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WADE FOSTER FC RS 14

How Zapier Went From 0 to 250,000 Users with Wade Foster

how to raise money for your business - wade foster interview

Are you looking for inspiration and specific tactics and strategies to grow your business? Want to know how to raise money for your business?

Trent interviews Wade Foster, the CEO and one of the co-founders of a rapidly growing company called Zapier. Zapier integrates SaaS tools from different vendors using triggers and actions.  It currently works with 300+ SaaS apps and is growing by about 10 apps per month.

Zapier has about 250,000 users and has raised $1.2 million. Among the investors are 2 of the most prominent venture capitalists in the Silicon Valley.

Listen now and you’ll hear Wade and I talk about:

  • (03:00)  Introductions
  • (06:45)  What did you do at the very start to test the idea?
  • (14:10)  What did you do after you signed up the first few users?
  • (15:30)  How long did it take to get to 1000 users?
  • (13:00)  What did you do after reaching 1000 users?
  • (17:30)  What was it like to be a part of Y-Combinator?
  • (19:00)  What had you accomplished by the end of the 3 months?
  • (22:00)  Tell us about the process of raising money.
  • (26:00)  What did you do with the money you raised?
  • (27:00)  What kinds of marketing activities worked for you?
  • (29:00)  What are some of the impacts of more integrations?
  • (30:00)  Tell me about the biggest mistake you’d made by this point.
  • (32:00)  How did you go about getting more integrations and users?
  • (34:30)  Why did you decide to be a virtual company instead of having an office?
  • (38:00)  What are the pros & cons of having a VC on board?

Resources Mentioned

More About This Episode

The Bright Ideas podcast is the podcast for business owners and marketers who want to discover how to use online marketing and sales automation tactics to massively grow their business.

It’s designed to help marketing agencies and small business owners discover which online marketing strategies are working most effectively today – all from the mouths of expert entrepreneurs who are already making it big.

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Transcript

Trent:
Hey there bright idea hunters. Welcome to episode 151 of the Bright Ideas Podcast, I am your host Trent Dyrsmid and this is the podcast where we help entrepreneurs to discover ways to use digital marketing and marketing automation, to dramatically increase the growth of their businesses.

If you are an entrepreneur and you are looking for proven tactics and strategies to help you increase traffic, conversions and profits, well my friends you are in the right place. How do I make good on that promise? What I do is I bring proven experts onto the show and I get them to explain to me exactly the tactics and strategies that they use to achieve the results that they’ve achieved. In other words I find someone for you, who have been super successful and you get to look over their shoulders, with hindsight to their benefit and see exactly how they got where they arrived.

In this episode I’m very pleased to announce that my guest is a fellow by the name of Wade Foster, who is the CEO and one of the co-founders of a very rapidly growing company called Zapier. They have about 250 000 users, they have raised 1.2 million dollars and among the investors are two of Silicon Valley’s most prominent venture capitalists.

In this interview Wade is going to share with me the story of how they got started, how they found the idea, how they tested the idea, how they got their first 1000 users, how they got into Y-Combinator, what it was like to be in Y-Combinator, it’s a pretty exciting thing to be part of to say the least and so much more. So if you’re looking for some inspiration, or you are looking for specific tactics and strategies to grow your own business you are going to absolutely love this interview. Get your pen and paper ready because there’s going to be lots of notes that you’re going to want to take.

Before we do that: quick announcement: I’m constantly emailed by people asking me what tools and resources I use to run my businesses. I have made a list of all them and on that page some of them are affiliate links so if you to GrabTrentsBonus.com and you choose to use any of those affiliate links to buy whatever software that it is, my way of expressing my thanks to you for doing so and there’s instructions at GrabTrentsbonus.com for this.

Just send me the email receipt for the purchase you made will verify that our affiliate link was in fact credited
and you’ll have the opportunity to choose from of some of my paid products and I’ll just give one of those to you as a free bonus as a thank you for using that link. With that said please join me in welcoming Wade to the show. Hey Wade, welcome to the show.

Wade:
Hey Trent, thanks for having me.

Trent:
No problem at all, thanks for making some time to come on. We’re going to talk about the story of how you’ve grown Zapier and you can tell me if I pronounce that properly enough.

Wade:
Zapier makes you happier, is the trick.

Trent:
Being from Canada, I’ve got the French-Canadian thing in the back whenever I see ‘ier”.

Wade:
Yeah, you’re not the only one.

Trent:
Probably not. There is probably some folks listening to this who don’t know what Zapier is yet. We’re going to get into that and it’s an app that I use I think is really, really cool but before we get into that stuff and the story of how you build it, let’s first introduce you, who are you and for the folks in my audience who don’t know you are, who are you and what do you do?

Wade:
Sure, I’m the co-founder and CEO of Zapier, I was born and raised in Missouri, live in California now and I spend all my days trying to help businesses make their tools work a little bit better for them and that all happened through Zapier which is a tool to connect other tools.

Trent:
Ok, give us the simplest definition I guess, you want to call your elevator pitch, or whatever you want to describe it, what exactly is Zapier?

Wade:
It’s a tool that connects other tools, I kind of use this metaphor of triggers and actions, so you can do things like; when I get an email it automatically create a trailer card, or someone fills out my unbalanced page and automatically saves them to Infusionsoft. It works with 300+ SaaS apps, so pretty much any tool that you might be using under the sun, you can hook up and do these cool little automations between the two of them.

Trent:
Ok, so folks in my case, how Zapier came onto my radar screen, is as some of you probably know, I use HubSpot and I use Infusionsoft and I wanted to be able to connect the two so when certain things happened in terms of triggers in HubSpot, I wanted the record automatically copied over to Infusionsoft and I wanted additional triggers to happen and I wanted it all to happen automatically. For example when someone completes the middle of the final web form in HubSpot I wanted a record created in Infusionsoft and I want my cellphone to go off without writing any code at all, because I don’t know how to write any code at all.

I was able to make that happen and I to use one other tool called PlusThis.com but I was able to make that happen in five minutes. Zapier does make you happier and in my case it does. Alright, where are you at now, what can you talk about, can you talk about revenue, number of users and traction, what kind of traction?

Wade:
Yeah, the latest numbers we published is that we are at 250 000 registered users. Quite a lot grown, 10% plus month over month, adding probably ten apps or so to the platform every month; good growth and trying to go faster.

Trent:
Absolutely, which is the name of the game. You have also raised some professional capital from angels and a couple EC’s and of course that puts a lot of pressure on as well. We’re going to talk about how you did that, but before we’re get to that, now that people understand that this is a company that is going places, let’s go back to the beginning because so many entrepreneurs, they’re always wondering how I get started, how I take this idea, how do I find an idea or how I take this idea that I got and actually test it out without blowing a bunch of time and a bunch of cash. So way early on what did that look like for you guys?

Wade:
The idea was originally my co-founder Bryan Helmig’s and I know Bryan playing music and we’d gone to the same to the same school together and we were always working together on projects and things like that, he is the developer, I’m marketing. We just kind of tagged team on various things, one of the things that tended came up a lot was we’d get clients that asked things like: “Hey can you make my Woofoo contacts go into MailChimp for me?” Or “can you get my CRM contacts to go into Google contacts for me?” Just like these little import export sort of deals between two different services.

We would write the code to do that and it was more hassle than what it was worth, it was small enough and easy enough thing to do but it’s not particularly fun or enjoyable but was clearly valuable to the customers. We start to think about what would it look like if we tried to do this, is there really that big of a problem.

I remember going to 37 Signals’ high-rises, the CRM that they have and I remember going to their Hope Forum and there was a thread about Google contacts integration that was probably about four years old and it had, I think somewhere around 300 to 400 comments of people saying: “Plus one, I really need this, most important thing in my business” that sort of stuff. 37 signals’ replied saying: “Hey, we would look into this, if resources came along we might take a look at it,“ that sort of thing.

But after four years it’s clear that they do not have the resources to really make it happen and on the priorities
I couldn’t really tell you why it hasn’t happened. So I started looking at other forums for SaaS companies to see if the same thing was occurring and it absolutely is and people were asking for integration in their forums and it was just too much work for a lot of SaaS companies really.

So what we did we started by building a couple of integrations in trigger action style thing, so we started with PayPal, High-rise and sms. The three very first things that you could do on Zapier was when someone pays you, you could get a text message about it via PayPal, or you could save them to High-rise. So that’s how we started, it was only that, but it was small enough that we could start. If people had that specific problem then they had a tool that would work for them.

Trent:
Ok, so this is really good stuff. How long did it take to code that?

Wade:
We actually did it at a start-up weekend which is these 54 hour hack-a-thon deals; we have the very first prototype up in less than 54 hours.

Trent:
So you got this prototype, you tested it, you know how it works now you need to get users and when you got no users, getting users is really hard to do, so what did you guys do? Did you go back to that discussion forum and started answering these people’s questions?

Wade:
Exactly, we would jump on the comments and I wouldn’t just forum spam them and tell them you should sign up for Zapier today, I would actually try and be helpful and say to them here is the API doc’s for this service and here is the API doc’s for that service, here’s how you might go about solving this problem with existing tools that was out there.

Here is Odesk or Freelance.com or places where you can hire people that who know how to do this. Then I would also though mention Zapier would say on the very end I’m working on a project that can solve this problem, here is a link if you are interested in talking to me about it at all, you can give me your email and we can chat.

That was all we needed to do, when we would put those comments in forums, we wouldn’t get a ton of traffic from that, we might get ten visitors or so a day from a single comment, maybe even less, but about 50% of them would reply and give us an email and start a conversation with us, which was fantastic. When we just started we didn’t need 10 000 people on day one, we just needed ten people to talk to and get feedback to know if this was working.

Trent:
Yes, classic program to do things in the beginning that don’t scale, you can talk to people.

Wade:
Yeah.

Trent:
There’s no better feedback than being able to talk to people. You had some of that conversations, you get people using the stuff, what then?

Wade:
Once we had people using it, there was many months, probably six, seven months of just polish that had to go into it, the product; the initial prototype that we build out quite frankly was not very good at all. People would sign up and would be barely be able to use it, I’d have to handhold them on Skype and get them on calls like this and walk them through setting it up, which was of course is not scalable at all, but people was still eager enough to use the product and we kept refining it and refining it and making it better and fixing things that they would bring up to us.

We kept driving traffic to the site, trying to get more people to get more interested in it and after six or seven months we were able to have, I guess what we would call a V1 and it wasn’t a NVP any more, it was like something that was good, it wasn’t great but we were proud enough that we could ship it and open it up to the public and let anyone sign up.

Trent:
Got to love those early adopters, huh?

Wade:
Yeah, yeah.

Trent:
So this six or seven month window of time, is it just you and your co-founder, are you guys full-time and if you are, because there is no money coming in, where you on angel backing that point, we’re you on credit cards saving accounts, how’d you pay the bills?

Wade:
It was myself, Brian and Mike and we were living back in Missouri at the time and it was a part-time project, we had day-jobs. Mike was actually in school still, we would work after work for another probably eight hours honestly and we’d work on the weekends. We would try putting just as much if not more time into Zapier as into our day-jobs at point in time, trying to get stuff going and get the wheels turning, get a machine going that we could actually start making money.

Trent:
Were you guys all first time entrepreneurs at this point?

Wade:
Effectively yes, we’d done some freelance work, we had some mini projects but nothing substantial ever came out of that.

Trent:
OK, those 2 were writing code, what were you doing?

Wade:
I was spending a lot of time trying to drive traffic to the site and get people to talk to us and use the product, get feedback about how it’s working.

Trent:
This is a real labor of love at this point, probably three guys sitting in one room pounding back Coke’s and pizza’s on the weekend and that kind of thing.

Wade:
That’s not too far from the truth.

Trent:
Alright, you get to your V1 and you realize that there’s something here, any idea how many users you had at that point in time, after the six or seven months.

Wade:
We had about a 1000 people who had signed up and paid an amount of money to use it that was actually interesting, our Beta was paid for as well so you had to pay to get onto our Beta.

Trent:
Ah, brilliant, so you really knew that you had a product that people really needed, how much would you charge them?

Wade:
It varied, the very first one’s all paid, yeah I think the first dozen or so paid a hundred bucks, but then we moved it around after that just testing the waters and feeling where people’s paying points were, I think it got as low as five dollars at some point in time and maybe as high as $200-$300. It was a onetime fee, you paid that amount of money and we told people you get in for the lifetime of the Beta, we don’t know how long it’s going to be, but for long as it lasts, you’re in.

Trent:
Ok, so those people aren’t getting a free ride anymore now they have to pay like everybody else?

Wade:
Correct, but when we actually launched, we gave them a year free and try to be very generous with them.

Trent:
Absolutely, give the love to the early adopters as a big old thank you; they played a pivotal role on helping you figure out what to do.

Wade;
Absolutely.

Trent:
Ok, then what? You had a 1000 users, seven months deep, you get a little bit of…..was the amount of money coming in, was that enough to cover the expenses like hosting and all that kind of thing?

Wade:
I don’t think so, but we didn’t have many expenses in terms of hosting or anything either at that point in time. It was relatively small.

Trent:
So it paid for the pizzas and the beer?

Wade:
It did, it paid for very little, but it paid for something, a few hundred bucks a month at the time.

Trent:
What did you do at this point, you got a 1000 people that have given you money, you’ve validated your product, then what happened next?

Wade:
We started to think about we’re still part-time at this point in time, we really want to make this go, we got this thousand people who paid to get into this Beta, we also got an email mailing list that has about ten thousand people on it and we’ve got about twenty integrations with popular SaaS services and a lot more people that want to integrate with Zapier or that we want to integrate with them. We really wanted to go faster and so we started to think about how might we do this, we ended up applying to Y-Combinator and went through their interview process and getting in for the summer 2012 batch.

Trent:
Nice.

Wade:
Once we got in, we moved everyone out to California and that happened to coincide right with the public launch of Zapier, the V1 launch was almost at the exact time we got into Y- Combinator.

Trent:
For those people who do not know what Y- Combinator is, you want to tell them?

Wade:
Sure, it’s a startup incubator. Companies that you might have recognize that have gone through there included Dropbox, Air BNB, Reddit, Stripe, some really big internet brands have gone through Y-Combinator. It’s a bit of university for start-up if you will, but condensed into three months, but that doesn’t do it entirely justice, but that’s probably the best.

Trent:
What was that experience like because you are going to be around a whole bunch of really smart, well connected, driven people, it got to have some impact?

Wade:
Yeah, absolutely, we’re in with about 80 start-ups in our batch, they have a dozen partners or so, who has all been involved with start-ups, some really big name start-ups, big acquisitions and worked with some really smart people, you kind of just inundated with people who really know what they doing, which is a fantastic learning environment.

Trent:
Give us an example of what it’s like once you moved to California, day to day basis, how did your lives change?

Wade:
Probably the biggest thing was we rented a small two bedroom apartment and we hold up honestly for three months we’re mostly spent the time with each other, just coding and trying to get customers, just doing that pretty much twelve hours a day or something.

Trent:
Six days a week, seven days a week?

Wade:
Six, seven days a week, we pretty much took breaks when we wanted them, we’d go and see a movie here and there, but most part Zapier was the only thing we cared about for three months.

Trent:
At the end of the three months what was the outcome?

Wade:
By the end of the three months we launched publically, we had over 30 000 registered users at that point in time, we’d gone from 20 integrations to 60 integrations, we’d launched our developer platform which allowed other people to do integrations with us and then we went out and raised our seed ground of money.

Trent:
During these three months you’re in Y-Combinator, what did they give you in the way of resources?

Wade:
There’s a hand full of things, for one they had network that has hundreds of founders that are, either still running companies or have exited and are now working in place like Google or Facebook or SalesForce, so you have access to that network. You have their expertise as well, so you do office hours with the partners probably once a week, where you get to talk about the biggest problems that you’re struggling with at the time. It could be customer acquisition, it could be some tech problem, it could be whatever, some partner on the staff that has gone through that and knows that and you get to borrow from their expertise.

You get a small amount of money, but it’s honestly trivial compared to the other stuff. The biggest thing is the focus that you get out of it, the fact that we moved away from all our friends and family, for three months we we’re hold up in the apartment and weren’t doing anything other than Zapier, was probably the most important thing that we’d done. We we’re able to achieve far ship, far more code and we achieved far more in that three month period than probably any other time because of that focus.

Trent:
No kidding. And was burn out ever a problem during those three months?

Wade:
Not too much, I think because you knew that there was an end in sight, at the end of the three months its going be a little bit back to normal. You never really felt too burned out about it.

Trent:
So you get out, get your 30 000 users, you’ve got a ton of street credit because you’ve been in Y-Combinator, did they prove pivotal in raising the money that you raised next or how did that happen?

Wade:
I think that YC has best said, is it gets you a meeting, somebody will at least take a meeting with you, doesn’t guarantee that you will raise money. Interestingly enough of the people that we raised money, I think only one of them did we meet after we went through demo day, almost all of them we talked to before demo day or even before we got into Y-Combinator so they’d express interest and they’d been following along with us for quite some time.

Trent:
Were these friends and family or were they private equity guys? What kind of money?

Wade:
We had a few friends that we’ve made in the business world, so to speak, some angels that we’ve met through working on Zapier who’d been early customers or early adopters of Zapier and then we had two institutional VC’s involved.

Trent:
Give me some details, because there are a lot of people who have not been through the process of raising money and is quite amazed the first time you go through it, so give us some insight having gone through that.

Wade:
Yeah, the interesting thing is, now as a first timer you think the best thing that you can do is pitch VC’s or pitch investors or whatever, but I think that actually it is a bit of the wrong way to go about it. The best way to go about it is build a good company, build a company that gets traction, build a company that people want to pay attention to even if it’s not a ton of people at first, especially in tech, especially if you’re doing B2B tech, consumer tech that sort of stuff.

Investors are paying attention, they’re watching products trends, they’re watching hacker news, they’re listening to what their portfolio companies are using. So what was happening to us was we started hearing from investors who wanted to take meetings with us saying: “Hey, I heard about you from so and so, I really think your company has potential, I’d like to chat and see how we can partner.” Which was cool and is actually pretty flattering at first, but then you realize afterwards it’s their job to take meetings, they can invest, they have the option to invest in 100% of start-ups that they talk to and they can’t invest in the stuff that they don’t talk to. Their job is to try and get to talk to you as much as possible, but the fact that they reach out is a good sign.

Then from there a lot of what YC helped out with too is perfecting your pitch, understanding what it is that they care about and hoping you tell a story that is interesting to them when you are ready to raise money. What we ended up doing, the process that we took which may or may not be applicable to others, was that through YC while we’re going through we actually turned down all the meetings, we said, “Hey we are not looking to raise money right now, but we’ll reach out later when we are and let you know if that’s all right with you.” And most people were totally fine with that. Once we were ready to raise money we reached out to them and say: “We would like to chat, we would like to have a meeting now if you’re interested. ”

We tried to line up as many of those meetings back to back to back as possible, I think I took 40 meetings in a span of two weeks with various angel investors or venture capitalists that I could, pretty much anyone. The approach that we took was breadth first, depth second so as many, many meetings as possible to just get a sense of who’s the most interested, who might commit quick and is really interested vs. who is more just surface level interested. So by doing those 40 meetings at once, we narrowed it down to a handful of folks that we thought could really be good. Those were the ones we worked on closing and we were able to get that done in about three weeks or so.

Trent:
You raised a total of how much?

Wade:
$1.2 million.

Trent:
Are you able to disclose what the valuation was for the money raised?

Wade:
No, we actually raised on convertible notes, which is another thing you people will probably want to read up on, if you search for convertible notes, you can find out about it from Quora and I think there is pricing stuff on YC site about convertible notes as well, which is not equity, you raise at an evaluation cap that says like; the next time you raise are the amount that we invest and will convert as this amount or less, depending on what the evaluation is that you raised at that time is. It was actually raised on a convertible note and not an equity run.

Trent:
Was there any debt service on the notes in the meantime or is it just the fact that they’re locking in their conversion rates.

Wade:
Basically locking in their conversion rates is the thing that they’re trying to do.

Trent:
After you raised that money, what happen then? Did you go the status quo and started hiring people like crazy; did you spend on marketing, where did it go?

Wade:
The biggest thing that we wanted to get right away was someone to help out with customer support, at the time I was spending probably: I would wake up at about 8 o’clock in the morning and I would work from about 8:30 till 3pm just doing customer support and answering customer queries.

We wanted to get someone to help share that load that was the first person, we hired that person and then from there that actually bought us a lot of time to figure out how exactly we wanted to go tackle things. We knew we wanted to get more integration on board and we knew we wanted to do a lot more in terms of on the marketing frame, customer acquisition front and I was able to spend a lot more time on that.

Trent:
What was some of the marketing activities that you started and worked well for you?

Wade:
The biggest thing that we started doing was we got a lot more serious about how we worked with our partners, so when we launched an integration we made sure to follow a bit of a checklist, we would do a couple of things. We would write about it on our blog, we would make sure it was in our newsletter.

We would make sure that there is an in-app announcement; we’d make sure it was shared on social and things like that. In return we would ask that of partners to do these things because these things will work well, some of them would do some of them, some of them would do all of them, that was really helpful for us because our best customers are their customers.

It’s really targeted so when they send an email out to their customer base and say you can integrate with all these other things through Zapier, it is a really good messaging, really good touch point for us. We made sure that we were doing that sort of thing on an ongoing basis and doing guest posts on their site, getting listed in their market places and things like that, which would help drive more targeted traffic.

Trent:
Did you have enough traction at his point that these people were coming to you and saying, “We would like you to integrate with us” or are you still reaching out to people saying “We want to build an integration for you?”

Wade:
At this in point in time it’s probably 80% of people reaching out to us and 20% of us reaching out to them. We launched a Zapier developer platform that actually does allow them to integrate with us.

Trent:
Ok.

Wade:
That’s where we were pointing most of those people to, if they were interested its’ like go there, that’s the official way to hook into Zapier. And because we had so many integrations by then, in August of 2012 when we launched that platform, we had about 60 integrations, each month it was growing ten to fifteen integrations a month. It became work impelling for a service to hook into Zapier because of that.

Trent:
The more integrations that you have, does that mean you also have more integration to maintain, I would imagine that it does and that’s going to drive up you costs?

Wade:
Yeah, the more integrations we have, there is more of a lot of things, that’s more customers we can talk to, that’s more ways that you can hook up tools in interesting ways, there is also more support, it’s more ways that people can get confused when they sign up for the site, it causes a lot of other interesting things as well that we have to work through from a product standpoint and from trying to figure out the best ways to introduce people to the integrations that they really care about.

Trent:
So up to this point in the story, with hindsight to your benefit, what would you say is the biggest mistake that you made, because being an entrepreneur is really just a series of mistakes and hopefully not anyone of them kills you and get smarter as you keep going? We all know you made lots of mistakes. For the benefit of the audience to try and help them to avoid making mistakes, what would you say is the biggest one that you made so far, at this point in the story?

Wade:
I think probably the biggest one is we had 10 000 people on our sign-up email list, who would express interest in Zapier, which is a fantastic number for a launch list, it’s a nice beefy list to market to and potentially get to use your services once you are ready, however we made the mistake of never emailing them until we launched. Some of those email addresses were six months, nine months old before they ever heard from us.

As a result it was pretty stale, we got pretty poor open rates, pretty poor click-through rates, we got some people there, we got some conversions, simply because of the size of the list, but it was not nearly as effective as it could have been, had we been nurturing that list on an ongoing basis and staying in touch of them. If I could rewind the clock, I would have made sure that we would have at least written an email to those folks once a month at minimum.

Trent:
Yeah man, “Hey, this is what we accomplished in the last month, thanks for being interested in Zapier.”

Wade:
Yeah,I think the reason we didn’t do that, I think we just kind of got scared, someone in tech and I’m not a huge fan of getting a lot of marketing and promotional emails and things like that, so we just kind of talked ourselves out of doing it, when in reality the worst thing could have happened is someone said: “Hey I am just not interested in this anymore”. At least the ones that were, would have remembered who we are.

Trent:
Exactly, I think the mistake you made, you made their decision for them instead of letting them make it.

Wade:
Exactly.

Trent:
Because there’s and unsubscribe button and they can click it any time they want. This phase in the story, this is middle 2012?

Wade:
Late 2012.

Trent:
Late 2012, what was the next big thing that happened?

Wade:
From here the path is kind of laid out for us, at least in the short term. We know that we need to get integrations, we know that we need more users, so a lot of the things that we spent our time on doing was: how can we get more integrations on board and how could we get more people to sign up.

There’s nothing really special or fantastic about this, we didn’t have a crazy press event, some epic milestone that send lots and lots of people our way, it’s just a bunch of daily commitments to do, work on new integrations and work with our partners to continually get education and resources out there. Over time our traffic grew from smaller amounts to much, much larger amounts and our conversion rates increased and just kind of spent a lot of this stuff that you have to do on a daily basis to run a web business, just optimizing those bets.

Trent:
How many people were on the team at his point in time?

Wade:
We had four when we hired the support person and we were pretty meticulous about when we brought new people on, we brought someone in December of 2012, we brought someone on in March of 2013 and we brought someone on in August of 2013. As we felt needs, we’re spending a lot of time spending doing X, we could bring on a person who’s full time job could be X. That’s how we really thought about it, it was just a series of how can I fire myself from this thing that I am doing that is maybe a little more structured than some other task that I need to go figure out next.

Trent:
Absolutely, so no great landslide events, just steady digging in the dishes every day, coming up with a routine, executing the routine, finding people to fill the void where you need them. Have we pretty much come to the end of the story?

Wade:
There’s a lot of things that we ended up doing differently, like for instance early on we had to decide are we going to be a co-located team or distributed team, we’re a distributed team, so that was a big decision we made.

Trent:
Let’s talk about that one for a bit because a lot of people are faced with that decision. Why did you choose to go distributed vs. co-lo?

Wade:
Mike, my co-founder, when we finished YC, moved back to Missouri because he had a longtime girlfriend that was still in school there and wanted to be close to her. It was a decision made for us, we could have kicked him out of the company but that wasn’t really a decision, which was not an option in our minds truthfully. It was made up for us, he’s going to be distributed why not other people, so when we started hiring folks, we just didn’t pay attention to location.

We learned some lessons along the ways on how we do communication, how we do hiring, how you structure meetings and things like that, for a distributed team. We spent a lot of time just thinking about, not just how we build a product but how we build a company, a team and things like that.

Trent:
With hindsight to your benefit, do you think there was any downside to going distributed vs. co-lo?

Wade:
Sure, I think there are downsides; I do think the upsides far outweigh the downsides. The downside of course is when you’re in-person some tasks is a lot easier, like brainstorming tasks can be lot easier, sketching out product features and things like that can be a lot easier in person. Fortunately things like brainstorming are less important when you have a roadmap in front of you, you spend 10% of time brainstorming and 90% of your time just executing on that thing.

One of the things that we do to try and mitigate that downside is every six months or so, twice a year, we fly everyone out to a location somewhere, usually in the United States and get together for a week and brainstorm on some of those things, work on the product together, mostly just enjoying each other’s company because we don’t get to see each other except for those two times during the year.

Trent:
So it sounds like that there are maybe seven or eight people on the team at this point?

Wade:
We’re actually at thirteen now.

Trent:
Thirteen, and are you at a point where the cash coming in pays all the bills?

Wade:
Yeah, pretty much so. We mostly re-invest all of our profits into the company, so we are at about net zero every month, but revenue pays the bills.

Trent:
That’s a nice place to be. I’m curious what percentage of the 1.2 million got spent, before you were able to achieve cash flow or break even?

Wade:
Not much honestly.

Trent:
Wow, that’s nice.

Wade:
Yeah.

Trent:
It is and it isn’t because in hindsight you think why did we take all that money, we could have owned the whole thing; however I’m sure you would attest the benefits of the relationship that probably came along with that money, were they substantial?

Wade:
Absolutely, we still work with our partners, our investors on a monthly basis. I make contact with them usually more frequent than that with at least with one of them. You know with help of a partner, with help on a situation around this, just to get their advice and their feedback because these are smart people, been there done that before. They may not know our exact situation, but they can at least provide insight on how they have seen it happen elsewhere.

Trent:
Having a venture capitalist as an investor, I have in my travels read all sorts of good and all sorts of bad. What do you think the best and worst parts of having a VC in the bed is?

Wade:
There are a lot of good things, one is you get access to their portfolio companies, which can be important for us.

It’s great because you’re integrating with a lot of portfolio companies, you get to learn from their experiences, their access is really pretty, pretty, broad, you get access to a lot of stuff that you wouldn’t get access to, which is fantastic for when you have problems, you trying to learn about something, you’re trying to meet with customers, meet with partners, you can short cut a lot of that stuff.

The downside is that you’ve got someone now that’s not you, that you got to work with, I guess. It’s easier to make decisions when it’s just you, just make a decision and go, but it’s nice at times too to have outside sparring partner as well, it’s kind of good and bad on both sides of the table. Somebody give you a gut check, play devil’s advocate, things like that. The downside of course is you give up equity and some of your company but for the most part it’s worth it if you’re thinking about building a high growth tech company.

Trent:
And as long as you’re meeting their expectations I’m sure they’re actually quite pleasant to have, it’s when you fail to meet their expectations that it’s not so much fun.

Wade:
Sure and you know they are used to it, their business model’s is that 1 out of 10 is going to get ahead, most of the time your company’s not meeting the expectations they have, hopefully if you’re working with someone good, especially in the venture community, they’re going to help you work through a lot of those issues.

Trent:
What do you think your next hire is going to be?

Wade:
We’re actually hiring right now for a *inaudible* partner marketing, someone to really help work with our 300 plus SaaS companies to get education, help promote the partners, help promote Zapier and just do a lot of content creation to teach people of all the awesome stuff they can do at Zapier.

Trent:
What would the compensation look like for them because I’m sure there’s a few people listening to this that might think, “Hey I’m interested in that?”

Wade:
We pay very competitive salaries, depending on your experience, how long you’ve been in part; it will probably be able to meet your needs.

Trent:
And do they get equity?

Wade:
Yeah, equity is on the table as well.

Trent:
Interesting, ok, what have I not asked about that you think that we should cover before we wind up the interview?

Wade:
You’ve covered a lot of the nooks and crannies of Zapier, I’m sure we could go deeper on specific topics or marketing tactics and things like that but that could be an entire different chat.

Trent:
All right Wade I want to thank you very much for making some time to be on the show and chat with me. I found it very, very interesting and I hope that you have enjoyed yourself.

Wade:
Yeah, thanks for having me Trent, this was a blast.

Trent:
No problem at all, take care.

Wade:
You too.

Trent:
Alright, to get to the show notes for this episode go to BrightIdeas.co/151 and if you really enjoyed this episode and would like to help me spread the word, you could very easily do that at BrightIdeas.co/love and I thank you in advance for doing that. So that is it for this episode, I am your host Trent Dyrsmid, it’s been my pleasure to have you come back for another episode of this show and I look forward having you back for another one soon.

Take care and have a good day, bye bye.

About Wade Foster

Wade is co-founder and CEO of Zapier. His work has been featured on sites like WSJ, Forbes, Mixergy and TheNextWeb.

 

 

JAMES DEER

How James Deer Has Grown His SaaS Company to $39,000 in Monthly Revenue

saas company examples

James Deer and his wife founded Gather Content, a new startup SaaS company doing just shy of $39K/mo in Revenue.

James started his career as a freelancer and built up a small client base. Eventually, he got so busy as a web designer that he had to hire a number of people. He quickly built up an agency to 13 people before he ended up selling it.

James will reveal the entire process he has taken with Gather Content – from concept to prototyping, getting customers, and getting funding, as well as long-term business goals.

Are you looking to grow a Saas business? Then this is an interview you do not want to miss!

Listen now and you’ll hear James and I talk about:

  • (04:00)  Introduction
  • (07:30)  How did you come up with the idea for Gather Content?
  • (12:30)  What did you do next after developing a prototype for the app?
  • (14:48)  What did you do after Smashing Magazine tweeted out your app’s landing page?
  • (20:00)  How did you get from $5k/mo to $15k/mo?
  • (23:00)  How did marketing automation play a role?
  • (28:00)  How did you discover who your ideal customer is?
  • (30:00)  How much monthly revenue are you doing now?
  • (33:00)  Tell me about how you raised some money.
  • (35:00)  How much did you raise and what are you using it for?
  • (37:00)  What does your exit strategy look like?
  • (46:00)  What does the future hold?

Resources Mentioned

More About This Episode

The Bright Ideas podcast is the podcast for business owners and marketers who want to discover how to use online marketing and sales automation tactics to massively grow their business.

It’s designed to help marketing agencies and small business owners discover which online marketing strategies are working most effectively today – all from the mouths of expert entrepreneurs who are already making it big.

Listen Now

Leave some feedback:

Connect with Trent Dyrsmid:

About James Deer

James DeerJames Deer is the founder of GatherContent– a service that helps agencies gather content from their clients painlessly. It helps replace the chaotic process of sending word documents, and emails back and forth for when you prepare web content. Previously James and his wife built up a small digital agency to 13 full-time staff which they later sold.

How I Made $19,000 While Learning to Create My First Software Product – And What I Plan to Do Next

Software

First, let me say this: I cannot write code – AT ALL.

Luckily, to be successful in software, I don’t need to know how.

My first attempt at creating software was a WordPress plugin that helps agencies connect with clients that don’t have mobile-friendly websites. I hired a developer to create the MobiLead Magnet for me.

To ensure that the developer built exactly what I wanted, I created a mockup that showed what every screen was supposed to look like and then created labels that described what each button would do when it was clicked. This didn’t require me to have any special technology skills, so no matter what your background is, you could easily create a mockup, too.

The plugin cost me about $1,200 to build and so far, I’ve sold about $20,000 worth of it. Given that this was my very first project, I’m pretty happy with the $19,000 profit earned so far.

The success of my landing page plugin has definitely increased my desire to improve the product and turn it into a fully featured Software as a Service (SaaS) app – and I’m very happy to say that is exactly what is going to happen—only this time, unlike every other venture I’ve been involved in so far, I’m not starting from scratch.

My Next Move in Software

A few weeks ago, I reached an agreement with the founder of ConvertKit.com to buy half of the company and in today’s post I’d like to share with you the thinking that went into this decision. I’d also like to invite you to come along for the ride as we attempt to grow this business from where it is today to our first goal of $30,000 a month.

Before we get into too many details, let me give you some background into why I think this particular business has so much potential. My hope is that when you see what my partner and I are doing, some of you will see ways that you might also get into the software business – even if you can’t write code to save your life.

5 Million Reasons to Love Software

Not so long ago I learned that Lead Pages had raised financing of $5M in a Series A round. I had heard the company was doing well prior to the round, however, I really didn’t think that a company making landing page software for Internet marketers would ever close a $5M round of VC funding.

I guess that shows what I (don’t) know!

Hearing this news made me think: if VC’s are backing a company with a SaaS app that makes creating landing pages easier to do, that must mean that some pretty smart folks see this as a market with HUGE upside, otherwise they wouldn’t have made the investment.

In case you aren’t familiar with the VC model, they are only interested in funding companies that can grow really big, really fast. Doing so involves huge risk (most fail); however, when the winners come in, they come in BIG TIME.

My First SaaS Business: a Software App for Marketing Agencies

BloggingImprovesInboundROI

(Source: Hubspot 2013 State of Inbound Marketing Report)

Longtime readers will know that I am the co-founder of a SaaS company currently in development. The software is designed for marketing consultants and agencies that want to profitably scale a “blogging for clients” service and helps them to significantly increase their productivity in this regard. It doesn’t even have a name yet, though we are getting very close to releasing the software to a select group of beta testers.

The thing that I love about the product that we are creating is that it is very much in sync with the massive increase in popularity of content marketing. For consultants and agencies, this represents a substantial opportunity to increase their retainer income by creating blog content on an ongoing basis for their clients.

The thing that is yet unknown about this is whether or not consultants and agencies will actually pay for the software that we are creating. We do have plans to take pre-orders, but we aren’t there just yet and I will feel a LOT more confident about the prospects for this business as soon as I have some pre-orders booked.

Normally, when I get into a new business, there is a lot of existing competition, so I have a very high degree of confidence that I’ll be successful. After all, if there isn’t any demand for a product, there wouldn’t be any competition, right?

“The existence of plenty of competition is a very clear indicator that customers are quite willing to pay for a solution and I believe there is always room for one more competitor”

With the SaaS app I mentioned above, we don’t really have much in the way of direct competition, and that worries me a bit. In the landing page space, however, there is a truckload of competition. This competition indicates a massive opportunity…plus a guarantee that people will actually pay for software that makes it easier to create landing pages.

My Second SaaS Business: Say Hello to ConvertKit

NathanBarryShortly after moving to Boise, I was introduced to a guy by the name of Nathan Barry. After meeting him for the first time, I came away from our meeting very impressed with how much Nathan had accomplished in his first year as an entrepreneur. To say that he’d made a success of himself is an understatement.

Nathan is an extremely talented designer, has written 3 books, has built a large following for his blog, and has extensive experience designing software. He is also the founder of ConvertKit.com, a SaaS business that makes it very easy for marketers to build a profitable audience. In fact, I highly recommend you follow along with our Audience Building Challenge.

As of this writing, ConvertKit has close to 100 customers and provides them with an auto-responder and responsive form creator. Did the world need another auto-responder with a form creator?

No, it didn’t need another one, it needed a better one, and that is exactly what Nathan has built.

The Product

There is definitely no lack of competition in the email marketing software space. The list of competitors includes names like Aweber, GetResponse, MailChimp, and many more. However, as I described before, wherever there is a lot of competition, there is also a lot of opportunity. To be successful, all one needs to do is create a product that is better than the incumbents for a well selected target market.

Notice that I said ‘well selected target market’. That is key. To attempt to go head-to-head with industry giants is generally a foolish move because there is simply no way to out-spend them.

However, when you are a scrappy start up that can make decisions and iterate quickly, there is also a substantial opportunity to pursue a niche market by creating a product, that for one reason or another, is better that what is currently available.

In fact, I’d go so far as to say that even if your product is only “just as good”, but your marketing message is better (for that niche), then you the odds that you will succeed are stacked in your favor.

Our Target Market

In our case, the niche that we are going to initially pursue is marketing agencies and consultants. The reason for this is pretty simple. Both Nathan and I have a fairly large following of these folks and we feel that we will be able to use this following to help us achieve our initial goal of $30,000/month in revenue.

Based upon the success of my MobiLead Magnet, I also know that consultants need a lot of help creating landing pages that will help them to attract more clients. To help them do this, one of the things we plan to add to ConvertKit is an updated version of the landing pages the MobiLead Magnet was designed to create.

While $30,000 a month might sound like a lot, in the grand scheme of things, a company that earns $360,000 a year is a very small company and we both believe that growing ConvertKit to this size is something we can achieve.

To help us get there, we intend to add features to ConvertKit that will make it a very compelling tool for our target customer and then use our marketing chops to attract enough customers to reach this first goal. Once we get to $30,000/month, we’ll have a very nice “lifestyle business” on our hands and will then need to make more decisions about our goals for the future, one of which will likely include our exit strategy.

Our Exit Strategy Options

exit-signOur goal with ConvertKit is to build a real business that generates a meaningful stream of predictable revenue (low 7 figures) and we anticipate that this will take us a number of years to achieve. The journey towards this goal will be filled with ups and downs, plenty of mistakes, wonderful lessons, and personal satisfaction.

In other words, it’s going to be a lot of work – and a lot of FUN.

When we achieve $1 million in annual revenue, the lifestyles that we will be able to enjoy will be fantastic and we’ll have done it by creating real value for our customers. At this point, I think that we’ll have much to be proud of.

We’ll also have some options for an exit that would not otherwise be available to us – and I’m sure that one of these options will be to sell the company for a healthy multiple of it’s revenue. If we were building a service business, as opposed to a SaaS business, the company would not likely be nearly as valuable because it would have lower profit margins and would not be capable of growing as fast as a SaaS company can – all else being equal.

I point this out, only because if you are building a company today, it’s very important that you begin to think carefully about how the business model (product or service) of company you are building now will affect your options to “exit” that business down the road.

The Team

As much as I like the product that Nathan has already built, the real reason that I bought into ConvertKit was because I wanted to build a landing page company and I want Nathan to be my partner.

ConvertKit is ideally suited to becoming a landing page company that also includes an auto-responder. Nathan has laid the foundation for that with what he built before I ever showed up.

I did consider some other options for developing a landing page company, but none of them included getting to work with a guy as talented as Nathan is – and, for me, that made buying into ConverKit the obvious choice.

The Opportunity That We See

It’s rumored that Lead Pages is currently doing about $250,000 a month in revenue. Having used their product, I can see why. They’ve made a terrific product that is very easy to use – and they’ve got a lot of traction with the Internet Marketing community as a result.

From a technical perspective, what they have created is actually quite simple and creating similar features in ConvertKit will not take us very long to do.

What Lead Pages hasn’t yet done is gotten traction with marketing agencies, consultants, and mainstream businesses (or if they have, they don’t promote that fact at all). They also haven’t build an auto-responder into their software so anyone that uses it must connect to yet another SaaS application. If you have been around online marketing for a while, this is no big deal. But if you are just getting started, it’s another point of friction in the user experience.

Think a bit of friction in the user experience is no big deal? Just tell that to Apple. Seems to me that there are quite a few people who are willing to pay extra for things that are incredibly easy to use.

SaaS30KTweet

Get ‘Em Young and Train ‘Em

When it comes to creating landing pages for mainstream small businesses, I think that the market potential is absolutely huge and for now, there is more than enough room for a number of competitors.

At the high end of the market, you have Unbounce. This is a very powerful tool, but it’s quite expensive and rather complicated to use. In my opinion the chances of a small business owner using it are quite slim.

There are plenty of existing plugins to create landing pages. I’ve tried many of them and they all seem to suffer from one limitation or another; and worst of all, they don’t really come with much in the way of pre-made templates. Without pre-made templates, there is more friction in the user experience.

I think that this is one of the reasons why Lead Pages has done so well with the Internet Marketing crowd. When I first signed into Lead Pages, the very first thing I noticed was how much effort they’d put into creating a fully stocked library of templates. Thanks to all the templates, I was able to create my first landing page in about 5 minutes.

By creating a product that serves the needs of customers who are just beginning to adopt online marketing, we believe that those customers will stay with us as they grow, so long as we keep developing more advanced features. That is one of the reasons that I quite like ConvertKit: thanks to Nathan’s design skills, it is very easy to use and is therefore ideal for people who are just starting out and don’t have to have to “read the manual” to get going.

Our Vision

With ConvertKit, our goal is to create an application that comes equipped with a wide variety of pre-made, yet completely customizable templates, all designed with the mainstream business owner in mind.

By giving these mainstream entrepreneurs a powerful tool to create high converting landing pages, as well as giving them a well designed auto-responder (so they don’t have to sign up for two different services and then figure out how to connect them), we feel that we’ll be able to get a lot of traction with them, and/or the agencies and consultants that serve them.

So What’s Next?

Building a successful business is not easy. The road to success with ConvertKit is going to be filled with highs, lows, and plenty of mistakes. To succeed, we are going to have to be smart and work our butts off.

If you’d like to come along for the ride, you’re going to get an insider’s view into everything we do – and we are going to share it all for free. It’s totally free and you don’t need to be a ConvertKit customer. To get each post emailed to you as soon as it’s published, sign up for the $30,000 mailing list below.

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