[4:03] So for folks who don’t know you, I want to give you an opportunity to introduce yourself. You have a pretty darn impressive resume, to say the least. So who are you and what have you done? And what are you doing?
- Well, thanks so much for saying that. You know, I sort of had the bad habit of doing enterprise software startups since the early 90s actually. So, yeah, I’ve had this for a while, and have started seven companies. This is now my seventh company. Six of them were acquired one way or another, you know. Some work had hits, you know, some were like singles, some were like doubles. You know, but learned a lot along the way. And I’ve been fortunate to be part of that, you know, some big trends. You know, even client server computing, the internet, open source, mobile, modern kind of work software, things like that. So it’s really been a lot of fun. You got to meet a lot of great people and each of those trends.
[4:58] So Peter is being exceptionally humble. The companies—he’s founded six enterprise software companies. They were acquired by Sun Oracle, Citrix, VMware, Sprinklr, and Prograph, which that is an impressive track record, to say the least. So, given what we’re going to be talking about today, Peter, I’m especially excited to have you on because this is kind of like, unlike a traditional interview, we decided we’re going to do this one as kind of a free consulting session for Trent and for Flowster on—you know, if you were at the helm, what would you be doing to accelerate our go to market?
So, just for folks who maybe are new to the show and don’t know what Flowster is, let me explain that very quickly first. And then we’ll kind of dive into two entrepreneurs, sitting in a coffee shop, having a chit chat about how to become more successful.
So Flowster is workflow management software. So what the heck does that mean? Well, every business on planet Earth has a number—generally a pretty large number—of repetitive processes that need to be done over and over and over and over to make the business move forward. Many companies believe that documenting those processes is a very good idea because it ensures a good execution of those processes, and makes it so much easier for bringing new employees up to speed, and so forth.
So Flowster is a tool for companies to create these processes and then delegate that work to their team. From a marketing perspective, Peter, while our software could be used by pretty much anyone in any industry, obviously that would be a pretty big marketing challenge to position it that way. So given my background in e-commerce, we have chosen—because we actually created Flowster to serve our own ecommerce business, we have chosen to position ourselves as the premier platform for ecommerce businesses who want to tap into and get access to established procedures for all of the highly, highly repetitive processes around running an ecommerce business. So that could be driving traffic, producing content, publishing a podcast, making a YouTube video, conversion, shopping cart abandonment, customer service, returns, shipping, fulfillment. Like there’s just a million things that an ecommerce business has to do in order to function.
So with the stage set like that, what I would like to really dive into then is, if you were the CEO or CMO of Flowster tasked with bringing the relatively new software to market, what would you do?
- Well, you know, this is my favorite thing to do is sit around and talk with people. I can pretend we’re now in a coffee shop. You know, six feet apart, outdoors. And, you know, and then I would ask you. Okay, well, you know, ranges like, well, how many customers do you have now? And where are they? Where are they located?
[8:19] Sure. We, up to this point, Flowster has been—it hasn’t had any of its own marketing. It’s largely been fed by my personal brand, which is the Bright Ideas Podcast. We have about 5,000 users, we have about 10% of those are paid customers. And for the most part, those people are ecommerce entrepreneurs who want to have a business like my Amazon reseller business. And so we have—they’ve become customers, because they bought a product of mine called WEBS. WEBS is a large collection of standard operating procedures or workflows, as I would call it, for people looking to build and scale an Amazon reseller business. So that’s what got us to where we are at. Going forward, we want obviously more of those people, but we’ve also thought that we would like to have more brands as customers.
So for example, on Amazon, it’s no great secret that Amazon ideally, would like to have brands selling direct to consumers via the Amazon channel. Get all the middlemen out of the way, get the lowest cost to the consumers because that’s what drives traffic to Amazon. And right now, and obviously, some brands do sell directly to consumers. They have their own Seller Central account, and they’re running it, and off they go. That is kind of the minority. Most brands on Amazon are either selling to Amazon, which has all sorts of positives and minuses, and or they have a whole host of third party sellers, which are reselling their stuff on the Amazon platform.
So my thinking is that there’s going to be some meaningful percentage of those brands that are out there that are thinking, “You know what? We want more control. And the way to get more control is to operate our own Seller Central account. And get rid of, either reduce or maybe even eliminate, all the third party sellers.” But here’s the rub, they don’t know how to do it. They don’t have any experience selling on Amazon. It’s this confusing black box to them. They don’t have the resources, the procedures, or the people.
So our message to them is, “Hey, we have all these really great procedures that make selling to consumers, via your own Seller Central account on Amazon, a paint by numbers experience. All you have to do is put some people in and follow these procedures. That’s the message that we are thinking is going to resonate with that target market.
- Well, I absolutely love it. And the thing is, you know, people think their startup is a startup or their business is a business. But especially in technology, it is why I was mentioning the trends I was fortunate to be part of early on, is you always have to step back and go, “Well, what’s the trend? And what’s the underlying trends?” And I think without a doubt, right now, the underlying trend is ecommerce, ecommerce, ecommerce. And the thing about it is it is hard and it is complicated. And that’s why I think a lot of people have avoided it. A lot of people, you know, businesses, or like, or brands are like, “Ah, you know, I used to sell on a store and now I sell through third parties.” Because they don’t want to deal with returns or irate customers, things like that. And, you know, the thing is, you reduce it to checklists, right? And so, there’s this resistance to it.
So I love that you can just say, “Hey, I’m part of this huge trend.” And you don’t even have to, like say much. To say, “Hey, now’s the time to be online and selling with, you know, taking your business to ecommerce and building a relationship with your customers directly.” Because, you know, the same reason you don’t want to be online, you know, is, you know, dealing with all these crazy mechanisms and how Amazon works. And you know, it’s really complicated. It’s complicated to buy Google Ads now, right? I mean, in the old days, when they first started, we all bought our names as a joke. So if our friends Googled us, we can have a little message from it. It took three minutes. I went into Google AdWords, like a year ago, I couldn’t figure it out. I didn’t even know how to start, right? But on the analytics and all that kind of stuff.
So the thing about, “Look, there’s a huge trend. You should be part of it. And I’ve made it a checklist. It’s so easy. I’ve made it easy. You don’t have to think, you know.” And there’s the thing about, “Hey, I can go look something off or I can do something, you know, versus thinking. You know, the prior is so much easier than the latter. So like, you don’t even have to think. You just have to follow my checklist.” And boom, your brand is online with a direct relationship with your customers.
And then, you have to be aspirational. Just like X. Right? You know, just like Casper The Mattress Company, or whatever, right? You know, I don’t know who’s hot or who’s done a great job in this sector. But these, be just like Michael Jordan. Be just like, you know, people love that. I can take X and make it Y. There’s always the before and after. Here’s you now, use my checklists, here’s you tomorrow, right? And just position it that way. And people like, “Oh my gosh.” You know, and then quantify it. Spend 20 minutes a day or it takes, you know, a day to set-up. And, you know, half an hour a day. And then, boom, you’ve got your Amazon store.
[14:04] So you mentioned in our pre-interview that it was important to understand where in the cycle the trend is. So with respect to ecommerce, where do you think it is? I mean, it’s been around for a while. But thanks to COVID, of course, it’s accelerating. And I don’t really see that changing.
- Yeah, so the thing is, you know, that thing about it takes 30 days for people to set new patterns. You know, I think it’s safe to say these have been established. Right? And, it is fascinating. Now, there’s certain sectors where it doesn’t translate as well. Like women’s clothing, right? And you see some brands are like trying to overcome that by, you know, get three sizes and send two back. Right? Within a week, you know, things like that, which I think Zappos and Rent the Runway, sort of innovated. So there’s a little bit of friction for certain types of goods.
You know me, I’m lazy. I don’t like to go to stores. And then like with COVID, all of a sudden like the two or three things I have to go to the store for, I no longer do. Right? Like Gillette shaving cream, I guess it was pressured, I didn’t want to mail it, or I have to go to Walgreens. And then SodaStream canisters to make sparkling water, but they can always hold the, you know, cans of LaCroix. I like to make my own, you know. Now you can get those by the mail. Or maybe you could before, I did. I just tried a long time ago and I couldn’t.
So, anyway. So like that last little step of stuff, you know, is now online. So I pay for the trend. You know, this is one of those that, you know, has been brewing for a long time. And there’s that, you know, chart or funny graphic floating around online that shows the growth of ecommerce, right? And it showed like, 10 years of was like this nice little steady snail and then the last three months, it just went boom. And just accelerated. You know, and it made me laugh and it made everybody laugh but it’s so true, right?
And what’s really interesting is, all of a sudden, you have a rush of new entrants into the market, right? Which is, you know, older people that didn’t like to shop online, now are. So in a lot of ways, you know, we’ve doubled the number of online purchasers. So everything’s online now. It’s crazy. And the thing about Amazon, you know, and I think they beat Google in terms of searches for products. So it used to be, people will go to Google, and they say, “I need shaving cream. Blah, blah, blah.” But now they just go to Amazon and search for it, right?
And I’ll be very frank, the Amazon search results are just terrible, right? I mean, it’s like, sponsored, recommended, and then there’s like, you know, 10 other things you can’t figure out what’s what, you know some of them have different return policies, and it’s really headache inducing, right? So that’s an advantage. You could like, help the sellers, like how to overcome that. Official, I guess on Twitter, people go like official, so and so. Right?
Yeah. So I think you can say the trend right now is red hot. And the beauty of that is people that are not part of it right now on the top of their mind, “how do I sell online?” If you used to distribute something on 50 stores and online was like 10% of your sales, you know, all sudden, it’s like, “Oh my gosh, I got to get on this thing.” Right? And they’re probably, you know, muddling around right now or paying a lot of money for consultants, and things like that. So…
[17:31] So we have these assumptions about who our target customer is, brands. We have this trend that we’re pretty confident in and there’s lots of data to support ecommerce is on the rise. And we want to get ourselves in front of this target audience and we want to validate our assumptions. Because obviously, well not obviously, but my belief is that in advertising, you know, you’re going to spend your first month or two maybe paying to get data so that you can refine your messaging and so forth. And then ultimately, create profitable campaigns to allow you to scale your organization. So conceptually simple, maybe not as simple to execute.
So what advice would you have for me? And first of all, validating our assumption that, “Hey, more brands are going to want to sell directly via their own Seller Central account on Amazon.” Like that is, I don’t know, like a data source. Maybe if I looked around hard enough for one, I might be able to find one. But because I’ve been working with brands for the last four years on Amazon, and we continually are pitching new brands, we hear more and more. You know, first hand data tells me that okay, I’m on the right track. But still, I’ve got to validate that my campaigns are going to work and that I’m going to be able to get the attention of these people.
- Well, the first step is, you know, who are the brands? And who are the companies? Right? So for example, if I have a product that I want to sell to the oil and gas industry, right? You know, stop your pipelines from leaking or whatever. No, I’m just being funny. I apologize. But you know what I mean? I would like to get a list of them first, right? And then I would figure which of them have already, you know, scratch the itch and which haven’t, right? So get a list of the top 10,000 brands in North America. Right? You know, imagine you’re focused on US-Canada initially, then figure out. And then [unintelligible], right? You know, or somebody on Mechanical Turk. Or, you know, I can’t remember what they renamed the online job boards to. And go through those and figure out which have done it and which have not, right?
And then specifically, which, you know, seems to have a lot of online sellers and have not done it. Right? And now you can start to target your message. And you go, okay, “I’ve now identified 2,000 brands that don’t have their own store on Amazon.” So they’re not the, I don’t know the right terms, the primary seller, or whatever, on Amazon. But have, you know, 15 other people selling their stuff, right? And so you go, “okay, I have 2,000 of these.” And then as part of the research, take a screenshot of what it is to search for food, and what the buyer experience is like, right? And because, you know, it’s confusing.
And you go, “Hey, you know, you sell…” I’m trying to think of something that’s, you know, “You’re like the top purveyor of pool noodles. Everybody’s staying at home playing their own pools or visiting their neighbor’s pool right now. And here’s what buying a pool noodle from you is like on Amazon, which is where everybody’s going.” They’re not going to Target anymore, right? They can just see the search results, then you’re like, “Here’s what it could be.”
So the thing is you’re targeting 2,000 people, and then you look at the time, it would take to tailor a message like that, right? And you go to the top hundred and actually make it personalized. And then you go to the other 1,900 and point to the aspirational one, right? “Here’s the person before, here’s the person after. This is what we could do for you.” Right? And you go, “Here are search results, you know, when you’re not a seller, and here it is when you are. And here’s the benefits, and this is why you increase conversions, and things like that.” And then just start reaching out to them.
So that’s the list of companies that have the need and then you have to figure out who at that company is the decision maker, right? Who in an ecommerce brand, you know, runs that channel, or even better, should run that channel, and isn’t right? And, you know, maybe you’re going to leadership. You know, maybe you’re going to the Head of Fulfillment, things like that, right? Maybe Head of Marketing, right? And here’s where you really got to be really crisp, you know, the before and after. Right? “Here’s your life with me, and here’s your life without me.” Right? And that’s really what you’re doing, right, is helping them kind of get ahead. Does that make sense? Or?
[22:24] Oh, it totally makes sense. I mean, so what you’re describing, as at least my understanding of it, is a direct sales outreach program. And while we absolutely intend to do that, I’m also wanting to be able to run ads. And I actually have more experience in direct sales than I do in running ads. So to begin with, I’m going to be working with an agency and I’ve vetted a number of them, and I’ve picked one. And my expectations are in the first month or two, the campaigns are probably not going to be profitable, but I’m going to get a lot of data on what’s working, what’s not working. We’re going to then refine our messaging, tweak our landing pages, run more experiments, run more split tests. And really try and drive towards profitable campaigns that allow us to scale. Am I thinking about that wrong? Or is there a better way to do that?
- No, no. So it’s a multi-channel, right? So you do outbound, right? And then you gotta put some ads in the mix. But again, you want to target those 2,000 companies, and a certain role within them. Right? And so like, one great way to do that is for example, LinkedIn, right? Advertising. And then you got to be, you’re gonna have to be, it’s funny to say creative, but you got to be creative about your creative, right? And this is where it’s gonna take some experimentation. Like, what does it take to, you know, get these folks to click? And then the most important thing is to figure out who the people are good at converting, right?
And then you have to have your whole funnel, right? So when they land, what is it that you want to give them, you know? And one fun thing to do is to learn how so and so brands got, you know, successfully on Amazon with their own store, you know, in 30 days, right? In 15 days by following the checklist and the right procedures? You know, something like that so they can have a story, right? And so that’s usually a really good thing to convert.
Some people are more tangible. Like if you’re talking to the operations manager at a brand say, “Check out one of our checklists and see how simple it would be to handle a return.” Right, which right now you have somebody, you know, kind of muddle, you know, some third party seller is like muddling their way through, you know. Check out how easy it is to do it yourself, right?
And we know you have a special business, and here’s like the little decisions you would make, and changes you would make for ways to handle a certain type of event, things like that. And like, give people a taste. So those are the kinds of meat you can use to hook people in, right? The lures if you will, if you’re fishing, right?
[25:09] So going back up a bit in my notes, you talked about getting a list of the top 10,000 brands, and then pay a VA, or an intern, or whatever to go through the list, etc. Where’s the best data source? If I was to say, “Hey, I want to know the top 5,000 brands in the online shoe or a shoe niche,” where would I get that from?
- Yeah. I have no idea. You have to Google for it and see who’s luring you, right? If you look at my businesses it’s usually more high ticket sales, so we use things like ZoomInfo, you know. But to find the brands, and certain niches, and things like that, I mean, I’m sure they have trade organizations, things like that. Like in my current business, you know, we saw privacy and data hosting software. So like one of the top outlets for that is the IAPP for example, right? The Industry Association of Privacy Professionals. So each of these have their own niches, right? That you and I probably never heard of. Right?
And another great thing to do is like, if you have an ad that gets people to that great content that you use to convert them, you know, you can also take that great content and place it at the, you know, industry association of shoe sellers, or shoe brands. You know what I mean? And I’m sure they all congregate somewhere, and share, and especially increasingly online, right? But where to get those lists for, like, yeah, brands that sell goods, you know, I’m sure there’s trade associations and things like that that cover it. I’ve never sold to that sector.
[26:45] Okay. Yeah. I know there are trade associations for those. And there’s, well, there used to be trade shows, but now they don’t have trade shows anymore.
- You know what’s cheaper for you now to reach out to that audience, right?
[26:59] Yeah, true. I don’t have to go to all the trade shows.
So you mentioned in our pre-interview, there’s a buyer and there’s a champion. So first of all, let’s make sure that me and the audience understands the difference. And then let’s talk about how we’re going to identify them.
- Yeah, look at the end of the day, there’s someone at a company that signs the check for what you’re selling. And that would be, you know, the buyer. But, you know, a lot of the time the buyer is not the decision maker, right? And, you know, and it’s funny, like, you know, there’s all these studies, and I’m not trying to be sexist, I’m just talking about like a sexist industry that has been for a long time, that it’s the women that buy cars. Right? But people seem to think that that man is the decision maker, right? You know, ‘cause like, I mean, this is like an old study, right? Like in the 70s, the man would come in and right off track and blah, blah, blah, blah. Right? But he’s not the buyer. You know, he might be the “decision maker”. And traditionally, you’d be like, “Oh, that’s the guy writing a check, and I’d rather sell to him, and blah, blah, blah.” He’s not making any decisions, the woman’s making all the decisions, right? You know what I mean? And he’s writing the check, right? And that kind of dynamic is really clear in most purchasing decisions, right?
There’s a decision maker and a brand is going to be like an operations manager. Or, you know, for right now, that’s fulfillment through third party sellers and stores. I don’t know the exact title because I don’t know the industry, but that’s the person that’s going to choose. Right? How to get there. And they’re probably asking that person like, “Hey, we got us to get better online.” And it’s just like, you know, let’s say they make custom shoes for hiking and they’re on Idaho, right? You know, there’s a nice shoe company, and they got great customers, and dah dah dah. And they, “Hey, you know, should we do something online?” And the guy was just like, “I don’t know.” Right?
But imagine that person now finds your checklist. And he’s like, “Oh, this is so easy to do.” Right? But he’s not the one who’s buying it, right? He’s got to go to someone else and go, “Hey, I need to buy this and here’s the budget.” Right? And, “Here’s what it would cost.” So you can reach to both of those folks, right? You can go to the decision maker and say, “Get this.” But the thing should be, “Here’s why you should do this and here’s what you should tell your operations manager.” Right? Or if you hit the operations manager, you go, “Hey, I used to think this was going to be hard, but now it’s really easy. And here’s the ROI calculator you give to the buyer.” You know what I mean? Does that make sense?
And you have to figure out the decision making within one of these brands. Who the roles are, right? And sometimes the role is not associated with the title. There’s someone sitting there that there’s going to be the go to, should we do this or not? That’s the decision maker, right?
[30:12] So what I’m wondering is I’m hearing you explain this as our price points, you know, you can sign up and use the software for under 100 bucks a month, and you don’t have to sign an annual contract. So it’s not a huge financial investment to say we’re going to use it or not use it, versus saying enterprise software sales where, you know, the price is orders of magnitude higher than that there’s an annual contract, like it’s a big commitment. Do we need to be concerned with the difference between the champion and the buyer, given our price point? Or do you think it’s a safe assumption to think that the champion probably has a discretionary budget to be able to spend 100 bucks a month?
- I think, frankly, that no person is an island anymore in a company. And, you know, something that is $100 a month to you, and should be cheap and easy for them to do, is actually a massive transition for the company, right? To now start selling direct. And it’s not a decision that person is going to make on their own, even if they can find the right tools at a cheap cost, right? So you’re going to be part of a big decision, and you’re actually the facilitator of it. And you have to help them share. You know, how they’re going to get that through the organization, and get everyone convinced, and aligned that now this is so easy and predictable, right? That we can do this, right? And we can cut the middle people out, and build a relationship with our customers, and give them better service. You know, and then the lift is they’ll recommend you to more people and things like that.
[31:45] Yeah, yeah. That’s actually a very good point: the decision to sell direct, or the decision to eliminate a big chunk of your third party sellers, or the decision to stop selling directly to Amazon and sell it. That’s a huge decision. A $100 is actually insignificant relative to the just that structural decision that any people who are going to be super senior in the organization are going to be involved in making. So as I say that I think to myself, well, then we probably need to have content around, ideally, case studies of, “Hey, look at this other company over here that used to do it the way you do it. Now, they do it this way. And here’s all the benefits they realized. And here’s how long it took. And if you’d like to achieve those similar results, great. We have all the checklists to make it easy for you to get there.”
- That’s the thing. What you guys really do, it’s a decision they probably want to make but they’re scared. And you can tell them the stories, “Hey, look at all these other people that made it and they’re doing great.” Everyone’s like, “Yeah, I would like to do that too.” What you offer is reduced risk, right? We make it easy to do, right? And predictable. So there’s no risk, it’s predictable. It’s something you should do. You’ve been scared of doing it ‘cause, you know, you might screw up. And then, you know, instead of selling your hiking shoes to awesome hikers that are doing the Pacific Crest Trail, now you’re like thinking about how to like, you know, organize something on Amazon, which is headache inducing, right? I mean, just a fire experience on Amazon is headache inducing. I can’t imagine what the back end is like, right? And we just reduced all the risk out of this, right? Because it’s actually not hard, it’s just, you know, something you don’t know how to do. But it’s not a hard thing to do. You know, it’s not like going to the moon.
[33:36] Yeah, it’s, I guess, metaphorically speaking, it’s the difference between saying to someone, “Hey, I want you to bake me a chocolate cake with I’m not going to give you instructions, go figure out how to do it.” Or, “Hey, I want you to bake me a chocolate cake, and here’s the recipe, and all you have to do is follow the recipe.” The second one I would say to the person, “Yeah, I can make that cake.”
- Yeah, in a video. And then here’s some things that can go wrong and how to fix it immediately, right? Like you over baked it, you know what I mean, things like that. Then all some people are like, “Oh, I can do it too,” you know.
[34:12] And I think we’ve probably covered it already. But one of the questions we said we were going to talk about is how do you reach your champions and your buyers? Is there anything that we haven’t talked about, about how we would reach those people?
- Yeah, there’s no checklist for it, right? Because every industry is different. The way they talk with each other is different, what motivates them is different. And this is the hard part of breaching a market is figuring out what’s unique about it, how people buy, where they congregate, you know, what wording works for them, what messaging type of work for that segment, you know, and the best way to do it, you know. Rather than throwing spaghetti at the wall, and talking about themselves, have customers be like, “Hey, would you like to hear my story?” What was the decision making in your organization? And what would be the best way to reach you? You found us, but if we want to reach you, you know. Have your allies and then promote them. They get something for it right there in your story. They get their brand out there.
[35:16] And we have, thanks to the other business, my Amazon reseller business, we already have relationships with dozens of different brands. So those conversations are easy for us to have.
[35:28] Okay. I’m just making some notes to myself here. So we are not VC backed, and don’t really want to be to be honest with you. And many of the competitors that we are up against are backed by VCs. How would you suggest that we go about competing with folks who have far more cash in the kitty than we do?
- Well, you know, the thing about a lot of businesses a lot of times, you know, there’s competition. And a lot of times the competition is better funded. You know, and you just have to be creative. And if you’re small, and there’s someone that’s big, right, you know, usually it’s helpful if you’re not doing the exact same thing as them, right? And then you have other leverages. You can charge last, be easier to adapt, things like that, right? But really, my rule book is if they’re zigging, you better be zagging. If the habit of the industry is doing X, you better be Y, and Y better be kind of more attractive to X to, let’s say, 5% of the purchasers. Right?
So, you know, one of the fallacies is, “Oh, you know, Nike sells shoes and this way, so I need to do it that way, too.” Right. And Nike has Michael Jordan. I’m gonna get a high school football star. So I don’t know, you know, I’m just using that example. But, you know, no, don’t do what Nike is doing. Do I keep on going with the shoe thing because you said shoes, right? You know, specialize, right? Do sell somewhere where Nikes not, you know, or reach buyers away, Nike’s not doing it. You know, on and on and on, you know. You gotta zig where they’re zagging.
[37:14] And we are doing that so far. We, you know, none of our competitors that I’m aware of are hosting a podcast. None of our competitors are as focused on the same niche that we are. I don’t know what they’re doing and thinking behind the scenes. But also, none of our competitors are going to have as much pre-made industry specific checklists, as we will have. Thanks to some content partnerships that we’re putting in place. So I do feel reasonably confident that we can achieve our own goals, even without the venture backed funding. Now, of course, time will tell and maybe at some point, we’ll change our mind about that. But for now, I think we’re okay.
- And this was good because you got to realize these VC backed places, right, they’re operating to different metrics than you, right? And they’re gonna blow through a lot of money to try to make a lot of money. You know, they have to return 10x to their investors, you know. And usually with that set of constraints, you’re getting a lot of bad decision making, you know, a lot of wasted stuff. You know, usually they grow too fast, and they will have a lot of internal people problems, constantly cycling through, reorganizing on and on and on as part of like that standard, “We’re growing. Yeah, we’re killing it.”
I mean, look, my last company, there is this competitor of ours, and they raised, I mean, so much more money than us. And they were funded by Andreessen Horowitz, right. And like Marc Andreessen was involved and dah dah dah dah. But they had bad technology. Just bad. They use the technology called Screen Scraping, right. To take an old app and make it work on mobile, right. And we did direct integration that would let you build a nice new app that would work on mobile, or web, right, or other portals. And these people, I mean, constantly copied our marketing, right, which was super annoying, right? Like our VP of Marketing came up with, you know, Micro App. So we were like Micro App. And a few months later, they’re Micro App, right? And Andreessen Horowitz would run the customers through their customer briefing center. And what a firm, I mean, they got them so many customers. But the product didn’t work, right? You know, and we ended up selling our company to Citrix for a lot of money. And then like six months later, you know, they’re off shopping the assets of what was left. But from the outside, they looked great.
So I wouldn’t be as fearful of a large competitor unless they actually have real traction and people are raving about them. Yeah, you know, because a lot of times they’re gonna fail, right. And there’s a reason why venture backed companies have a high failure rate, right. It’s because of that weird treadmill you get on.
[40:11] Yeah. If I do decide at some point that I want to raise money, do you ever suggest that—so let’s just make an assumption here. So let’s say that I can fund this thing to get to 100 grand a month in MRR. And we could say we’re break even at 100, only because we’re spending a lot on ads to continue to grow. And I want to continue to grow quickly because within five years, I want to have a meaningful exit. So let’s set the stage with that.
So a year in, we get there and I realize I don’t have enough cash on my own to fund this thing. The way I see it, I could do a couple different things. I could go and get money from friends and family, which I think would be my first choice. I could go the traditional VC route. Or I could do something, I recently interviewed Rand Fishkin, the founder of Moz on my show, and he raised some money for his latest startup called SparkToro. And that particular method of raising money is now kind of referred to as the SparkToro method, which is not the traditional VC approach. It’s a little bit juicer, or it’s a little bit, hmmm, no, maybe it’s not much different than friends and family. Anyway, long way of asking the question. When I get to that point, if I want to raise money, what would your advice be on how I should go and do it?
- Well, if you’re at 100k MRR, you’re over a million dollars ARR, right? That’s a much easier business to attract investors than, “Here’s me with my PowerPoint. If you give me money, I’m gonna quit my job and do this company.” There’s a lot of people raising money, right?
So then you have a viable business. And you have to go with what’s the growth of how it’s going to be. How to get from one million ARR, to eight, to 20, to 50. You know, you have to show that path. And then depending on that path, that depends on who you’re going to get to invest, right? But you know, and the good news is the days of having to be in Silicon Valley and blah, blah, blah are kind of over right now. Because no one’s meeting face to face. And it’s just accelerating an existing trend where a lot of entrepreneurs are in Austin, or Denver, or wherever the heck, right?
So, you know, imagine it’s like a year from now and everything’s getting bought online. You know, the brands that aren’t online are feeling more and more pressure to do so. You’re this great facilitator to do it. You got to a million ARR just charging $100 a month, but now here’s your new offering. That’s going to be $1,000 a month. Right? And I think you’ll be able to attract money, right? That’s a huge trend. Right? investors are looking forward, brands are struggling, right? And you can slot in. And then not only that, you can use your same software in other industries, right? So you just have to show that type of growth, vertical, where you are right now. And then horizontal, where else you can go to get the numbers up. Right? And that will attract investment. But then you also have to figure out if that is actually what you want to do, right? You know?
[43:20] Yeah, that’s very, very true. I do have some personal goals, and we don’t need to get into those here. But I would love to get it to a certain level within a five year period of time and then have a certain level of an exit. And then, I’m essentially off to do whatever I would like to do.
- So don’t even bother talking to VCs, right? Just talk to smaller investors, you know, people were comfortable with those kinds of returns, and you’re safe. That’s right, you’re right, a million ARR, you’re gonna take 10 million ARR, you’re gonna exit per session. And I mean, right now people can’t put money anywhere, right? You know, you hear this thing about, “Oh, no, you can’t.” Because you don’t make any money from the US Treasuries anymore, right? Well, in the zero interest kind of world. If people have a bunch of money sitting in like CDs or savings, just not making much money anymore, right? And the stock market is scary, right? Up, down, up, down. Right?
[44:16] So if you’re going the VC route, I would assume that you should be going that route only if you’re thinking, “Hey, I’m trying to build, you know, a $500 million exit.” Or what is the number?
- It’s significant. And you have to understand the VCs are not investing their own money. So if you go to smaller investors, they are investing their own money. The VCs, they’re getting money from, like, teachers pensions funds, right? And the teachers pension fund goes, I’m gonna put, you know, 60% of my money in bonds and 30% in stocks. And I’m going to take point 0.5% and put it in something that I expect the 10x out of, right? You know what I mean?
And so, yeah. You think these guys are, you know, ah, you know, they drive their Porsche, and they have a fancy office, you know. No, they’re under a lot of pressure. They got to do better than a hedge fund, they got to do better than the SMP. And they’re spending pension money, right? Like the cash register pension fund. And I mean, these are like real people, right? That are depending on them to return money. It’s not all just like family offices and stuff, right?. They’re part of an asset class that is the most aggressive, you know.
[45:26] Have you raised money from VCs, family offices, friends and family? Like kind of all of the above? Or did you habitually use one particular method?
- Uh, you know, early in my career, it was friends and family. And then since that, it’s all been self-funded and VCs.