For the past two years we’ve been hard at work building Outseta, an undertaking that was a direct response to our own experience launching and scaling a successful SaaS start-up.
As an early stage company, we found that a lot of stuff we had to build had nothing to do with our core product; authentication for existing users, lost password workflows, subscription management logic—that kind of thing. Then we did what everyone else in SaaS does—we evaluated, bought, integrated, and maintained a whole bunch of other SaaS products. A CRM. A billing system. Email marketing software and a help desk. Should we build our own subscription management logic again?
At the end of the day we decided to build Outseta because:
We saw an opportunity to help SaaS founders get products to market much faster.
The status quo was ridiculously inefficient—we saw an opportunity to give SaaS start-ups the tools they need to scale to about $5M in ARR for a fraction of the price.
If you’ve been following our progress something exciting happened since our last company update—we launched an entirely new SaaS product of our own. Here’s how we got that product to market about 50% faster while also gaining significant efficiencies that will help us scale well into the future.
Let’s get a few things out of the way first—yes, we launched this product partially to highlight how easy it is to launch a SaaS company with Outseta.
Second, while that was the case, this is a legitimate product that we only built because we realized a true need for it ourselves—this was not a creative exercise.
Finally, there are all kinds of “Launch your product today” or “Launch 10 products next week!” contests flying around the internet of varying pedigrees. The product that we launched is not a one page website, and it’s not a hack to validate your idea overnight. It’s a full-fledged, well designed, and fully functional SaaS application. You can call it a micro-SaaS project if you like or you can check it out for yourself by signing up for a trial at CompareRentalBookings.com.
The idea behind the product
My Co-founder Dimitris has built software products for the real estate rental market before, Co-founding Buildium in 2004. While he’s still actively involved in the company as a board member, more recently he’s been working on Outseta as well as an Airbnb rental business in his hometown of Athens, Greece.
Unsure of the nightly rate he should be charging for each of his rentals, Dimitris began using Airbnb’s own smart pricing tools. He found that the tool consistently told him to drop his prices down to his base price—the lowest nightly rate he’d allow his property to rent at. He had a hunch he was leaving money on the table.
Next, he tried a number of the other Airbnb pricing tools on the market. Again, he found his nightly rates were dropping prematurely. These tools were also expensive and they didn’t tell him anything about how often competitive properties were being booked and at what nightly rate. He wanted to know exactly how his property was performing against the properties he was most often competing with for bookings. He could get at this information but it was a manual process that he found himself performing over and over again—a perfect problem to solve with software.
That’s the problem we set out to solve with CompareRentalBookings.com—a tool for hands-on Airbnb hosts and management companies who, armed with the best data possible, can make better pricing decisions to maximize their Airbnb hosting earnings.
The very first version of the product pulled data from Airbnb’s API into a Google Sheet. Dimitris was finally able to see how much competitive properties were actually making, so he could benchmark his own performance and price his properties more appropriately.
Realizing that this data was proving valuable to him, he pulled together a prototype of what the product might look like in Moqups and shared it with Dave and I in late October.
“This is a product we could build pretty quickly, and it’s been really valuable to me,” Dimitris said. “What do you think?”
We were all a bit gun shy about taking time and energy away from our product backlog at Outseta, but we realized that by using Outseta we could dramatically cut down on the time required to deliver the product.
We looped in our design lead, James, and decided the product would consist of a SaaS application that allows hosts to choose the competitive properties that they want to track as well as email notifications highlighting new bookings. We decided hosts could track 5 comparison properties for each of their own for $5 per month—if hosts get even one additional reservation by using the tool, the product likely pays for itself 20 times over.
James delivered some final designs for the email and SaaS product using Invision. Here are the design files.
With the designs in hand, Dimitris and Dave began development in mid October. Dimitris had already requested access to Airbnb’s API, which we use to pull in the pricing and occupancy data the product relies on. In terms of technical architecture, the product is built using .NET and the base angular framework.
The product would likely have taken 3-4 weeks to build if we’d focused on it full-time—instead we built it over about 6 weeks in a very part-time capacity. Here’s how that time was split up.
1-2 days to setup the development environment
1 week to create the algorithm that downloads the data and creates summary data
1 week to build the APIs
2 weeks for front-end development
2 weeks to build the email notifications
Standing up the business and implementing Outseta
During product development, Dimitris and Dave were able to spend all of their time and energy on building “core” product functionality because they knew we’d be launching the product with Outseta.
As a relatively non-technical person, I was able to instrument much of the functionality they would have otherwise had to build. First, I bought the domain comparerentalbookings.com and created a Squarespace website using the “Bedford” theme. I paid $20 for the domain and the website is $18 per month.
Next, I decided that we’d offer a 14-day free trial prompting users for payment after the trial expires—I set this up as well a pricing plan to charge $5 per month per property tracked. I was able to do both of these tasks within Outseta, which can be connected to a payment gateway in seconds. If you have an existing Stripe account, here’s how to connect Stripe to Outseta (all you need is your “secret key.”)
Without using Outseta, we would have had to build the free trial logic manually. We probably would have billed manually for some time, as we would have had to write something automated to handle billing based on the number of properties tracked. This logic easily could have taken 3-4 weeks to complete and integrate with Stripe.
Next, we needed a way for people to sign-up and login to the product from our website. Using Outseta’s sign-up and login widgets, I was able to easily drop this code into our website pages.
Here’s documentation on how to integrate Outseta’s sign-up and login widgets with your website and product. I embedded the sign-up widget directly on our free trial page, which you can see here: https://www.comparerentalbookings.com/free-trial/. I used a pop-up for the login functionality so that users can come back to our website to login to their Compare Rental Bookings account.
Using these widgets also meant we didn’t need to build lost password workflows—realistically it could have easily taken a month to build the functionality that these widgets gave us out of the box.
We can also see who has registered for the product and who is logging into the product without needing to access our database or integrate with a CRM system. This is something we likely would have done further down the road if we weren’t using Outseta, but it’s a nice added benefit at this stage that makes it really easy to identify which accounts are engaged.
With the technical implementation of Outseta complete, I set out to prepare us to bring on and support new customers.
First, I set up our sales pipeline stages within Outseta CRM so we can track sales.
Next, I added Outseta live chat to our website. All I needed to do here was add a script to the <body/> tag of our website pages. I also set up our shared customer support inbox so users can submit support requests by emailing us at at support(at)comparerentalbookings.com.
I then used Outseta’s knowledge base to author some articles that I thought would be helpful to our early customers. We mapped the knowledge base to a custom subdomain that’s accessible here: http://support.comparerentalbookings.com/support/kb#/categories.
As a final step, I set up activity notifications so that Dave, Dimitris, and myself get email updates whenever an account is created or updated. Again, this callback functionality is free and available to us out of the box.
Just like that, we had a fully operational business ready to scale.
Using this process, we were able to launch CompareRentalBookings.com in about 6 weeks while working part-time. We have the tools in place that we can easily use to scale the business to thousands of users and millions in revenue. Perhaps most importantly, we have known, low overhead of $99/month and far fewer manual processes and disparate software tools.
How Outseta Helped Us Get Our Product To Market Faster
- We saved time by not needing to build free trial logic.
- We saved time by not needing to build sign-up (product registration) or login (product authentication) functionality.
- We saved time by not needing to build lost password workflows.
- We saved time by not needing to build infrastructure for activity notifications.
- We saved time by simply adding a script to our product that handles account upgrades, downgrades, cancellations, user management and permissions, and updates to billing information.
- We saved time by not needing to spend any time integrating software solutions—our CRM, help desk, marketing automation, and live chat tools work seamlessly together from the get-go.
Key Benefits Realized By Launching With Outseta
- We increased efficiency by not billing manually to start. We didn’t have to write an automated script to handle billing based on the number of properties tracked.
- We can now change pricing models and experiment with new pricing plans without any development help. We can change our pricing plans from within Outseta and our website and registration workflow will update to reflect the changes automatically.
- We can see who has registered for our product and who is logging in consistently (a useful barometer for user engagement) without accessing our database.
- Our technology stack is completely free and likely will be for several more months. Once we cross 250 contacts in our CRM, all of this functionality will cost us just $99 per month with no limits on users, contacts, emails, or conversations.
Have any questions about the process we used to launch CompareRentalBookings.com? Wondering if Outseta can help you get your SaaS product to market faster? We’d love to hear from you—just drop us a note as a comment below!
By Geoff Roberts 12 min read
When we first started building Outseta we stated outright that we weren’t interested in raising venture capital—instead, we planned on bootstrapping the business and remaining independent. It wasn’t that we had any issue with venture capital per se, it was simply a reflection of never wanting to have our hand forced in pursuit of growth if we thought it wasn’t what was right for the business. There’s a lot of advantages to organic growth that aren’t discussed enough.
Over the past 12 months there’s been an explosion of new financing options and models made available to companies that feel like us. And many of them are attractive to the extent that they’ve flipped our own internal dialogue.
This post is for other early stage SaaS companies who are similarly considering whether some of these new forms of capital make sense for their business. I’ve read the fine print to highlight the unique attributes of each fund and who they are best suited to—and I’ll share our own thinking in terms of each model’s appeal to our own business.
Key Personnel: Bryce Roberts
Revenue Requirement: Post revenue, but no minimum requirement.
Equity Stake: Yes, but diminishing to 10% of Indie.vc’s initial equity stake.
Board Seat: No
Investment Docs: https://github.com/indievc/terms
Application Deadline: March 1, 2019
Apply Here: http://www.indie.vc/apply
Indie VC is the OG on this block and describes itself as “growth revenue for post-revenue companies.” This is the company’s third fund, which is designed to support founders on their path to profitability.
The program is an accelerator that lasts for 12 months, with investments ranging anywhere from $100,000 to $1 million—the historical average for the fund has been around $285,000. Included in the investment docs is a predetermined percentage of ownership allocated to the fund should you choose to sell your company. Your company will begin repaying the fund 12 to 36 months after the investment is made.
Typically founders will pay 3%-7% of monthly revenue until they have repaid the fund 3x the amount invested. Each time a payment is made, the fund’s ownership stake is reduced with the founders’ ownership shares increasing. Founders can repurchase up to 90% of the fund’s ownership stake via these payments or lump sum payments, with the fund maintaining 10% of the equity that it was initially allocated.
How They Help
Indie.vc helps founders primarily by exposing them to one another and organizing quarterly events and retreats for portfolio companies. The fund also has monthly meetings with each portfolio company.
The Indie.vc model is really appealing to me—they’ve done this a few times already and I suspect they’ve worked out many of the kinks. I’m also attracted to the simplicity of their model—the predetermined equity stake in the business, the 3x payout that you need to return to the fund, and the fact that you can earn back 90% of the equity the fund initially takes.
I even like that the fund hangs on to a residual equity stake, so that they will continue to be in your corner for the long haul. The 10% of the equity they were initially issued that they do hang on to could potentially be seen as steep, particularly if they are funding companies that already have $20,000+ in MRR so that’s something to consider. But it’s always good to look at the companies and people that you take from money as long term business partners.
Revenue Requirement: No minimum requirement
Equity Stake: Yes—8%-15%
Board Seat: No
Investment Docs: https://tinyseed.com/faq/
Application Deadline: February 15, 2019
Apply Here: https://tinyseed.com/apply/
Like Indie.vc, Tinyseed is not just a funding model but a 12 month accelerator program. The fund focuses exclusively on subscription software companies and is willing to invest in pre-revenue companies.
Tinyseed invests $120,000 for your company’s first founder, then up to $20,000 per additional founder. The fund does take a permanent equity stake in your business of 8%-15%, although they do not take a board seat or hold any voting rights.
Of the money invested, a lump sum is delivered upfront to help out with start-up costs, with the remainder being paid out to the founders as salary on a monthly basis for the duration of the program. Founders agree to a salary cap (based off of the average salary of a software engineer in the nearest major city), and can increase their salary up to that cap as the business makes money. Any revenue beyond that salary cap is paid out as dividends, which are paid out to founders and the fund based on their percentage of ownership in the company.
The founders maintain complete optionality in terms of when to take dividends—if they prefer to invest revenue back into the business they have the option to do so. The idea here is that the fund gets paid when the founders choose to get paid. If the company sells, Tinyseed receives the initial investment back (minus any dividends paid to date), and then the proceeds are divided based on percentage ownership in the business.
How They Help
Tinyseed invests in cohorts of 10-15 companies at once so that portfolio companies benefit from exposure to one another—this includes weekly calls with other portfolio companies. They also have a network of mentors that’s about as strong as could be if you’re looking to build an early stage SaaS company. Mentors are available during scheduled office hours calls.
Tinyseed is particularly attractive to me because of the money, the advisors, and the ecosystem it would plug us into—the companies Tinyseed is funding represent our exact target market at Outseta. While it would be nice to have some additional cash to invest into the business and begin taking some salary, the $160,000 total doesn’t go very far when split between 3 founders. It would probably allow us to each take a salary of around $3,000 per month—not nearly enough to live on—making the fund’s money a more attractive option for single founders.
The advisors are a huge reason, in my eyes, to apply to this fund but they are also probably the biggest variable. How much interaction does a portfolio company actually get with each of the advisors? It’s not like Rand Fishkin has the time to work with 10-15 companies on SEO or Hiten Shah has the time do so the same with each on product strategy. I know the advisors are more than names slapped up on a marketing website, but the extent of their involvement is certainly an open question. The ecosystem, for us, is a no-brainer.
It’s worth noting that Tinyseed takes and keeps the largest equity stake of any of the options on this list, but the stake seems reasonable given that they are typically making earlier stage (riskier) investments. If I was an investor, this model would be hugely attractive to me—spending $120,000 to buy a 8%-15% stake in a company could prove to be hugely lucrative if a company does reasonably well. I’m sure this fund will see a huge volume of applications from some awesome companies.
As an operator, I love the model of the fund gets paid when the founders get paid—I think Tinyseed nailed this aspect of their investment model. While I’m not crazy about giving up 8%-15% equity in the business, paying dividends based on percentage of ownership in the company makes logical sense to me. I’m comfortable with the equity stake because it means that the mentors and other folks involved in this fund are going to be on your side for the long term, which is a pretty amazing benefit.
Side note—we’re applying to Tinyseed. Here are our application answers.
Revenue Requirement: No minimum requirement
Equity Stake: Yes, but diminishing. In their default terms Earnest holds a small residual stake.
Board Seat: No—upon request Earnest can become a board observer without voting rights
Investment Docs: Shared earnings agreement V1
Application Deadline: Open applications beginning in January 2019
Apply Here: https://earnestcapital.com/apply/
Earnest Capital makes seed stage investments in “bootstrappers, indiehackers, makers, and real businesses.” Their investment model was developed to align with founders who want to build sustainable, profitable businesses.
Earnest invests upfront capital in businesses typically after a product has launched, but before the founders begin working on the company full time. The investment model has two main components:
Businesses pay back a “Return Cap” which is 3x-5x the amount invested in their company.
In their default terms, Earnest will maintain a small residual equity stake in the business even after their Return Cap is paid back—this amount scales down as the fund is repaid, but never reaches 0. This means that Earnest and their advisors are still incentivized to keep helping you grow the business after the Return Cap is fully paid because they would participate in a sale if it ever happened. “We will likely still offer and do deals that have no residual stake after the Return Cap is repaid, but that will likely entail a higher total Return Cap to compensate for the lack of residual stake,” says Principal Tyler Tringas.
Earnest calculates “Founder Earnings” which is net income + any amount of founders’ salaries over a predetermined threshold. Similarly to Tinyseed, this model is designed to give founders the option to continue investing profits in their business if they see fit and the fund is only paid when the founders are paid.
How They Help
Earnest also has a strong network of mentors, all of whom have skin in the game having invested in Earnest companies. There is no curriculum or prescriptive structure to mentorship; Earnest companies are expected to tell the fund what they need and ask for help. All mentorship is handled remotely.
I’ve really enjoyed following Earnest Capital’s story and the research that went into them coming up with their investment model. I also like that all of their advisors have skin in the game—it definitely makes me feel like they’ll be accessible and helpful. Like Tinyseed, I love the alignment of the fund gets paid when the founders get paid, but Earnest is much more appealing to me if returning 3x the amount invested to the fund rather than 5x.
As with Tinyseed, I understand the reasons for this as they are making early stage bets, so it’s sort of pick your poison—a bigger return multiple or a larger equity stake. But I’d be hesitant to take too much money; the idea of taking on $200,000 and needing to repay $1,000,000 is a little daunting.
We are considering applying to Earnest as well—we prioritized the Tinyseed application given the pending deadline. Earnest also asks founders for some additional materials including a video overview of the product that we’ve yet to film. Stay tuned.
Key Personnel: BJ Lackland
Revenue Requirement: $15,000 monthly recurring revenue and gross margins of 50%+
Equity Stake: No
Board Seat: No
Apply Here: https://www.lightercapital.com/apply/
Lighter Capital provides “revenue based financing” to SaaS, tech services, or digital media companies based in the United States. They have provided funding to over 300 start-ups to date.
Lighter Capital makes investments of $50,000 to $3 million—up to ⅓ of a company’s annualized revenue run rate. The money borrowed is typically repaid over 3-5 years, with payments ranging between 2%-8% of your monthly revenue. Typically the money returned is between 1.35x-2x the amount borrowed.
Companies do not need to be profitable to secure financing, but there should be a clear path to profitability in the company’s future. Funding is typically received within 4 weeks of application, and follow-on rounds can be distributed in 3-4 business days. Lighter Capital only funds companies based in the United States.
How They Help
Lighter is not an accelerator and does not offer a network of mentors—instead it’s more of a true financing option. “Aside from the reporting, where we are most helpful is planning out a company’s financing, frankly” says CEO BJ Lackland. “As opposed to a VC we don’t necessarily need to know the best VP of Sales candidate in healthcare tech in South Carolina. What we know is if you’re doing X million in revenue and have this kind of burn rate and this kind of growth rate, what kind of capital is available to you from which different sources? Whether it’s angels, VCs, or banks, we probably know how to introduce you to any of those sources. So we can help with strategy, mostly on the capital side.”
Lighter Capital is without question the most attractive of these models is you’re simply looking for financing given the speed at which they make funding decisions and that you’re only on the hook for returning 1.35x-2x the amount borrowed. That said, there’s a reason for that—they’re taking on far less risk by only funding companies with $15,000+ in MRR and otherwise healthy financial metrics.
Outseta isn’t there yet, so at the moment this option is out of reach for us.
Key Personnel: Mitch Kessler
Revenue Requirement: $10,000 monthly revenue
Equity Stake: No
Board Seat: No
Application Deadline: Open applications
Apply Here: https://metcalfe.fund/#signup
Metcalfe Fund is a new financing option that “provides growth capital to online businesses using actual business data instead of a credit score.” The company invests in SaaS, e-commerce, and other types of online businesses.
After providing funding to your company, Metcalfe is paid back over time using an agreed upon percentage of your future sales. Repayment occurs daily with a small fixed percentage of daily sales being automatically debited from your bank account—they refer to this investment model as a Structuralized Future Revenue Purchase, or SFRP. The company provides financing in the range of $10,000-$500,000, which is typically paid back within 6 months for a 6%-10% fee (12%-20% annualized). Loan decisions can be made in a matter of days.
I asked Founder Mitch Kessler what factors are considered when making loan decisions. “In general we are assessing a company’s marketing sophistication and their financial health,” says Kessler. “We can cross-pollinate marketing and financial metrics, such as conversation rates, CAC, LTV, AOV, and Revenue forecasts to get a better idea of their potential future revenues aided by marketing, and if they are able to do this themselves or if they will need help from marketers in our network.”
Businesses must be based in the United States and have been in business for at least six months to qualify.
How They Help
Metcalfe’s funding model is focused specifically on delivering funding to be spent on digital marketing and growth. Metcalfe is essentially a marketplace of vetted marketing agencies and talent, which it will in turn introduce to the companies that it’s providing funding to. By playing matchmaker, Metcalfe seeks to provide agencies with clients who have money to spend while providing companies with pre-vetted marketing partners who will deploy the provided capital as efficiently as possible.
Of the alternatives on this list many are new and Metcalfe is the newest. Like Lighter Capital, this option will be out of reach for earlier stage companies that don’t yet have the $10,000 monthly revenue that’s required. For businesses needing a short term injection of cash to spend on marketing, this is a strong option with reasonable payback terms. It’s also a model that’s well aligned with more technical teams that don’t have in-house marketing expertise. Taking financing from a company that’s also pairing you with an agency partner they believe in is reassuring.
A new generation of financing options is here
All of the alternatives on this list are new and interesting options that allow founders to raise capital while maintaining control of their businesses—and more alternatives seem to be hitting the market every day. Rather than being shackled by cookie-cutter financing models, a new generation of entrepreneurs is learning that if you can dream up a new financing structure you can probably make it happen. But more importantly, there seems to be a new emphasis on building real, profitable businesses. I for one believe that’s a good thing that will ultimately result in stronger, more durable businesses.
By Geoff Roberts 10 min read
Today marks the two year anniversary of when we published our launch announcement, telling the world of our plans to build Outseta. While we’ve consistently published monthly updates to keep our customers and audience abreast of our progress, the two year milestone is a good opportunity for us to share more broadly some of the decisions we’ve made and what we’ve accomplished. I hope this is a useful barometer of progress for other bootstrapped SaaS start-ups with equally ambitious projects.
Let’s get right into it starting with how much we’ve spent on the business.
We’ve written in the past about our decision to bootstrap the company and shared our operating agreement publicly so that customers and potential employees alike understand how we make financial decisions. Dimitris, Dave, and myself have yet to pay ourselves any salary and are instead trading our time for sweat equity in the business. We’ve tried hard to be extremely financially disciplined and fight the urge to invest in growth prematurely.
2017 2018 Total
To date we’ve spent $32,179.72 building Outseta - roughly $8,000 in 2017 and $24,000 in 2018. The majority of our expenses in 2017 were related to software and development infrastructure required to build the product. Food and dining represented our biggest line item for the year - we admittedly got a little carried away there so we pulled back heading into 2018. Remarkably, Dimitris is still invisible when he turns sideways.
In 2018 you’ll notice some line items grew significantly. The $11,123.75 we spent on consulting services was primarily design related expenses, as James Lavine began working with us. We knew we needed more design bandwidth than we could afford, so James has been working for a combination of salary and equity (more on this shortly).
Forte fees represent payment processing costs associated with one of the payment gateways we support, Forte Payment systems. We invested about $3,000 in marketing, the majority of which was related to paid customer acquisition experiments we ran with Linkedin, Twitter, and Google Ads. We also signed up to attend MicroConf for the first time - an expense incurred in 2018 even though the event is this upcoming March.
One of the reasons we’ve been able to keep our expenses so low is that Dave, Dimitris, and myself have not yet taken any salary. Any time and money we’ve invested in Outseta has been in exchange for equity in the business. When we added James to the team at the beginning of 2018, we asked him to help us out 20 hours per month. We’ve been paying him for 8 hours of his time each month and he’s been earning 12 hours worth of sweat equity in the business each month. Here’s how equity in Outseta shakes out today.
Dave and Dimitris spent some time setting up our development infrastructure at the end of 2016 and invested more time in the business throughout 2017 as they worked to deliver our minimum viable product. Our founding team worked an equivalent number of hours throughout 2018, but Dave and Dimitris also kicked in some cash to cover our operating expenses which explains the differences you see in the equity allocation between each of us.
Dave, Dimitris, and myself will begin paying ourselves a nominal salary in 2019 - more on that in our next company update.
On the product front, we’re all very excited about the progress that we’ve made. 2017 was spent entirely focused on delivering our MVP. We began marketing and selling our MVP on January 1, 2018 while continuing to build out the product’s core functionality.
Dimitris has focused primarily on back-end development while Dave does both back-end and front-end work. James’ design work dramatically leveled up the usability and polish of the user interface throughout 2018. So far, we’ve built functional product that includes…
Customer communication tools
Other “scaffolding” SaaS businesses need
Widgets to sign-up or login to a SaaS product
Lost password workflows
Lead capture forms
When we initially scoped Outseta, we envisioned SaaS metrics and reporting as a key part of the platform. While we still intend to build these features, we de-prioritized them as there were (and continue to be) a number of features more immediately relevant to our customers. We have the infrastructure and designs in place for reporting, but will be focusing primarily on additional improvements to the CRM moving into 2019.
Generally speaking the product’s core features are in place. We’ll now focus on taking each of them deeper by adding functionality to draw us closer to feature parity with the point solutions we compete against (as long as it’s specifically relevant to SaaS start-ups).
Marketing Strategy and Results
With the exception of about $2,000 spent testing paid online advertising, we’ve focused our marketing efforts over the last two years entirely on “free” channels. This has included:
Launching Outseta on Product Hunt and BetaList
Launching on Product Hunt and BetaList is worthwhile - these channels provided a one-time spike in website traffic and account sign-ups and are a great way to stir up some early users. The day we launched on Product Hunt we saw more website traffic than any other day in the last two years, and both the Product Hunt and BetaList launches resulted in 30+ account sign-ups each.
In addition to these launches the other major spikes in traffic were a result of another company’s blog post published on Hackernoon that did really well and linked to one of our own blog posts and one of the most successful articles that we published on our own blog, 4 SaaS Start-ups And Their Quest For Independent Growth.
Email prospecting was our second biggest undertaking from a marketing perspective. My approach to email prospecting is very time consuming, but it was effective in starting sales conversations.
Emails sent: 452
While email prospecting did start the majority of our sales conversations in 2018, in retrospect I wish I had spent less time here. While it’s a strategy that I think was appropriate given our stage - my goal was basically to stir up a small number of early accounts without spending any money - if I could do it again I’d focus more time in areas that would deliver longer term, sustainable gains. Like content marketing.
Content Marketing Results
Content marketing is where I’ve spent the vast majority of my time and energy over the last two years - I began these efforts a full year before we had any product to sell. Our strategy has been pretty simple - we publish a monthly company update (only if we genuinely have something worth our audience’s attention) as well as one other post per month on topics primarily related to growing SaaS start-ups.
We published a total of 27 posts in 2017 and 16 posts in 2018, including a few guest posts on blogs from companies like Kissmetrics, Crazy Egg, and Capterra. Here’s our content calendar with a history of all of the posts we’ve published or you can check most of them out on our blog. Most of the content we’ve published either highlights our own entrepreneurial journey or is heavily researched, long form content of 2,000-3,000 words. Our top performing posts to date are:
I chose to invest in content marketing for a few reasons.
We have some internal competency in writing. I was a writing major as an undergrad and see writing as one of my strengths.
We’re playing the long game - we set out to build Outseta with a genuine 10+ year mindset. We started to feel the impact of our content after about 18 months, which was OK because of this mindset.
I view content marketing as an investment in our brand.
I view content marketing as a long term investment in building sustainable, organic traffic.
So how has it worked out for us?
In short, I’m really pleased with what our content marketing has done for our brand. In a relatively small period of time, we’ve developed a small but highly engaged audience. I’ve gotten a lot of positive feedback on the articles we’ve published from people I admire and whose opinions I trust.
As we continue to grow tying our content marketing investments to revenue is most important, but as an early stage company I’ve bought into a metric called Unsolicited Response Rate (shout out to Jay Acunzo for popularizing this measure). This is simply a measure of how many people send me an unsolicited comment or note after each piece of content that I publish. We’re all busy, so if someone goes out of their way to send along a note that says, “hey this post is awesome and/or helped me,” that’s a pretty good indication that the content is resonating and providing value.
Coupled with our publishing cadence, I’m proud that we’ve earned a “these posts are worth reading” spot in many people’s inboxes. More importantly in terms of measuring ROI, almost every account sign-up in Q4 of 2018 was either a referral form an existing user or someone who specifically mentioned that they found us through one of the articles we’ve published.
While the positive feedback has been great, I definitely haven’t spent enough time investing in what I call “deliberate SEO.” I have spent very little time on deliberate link building outreach, further optimizing older posts for target keywords, or working on content projects that were designed primarily for their SEO benefit or potential. Earlier this year I asked SEO expert Neil Patel how much time I should be spending on link building and he suggested 5 hours per week - I definitely haven’t done that.
While I’ve promoted my posts fairly aggressively (without paid promotion), my hypothesis has essentially been, “Focus on creating awesome quality content and links and organic traffic will follow.” While that’s proven to be true and our organic traffic has grown, outseta.com is still a low traffic website - I know we can grow organic traffic much more quickly.
I think that we’re sitting on a golden opportunity in the sense that with a little more time spent in this area, it should be relatively easy for us to grow our site traffic substantially. As we look to grow more aggressively in 2019, this is an area that I need to spend more time on.
Without spending much time on SEO, our website traffic went from about 4,000 unique visitors in 2017 to over 10,000 unique visitors in 2018. More importantly, account sign-ups grew from 32 in 2017 to 279 in 2018.
Customers and Revenue
OK, OK, I know what you’re thinking. All of the above it great, but how is Outseta doing in terms of customers and revenue?
We’re not publicly sharing our customer count and revenue only because we haven’t really invested in growth yet. The majority of the companies that we’ve signed up so far have been opportunistic or inbound. Our numbers are still very modest, but we’re happy to share them with any prospect that asks.
Most importantly, we’re trying really hard to be patient and follow Mark Roberge’s framework:
Customer success. Then unit economics. Then growth.
Heading into 2019, the product and company is at a point where we’re now ready to invest more heavily in growth. We recently took on a project that’s essentially providing seed funding to support these upcoming investments - we’ll be detailing this decision in our next company update.
We’re also committed to sharing customer and revenue updates for the first time later this year in tandem with the launch of Outseta's reporting features. Stay tuned and you can hold us accountable to that!
We hope our reality is helpful
We wanted to share this information because topics likely equity allocation and expenses are so often secretive in the world of technology start-ups. Beyond that, our social media feeds are so often flooded with the outcomes and performance metrics of a small swath of successful, heavily venture backed companies founded by celebrity entrepreneurs.
While our metrics and expenses are in no way jaw dropping, we think from product to marketing we’re chipping away and making slow and steady progress in the right direction. If you’re a team of “normal” founders that’s bootstrapping a side project into a full-time one, we hope this post is both helpful and reflective of what reality often looks like. Any and all questions welcomed!
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?