound harsh, for me, that’s the root cause of the issue. We live in this crazy tech enabled universe where for some reason it seems unacceptable to simply say, “Hey, we offer an email marketing tool. Or an analytics tool. Or a live chat tool. It’s rock solid. Our differentiator is teaching you to leverage this channel or tool better than anyone else.” That’s not very sexy, is it? But I’d argue that message is actually a really good thing.
And what if it’s the truth?
We’re leaving our values as consumers at home
Seriously, when was the last time you heard that message? There are companies out there doing this, but they seem to be the exception rather than the norm and they are certainly much more prevalent with technology products outside of martech. Basecamp is a company that comes immediately to mind. Wistia, another.
I yearn for a world where more martech vendors are OK saying “This is what we do, we do it really, really well, and ultimately our technology is an enabler rather than a marketing strategy in and of itself. Let’s teach you the fundamental marketing strategies our technology supports; or how to make the most out of the marketing channel our tool supports; that’s how you’re going to crush it!”
That would be refreshing.
There’s a strange phenomenon at play here, too. To borrow a tech stereotype (always dangerous, but one that I’ve found to be true), many tech start-ups are filled with employees that are regular consumers of craft beer or craft coffee (I’m guilty as charged). Heck, many of these companies even have exotic craft beer or coffee on tap within their own office kitchens. Given the choice of drinking a Heady Topper or a Heineken, the Heady Topper is chosen. A Guatemalan slow drip coffee from the local corner coffee shop versus a large black from Dunkins? You know who wins here.
Another such example where this phenomenon is on display is the music industry. Music buffs celebrate “underground” or “indie” bands, yet when their favorite artists or bands achieve the acclaim or success that their talent warrants they are often shunned as “having gone mainstream” or “selling out.”
The point here is most of the companies guilty of causing marketing technology vendor fatigue are filled with employees who as consumers, value companies and products who purposely stay small, who keep it real, who are more than happy to do their thing and do it really well without the need “transform” or “next-gen” anything. Without the need to become the next Starbucks.
Yet when it comes to their professional careers, they’re all too quick to jump on the bandwagon. To chase building that unicorn. To become a cog in the hype-wheel. To focus on growth at all costs.
Why is that?
Root causes of marketing technology vendor fatigue
The reasons why marketing technology vendor fatigue exists are not terribly difficult to uncover, but they don’t seem to be discussed all that often. I’ve boiled it down to three primary culprits.
First, competition. It’s well documented that there are over 6,000 marketing technology vendors out there, and that estimate is probably conservative. With so many companies vying for the attention of marketers, it makes logical sense that you need to either make a lot of noise, consistently, or say something different than all the other vendors in order to stand out. Or both. Next thing know you have carefully crafted and spun messages suffocating you from all angles.
Just this past week, during the course of my “normal” online life I was touched or interacted with 41 times by a single marketing technology vendor. 41!
Have they delivered their message? No doubt. Have they done it with consistency? Sure have. But if that’s what we’re calling “good” marketing these days… that’s just not something I want to be a part of. We can do better.
The second culprit I personally sympathize with more, because it has to do with time tested sales fundamentals. In order to sell effectively, you need to develop pain in the eyes of the buyer. Only once pain has been developed, realized, and the buyer feels urgency to act to relieve that pain are you able to introduce your company’s solution as the antidote to that pain. I view this very much as a truth, but even with that being the case I’m certain that you can alleviate your potential customer’s pain without needing to “transform” their approach or corral them into joining your “movement.” If you have a better solution for me, if you can improve my efficiency or process, just say so and I’m all ears.
An example of this can be found in Andy Raskin’s article The Greatest Sales Deck I’ve Ever Seen. Andy helps venture-backed start-ups tell their stories and craft their messages, and he’s one of the best in the biz at it. I’ve personally learned a lot from his articles and I’m quite sure his work has generated fantastic results for his clients. But just pause to notice the language used in Andy’s framework - he suggests that you name thy enemy, that you frame your customers’ problems as monsters, and position your product’s features or capabilities as magic gifts capable of slaying those monsters.
I get it, and I even believe the framework to be effective. But with 6,000 martech vendors all slaying monsters at once, how can the end consumer not feel exhausted? How can I not be lost in a dizzying spell of marketing technology vendor fatigue?
The third culprit is perhaps the biggest source of the issue; the vast majority of the companies that have caused my marketing technology vendor fatigue are heavily backed by venture capital. Don’t get me wrong, there is absolutely nothing wrong with raising VC money; it can represent a completely appropriate accelerant of growth or in some cases, a necessary means of building your company.
But with very few exceptions when you do raise VC money, you forfeit the right to build your company completely on your own terms. As Kim-Mai Cutler, Partner at Initialized Capital recently put in her article the The Unicorn Hunters, venture capital represents “Rocket fuel with strings attached…. When a company accepts venture funding, it commits itself to steep expectations for future growth.” When you raise VC money, you are more often than not committing to (trying to) build a Starbucks.
Rand Fishkin’s new book Lost and Founder breaks down this commitment and the often-neglected flaws of the VC model pretty clearly. VC’s are betting on beating the public markets, which extrapolated over a 10-year period means that VC firms need to earn roughly 3x their initial fund size over 10 years just to beat the public markets.
Take the example of a VC who raises a $100mm fund and invests $30mm into your martech company. Assuming your company is the lucky one, the 1 in 10 investment that turns out to be the (successful) fund’s home run, you need to take that $30mm and turn it into $300mm in the next 10 years.
Needless to say, that’s damn hard to do. Next thing you know you’re “creating” categories and flooding the market with your message at every turn. Your chasing growth at all costs, and I’d argue your increasingly creating marketing technology vendor fatigue amongst your buyers.
So what’s the solution?
The marketing technology Eden that I envision
The truth of the matter is spinning your marketing technology product as something new, something majorly transformative and disruptive, and flooding the market with your message at every opportunity can be massively, massively effective. It can build brand awareness, it can position your product in the eyes of your buyers, and it can generate enormous returns for your company and investors. There is absolutely nothing intrinsically wrong with this approach.
That said, if there’s a shift that I see it’s that consumers of these products – particularly more experienced buyers with the power to make buying decisions – are increasingly seeing through the hype and choosing to transact with companies that share the values that they hold as a consumer (a good thing!). They want companies that are authentic, that will keep it real with them, that share their values. So let’s call bullshit on ourselves, at least a little, can’t we? Let’s at least tone down the hype machine and instead reinvest our time and efforts into the things that matter more to our customers.
On a positive note, I think that we’re already starting to see some momentum in positive directions. What I’ll call SaaS 1.0 companies underinvested in what’s come to be known as “Customer Success;” SaaS 2.0 companies have started to double down in this area and are realizing the benefits of doing so. My hope is that SaaS 3.0 martech companies tone down the hype, and instead invest additional time and effort into:
Better, more personal self-service experiences.
Look no further than Amazon’s world domination and the countless statistics highlighting the extent to which consumers prefer the ability to self serve. B2B marketing technology software companies have a long way to go on this front.
No matter how great the self-service you provide is, at some point prospects and customers will want to talk to a real human being. And it’s really, really damn simple what consumers want when this occurs – they want a prompt response, from someone who knows what they heck they’re talking about.
The best customer software in the world serves little value if the person responding to the customer service request isn’t knowledgeable enough to craft a high value response or takes a week to reply. The best live chat tool in the world is worthless if it’s not staffed with a knowledgeable sales or marketing person on the other end who is able to provide an immediate and thoughtful response. It’s almost never the tool that’s providing that fantastic customer experience or delivering the fantastic growth marketing technology vendors want you to believe it will; it’s the people leveraging that tool.
So invest more in your people and less in your hype! If you sell SEO software, hire more experienced SEO consultants. Send your staff to a SEO bootcamp. Whatever it takes.
Besides reallocating some of your companies energies in these directions, you can also be part of the solution as a consumer. Whatever your marketing technology need, one thing that’s for certain is there’s no shortage of high quality tools out there to fulfill that need. Actively seek out the companies that are doing things on their own terms, that will keep it real with you, that have invested their time in their people and in you as a customer. Revel in discovering the awesome products that exist that no one else knows about, and when you find them, share them with those that are close to you.
We revel in doing this with coffee, with beer, with AirBnBs as opposed to Marriots. Why not do this with software, too?
It’s not surprising given the competition and prevalence of the “Silicon Valley mindset” in the marketing technology space that the issues outlined in this post exist, and that a growing number of marketers are feeling marketing technology vendor fatigue.
And if you think about it, it makes sense that this space is filled with people with a knack for creating carefully spun messages that represent little more than hype. If you look back 50 or even 20 years that’s to a large extent what marketing was. Those were our roots, and the progress we’ve made by stepping away from that past and embracing data driven marketing has now earned marketers a seat at the strategy table.
A very good thing.
But I’m of the belief that we can still do better, that we can be more real, and that we can actually still achieve better business results by focusing less on “slaying monsters” and more on providing better customer experiences while continuing to reallocate our budgets towards processes and people that make customers more successful. Even if that results in diminished reach, for SaaS companies I think a more direct path to revenue growth is the increased customer loyalty and customer lifetime value we could realize if we turned down the bullshit, just a bit.
Can you relate?
By Geoff Roberts 8 min read
At Outseta almost all of our customers are early stage SaaS start-ups; in many cases just a single Founder or a small group of Co-founders. Every single one of these companies knows they “should be doing SEO,” but between building your product, incorporating your business, testing other marketing channels, and hustling to make some early sales SEO too often gets pushed by the wayside.
That’s too bad, because the sooner you start taking SEO seriously the sooner your business will realize the the benefits of sustainable organic traffic. Even if you’re investing heavily in SEO, this often takes 12-18 months.
With this very challenge in mind, I decided to ask three leading SEO experts about two of the biggest SEO related challenges I see early stage SaaS start-ups face; both of which I'm wrestling with at Outseta.
Let’s meet our experts.
Neil Patel, Co-founder of Kissmetrics, Crazy Egg, and Neil Patel Digital
Let’s do it.
Question #1 - Link building with limited resources
Geoff Roberts: We are an early stage, bootstrapped SaaS business. I am the Co-founder responsible for go-to-market strategy; I own all of our marketing efforts as well as sales. Link building is a very time consuming task, so I’ve basically chosen not to spend time deliberately building links and am instead focusing on content quality and occasional guests posts on other sites. I feel like I should be spending more time specifically on link building, but it’s such a time-suck and I have other competing priorities (sales for one!). What’s your advice for other bootstrapped start-ups when it comes to link building - how much time is “enough,” and how would you recommend they tackle link building in a more deliberate, cost effective way?
Miguel Salcido: Well, it's never ‘enough’ time. Link building needs to be an ongoing effort, like any marketing channel. You will need to prioritize.
Focus more on content for third-party sites like LinkedIn, B2B blogs, and Medium which seems to be a great place for start-ups. Because at this point, your product is fairly unknown and very niche. You need to get the word out and build brand. So put most of your energy here to start out. Use ghostwriters if necessary to save time. Once you’ve established the brand and traffic to your site, you can shift the focus to more content for your own site.
Make sure that you have at least 2-3 very high quality guides or content pieces that you can use to drive people to, making sure to have a lead magnet (tools/checklist/calculator/etc.) that you can offer with each piece of content so you can capture emails.
For your content, try to focus on use cases for your software if possible. And interviewing SaaS startups is also a good route.
Create “teasers” for every piece of content you have and post those out through your social channels, focusing on LinkedIn. Schedule these to post regularly. The teaser should entice readers to “click here to see the full article” in order to get them to your site. Schedule all of this using Buffer + Quuu.
Neil Patel: I would follow the tips in this video. And as for time, I would spend at least 5 hours a week building links. After a year you can slow down.
Marty Martin: Link building is a hateful, extremely time consuming, onerous task, and not one that many people have a real knack for. Being successful in link building is all about your creativity, process, and breaking it out into manageable tasks. Otherwise, it can take an unending amount of time.
Link building at scale, as a siloed task, can be broken out roughly into the following steps that can be run in parallel, saving you time and frustration:
This is typically the realm of agencies, and not something a bootstrapped startup can pull off on its own.
But don’t despair! As a startup, there are other options to consider. If you’re getting a lot of press because you’re amazing, ask for the links. One option is to use a tool like Ahrefs’ Alerts. It will notify you of any mentions of your brand name, where the citation is not linking to you. Then simply email the journalist or website editor, thank them for the mention, and ask for the link back to your home page so their readers can find you. That’s an easy, manageable, once a week type activity that will earn you links over time.
Another option, is using Ahrefs (as mentioned above), or another tool such as Majestic that will show you your competitors’ broken links. A small amount of checking and you may find a resource your client used to have that now 404s, and that’s an opportunity for you. Build the same resource, download the list of broken URLs, use an intern or other internal resource to find contact info for all of those websites, and write to them to tell them their users are missing out as the site they’re linking to no longer has the resource in question, but your site does. Ask for them to update their broken link to your website. This is a task that can be broken out into a process as described above, and tackle a bunch of links at once. We’ve found broken resources with thousands of link opportunities this way.
Does your college or university have an online magazine and/or alumni magazine? Pitch them to write about your recent advancements as an entrepreneur. Do you have business partners and other principals? They should pitch their schools as well!
Build a useful asset, driven by data, that can be a useful resource to journalists or other websites. For example, the government has tons of freely available, regularly updated datasets you can use to build a data driven piece of content on your website. We have used data from the Census Bureau, US Patent & Trademark Office, and other resources to build amazing pieces of content for our clients. They attract links naturally, and with a little outreach effort, you can draw in additional links.
Having the right tool helps as well. We use a tool called Pitchbox to manage our outreach and follow ups. It makes the outreach and response process a breeze.
Question #2 - Keyword selection in established, competitive categories
Geoff Roberts: At Outseta we offer a platform that integrates CRM, subscription billing, email marketing, help desk and knowledge base, and reporting tools. “CRM,” “Email marketing,” and “Subscription billing” are insanely competitive keywords - to the extent that I feel like it’s not even worth us really targeting them. Also, we sell a platform solution that isn’t nicely categorized as “marketing automation,” for example. As a result, I haven’t been very deliberate in selecting keywords to date; our SEO strategy has instead primarily been…
The “normal” build your first few links stuff that start-ups do - building social media profiles, an Angellist profile, some start-up directories, reviews sites, etc.
Creating very high quality, long form content - the idea being if the content is good enough, it will naturally build backlinks.
Guest posts on other topically relevant blogs.
What’s your take on this approach? How would you recommend start-ups in established, competitive categories get more deliberate with keyword selection given these challenges?
Miguel Salcido: You are a hyper-niche B2B SaaS startup. There are no keywords to describe everything you do. So you will have to focus on the solutions your platform provides, and yes those are super competitive terms. I’d also focus on “startup” related terms (startup tools, SaaS startup tools, etc).
If you can find a similar company and see what they target, using SEMrush, then that’s a good idea for keyword research.
Your approach so far is solid, just make sure the content is in fact really high quality and you do that by measuring engagement, email signups, links, and sharing. If you’re not getting those things, then your content is not resonating.
Neil Patel: I wouldn’t worry about keywords. Just blog about content that is super highly relevant (to your audience) and you will start to rank for terms. Next, place banners and links within blog content to landing pages to drive signups.
Finally, go into Google search console and see what pages get the most traffic. Look at the list of keywords that you are getting impressions for and then sprinkle in the keywords you haven’t mentioned on your site yet. The key isn’t to just add keywords, but it is to also expand the content.
Marty Martin: If you are starting a new niche or opportunity with your SaaS product, why not come up with a catchy industry name (think how Rand Fishkin of SparkToro and Dharmesh Shah of Hubspot coined the phrase "Inbound Marketing"), and start using that name in all of your marketing. Eventually, when people start searching for that phrase, you’ll already be the dominate player. Now, this isn’t an easy thing to do, but if it catches on, you’ll be set.
I think your approach above is time tested and can pay dividends with time, but most startups don’t have the luxury to wait for good content to become seasoned and linked to. Good, long form content can draw links over time, but it is a very slow process without outreach.
One thing that may get you more awareness is to build integrations for Zapier, IFTTT and similar services. I’ve become aware of many amazing tools just by browsing their integrations.
Thank you to Miguel, Neil, and Marty for weighing in on these questions. For any SaaS start-up that’s resource constrained, I hope this provides some clarity on your approach to link building. And for any start-up competing in an established and extremely competitive category, hopefully the advice this group shared will help identify the keyword targeting strategy that will yield the most meaningful results for your business.
By Geoff Roberts 3 min read
This is the first company update we’ve published in 2018, so let’s start with the big picture; we’ve delivered our minimum viable product, have started charging our users, and are continuing to develop the platform based on user feedback. Here’s a closer look at what’s new.
Our team is growing
We’re excited to announce that James Lavine has joined our team as a designer. James started working with us in January and is already responsible for the brand refresh that you see on our website and in our software. James is now earning sweat equity in Outseta commensurate with his contributions. We feel that with Dimitris and Dave on development, James on design, and myself focused on our go-to-market efforts we have the team we need to get Outseta to the next level. Welcome, James!
Redesigned knowledge base
One example of James’ work is our newly designed knowledge base. The new design features larger, easy to read text as well as an easy means of navigating between categories. The design is also particularly well optimized for mobile devices, making important product documentation available wherever you are.
New Feature! Sales pipeline management
We had initially scoped SaaS metrics and reporting functionality into our minimum viable product, but we decided to punt on this feature temporarily and instead build functionality to help SaaS start-ups manage their sales pipeline. We made this decision primarily because of our own need for sales pipeline management tools; we figured if we needed this functionality prior to reporting capabilities most other early stage SaaS start-ups would as well.
The drag-and-drop interface allows you to set up as many pipelines as you like, while easily adding columns to your pipelines that can be customized to mirror the stages of your customer acquisition process. As deals progress you can move cards through the various stages of your pipeline, making it easy to keep track of where each potential customer is in your customer acquisition funnel.
New Feature! Engagement index
Last but not least, we added a widget to our dashboard to help you measure your customers’ engagement with your software. If you are using Outseta’s subscription management widget for product registration and authentication, you can now easily see the aggregate and unique number of people who have logged into your software each day. By selecting the “Data View” you can see exactly who is signing into your product and when they logged in.
This has been really useful to us from a sales and customer support perspective, as it enables us to proactively reach out to users and offer help when we know they are actively engaged with our product.
At the end of Q1 our team got together in Boston to do a retrospective on Q1 and discuss our goals for Q2. Here's what we'll be focused on.
Improve the customer onboarding experience.
Implement a customer success program for early customers. This includes weekly meetings where we ask for product feedback, then help customers with their businesses however we can. We're looking for 100% customer retention.
Improve sales pipeline management tools; help sales reps spend their time in the right areas with better lead scoring, lead management, and engagement metrics.
Develop a Wordpress plugin to make it easier to capture website form data and send it to Outseta CRM and email lists. Our users often start by syncing newsletter sign-up, beta registration, or “request early access” forms with Outseta.
That's all for now.
-Dave, Dimitris, Geoff, & James
By Geoff Roberts 5 min read
As I’ve been engaging with SaaS start-ups across industries this year, one thing has become certain; real estate tech is hot in 2018. The real estate tech start-ups listed below range from companies that are still developing their products to venture-backed businesses that have already found significant traction and revenue. Here’s our hand-curated list of real estate tech start-ups set to make waves in 2018.
Approved - Approved is a San Diego based SaaS company that’s building a platform to modernize mortgage lending. Led by two former Redfin employees, the company recently raised $1mm in funding and is an EvoNexus portfolio company. The platform automates the collection of loan documents and also features instant loan approvals.
eLandlord - eLandlord is a Boston based company developing a mobile platform to help landlords and homeowners save time and money in repairs, while also taking a more proactive approach to preventative maintenance. “We’re allowing property owners to outsource the painful parts of property maintenance to us so they can spend more time with their family,” says Charles Hadsell, Founder and CEO. eLandlord offers an alternative to property management through a usage-based model and a hand-picked network of service professionals and partners.
Team: Founder & CEO Charles Hadsell
dwel.co - dwel.co is a New Jersey based online property management platform built for both landlords and tenants. The company’s solution is specifically focused on streamlining the accounting and financial aspects of the landlord-tenant relationship. “dwel.co is dedicated to providing real estate investors with the tools they need to manage their business, their way” says Joe DiNardi-Mack, Co-Founder of dwel.co. The founding team met at Rutgers.
IDX Boost - IDX Boost offers advanced MLS search tools, as well as user analytics and marketing automation tools. “We’re making powerful online marketing tools simple and affordable for realtors,” says Josh Stein, Co-Founder of IDX Boost. The company’s “ready-to-launch” real estate websites and Wordpress IDX plugin have already helped hundreds of agents make beautiful WordPress sites, track their users, and automate their outreach.
coUrbanize - coUrbanize is a Boston based company that provides an online community outreach platform for real estate developers and municipalities. The platform allows you to post updates and host online conversations with the community so projects progress faster. “coUrbanize uses technology to give every community member a voice instead of having to attend inconvenient meetings while enabling developers to gather, package, and submit feedback into public record ahead of meetings,” says Chief Operating Officer Alo Mukerji.
Off Market Leads - Off Market Leads is a platform that allows New England real estate investors to find, market to, and close off-market deals. The platform allows you to search off-market leads and create direct mail lists with data on ownership, taxes, mortgages, liens, pre-foreclosures, sales, and more. Off Market Leads is the official real estate investment partner of The Warren Group, the most comprehensive and accurate source of information on real estate in New England.
Team: Founder Tyler Cubell
Apt. App - Apt. App is a Denver based mobile platform that seeks to improve the resident experience in multi-family properties. The app’s features focus primarily on fostering communication and building community; an example of this is the ability to safely and anonymously notify other residents of a common disturbance such as a noise complaint.
New York Equity Group - NYEG is a real estate investment, development, and technology company operating in the northeastern United States. The company’s real estate investment software is designed to help anyone assess a real estate investment opportunity in 5 minutes. The product is scheduled to become publicly available in Q2 of 2018.
Team: Founder Philip Michael
Enviar - Enviar offers real estate landing pages designed to generate leads for your properties. The company is currently in beta but already has traction in the form of 200 customers who have published more than 3000 landing pages.
Team: Stealth mode
Localyfe - Localyfe provides customized property recommendations to buyers and renters using proprietary algorithms, experiential data, locational analytics and user data, while delivering tools and data to market professionals. CEO Brian McAllister previously served as Senior Vice President of Corporate Development at CBRE, the largest commercial real estate services and investment firm in the world.
If you are a real estate investor, a home buyer, or a resident the 12 companies listed above are primed to make your next real estate dealing that much less painful. Whether you're looking to invest, buy, or move-in, these companies may soon become... household... names.
Who is missing from this list? Feel free to mention other real estate tech start-ups worth watching in 2018 via a comment below.