Last year Clement Vouillon of Point Nine Capital wrote an article entitled The Rise of the Non “VC compatible” SaaS Companies. It made the rounds in tech circles online. And it expressed a growing sentiment in the world of SaaS start-ups; for the majority of SaaS founders the traditional VC model is a clusterfuck that makes very little sense.
Fast forward 18 months, and the article looks downright prophetic.
In recent months some of the most well known names in tech have announced that they’ve decided to buy out their investors. First it was Wistia, followed shortly thereafter by Buffer; both buyouts a sort of declaration of independence that gave both companies back the ability to build their businesses on their own terms.
Rand Fishkin of Moz poured his heart and frustrations into his book Lost and Founder, then began building SparkToro taking a drastically different approach than he did in building Moz. Investment funds like Indie.VC have turned from a little known “isn’t it cute what they’re doing” blip on your Twitter feed to a highly regarded fund with an extremely passionate following.
If you’re reading this post, this probably isn’t news to you.
I’ll be the first to admit that all of the above resonates with me - I think more companies looking to stay independent and operate on their own terms is, generally, a good thing. But that said, the dialogue around the “VC compatibility” issue has quickly become very much divisive and polarizing.
Venture capital is not inherently bad or the manifestation of greed and commitments to impossible-to-deliver growth. And the companies choosing the independent path are not all hipster led lifestyle businesses choosing nobility over bankroll and operating with a chip on their shoulders.
The fact of the matter is there are countless ways that you can choose to build your business, and even amongst this new flock of independent SaaS companies there are significant, deliberate differences in the approaches these companies have taken.
This post will look at two more established companies - Wistia and Buffer - and two newer start-ups - Outseta (my start-up) and SparkToro - taking a closer look at the pros and cons of the unique decisions each company has made on their road to independent growth.
TWO ESTABLISHED COMPANIES CHANGE COURSE
Don't fret, we just bought out our investors and took on some debt
$650,000 from angel investors in 2008
$775,000 from angel investors in 2010
$17.3M in debt from Accel-KKR in November 2017
Wistia, a Cambridge, MA based video hosting company, made waves throughout the SaaS world this July when they formally announced that they had taken on $17.3M in debt to buy out their investors.
The company had for a few years prior followed a growth-first path, hiring aggressively and prioritizing projects designed to make an immediate impact on their growth rate. This newfound focus created cultural issues within the company, saw the company’s monthly burn rate dramatically increase, and did little to accelerate growth. At the end of the day, “We broke pretty much everything,” says CEO Chris Savage. Perhaps worse yet, long tenured employees of the company began leaving, saying the new focus on growth “didn’t feel Wistia.”
Wistia is certainly not the first tech company to suffer from over-scaling, but their story is both unique and illuminating for a number of reasons.
First, Wistia had for years taken a long-term approach to growth. They had built a highly profitable business that was generally adored by its customers. They had been very deliberate about not raising too much money, and to date the company has only raised a total of $1.4M. Their first round of Angel investment in 2008 had not been a round for the sake of raising a round, or funds really even earmarked to invest heavily in growth. Founders Chris Savage and Brendan Schwartz only raised money when after two years, “we admitted to ourselves we needed some help from folks with more experience than us.”
Despite taking this carefully considered, only-what-we-need approach to growth they began hearing advice and a narrative that you’d be hard-pressed to find anywhere outside of the traditional Silicon Valley tech bubble.
“As we grew the company and began sharing our story, we kept hearing the same counterintuitive advice from other entrepreneurs — Wistia was too profitable. We weren’t spending enough on growth, thereby limiting our opportunity.”
While I’m all for reinvesting in growth, it’s hard not to chuckle when you hear that a business is too profitable. In a for-profit business, isn’t making profit the objective? The idea of temporarily jacking up your annual growth rates so you can sell your business at a high valuation multiple is really a much more sideways approach to growth if you take off your tech blinders for a minute and use your head.
But after a few years of more aggressively chasing growth and realizing that they were no longer having much fun, Wistia’s Founders decided something had to change. If they were to get back to growing Wistia on their own terms, some serious challenges lay ahead.
They needed to provide a return to their angel investors
They needed to provide return to their employees
With no intention of selling their business, they needed to replace their stock option plan
They didn’t have enough cash on hand to buy back stock, so they had to raise money
They had to raise debt which increased their ownership in Wistia, but also their risk
The solution to the problem that gave Wistia back the right to grow on their own terms came in the form of taking on $17.3M in debt from Accel-KKR in November 2017, an enormously difficult decision that has since been generally and rightly lauded in tech circles.
“We felt confident that the profitability constraints the debt imposed would be healthy for the business. Spending or hiring ahead of budget to try to juice growth weren’t options in this model and we’d be forced to grow the way we wanted to: sustainably, with a focus on creative, long-term solutions for our customers and team,” said Savage.
As one of Wistia’s very early customers, I watched the company grow up from afar and had heard bits and pieces of this story from those both inside and outside of the company. But as I reflect on this story, there’s three things that stick out in my mind that I admire.
Wistia’s Founders made the decision to take on debt after they received an offer to sell their company outright. It was a large enough sum of money to change their lives, and their family’s lives, forever. Not many people choose to walk away from a pot of gold. Especially when you’re taking on $17.3M of debt in a business with an annual run rate of $32M.
In raising debt, the company chose to provide a return to both their investors and their employees. It was the right thing to do, but this is exceedingly rare.
Ultimately one of the major reasons Wistia chose to raise debt was so that they could get back to taking long-term, creative risks that had been hadn’t been prioritized when they were pursuing growth more aggressively. While taking creative risks may not be what’s most important to your tech company, it’s one of Wistia’s four core values and is deeply important to them. I applaud them for “knowing thyself” and serving their values above all else.
Curious how he felt reflecting on the decision to raise angel money - a decision that ultimately resulted in Wistia needing to take on $17M in debt - I asked Wistia Co-founder and CTO Brendan Schwartz if he’d do anything differently.
“That money brought us two phenomenal teammates, a really helpful mentor who's still on our board, and lots of connections and help from investors. I'm quite confident we would not be as successful without raising that money initially,” said Schwartz. “The only thing I think we would have done differently in retrospect would be to structure the deal with some kind of payback terms similar to what Bryce has been doing with Indie.vc. I think that's a great way to preserve optionality - you can pursue the venture track or you can aim for profitability, pay back your investors, and maintain full control over your business.”
$120,000 through AngelPad start-up accelerator in August 2011
$330,000 seed round in December 2011
$3.5M series A round in December 2014 (60% was from Collaborative Fund)
Bought out main series A investors (representing $2.3M of $3.5M raised) in July 2018
Just a few short months after Wistia’s announcement another household name in tech circles, Buffer, announced that they were also buying out their investors. While they didn’t need to take on any debt to buy out their investors - let alone $17.3M worth - their story is uniquely turbulent in a number of ways.
Buffer began as very much a darling child of the tech world - they had everything going for them. After raising a total of $450,000 in 2011, Buffer would raise a Series A round of $3.5M in 2014 - 60% of which came from Collaborative Fund.
Buffer was so hot at the time - revenues were growing 150% per year - that the terms they got for their Series A were insanely good. They were doing $4.6M of revenue at the time and the business was valued at $60M - a valuation multiple of 13x revenues. The $3.5M they raised only required them giving up a 6.2% equity stake in the company… and no board seat. The company even took $2.5M of the $3.5M and paid it out to the Founders and early team members.
Without question, Buffer was flying high.
After the Series A, Buffer fell into a similar trap to Wistia - they hired too quickly, specifically to accelerate product development. Shortly thereafter Co-founder and CEO Joel Gascoigne and team had to make the tough decision to layoff a number of Buffer employees to regain financial control of the business. Morale took one on the chin.
Shaken by this experience and unwilling to compromise on many aspects of his company’s unique culture (open salaries, fully-remote team) that he viewed as Buffer’s secret sauce, Joel began articulating a vision for the company that accepted a slower, more deliberate growth rate. This vision was not aligned with his investors, or his Co-founder and CTO, both of whom would leave the company.
As tensions with his Series A investors increased, the fine print on the Series A term sheet surfaced some additional challenges if Buffer sought to control its own growth trajectory.
They needed to provide a return to their investors
They had to layoff employees after hiring too aggressively
They could not provide liquidity to employees or seed investors without majority support from Series A investors. They had to buy them out first.
Their Series A term sheet provided downside protection for Series A investors, who had the right to claim a guaranteed 9% annual interest on their investment at any point 5 years after the initial investment.
Communication soon broke down with Collaborative Fund and Joel found himself in a meeting where he was being asked if he would step down as CEO of Buffer if he could not afford the 9% annual interest his investors were entitled to after 5 years. If Joel was not willing to pursue growth that was in alignment with his investor’s expectations, he could be squeezed out of his company altogether.
Luckily for Buffer, the layoffs and slowed emphasis on growth had helped Joel regain control of the company and start operating profitably again; so much so that he was putting $400,000-$500,000 of profit away in the bank each month. Buffer spent $3.3M - about half of the cash they had in the bank - to buy out their main VC investors (who had kicked in $2.3M of the $3.5M Series A investment). Those that chose not to accept the buyout proved to be comfortable with Joel’s decision to grow the company at a slower, more organic rate moving forward.
While Buffer’s path to independence did not require walking away from a pot of gold and taking on a large amount of debt, the company’s path was both turbulent and admirable in its own right. Laying off employees, watching your relationship with investors who believed in you sour, losing a Co-founder and a CTO, and having it suggested that you might be squeezed out of the company you’ve spent the last 7-8 years of your life building is all agonizing stuff that will keep you up at night.
To make matters worse, when you “had it all” previously these things are even harder for your team and employees to understand. Said Gascoigne, “Whereas in the past we’d had it all and achieved growth alongside creating a unique culture with a fully remote team and high levels of transparency, it now started to feel like we had to choose between those things. It was suggested that some of the fundamentals that I had come to value could be removed to create a productivity environment that would increase the growth rate.”
Another takeaway for me from Buffer’s story is how easy it is for Founders and investors to become misaligned, even when both sides have good intentions. When Buffer set out to raise their Series A, they knew they were raising an “atypical round” in terms of the round’s size, not turning over a board seat, and only giving up a small stake in their company.
Collaborative Fund, who looks to make investments that are “better for the world” and “pushing the world forward,” was open to this structure granted some downside protection. Said Gascoigne, “We shared openly that we may not want to raise further funding, sell the company, or IPO. We were transparent that we wanted to be able to keep questioning the way things are done. Specifically, we communicated that we wanted the option to be able to give a return via distributions, not an exit.”
The point is these conversations were on the table from the get-go and from afar this looks like a situation where neither the Founder nor the investor meant any ill-will or malice. But while stashing away $400,000-$500,000 of profit per month and accepting a slower growth rate made a lot of sense to Joel, it certainly didn’t jive with the expectations of his lead investor; previous conversations had or not.
Ultimately what I appreciate most about Buffer’s story is similar to what I appreciate about Wistia’s.
Buffer chose to pay out $2.5M of the $3.5M they raised in their Series A to their Founders and early team. I applaud the decision to pay out those who were responsible for the company’s early successes and the company’s ability to raise that round in the first place.
While Wistia wasn’t going to sacrifice their ability to take creative risks, Joel wasn’t going to compromise the remote workforce and highly transparent culture that he’d built at Buffer. In fact, he saw these aspects of the company as largely responsible for their successes. I admire his recognition of this part of their culture as a strategic advantage and something that he would absolutely not compromise on.
TWO NEW COMPANIES PLOT THEIR COURSE
Our start-up structures are new and daring, we distribute wealth through profit sharing
Sparktoro, a Seattle based company that’s building a “search engine for audience intelligence,” is a product of Rand Fishkin (formerly Co-founder of Moz) and his Co-founder Casey Henry.
$1.3mm from 35 angel investors in June 2018
When Rand Fishkin made the decision to start building his next company after Moz, he came out of the gates swinging with his book Lost and Founder followed shortly thereafter by a very atypical funding round.
The traditional VC model was not a fit for his new business, and he wasn’t afraid to say it. He’s hell-bent on showing that there are alternative paths for Founders who want to retain the right to grow their company on their terms.
Rand and Casey chose a corporate structure and investment terms that are a departure from the norm - the company is a LLC and can pay dividends to employees and investors when the company does well. The company has the option to pay profits out to investors or choose to invest profits back into the company’s growth. On the surface, this structure looks similar to the deal Basecamp made when they took investment from Amazon.com CEO Jeff Bezos - a no control stake in a LLC that has now returned (via profit sharing) more than 5 times the amount Bezos initially invested.
The structure is also specifically designed to hold the Founders accountable; neither Casey nor Rad can take any profit or raise their salaries above the market average for Seattle until they have returned all invested capital to their investors.
Changes to this structure require that 80%+ of outstanding units (think of these as stock options) vote for the suggested change. If the company is sold, investors get to greater amount between the amount they invested or the worth of their outstanding units.
They wanted the ability to stay independent and profitable vs. seeking an exit or IPO
They wanted the ability pay out invested capital as dividends when the company did well
The Founders had different financial situations and didn’t want to wait to start working on SparkToro full-time
SparkToro’s path is most interesting to me because the decisions they made were very much intentional and deliberate. While Wistia and Buffer had existing investors and lots of success before they were faced with the financial restructuring of their businesses, if they wanted to plot their own independent course their hands were somewhat tied and they had to figure out how to best make that happen. Casey and Rand were starting with a perfectly blank slate.
The first thing that I like about what they did is they made a deliberate effort to highlight their new course in the hopes that others can follow or at least derive some inspiration from the decisions they made. This is evident in their one page term sheet, their investor prospectus, and even their mention of using tools like Carta to distribute units. All of this is helpful fodder and they took the time to make these documents clean, understandable, and generally as useful to others as possible.
But what’s really most interesting to me about SparkToro’s path was that behind the term sheets, financial figures, and equity structures they took the time to share the human element behind some of their decisions.
They could have bootstrapped the business, but they decided not to because that wasn’t an option for Casey’s family or financial situation. Rand had previously funded Moz in the early days via consulting revenue, and was well aware of the hidden costs and tradeoffs that come with bootstrapping.
And let’s face it - between Moz’s success and Rand’s standing in the worlds of marketing and VC-backed technology companies, money wasn’t only available but it was available on their terms. They got a decent valuation with very little traction and were able to add a number of key investors with a vested interest in their business without giving them voting rights.
While this scenario is exceedingly rare, it definitely removes the majority of the drawbacks often associated with raising money. While SparkToro did give up a good amount of equity, the only other real downside in this scenario is adding some complexity around reporting and legal costs earlier on than they might otherwise have. And while their investors don’t have voting rights, they still represent stakeholders that need to be considered in future decision making.
With these realities on the table, I appreciate the deliberately frugal approach and agreements Rand and Casey made regarding how their funding would be spent. By agreeing to take market level salaries and not allowing themselves to raise their salaries or dip into any profits themselves until all capital is returned to their investors, they’re demonstrating self-imposed financial constraints that show investors they’re being responsible and judicious with their investment dollars.
It was also cool to see the one area where they admittedly splurged - high quality health insurance through WTIA. They weren’t afraid to call out their needs in this area or compromise and put their families at risk by skimping on their healthcare until a later stage. Personally, I was not aware of programs like these and while WTIA’s program only serves the state of Washington, this set me on a course to exploring options like this for California residents (where I live).
All of which brings us to my start-up, Outseta, a fully remote team that’s building a suite of software tools specifically for early stage SaaS start-ups. We’ve been in business since late 2016, and since the get-go have been building our own intentionally independent path. Like SparkToro, we also open sourced our operating agreement in the hope that it would be helpful to others considering a similar path.
My Co-founder, Dimitris, also Co-founded Buildium, where we met. Buildium (founded in 2004) was set up as a LLC with a membership units plan to help drive employee retention and deliver financial rewards to employees in the case of a liquidity event. It was certainly one of the few SaaS start-ups I was aware of with this structure at the time. Buildium bootstrapped for its first 8 years, well past $5mm in revenue, before eventually raising money to keep accelerating growth. The path we’ve chosen at Outseta certainly reflects this past experience, but with some notable changes.
We wanted the ability to stay independent permanently and have all employees reap financial benefits when the company does well via profit sharing rather than pursuing an exit that makes a small number of shareholders wealthy
We wanted to to embrace self-management, a structure that rewards autonomy and focuses on rewarding employees for their contributions to the company rather than their positional authority or job title
We knew we’d be bootstrapping against heavily venture-backed competitors in a particularly competitive market
Our founders have very different financial situations, which we knew would predicate us taking a long term approach to building the company
The first thing that I’ll note is that by deliberately choosing to bootstrap in such a competitive market, we knew that we had to take a very long term approach to building Outseta. We have and are continuing to ramp up the amount of time we spend on the company - Dimitris is still involved with Buildium as a board member, and my Co-founder Dave and I both continue to take on some consulting work.
There’s obviously a trade-off here, one that was questioned recently when I was interviewed by Nathan Latka on his podcast. “If you’re so confident in what you’re building, why don’t you go all-in?” he asked. In short, our answer is…
We’re building a product with key functionalities - CRM, subscription billing, and customer communication tools (email, live chat, help desk) - that don’t need to be “validated.” These are established categories and known needs of the companies we serve - there’s no “first mover” advantage in this market and there are already players of all shapes and sizes.
Like Wistia, we think that needing to operate within the constraints of our own profitability is actually a good thing and will keep us financially disciplined.
I would argue that the path we’ve chosen is much more “all-in” than building the company using someone else’s money. We’re putting ourselves, our own time, and our own money on the line.
Perhaps most importantly, I’d say our ability to take this long term approach is only possible because of the relationships our founding team has with one another. I worked with Dimitris for 5 years previously at Buildium, Dave and Dimitris worked together previously at Sapient. In addition to the prior working relationships, there are friendships. While that creates challenges of its own, what it’s meant for us is a high degree of confidence and philosophical alignment in how we want to build Outseta.
Secondarily, it’s really important for us to share Outseta’s financial successes with our team without requiring an exit event. As such, all employees at Outseta are eligible to participate in profit sharing once they’ve been with the company for one year. We also issue membership units (like stock options) to employees and offer a buyback program so that if an employee gets a great opportunity elsewhere they can take it and still cash in on the value of their units. This program pays back employees based on the number of membership units they hold and the valuation of the company, which we calculate as 2X the past year’s revenues.
Finally, as Rand and Casey did it’s worth acknowledging that our founding team has different family and financial situations. This is certainly a potential source of misalignment, but at the same time it’s a reality that’s forced us to consider how we wish to structure and operate Outseta that much more.
Since day one, every hour spent working on Outseta has been tracked and everybody is earning sweat equity in the business commensurate with their time invested in the company. The plan, absolutely, is for us all to go full-time when we have the revenues to support our own salaries.
In the meantime, I have all the “normal” financial challenges that you might expect; I have a mortgage payment each month, school loans to pay off, and a fiance who wants to remodel our bathroom. On top of that, I simply need to “keep the lights on” as well as pay for my own health insurance. All of the above is without question stressful, especially when you look at friends with big-salaried corporate jobs and growing 401ks.
My advice for anyone considering bootstrapping that doesn’t have financial freedom is this; don’t fall into the trap of viewing bootstrapping as this noble endeavor that’s going to impose some short term limitations. Manage your burn rate obsessively, and create a plan to keep yourself financially afloat for 3 or 4 years.
I’m coming up on two years now making about a 50% salary without any benefits. I’m 32 years old and generally healthy, so I opted for a “good enough” health insurance policy that really just provides coverage were anything bad to happen to me health-wise - it costs about $280 month through Covered California.
Bootstrapping for 3 months is very different than bootstrapping for 3 years, so do some soul searching ahead of time to figure out if this is feasible for you.
Wistia and Buffer are two very admirable companies that have done well for themselves already. Outseta and SparkToro are really just getting started. But while all of these companies have made very different decisions to get to where they are today, they all share a common belief - that the right to grow your business at a more organic, deliberate pace can actually be one of the biggest advantages to long term revenue growth that’s out there.
If you’re considering a similar path I hope this provided some inspiration, and I’d love to hear about your company’s path via a comment below.
By Geoff Roberts 5 min read
With some vacation time now in our rearview we’re heading towards the home stretch of 2018, making it the perfect time to fill you in on what we’ve been up to at Outseta since our July company update. Here’s the latest and what’s to come.
We now support Stripe as a payment gateway
When we launched our subscription billing and management functionality, we initially partnered with Forte Payment Systems as our payment gateway. We did this because it allowed us to offer the best possible pricing to our customers, but Forte can only support processing payments in the United States and Canada.
We’ve received quite a bit of interest in Outseta from international customers and companies domestically that sell internationally. As a result, adding Stripe as a payment gateway very quickly became the most requested feature from our users.
We’re happy to say that we now offer Stripe as a payment gateway. While many early stage SaaS companies just think “I’ll use Stripe!” when considering their billing needs, they very quickly realize that they need to build quite a bit of other “scaffolding” around Stripe - subscription management functionality and logic to handle upgrades, downgrades, and cancellations being a few examples. We’ve built this functionality already so our customers don’t need to and we’re eating the $.30 per transaction fee that Stripe charges as well.
You can learn more about our subscription management and billing tools here.
API support for partial CRM record updates
When we rolled out the first version of our REST API, if you wanted to update one of your CRM records the API would resubmit all data on that record. This wasn’t ideal for companies using multi-step onboarding processes or forms, because if a user abandoned the form or onboarding sequence prior to completing it the data that they had entered would not be captured and they would essentially lose out on a (partial) lead. We’ve updated our API to now support partial updates to CRM records to better support these workflows.
Shout out to Callum at TapTapGo for this feedback!
Paid advertising experiments
Our go-to-market strategy to date has consisted primarily of launching on Product Hunt, email prospecting, and content marketing - essentially free tactics focused on building our our audience and stirring up some initial customers. As our product matured, we got to the point where we decided it was worth experimenting with some paid advertising moving into Q3.
The goal of these efforts is to test the waters and see where opportunities to acquire customers with paid advertising may lie, while being very judicious about limiting expenditures. Here’s what we’ve done so far.
Because our product competes in a number of hyper competitive categories, we need to stay away from keywords like CRM, subscription billing, and email marketing. While these keywords are accurate descriptors of what we offer, there’s simply too much competition on these keywords; we’re priced out.
As a result, we’re looking for creative ways to cost effectively tap into search intent from people who would likely be interested in our product. That means we’re primarily targeting keywords that have low search volume and low competition, but still represent highly relevant traffic. A few examples of keywords we’re bidding on…
MicroConf - MicroConf is a conference for self-funded software entrepreneurs; there couldn’t be a group of people that’s a better fit for Outseta. While this audience is not searching for software when they search for MicroConf, we’re using some interesting ad copy to lure them in to a landing page we built specifically to address this audience: https://www.outseta.com/microconf.
Indie.VC - Indie.VC is a venture capital firm that invests in companies that focus on selling their product at a profit from day one. Again, our approach at Outseta likely resonates with this audience and companies that are truly focused on profitability from an early stage are attracted to our pricing model.
Best platform for startups - A long-tail keyword that’s relevant and has low competition.
Because these keywords all have low search volume it’s going to take several months to get a good sense of how effective these campaigns will be; we don’t have any results worth sharing just yet. But we’re getting clicks, quite cost effectively.
Linkedin Direct Sponsored Content
A more aggressive experiment that we ran was throwing $500 at Linkedin advertising. We did this because we know founders of SaaS companies tend to be active on Linkedin and we can easily target the right buyer persona using targeting criteria like…
Industry: Computer Software
Title: CEO, Founder, Co-Founder
Company Size: 1-10
You get the idea. For the $500 budget, these ads generated:
3,018 impressions (the number of times the ad was shown)
80 clicks (landing visitors on our website - $6.25 per click)
3 Outseta accounts created ($166.66 per account)
Ultimately the success of these campaigns will be assessed by revenue created and there’s lots of room for landing page optimization - we sent people who clicked on the ads to our home page this time around. But this experiment gave us some useful benchmarks in terms of how our ads would be responded to, which messages resonated, and how cost effectively we can drive visitors to our website (and create account sign-ups) using Linkedin.
Sales Pitch, Take Two
You may remember from previous updates that we decided to put a page called "Sales Pitch" in the primary navigation on our website. We don't want to come off to prospects as "salesy," and instead want to readily surface any materials that will help them decide if Outseta is right for their business.
Our original sales pitch hit hard on the importance of start-ups saving time evaluating, integrating, and maintaining software tools. But we started hearing from our users that that was only part of the story; they were realizing other benefits as well. As a result, we updated our sales pitch page pretty dramatically to give a more complete picture of the benefits of working with Outseta. The retooled page better represents our pie-in-the-sky vision of the benefits all Outseta customers will realize.
You can check it out here: https://www.outseta.com/sales-pitch/.
We’re hard at work on what the next major feature that will be added to the Outseta platform - it’s one we’re particularly excited about, and the next time you hear from us it should be ready for action. At that stage we’ll transition from building new, primary pieces of functionality to going deeper on each of the core features of our product.
Thanks for following along!
-Dimitris, Dave, Geoff, & James
By Geoff Roberts 5 min read
It’s been a couple of months since our last Outseta Company update, so we figured we’d hit you with one before you’re all lounging by the lake/beach/pool for the 4th of July. Here’s what we’ve been up to since April.
New Navigation UI and Global Search
Since James Lavine joined our team, he’s been focusing on improvements to our user interface. These changes are perhaps most evident in our new navigation, where you’ll see CRM, Marketing, Support, and Billing tools running down the left hand side of the screen. We’ve also added search functionality at the top of the screen, so you can locate People, Accounts, or Deals that much more quickly.
We’ve rolled out a new onboarding process to make it easier for customers to get started off on the right foot. You can see the new onboarding workflow for yourself either by creating a free account and walking through the account setup steps (complete with jokes about canned meats), or by clicking through this InvisionApp prototype.
We also added a “Getting Started” checklist once you complete the initial account setup steps along with some calls-to-action to complete the most common onboarding actions.
Other Quick Hits
A few other noteworthy enhancements; you can now accept Amex payments, merge email lists, and look at drip email campaign performance statistics on both an aggregate and email-by- email basis.
We recently pow-wowed to set goals for Q3 and came away with two primary product priorities that we'll be working on this summer. The first is allowing Outseta customers to process payments through Stripe in addition to Forte Payment Systems, our existing payment gateway. We've had some inbound interest from international customers, and offering Stripe will help us better support them.
The second major product priority is adding live chat functionality, both for use on your website and inside your application. Live chat is commonly used in both the context of sales and support, and adding this feature will help bring us closer to feature parity with the more established players in this space who are increasingly being dragged upmarket. This is one example of additional value we are delivering to our users, without any increase in price; the goal here is make the decision to use Outseta a no-brainer for an early stage subscription business.
What we’ve done so far
After launching our MVP on January 1, we made a deliberate decision to think long term and fight the urge to start pursuing growth aggressively. It was more important for us to start working with a small number of customers to validate what we’ve already built and incorporate their feedback into the product. So far we’re happy to say that customer retention is at 100%, which was our primary goal as a company.
In addition to things like launching on Product Hunt and growing our organic website traffic via content marketing, the vast majority of effort towards landing those early customers has been focused on email prospecting. Some quick stats on this front.
Companies contacted: 329
Companies that engaged with us: 120 (36.5%)
Product demos: 24 (7.3%)
All of this outreach was 100% “cold,” sourcing leads from sites like AngelList, Product Hunt, Betalist, and GetProspect. You can read more about our approach to email prospecting here.
As we move into the second half of the year, we have a much more mature product and are going to look to test some paid acquisition channels - primarily via Facebook and Google Adwords.
Our prospecting efforts have given us a significant and highly targeted list that we can use in Facebook to build a look-a-like audience and expand our reach to new buyers of the same persona.
We’re going to focus our Adword experiments in two areas - one is targeting software buyers specifically at small, self-funded SaaS companies. The other will try to intercept search intent for relevant keywords that have a low search volume, but also low competition. We’ll provide an update of the success of these experiments later this year.
Other Company News
As you may recall from our operating agreement, we've made a deliberate decision to embrace remote work. We think it's a significant competitive advantage both in terms of recruiting and in terms of employee retention. So catch this...
On a normal day, I work in San Diego, CA. James works in Portland, ME. Dimitris and Dave work in Boston, MA. So if I hopped on my sleigh and rode to pick up James in Maine, then we roared down to Boston to pick up Dimitris and Dave, chipped the ice off our windshield and headed to San Diego for an afternoon surf we'd cover about 6,296 miles.
This summer we're stretching that net quite a bit. At various points this summer, Dave will be working from Oahu, Hawaii. Dimitris will be in Athens and Varkiza, Greece. Geoff will be in Sifnos, Greece before joining Dimitris in Varkiza. And James will be in Nairobi, Kenya.
So if Dave jetpacked from Hawaii to Greece to meet Dimitris and Geoff for our weekly team meeting, before shooting down to Nairobi to swoop up James, then we all continued on our way back to Hawaii for some R&R, we'd cover about...
We hope you don't do that - it's summer, it's hot, and we hope you enjoy your 4th of July wherever you are!
-Dimitris, Dave, Geoff, & James
By Geoff Roberts 12 min read
I read an article recently on ESPN after the Boston Celtics took a 2-0 lead in the NBA’s Eastern Conference Finals about LeBron James’ Cleveland Cavaliers and the organizational fatigue the Cavs are currently experiencing. The Cavs have recently made several deeps runs into the postseason, resulting in longer than normal seasons. Media scrutiny has been relentless. Players and coaches have come and gone. And off-court distractions have been plentiful as LeBron and Co chase a nearly impossible dream of trying win championship after championship in LeBron’s pursuit to match Michael Jordan’s 6 NBA championships.
The article got me thinking about a different sort of fatigue that I’ve been feeling in my own career and industry; the world of venture capital backed marketing technology start-ups. I’ve known that this feeling has been there for a while now, the embers smoldering, but more recently the feeling has really started to burn in earnest. I call this feeling marketing technology vendor fatigue.
Marketing fatigue has been written about before, but to me the issue is much deeper than the volume of marketing messages we must sift through or the plethora of technology decisions modern CMOs must make. I want to talk about false narratives, next to impossible growth goals, and the underlying root causes of this issue.
For me, marketing technology vendor fatigue is caused by being repeatedly bombarded by marketing technology vendors with messages and content telling me that I have it all wrong – there’s a new way to do marketing, the next-generation way, it’s going to transform everything, and I better get onboard!
In short, 99% of the time this is complete bullshit. To make matters worse, the world of VC backed marketing technology start-ups is relatively small and very much an echo chamber, resulting in marketers like myself being hit over the head with these largely false messages over, and over, and over. On Facebook. On LinkedIn. Via email. At conferences. And every… single… other… channel.
Ultimately I’m writing this article for a few reasons, which I’d like to state up front:
First and foremost, I’ve found by talking to other marketers that I’m definitely not the only person that feels this way. Which provides an opportunity for martech companies to better understand their buyers and show a bit more self-awareness in their own marketing strategies.
Second, there are very clear and logical reasons why this occurs. I’d like to inspect those.
Most importantly, because this comes with an opportunity cost that is often at odds with what’s actually best for customers.
Let’s dive in.
Defining marketing technology vendor fatigue
First, let’s start with a definition.
marketing technology vendor fatigue - The feeling that results from being relentlessly bombarded by messages from marketing technology vendors telling you that their tools represent a new, transformative, or revolutionary way of doing marketing when their technology very clearly supports a time-tested fundamental of marketing or a pre-existing marketing channel. Most often repackaged ideas, concepts, or strategies; hype.
While that may sound harsh, for me, that’s the root cause of the issue. We live in this crazy tech enabled universe where for some reason it seems unacceptable to simply say, “Hey, we offer an email marketing tool. Or an analytics tool. Or a live chat tool. It’s rock solid. Our differentiator is teaching you to leverage this channel or tool better than anyone else.” That’s not very sexy, is it? But I’d argue that message is actually a really good thing.
And what if it’s the truth?
We’re leaving our values as consumers at home
Seriously, when was the last time you heard that message? There are companies out there doing this, but they seem to be the exception rather than the norm and they are certainly much more prevalent with technology products outside of martech. Basecamp is a company that comes immediately to mind. Wistia, another.
I yearn for a world where more martech vendors are OK saying “This is what we do, we do it really, really well, and ultimately our technology is an enabler rather than a marketing strategy in and of itself. Let’s teach you the fundamental marketing strategies our technology supports; or how to make the most out of the marketing channel our tool supports; that’s how you’re going to crush it!”
That would be refreshing.
There’s a strange phenomenon at play here, too. To borrow a tech stereotype (always dangerous, but one that I’ve found to be true), many tech start-ups are filled with employees that are regular consumers of craft beer or craft coffee (I’m guilty as charged). Heck, many of these companies even have exotic craft beer or coffee on tap within their own office kitchens. Given the choice of drinking a Heady Topper or a Heineken, the Heady Topper is chosen. A Guatemalan slow drip coffee from the local corner coffee shop versus a large black from Dunkins? You know who wins here.
Another such example where this phenomenon is on display is the music industry. Music buffs celebrate “underground” or “indie” bands, yet when their favorite artists or bands achieve the acclaim or success that their talent warrants they are often shunned as “having gone mainstream” or “selling out.”
The point here is most of the companies guilty of causing marketing technology vendor fatigue are filled with employees who as consumers, value companies and products who purposely stay small, who keep it real, who are more than happy to do their thing and do it really well without the need “transform” or “next-gen” anything. Without the need to become the next Starbucks.
Yet when it comes to their professional careers, they’re all too quick to jump on the bandwagon. To chase building that unicorn. To become a cog in the hype-wheel. To focus on growth at all costs.
Why is that?
Root causes of marketing technology vendor fatigue
The reasons why marketing technology vendor fatigue exists are not terribly difficult to uncover, but they don’t seem to be discussed all that often. I’ve boiled it down to three primary culprits.
First, competition. It’s well documented that there are over 6,000 marketing technology vendors out there, and that estimate is probably conservative. With so many companies vying for the attention of marketers, it makes logical sense that you need to either make a lot of noise, consistently, or say something different than all the other vendors in order to stand out. Or both. Next thing know you have carefully crafted and spun messages suffocating you from all angles.
Just this past week, during the course of my “normal” online life I was touched or interacted with 41 times by a single marketing technology vendor. 41!
Have they delivered their message? No doubt. Have they done it with consistency? Sure have. But if that’s what we’re calling “good” marketing these days… that’s just not something I want to be a part of. We can do better.
The second culprit I personally sympathize with more, because it has to do with time tested sales fundamentals. In order to sell effectively, you need to develop pain in the eyes of the buyer. Only once pain has been developed, realized, and the buyer feels urgency to act to relieve that pain are you able to introduce your company’s solution as the antidote to that pain. I view this very much as a truth, but even with that being the case I’m certain that you can alleviate your potential customer’s pain without needing to “transform” their approach or corral them into joining your “movement.” If you have a better solution for me, if you can improve my efficiency or process, just say so and I’m all ears.
An example of this can be found in Andy Raskin’s article The Greatest Sales Deck I’ve Ever Seen. Andy helps venture-backed start-ups tell their stories and craft their messages, and he’s one of the best in the biz at it. I’ve personally learned a lot from his articles and I’m quite sure his work has generated fantastic results for his clients. But just pause to notice the language used in Andy’s framework - he suggests that you name thy enemy, that you frame your customers’ problems as monsters, and position your product’s features or capabilities as magic gifts capable of slaying those monsters.
I get it, and I even believe the framework to be effective. But with 6,000 martech vendors all slaying monsters at once, how can the end consumer not feel exhausted? How can I not be lost in a dizzying spell of marketing technology vendor fatigue?
The third culprit is perhaps the biggest source of the issue; the vast majority of the companies that have caused my marketing technology vendor fatigue are heavily backed by venture capital. Don’t get me wrong, there is absolutely nothing wrong with raising VC money; it can represent a completely appropriate accelerant of growth or in some cases, a necessary means of building your company.
But with very few exceptions when you do raise VC money, you forfeit the right to build your company completely on your own terms. As Kim-Mai Cutler, Partner at Initialized Capital recently put in her article the The Unicorn Hunters, venture capital represents “Rocket fuel with strings attached…. When a company accepts venture funding, it commits itself to steep expectations for future growth.” When you raise VC money, you are more often than not committing to (trying to) build a Starbucks.
Rand Fishkin’s new book Lost and Founder breaks down this commitment and the often-neglected flaws of the VC model pretty clearly. VC’s are betting on beating the public markets, which extrapolated over a 10-year period means that VC firms need to earn roughly 3x their initial fund size over 10 years just to beat the public markets.
Take the example of a VC who raises a $100mm fund and invests $30mm into your martech company. Assuming your company is the lucky one, the 1 in 10 investment that turns out to be the (successful) fund’s home run, you need to take that $30mm and turn it into $300mm in the next 10 years.
Needless to say, that’s damn hard to do. Next thing you know you’re “creating” categories and flooding the market with your message at every turn. Your chasing growth at all costs, and I’d argue your increasingly creating marketing technology vendor fatigue amongst your buyers.
So what’s the solution?
The marketing technology Eden that I envision
The truth of the matter is spinning your marketing technology product as something new, something majorly transformative and disruptive, and flooding the market with your message at every opportunity can be massively, massively effective. It can build brand awareness, it can position your product in the eyes of your buyers, and it can generate enormous returns for your company and investors. There is absolutely nothing intrinsically wrong with this approach.
That said, if there’s a shift that I see it’s that consumers of these products – particularly more experienced buyers with the power to make buying decisions – are increasingly seeing through the hype and choosing to transact with companies that share the values that they hold as a consumer (a good thing!). They want companies that are authentic, that will keep it real with them, that share their values. So let’s call bullshit on ourselves, at least a little, can’t we? Let’s at least tone down the hype machine and instead reinvest our time and efforts into the things that matter more to our customers.
On a positive note, I think that we’re already starting to see some momentum in positive directions. What I’ll call SaaS 1.0 companies underinvested in what’s come to be known as “Customer Success;” SaaS 2.0 companies have started to double down in this area and are realizing the benefits of doing so. My hope is that SaaS 3.0 martech companies tone down the hype, and instead invest additional time and effort into:
Better, more personal self-service experiences.
Look no further than Amazon’s world domination and the countless statistics highlighting the extent to which consumers prefer the ability to self serve. B2B marketing technology software companies have a long way to go on this front.
No matter how great the self-service you provide is, at some point prospects and customers will want to talk to a real human being. And it’s really, really damn simple what consumers want when this occurs – they want a prompt response, from someone who knows what they heck they’re talking about.
The best customer software in the world serves little value if the person responding to the customer service request isn’t knowledgeable enough to craft a high value response or takes a week to reply. The best live chat tool in the world is worthless if it’s not staffed with a knowledgeable sales or marketing person on the other end who is able to provide an immediate and thoughtful response. It’s almost never the tool that’s providing that fantastic customer experience or delivering the fantastic growth marketing technology vendors want you to believe it will; it’s the people leveraging that tool.
So invest more in your people and less in your hype! If you sell SEO software, hire more experienced SEO consultants. Send your staff to a SEO bootcamp. Whatever it takes.
Besides reallocating some of your companies energies in these directions, you can also be part of the solution as a consumer. Whatever your marketing technology need, one thing that’s for certain is there’s no shortage of high quality tools out there to fulfill that need. Actively seek out the companies that are doing things on their own terms, that will keep it real with you, that have invested their time in their people and in you as a customer. Revel in discovering the awesome products that exist that no one else knows about, and when you find them, share them with those that are close to you.
We revel in doing this with coffee, with beer, with AirBnBs as opposed to Marriots. Why not do this with software, too?
It’s not surprising given the competition and prevalence of the “Silicon Valley mindset” in the marketing technology space that the issues outlined in this post exist, and that a growing number of marketers are feeling marketing technology vendor fatigue.
And if you think about it, it makes sense that this space is filled with people with a knack for creating carefully spun messages that represent little more than hype. If you look back 50 or even 20 years that’s to a large extent what marketing was. Those were our roots, and the progress we’ve made by stepping away from that past and embracing data driven marketing has now earned marketers a seat at the strategy table.
A very good thing.
But I’m of the belief that we can still do better, that we can be more real, and that we can actually still achieve better business results by focusing less on “slaying monsters” and more on providing better customer experiences while continuing to reallocate our budgets towards processes and people that make customers more successful. Even if that results in diminished reach, for SaaS companies I think a more direct path to revenue growth is the increased customer loyalty and customer lifetime value we could realize if we turned down the bullshit, just a bit.
Can you relate?
By Geoff Roberts 8 min read
At Outseta almost all of our customers are early stage SaaS start-ups; in many cases just a single Founder or a small group of Co-founders. Every single one of these companies knows they “should be doing SEO,” but between building your product, incorporating your business, testing other marketing channels, and hustling to make some early sales SEO too often gets pushed by the wayside.
That’s too bad, because the sooner you start taking SEO seriously the sooner your business will realize the the benefits of sustainable organic traffic. Even if you’re investing heavily in SEO, this often takes 12-18 months.
With this very challenge in mind, I decided to ask three leading SEO experts about two of the biggest SEO related challenges I see early stage SaaS start-ups face; both of which I'm wrestling with at Outseta.
Let’s meet our experts.
Neil Patel, Co-founder of Kissmetrics, Crazy Egg, and Neil Patel Digital
Let’s do it.
Question #1 - Link building with limited resources
Geoff Roberts: We are an early stage, bootstrapped SaaS business. I am the Co-founder responsible for go-to-market strategy; I own all of our marketing efforts as well as sales. Link building is a very time consuming task, so I’ve basically chosen not to spend time deliberately building links and am instead focusing on content quality and occasional guests posts on other sites. I feel like I should be spending more time specifically on link building, but it’s such a time-suck and I have other competing priorities (sales for one!). What’s your advice for other bootstrapped start-ups when it comes to link building - how much time is “enough,” and how would you recommend they tackle link building in a more deliberate, cost effective way?
Miguel Salcido: Well, it's never ‘enough’ time. Link building needs to be an ongoing effort, like any marketing channel. You will need to prioritize.
Focus more on content for third-party sites like LinkedIn, B2B blogs, and Medium which seems to be a great place for start-ups. Because at this point, your product is fairly unknown and very niche. You need to get the word out and build brand. So put most of your energy here to start out. Use ghostwriters if necessary to save time. Once you’ve established the brand and traffic to your site, you can shift the focus to more content for your own site.
Make sure that you have at least 2-3 very high quality guides or content pieces that you can use to drive people to, making sure to have a lead magnet (tools/checklist/calculator/etc.) that you can offer with each piece of content so you can capture emails.
For your content, try to focus on use cases for your software if possible. And interviewing SaaS startups is also a good route.
Create “teasers” for every piece of content you have and post those out through your social channels, focusing on LinkedIn. Schedule these to post regularly. The teaser should entice readers to “click here to see the full article” in order to get them to your site. Schedule all of this using Buffer + Quuu.
Neil Patel: I would follow the tips in this video. And as for time, I would spend at least 5 hours a week building links. After a year you can slow down.
Marty Martin: Link building is a hateful, extremely time consuming, onerous task, and not one that many people have a real knack for. Being successful in link building is all about your creativity, process, and breaking it out into manageable tasks. Otherwise, it can take an unending amount of time.
Link building at scale, as a siloed task, can be broken out roughly into the following steps that can be run in parallel, saving you time and frustration:
This is typically the realm of agencies, and not something a bootstrapped startup can pull off on its own.
But don’t despair! As a startup, there are other options to consider. If you’re getting a lot of press because you’re amazing, ask for the links. One option is to use a tool like Ahrefs’ Alerts. It will notify you of any mentions of your brand name, where the citation is not linking to you. Then simply email the journalist or website editor, thank them for the mention, and ask for the link back to your home page so their readers can find you. That’s an easy, manageable, once a week type activity that will earn you links over time.
Another option, is using Ahrefs (as mentioned above), or another tool such as Majestic that will show you your competitors’ broken links. A small amount of checking and you may find a resource your client used to have that now 404s, and that’s an opportunity for you. Build the same resource, download the list of broken URLs, use an intern or other internal resource to find contact info for all of those websites, and write to them to tell them their users are missing out as the site they’re linking to no longer has the resource in question, but your site does. Ask for them to update their broken link to your website. This is a task that can be broken out into a process as described above, and tackle a bunch of links at once. We’ve found broken resources with thousands of link opportunities this way.
Does your college or university have an online magazine and/or alumni magazine? Pitch them to write about your recent advancements as an entrepreneur. Do you have business partners and other principals? They should pitch their schools as well!
Build a useful asset, driven by data, that can be a useful resource to journalists or other websites. For example, the government has tons of freely available, regularly updated datasets you can use to build a data driven piece of content on your website. We have used data from the Census Bureau, US Patent & Trademark Office, and other resources to build amazing pieces of content for our clients. They attract links naturally, and with a little outreach effort, you can draw in additional links.
Having the right tool helps as well. We use a tool called Pitchbox to manage our outreach and follow ups. It makes the outreach and response process a breeze.
Question #2 - Keyword selection in established, competitive categories
Geoff Roberts: At Outseta we offer a platform that integrates CRM, subscription billing, email marketing, help desk and knowledge base, and reporting tools. “CRM,” “Email marketing,” and “Subscription billing” are insanely competitive keywords - to the extent that I feel like it’s not even worth us really targeting them. Also, we sell a platform solution that isn’t nicely categorized as “marketing automation,” for example. As a result, I haven’t been very deliberate in selecting keywords to date; our SEO strategy has instead primarily been…
The “normal” build your first few links stuff that start-ups do - building social media profiles, an Angellist profile, some start-up directories, reviews sites, etc.
Creating very high quality, long form content - the idea being if the content is good enough, it will naturally build backlinks.
Guest posts on other topically relevant blogs.
What’s your take on this approach? How would you recommend start-ups in established, competitive categories get more deliberate with keyword selection given these challenges?
Miguel Salcido: You are a hyper-niche B2B SaaS startup. There are no keywords to describe everything you do. So you will have to focus on the solutions your platform provides, and yes those are super competitive terms. I’d also focus on “startup” related terms (startup tools, SaaS startup tools, etc).
If you can find a similar company and see what they target, using SEMrush, then that’s a good idea for keyword research.
Your approach so far is solid, just make sure the content is in fact really high quality and you do that by measuring engagement, email signups, links, and sharing. If you’re not getting those things, then your content is not resonating.
Neil Patel: I wouldn’t worry about keywords. Just blog about content that is super highly relevant (to your audience) and you will start to rank for terms. Next, place banners and links within blog content to landing pages to drive signups.
Finally, go into Google search console and see what pages get the most traffic. Look at the list of keywords that you are getting impressions for and then sprinkle in the keywords you haven’t mentioned on your site yet. The key isn’t to just add keywords, but it is to also expand the content.
Marty Martin: If you are starting a new niche or opportunity with your SaaS product, why not come up with a catchy industry name (think how Rand Fishkin of SparkToro and Dharmesh Shah of Hubspot coined the phrase "Inbound Marketing"), and start using that name in all of your marketing. Eventually, when people start searching for that phrase, you’ll already be the dominate player. Now, this isn’t an easy thing to do, but if it catches on, you’ll be set.
I think your approach above is time tested and can pay dividends with time, but most startups don’t have the luxury to wait for good content to become seasoned and linked to. Good, long form content can draw links over time, but it is a very slow process without outreach.
One thing that may get you more awareness is to build integrations for Zapier, IFTTT and similar services. I’ve become aware of many amazing tools just by browsing their integrations.
Thank you to Miguel, Neil, and Marty for weighing in on these questions. For any SaaS start-up that’s resource constrained, I hope this provides some clarity on your approach to link building. And for any start-up competing in an established and extremely competitive category, hopefully the advice this group shared will help identify the keyword targeting strategy that will yield the most meaningful results for your business.
By Geoff Roberts 3 min read
This is the first company update we’ve published in 2018, so let’s start with the big picture; we’ve delivered our minimum viable product, have started charging our users, and are continuing to develop the platform based on user feedback. Here’s a closer look at what’s new.
Our team is growing
We’re excited to announce that James Lavine has joined our team as a designer. James started working with us in January and is already responsible for the brand refresh that you see on our website and in our software. James is now earning sweat equity in Outseta commensurate with his contributions. We feel that with Dimitris and Dave on development, James on design, and myself focused on our go-to-market efforts we have the team we need to get Outseta to the next level. Welcome, James!
Redesigned knowledge base
One example of James’ work is our newly designed knowledge base. The new design features larger, easy to read text as well as an easy means of navigating between categories. The design is also particularly well optimized for mobile devices, making important product documentation available wherever you are.
New Feature! Sales pipeline management
We had initially scoped SaaS metrics and reporting functionality into our minimum viable product, but we decided to punt on this feature temporarily and instead build functionality to help SaaS start-ups manage their sales pipeline. We made this decision primarily because of our own need for sales pipeline management tools; we figured if we needed this functionality prior to reporting capabilities most other early stage SaaS start-ups would as well.
The drag-and-drop interface allows you to set up as many pipelines as you like, while easily adding columns to your pipelines that can be customized to mirror the stages of your customer acquisition process. As deals progress you can move cards through the various stages of your pipeline, making it easy to keep track of where each potential customer is in your customer acquisition funnel.
New Feature! Engagement index
Last but not least, we added a widget to our dashboard to help you measure your customers’ engagement with your software. If you are using Outseta’s subscription management widget for product registration and authentication, you can now easily see the aggregate and unique number of people who have logged into your software each day. By selecting the “Data View” you can see exactly who is signing into your product and when they logged in.
This has been really useful to us from a sales and customer support perspective, as it enables us to proactively reach out to users and offer help when we know they are actively engaged with our product.
At the end of Q1 our team got together in Boston to do a retrospective on Q1 and discuss our goals for Q2. Here's what we'll be focused on.
Improve the customer onboarding experience.
Implement a customer success program for early customers. This includes weekly meetings where we ask for product feedback, then help customers with their businesses however we can. We're looking for 100% customer retention.
Improve sales pipeline management tools; help sales reps spend their time in the right areas with better lead scoring, lead management, and engagement metrics.
Develop a Wordpress plugin to make it easier to capture website form data and send it to Outseta CRM and email lists. Our users often start by syncing newsletter sign-up, beta registration, or “request early access” forms with Outseta.
That's all for now.
-Dave, Dimitris, Geoff, & James
By Geoff Roberts 5 min read
As I’ve been engaging with SaaS start-ups across industries this year, one thing has become certain; real estate tech is hot in 2018. The real estate tech start-ups listed below range from companies that are still developing their products to venture-backed businesses that have already found significant traction and revenue. Here’s our hand-curated list of real estate tech start-ups set to make waves in 2018.
Approved - Approved is a San Diego based SaaS company that’s building a platform to modernize mortgage lending. Led by two former Redfin employees, the company recently raised $1mm in funding and is an EvoNexus portfolio company. The platform automates the collection of loan documents and also features instant loan approvals.
eLandlord - eLandlord is a Boston based company developing a mobile platform to help landlords and homeowners save time and money in repairs, while also taking a more proactive approach to preventative maintenance. “We’re allowing property owners to outsource the painful parts of property maintenance to us so they can spend more time with their family,” says Charles Hadsell, Founder and CEO. eLandlord offers an alternative to property management through a usage-based model and a hand-picked network of service professionals and partners.
Team: Founder & CEO Charles Hadsell
dwel.co - dwel.co is a New Jersey based online property management platform built for both landlords and tenants. The company’s solution is specifically focused on streamlining the accounting and financial aspects of the landlord-tenant relationship. “dwel.co is dedicated to providing real estate investors with the tools they need to manage their business, their way” says Joe DiNardi-Mack, Co-Founder of dwel.co. The founding team met at Rutgers.
IDX Boost - IDX Boost offers advanced MLS search tools, as well as user analytics and marketing automation tools. “We’re making powerful online marketing tools simple and affordable for realtors,” says Josh Stein, Co-Founder of IDX Boost. The company’s “ready-to-launch” real estate websites and Wordpress IDX plugin have already helped hundreds of agents make beautiful WordPress sites, track their users, and automate their outreach.
coUrbanize - coUrbanize is a Boston based company that provides an online community outreach platform for real estate developers and municipalities. The platform allows you to post updates and host online conversations with the community so projects progress faster. “coUrbanize uses technology to give every community member a voice instead of having to attend inconvenient meetings while enabling developers to gather, package, and submit feedback into public record ahead of meetings,” says Chief Operating Officer Alo Mukerji.
Off Market Leads - Off Market Leads is a platform that allows New England real estate investors to find, market to, and close off-market deals. The platform allows you to search off-market leads and create direct mail lists with data on ownership, taxes, mortgages, liens, pre-foreclosures, sales, and more. Off Market Leads is the official real estate investment partner of The Warren Group, the most comprehensive and accurate source of information on real estate in New England.
Team: Founder Tyler Cubell
Apt. App - Apt. App is a Denver based mobile platform that seeks to improve the resident experience in multi-family properties. The app’s features focus primarily on fostering communication and building community; an example of this is the ability to safely and anonymously notify other residents of a common disturbance such as a noise complaint.
New York Equity Group - NYEG is a real estate investment, development, and technology company operating in the northeastern United States. The company’s real estate investment software is designed to help anyone assess a real estate investment opportunity in 5 minutes. The product is scheduled to become publicly available in Q2 of 2018.
Team: Founder Philip Michael
Enviar - Enviar offers real estate landing pages designed to generate leads for your properties. The company is currently in beta but already has traction in the form of 200 customers who have published more than 3000 landing pages.
Team: Stealth mode
Localyfe - Localyfe provides customized property recommendations to buyers and renters using proprietary algorithms, experiential data, locational analytics and user data, while delivering tools and data to market professionals. CEO Brian McAllister previously served as Senior Vice President of Corporate Development at CBRE, the largest commercial real estate services and investment firm in the world.
If you are a real estate investor, a home buyer, or a resident the 12 companies listed above are primed to make your next real estate dealing that much less painful. Whether you're looking to invest, buy, or move-in, these companies may soon become... household... names.
Who is missing from this list? Feel free to mention other real estate tech start-ups worth watching in 2018 via a comment below.
By Geoff Roberts 10 min read
In recent years much has been written about the "death of email marketing," the basic premise being that everyone's inboxes are more inundated with emails than ever before. Spammers are a problem and response rates are on the decline as we all get better at ignoring the noise in our inboxes.
Email prospecting is a blunt instrument, they say. At best it's a spray and pray game where you blast a sizable list of targets and pray for a 20% open rate and a 2% response rate.
The day I sat down to write this post I stumbled across the following Linkedin update from Larry Kim, Founder and former CEO of Wordstream. Larry has Founded and acted as CEO of successful tech companies, has been a mentor in Techstars, and is the type of guy with a Twitter following of 35,000+. I must admit it put a smile on my face to see him openly vouching for sending cold emails.
I would even argue that with all the lousy emails people are receiving, there's never been a better time to stand out from the crowd with a well designed email prospecting strategy. This article will outline step-by-step the approach that I've been using at Outseta to achieve a 40% response rate on prospecting emails. My hope is some of these tactics will help you in your prospecting efforts, too.
A "cold" email list does not equal a low quality list
When I say that I've been sending emails to a "cold" list, what I mean is that not a single person that I've emailed knows me or anything about Outseta. What that does not mean is that I'm emailing a low quality list - if you are sending emails to undeliverable email addresses, or have out-of-date contact information, that's on you.
Step 1: Find a data source that contains information on target companies
The first step in successful email prospecting is finding a data source that contains information on target companies. At Outseta, we sell to early stage SaaS companies so sites like Founder Dating, Gust, AngelList, and Product Hunt are a great place to find target companies. AngelList and Product Hunt even let you sort specifically to find SaaS businesses, then filter by "Joined" or "Created Date" making it easy to find newly added leads.
There's 13,357 potential leads for me right there on AngelList alone!
If you sell to colleges, an example of a data source could be the Princeton Review. If you are looking to sell your product to yoga studios in San Diego, you can simply Google "San Diego yoga studio" and begin building your list of targets that way.
I recommend building a list of at least 50 target companies to start.
Step 2: Find relevant contacts at your target companies
Now that you have a a list of target companies, you need to find the right person to reach out to at each of your targets. Here are a few tricks that I recommend.
About Us pages
Lots of companies today have "About Us" pages on their website. This often acts essentially as a directory of company employees. Here's an example from our own website.
Look up the target company on Linkedin
By looking up your target company on Linkedin, you'll find what is essentially a company directory of Linkedin member profiles. Simply search for the name of the company, then click the link that says "See all employees on Linkedin."
Google Search "Company name, title"
In this example, I searched for "Mailchimp CEO."
One of these three tactics usually does the trick. Now you should have a nice list of target companies and specific people at those companies that you'd like to reach out to. Which brings us to...
Step 3: Find email addresses for your targets
The best way to get started with finding email addresses is simply looking the person up online. Check their Twitter profile. Maybe they have a "Contact" page on a personal website, or an About.me page that contains contact info. If you visit the person's Linkedin profile, you'll find it says "Contact and Personal Info" in the right hand side bar. By clicking "Show more" you'll expand this section, and oftentimes find contact information readily available.
If none of the above tactics work, your next best option is searching for the email address of anyone else at your target company. Most companies use a consistent structure for their email addresses - something like firstname.lastname@example.org or email@example.com. If you can figure out what email structure the business uses, you can then use a tool called Hunter.io to guess at what the person's email address might be, and verify if you are correct or not. In this example, I verified that geoff(at)outseta.com is in fact a valid email address.
If you can't find a valid email address for someone on your target list, remove them from your list and move on. Again, your success will depend on the quality of your list!
And a final note; when you first start this process, you should build your own list. It's your responsibility - nobody else is going to assemble the list with as much care as you will. Once you've proven this process and that it can generate results, you can absolutely train someone else to do this for you... but you should do it to start.
Crafting prospecting emails that get responses
Now that you've assembled a high quality email list, it's time to craft your approach.
Step 4: Your subject line needs to be something your recipient cares about
This sounds obvious, but it happens all the time; prospecting emails are sent with a subject line that the sender, not the recipient, cares about. "Sign up for Product XYZ" or "Can we connect for 15 minutes"...
The recipient has never heard of product XYZ, or you for that matter, so why would they want to connect?
Much has been written about email subject lines - yes you should avoid words like "Free" or "Sale" to avoid spam filters - so I'll just leave it at you need to mention something that the recipient genuinely cares about, that peaks their interest in a non-gimmicky way.
In the case of the prospecting emails I've been sending, I came up with a very simple solution - make the email subject line the name of the company that I am emailing. Nothing more than "Subject: Start-up Name."
This sounds simplistic, but in this case it works - start-up companies are by definition unknown. They have little-to-no brand awareness, and are starved for attention. It makes sense that when you email a start-up Founder with the name of their company in the subject line, they get excited - "Someone knows about us!" and they open the email.
Step 5: Personalize your approach
This is probably the single most important step in this process, and it's the one that everybody skimps on. I like to start all of my prospecting emails with...
My name is Geoff Roberts, I'm a Co-founder of Outseta."
After that brief introduction, I immediately make some sort of personalized comment about their business. Everybody has been on the other end of generic email blasts, and it's immediately obvious when you receive an email like that. So take five minutes to learn about the prospect you are emailing and try to add value to them in some way. Consider...
Asking them a clarifying question about their product or service - show genuine interest in them.
Providing a tip that might be useful to them based on your past experience.
Drawing parallels between their business and your own.
Offering to help them in some capacity.
The number of ways you can go about doing this are endless, but you need to do your research first. Check out their website, look at content they've shared, and look at their social media interactions. If you can't genuinely add value or personalize your approach in some other meaningful way, take them off of your list. Here are a few examples from emails I've sent.
This was a company that provides real estate websites to real estate investors.
"I stumbled across (Company Name) on AngelList when I was researching SaaS companies in the real estate industry. I was previously head of marketing at Buildium, a property management software company so I've spent a lot of time thinking about how to market websites and software tools to an audience of real estate investors."
This email got a response and we ended up talking both about Outseta and about how the start-up could best market their business.
Another company I emailed was building a network for start-up Founders to share their objectives and drive accountability.
"I came across (Company Name) on Angellist and I love the concept of providing collaborative workspaces in order to set objectives and drive accountability. One of our idea validation interviews at Outseta was conducted with a very similar company called OpenCompany, which has since rebranded and pivoted a bit to become Carrot.io."
Again, I likely got a response because I was familiar with a company that was tackling a very similar problem. The recipient checked them out, was curious about why they pivoted, and I was able to peak his interest because I shared something very relevant to him.
Ultimately, I had a strong hunch that the personal approach I was using in my prospecting emails was one of the primary drivers of the strong response rate that I was seeing. I decided to test this hypothesis - the results were pretty astounding.
Personalized Approach: 117 emails sent, 48 responses, 41% response rate.
Traditional Email Blast: 437 emails sent, 7 responses, 1.6% response rate.
That's right - I saw a 39.4% increase in response rate when I took the time to personalize my email approach. Same quality list. Same call to action. The only difference was I led with a personalized comment based on researching the recipient's business, rather than sharing a more generic comment with a larger audience.
Two or three sentences of personalization is enough, but it's an absolute must.
Step 6: Clearly and succinctly articulate your value proposition
Now that the recipient knows that they aren't on the end of an email blast and that I've actually taken the time to understand their business and engage with them in a meaningful way, it's time to tell them what I have to offer and why it's important to them. Again, 1-2 sentences should suffice - get to the point! Usually I go with something like...
"Anyways, at Outseta we've built a platform that offers fully integrated CRM, subscription billing, customer communication, and reporting tools. This allows SaaS start-ups to launch "leaner" with less technical overhead."
Step 7: Ask for permission to send them additional content or information
I will admit, this is a practice that I was initially skeptical of - start-up Founders tend to be insanely busy people, so why wouldn't I just send them information right away? Do they really want me to send them another email?
Turns out, this works really well. I end each of my prospecting emails with...
"Would it be OK if I sent along more information on our approach?"
This works for a few reasons:
I've already grabbed their attention with a personalized approach.
I've clearly (and quickly) mentioned what I'm offering and why it matters to them.
I'm building some credibility and trust by not jamming marketing materials down their throat that they didn't ask for.
My goal with this initial prospecting email is simply to get a response from the person - any response! If the person responds I know that they are alive, that they read my message, and the door is open to engage with them further.
By ending the email with an open ended question, recipients that are interested in what I'm offering will usually reply with a "Sure, send some info over." Those that aren't interested tend to send along a polite "No thank you," which is equally valuable and let's you know that you should spend your time elsewhere.
Here are the actual responses from the examples I shared earlier.
Step 8: Consider the timing of your emails
Don't get hung up trying to find the mythical perfect time to send prospecting emails, but do use some common sense and whatever information you have at your disposal.
At Outseta, I've found good triggers to be when companies launch their product on Product Hunt or publish their company profile on AngelList. These indicate early stage businesses that are just getting a product to market or are embarking on their start-up journey, and that's the time that we'd ideally like to intercept our prospects.
If you were selling a product to colleges, chances are it's best not to send prospecting emails on graduation day. You get the idea.
Last but not least, a little experimentation is a good idea. I saw particularly strong response rates during the "dead" week between Christmas and New Years, when start-up Founders had more time than usual to unbury themselves from their email inboxes.
Yes, this is a time intensive process and it's easy to make excuses as to why your email prospecting efforts aren't working. But for bootstrapped start-up this is a strategy that costs nothing, that can yield significant results.
Start small. Send 10 emails that are absolutely the best emails you can craft.
I think the responses you get will surprise you.
By Geoff Roberts 6 min read
In the past few months I've been involved with launching a number of SaaS products on Product Hunt, a community where early adopters discover the latest new technology products. Product Hunt is the best site of its kind, followed by Betalist; both sites represent a unique opportunity for early stage start-ups to gather product feedback and land their first users.
There are plenty of "How To Launch On Product Hunt" guides already out there, and I've devoured most of them at this point. My first piece of advice is to take it straight from the horse's mouth - Product Hunt has published two guides on the topic themselves.
The reason for this post is twofold; first, the best way to launch on Product Hunt has changed pretty dramatically, so a lot of the content that's already out there is outdated. Second, I'll give an honest assessment of my own experience in terms of what worked for us and what didn't.
Let's do it.
Is Product Hunt's Ship product worth it?
Product Hunt's Ship product is a suite of tools designed to help you gather product feedback and build an audience prior to officially launching your product on Product Hunt. I will admit that I was at first skeptical about Ship, but I decided to pony up the $79 per month to give the product a whirl. I realized a few benefits from using Ship.
Ship allows you to schedule your launch on Product Hunt. Honestly this is mostly a convenience thing, but it's a nice perk of using Ship. Without Ship, you need to fill out all of information required to launch a product in real-time per se; what this means in practice is that it's been the norm for people to wake up at ungodly hours to launch their product, maximize the amount of time they have to accumulate upvotes, and get something of a first-mover advantage.
This is definitely helpful in terms of planning your launch; you can set expectations with your internal team in terms of exactly when your product will launch, and you can easily schedule other promotional activities to work in tandem with your selected launch time. This was also helpful to me because it allowed me to reach out to the Product Hunt team in advance and let them know exactly when we were planning to launch (more on why I did this shortly).
Ship represents a massive opportunity for influencer marketing and virality. In all honesty, there used to be a pretty fool proof way to all but guarantee a successful launch on Product Hunt if you could just pull it off; getting an influencer with a large following to "hunt" your product. I'm talking a Jason Lemkin or a Hiten Shah type. In the past if you were able to recruit an influencer with a large following to hunt your product on launch day, it would automatically notify all of their followers via email that they had hunted your product driving a ton of traffic and upvotes to your page.
This tactic doesn't work anymore... unless you use Ship. So if you have a personal connection to a major industry influencer, or have someone like that on your board, or can simply convince an influencer to subscribe to your product then you can still reap this benefit. This is a pretty smart monetization strategy by the team over at PH.
How this works today is if you are using Ship, you are allowed to build an "Upcoming Product" page that Product Hunt will also help promote. Get your influencer to subscribe to your upcoming project page, and all of their connections will be automatically notified. Bingo, you've tapped into the virality benefit that PH used to offer. If you know someone with a significant following on Product Hunt, Ship is absolutely worth the $79 per month.
Ship allows you to directly communicate with people interested in your product prior to launch. Ship captures contact information for anyone who subscribes to your upcoming page and allows you to email them directly. The number of people who subscribe to your upcoming page is a decent barometer for how much interest there will be in your product, but on top of that this is useful in terms of gathering feedback on your product prior to launch and communicating updates to your subscribers to keep them in the know as your launch day approaches.
Tips for launch day
The mechanics of writing a good Product Hunt listing are covered well elsewhere; tips for writing solid taglines, adding relevant images, a descriptive GIF, etc. What follows are additional promotional tactics that proved valuable.
Email "Upcoming" page subscribers. If you did take advantage of Ship, PH gives you the tools to directly email all of your upcoming page subscribers. This is a no-brainer, as these people have already expressed interest in what you are working on. On launch day take the time to send every subscriber a personalized email letting them know about your product launch and asking them to upvote your product. I think you'll find that just about everyone will oblige; this represents low hanging fruit.
Email else anyone who has expressed interest in your product. At Outseta we are pretty protective of the audience that we've built. While lots of "how to launch on Product Hunt" guides suggests blasting every email contact and social channel that you have at your disposal on launch day, I think this is overkill and can lead to lots of people being hit with duplicate, poorly targeted messages.
As with any marketing campaign, you need to consider your audience. You might sell to an industry that is altogether unfamiliar with Product Hunt; if that's the case, you're going to get little value emailing that audience about your PH launch.
If you have contacts that you feel are likely to be Product Hunt users, by all means notify them of your launch. Beyond that I'd advocate for only reaching out to contacts that have expressed legitimate interest in your product in some way, perhaps as beta users. In this case even if the contacts aren't PH users, they may be invested enough in your idea to create a PH account in order to upvote your idea.
Product Hunt allows new users to login with existing Twitter, Facebook, or Linkedin accounts. They must then complete some configuration settings around their name and title, as well as the types of products they are most interested in. This is a pretty easy process, but spell it out in your email approach so that you recipients know exactly what your ask is of them and how they can go about delivering on your ask.
Tweet at Product Hunt. Tweet a link directly to your listing @ProductHunt. Don't include any other hashtags. It's in PH's best interest to also share particularly well designed and launched products.
Share a relevant "collection" of related products. Product Hunt allows you to assemble "collections" of related products. Prior to your launch, take some time to build a collection of products that are relevant and useful to your own product's potential users. For example, when we launched Outseta I compiled a collection entitled "The Day One SaaS Start-up." Every product in the collection is relevant to our audience and complimentary to our own product.
Once you've assembled your collection, reach out to Niv Dror who is in charge of community at Product Hunt (Niv@producthunt.com or @Nivo0o0 on Twitter). This is a good way to get your collection in front of the team at PH, in hopes that they will help promote the collection that you've assembled.
Product Hunt is just one channel to get the word out about your SaaS start-up, but it's an inexpensive one that can serve as a serious catalyst for finding your product's initial users. Follow the guidance outlined in this post and you'll have a better chance of making your Product Hunt launch as impactful as possible.
By Geoff Roberts 10 min read
When you say “Blockchain” or “Ethereum” to people who live their lives outside the spheres of tech or highly speculative investments, you often get confused or simply apathetic reactions, to which I say… understandable. But the applications of blockchain technology are in fact vast, highly useful, and go way beyond whether or not you’ve chosen to invest in Bitcoin.
We’ve been writing for more than a year now about our desire to build a self managed, non-hierarchical business. One that is absent of bosses, where work is both more rewarding and meritocratic. Allow me to introduce you to Jack du Rose, CEO and Co-founder of Colony.
Colony is building a platform on which to build open organizations. The rules of the organization are enforced by blockchain technology rather than paper based contracts, allowing anyone to contribute to the organization and earn payment or ownership commensurate with their contributions to the “colony.” Workers earn “reputation” and influence based on merit.
We caught up with Jack because we are interested in a future where work sucks less, where no one feels like nothing more than a cog working in a company where disproportionate rewards are reaped by few. It’s an ambitious undertaking, and Colony isn’t the only company focused on solving this problem - make no mistake about it, there will be an entire generation of SaaS start-ups embracing this model before you know it.
Geoff Roberts: Hi, Jack. Good to have you. Why don’t you start by giving us the elevator pitch regarding what you are working on at Colony?
Jack du Rose: Colony is a platform for open organizations. By open organizations I mean what some people might call decentralized organizations; essentially it means that we’re creating software that enables people all over the world to work together and complete projects or start companies together without needing to know or trust each other. So it's a platform and a protocol that provides a software based framework so that the organization runs based on a set of immutable smart contracts rather than on the basis of legal agreements and paperwork.
Geoff Roberts: So if you are talking to someone who doesn't understand what blockchain is... why should it matter to them that the rules of the organization don't live on paper contracts but instead live in blockchain? Why should people care?
Jack du Rose: People should care about this thing because it’s powered by software. Let's forget about Ethereum for now. If a company’s operates based on paperwork there has to be somebody who is managing that paperwork, somebody who is looking after the fact that that paperwork is being done. You're trusting that there are people who are competently adhering to the rules, but also that they are honestly adhering to the rules. You can't really trust that unless you've got the laws of a nation to back up and ensure that there will be consequences to anybody who is either negligent or malfeasant.
The nice thing about doing it on Ethereum is that you don't need a national legal system to enforce the rules of the organization. You can create smart contracts that lock up value or that have inherent consequences for misbehavior if you go against the rules.
Now if that's a centralized piece of software it's difficult to trust that you can predicate the existence of your company on that piece of software. For example, if Colony was a centralized piece of software we could get ourselves sold to Linkedin. Linkedin could then say "Oh we're going to shut this down actually," so for all the people who started your company, tough, it's gone. You probably just get that little email saying, "Hey, great news we've been acquired! We're joining this company and oh and at the end of the month we're going to stop providing our service.” So that's one important thing that need not happen.
Finally, smart contract based applications are sort of truly in the cloud. With decentralized applications, you'll always be able to use them. Once Colony is live on mainnet, even if the whole Colony team gets run over by a bus, you’ll still be able to use Colony. So that's really important if you're considering this kind of software as the infrastructure for an organization. You'd be incredibly foolish to predicate your business, your livelihood, all of your employees and stakeholders on some company that could run out of money or get acquired at any point.
Geoff Roberts: Talk to me about the product itself... is a Colony akin to a specific project or akin to a specific company? How do you think about the notion of a colony?
Jack du Rose: A Colony could be a company. I generally think there's some sort of quickening point when a project becomes a company. I'm not exactly sure what that looks like but I would say that almost every Colony starts out as a project.
Geoff Roberts: Got it. And with this notion of a Colony being open and fluid, where anyone can contribute to a Colony, is there still a notion that you're being hired to a specific Colony or is there a process to invite someone to your Colony?
Jack du Rose: Yes. We don't necessarily think that the only use of Colony will be this sort of really utopian vision of fluid organizations where it's completely leaderless. I think that there will be a bunch of different organizational types. Some will be more socially centralized, some will be completely socially decentralized. By that I mean that there's various trusted people within some organizations. I think that's likely to be the case.
I think some people want to be able to use Colony for, you know, they've got their centralized team, their core team if you like, and then they have a bunch of external contractors that they want to be able to work with. So I think it will be a broad spectrum of different organizational types. As it stands today everybody needs to be invited to join a Colony. I don't think it's going to be right for all if not most organizations to be just completely open. Many will want to be invite only.
Geoff Roberts: I know this is a very broad question but as you think about real life scenarios that Colony is going to have a hard time supporting what sort of things immediately come to mind?
Jack du Rose: I can't see Colony being used to run a veterinary surgery. Or a bakery. You know, there's all types of companies that run just fine as they are and they necessarily need to be collocated. It doesn't add a huge amount to be able to coordinate yourself, or have this kind of egalitarian way of working. I also have some doubts as to whether any very, very large organizations are likely to embrace sort of new organizational paradigms, just as we don't generally see those kind of organizations embracing things like holacracy. It's just very, very hard for them to do so. They're very interested in different organizational models, but it's not something that springs to mind as something which is going to be an easy change.
Geoff Roberts: Sure. So a key idea here is that people working on a colony are paid or earn ownership in a company in line with their contributions to the colony. In order to facilitate that there's a systematic peer review of work completed. Can you talk to me about that? How has this process worked with your beta testers or just how you envision that peer review process working?
Jack du Rose: A peer review would be understandable to mean that when you do piece of work it gets put out to a whole bunch of people and those people approve it in some way. That's not how it works at all in Colony, actually. There are three roles within a piece of work. We consider the smallest piece of work to be a task. But there are three roles within a task. There's the manager of the task - that's the person who defines it, who sets the budget for it. You've got the worker, the person who does the work for the task obviously. Then you have the evaluator, whose role is to make sure the task has been adequately completed and rates it.
Sometimes all three roles can be played by the same person - people are incentivized to check what everybody else has done because if they find something that they disagree with they are incentivised to raise a dispute over it. Someone raising a dispute can put down a stake to claim some action taken by another is inappropriate. The person against whom the dispute has been raised may then either back down, or match the stake deposited by the objector. Only then will a vote be called to arbitrate the dispute, and the winning side will receive a share of the losing side’s stake. So essentially the peer review is implicit by virtue of the fact that people are incentivized to police activity in their Colony.
Geoff Roberts: Talk me through the idea of the reputation system and how that is leveraged.
Jack du Rose: Within a colony we have tokens and reputation. Whenever you do a piece of work you earn tokens for doing that work and you also earn reputation as a function of the number of tokens that you earn for doing the task and how well the evaluator thinks you did it.
The reputation that you have is important because it informs the amount of influence you have when a vote is necessary or when you're requesting funding for a task. The more reputation you have, the more of the funding of the Colony you can direct. Also from the perspective of your earning ability within a Colony, the more reputation that you have and the more tokens that you have, the larger the proportion of the revenue of the Colony that's going to be yours to claim.
Geoff Roberts: OK. And what does that reputation score actually look like? Is it a number 1 through 10, or 3 out of 4 stars?
Jack du Rose: It's an unbounded number associated with two different values within a Colony. For every task that you do you simultaneously earn reputation in these two different attributes. One is the skill that you used, and the other is the context in which you used it. So that would be the departments or projects that you worked within.
Geoff Roberts: How do you see company direction or strategy created, maintained, and reinforced over time for companies built on Colony? When a project kicks off it has some sort of strategy and mission. And then you can work from that for months or years depending how broad that is but at some point that needs to be revisited. How have you envisioned that working?
Jack du Rose: I think that a common misconception about organizations that will be completely decentralized is that they will be leaderless, that there will be nobody who is providing vision, who is providing the direction. I think that that's not proved to be true at all. I think even in the most decentralized projects, Bitcoin for instance, there are leaders who emerge and people rally to a flag. I think this will be no different whatsoever.
I think with strategy - that's also a job, that's also something that needs some people to do that work. It's not just sort of an emergent consequence of an organization. It's usually the C-level people within an organization who are the people who create that strategy. In this case those C-level people, rather than being canonized as they currently are, will instead emerge as a consequence of the quality of their actions and the fact that people want to follow them.
Geoff Roberts: Fair enough. Sounds good.
Jack du Rose: Good stuff, it's been great to talk to you guys.