What's up, everybody? This is Cortland from IndieHackers.com, and you're listening to
the IndieHackers podcast. On this show, I talked to the founders of profitable internet businesses,
and I try to get a sense of what it's like to be in their shoes. How do they get to where they
are today? How do they make decisions, both with their companies and in their personal lives,
and what exactly makes their businesses tick? And the goal here, as always, is so that the rest
of us can learn from their examples and go on to build our own profitable internet businesses.
If you're enjoying the show, you should leave a review for us on Apple Podcast. It's one of the
best ways to give back and support the show and help other people find it. So I really appreciate
it. In today's episode, I sat down with Rob Walling, the founder of TinySeed. Rob is somewhat
of a recurring guest on the show. I like talking to him because he has such a wide perspective of
what's going on. He was a founder and a bootstrapper. He grew his company drip to an exit worth many
millions of dollars. He now invests in companies at TinySeed, where he gets a very wide purview to
see all sorts of trends and opportunities. And so in this conversation, we talk about what it
takes to start a successful SaaS company as an indie hacker in October 2020, not 10 years ago,
not five years ago. But right now, today, we cover the different trends and opportunities that you
should be aware of. We asked the question whether or not you should start an info product instead of
a SaaS company, given how crowded and competitive SaaS has become. And we take a look at how some
of Rob's portfolio companies are coming up with their ideas, finding their niches, and competing
in such a crowded market. It's obviously a lot to cover, but I really enjoyed this type of
conversation and hope to do this format more often. So I hope you enjoy the episode as well.
What are some new things you're seeing with SaaS companies today, then?
I mean, I think there's quite a bit because, you know, marketing channels that everybody thinks
about, they all have a half life, right? So cold emails started getting big in 2011, 2012,
when predictable revenue came out. And it worked really, really well in the early days, and then
it started working less well. And now what I'm seeing is it works in some niches that are not
overly saturated with it. But if you're using cold email to get on a podcast, for example,
Cora Lynn, I don't know how many emails you get, I think we get about 20 or 30 a week.
And I've literally let one person on the podcast in 10 years from a cold email.
So those are the types of things we're at. But I bet that, but pitching cold email to
get on a podcast, I bet that actually worked five years ago or something,
because no one was doing it, right? And there are still like niches, like verticals where,
like the interior design space, for example, because we have a company in batch one of
Tiny Sea called Gather. And cold email works for them because it's just not this oversaturated,
everyone's sending it to startup founders, you know, and designers and, and whatever. So
there's a lot new in the sense that old marketing approaches start to, to wither a little bit.
I'm not saying they don't work anymore, because there's so many classic, you know,
things that are going to work forever, but you just have to figure out what the new tactics are.
I think some things that, that are certainly still working today, perhaps better than ever,
like integrations are such a huge piece. Integrations are one of the few,
it's the remote, you think about Zapier, like, would you, would you compete with Zapier today?
Yeah, probably not. But I personally would not, but I've seen some people who are trying it.
And it's hard to say whether it's going well or not. But like, I think you've got a good point,
the integrations being like a huge most because they just have so many more than everyone else.
Yeah. Yeah. And that's what we saw. So with drip, which is email service provider,
marketing automation provider that, that I built with a co-founder sold in 2016,
as you already referenced, we had 35 integrations in the first 18 months. And that was such a big,
like lock, lock-in is not the right word because we weren't locking our customers in,
but it was just something that no one else had. And then there was the co-promotion. It's one of
the very few, in fact, it's one of only two marketing approaches that both allow you to
expand your reach as a marketable event and help existing customers. Because you think about SEO,
SEO doesn't help existing customers, right? Cold Facebook, cold email, Facebook ads,
they don't help existing customers. But integrations and content marketing are the
two bottom of the funnel content marketing where you're actually educating your existing customers.
So I would say those things are new. I think the other thing is everyone keeps saying it. I heard
from some people, oh, it's not helpful to hear this, but it is more competitive bottom line
because SAS wasn't even a word 15 years ago. And then it became a word sometime between,
I don't remember 2005 and 2008, and then more and more people. And there were all these niches
where you could launch a SAS and no one was there. And of course now there are very, very few of
those. So what I think is different even between, let's say five or 10 years ago and today is to
kind of shoot for one of these unfair advantages to get into it, to build something sustainable
in SAS. And I think being early is one, sometimes requires luck, sometimes there's skill involved
with being early to a space. Example of this is a barometrics, like Josh was early to the
Stripe ecosystem. It was before anyone else had done this one click OAuth thing. And that was,
that was the novelty. Now the fifth person, the fifth startup that did that, it was just less
novel and they didn't grow as fast as barometrics did. And then I think the other two pretty powerful
things are, there's three actually, having an audience, which I'm going to talk about because
I got into a kind of a Twitter conversation about the true value. Like if I didn't have an audience
today and I was going to launch a SAS, is it worth spending the time to build an audience today
to launch that SAS too? And my thought is no, it's not. But if you already have an audience,
yeah, there's a huge advantage there. And the other one is, there's another one that's your
network, right? You look at how Nathan Barry grew ConvertKit and it wasn't through his audience
because through his audience, it was at about 1500 MRR after two years or 18 months, it was his
network that built it. And same with me with Drip. I mean, there's been a bunch we've seen where
Noah Kagan's really good at this. And then the last one is this kind of unique ability.
It's like growth, but growth at a higher level. The growth chops, like one of the few in the
world has. Like again, Noah Kagan knows growth really well. Sushant Patel, Ruben Gomez with
BidSketch and DocSketch, like he knows SEO, like very few people. So if you have that,
you can go into a space, even a really competitive one, like Ruben's in the electronic signature
space, which is a nightmare, right? It's like you have DocuSign, you have HelloSign, you have all
these things. But having that ability to get in there and find that proprietary traffic channel
and just own it, that's a big deal. So that was a long answer. But those are kind of some new,
like newer things or newer trends. I think if someone's trying to get into SaaS today,
these are the things I'd be thinking about.
And you're being humble here. But one of the newest trends that's been on my radar here is
that as a bootstrapper minded SaaS founder today, you can actually raise money. And it doesn't mean
giving up the entire control of your company and having to be a slave to this goal of hitting a
unicorn valuation and having to hire and grow faster than is healthy for you. You can actually
kind of grow at a normal rate and still get funding and sort of de-risk your business. And
that's kind of what you're doing at Tiny Seed. And it just seemed to be like a ton of companies
and funds and just like vehicles for investing in people who five, 10 years ago had really no hope
of raising any money whatsoever. So we've got that to talk about. We've got all the stuff that you
listed. Maybe a good place to start is with this sort of audience first mantra and this tweet that
you made. So people have been saying this forever that what you want to do if you want to find an
audience or a customer base for your product is you want to build your audience first. So that
means you write helpful stuff online and you put out helpful tweets and blog posts. And eventually
you get lots of followers on Twitter and you get lots of people on your mailing list. And then you
can sell products to them because it's super easy because you've got the distribution channel
figured out. You've got all these people who want to hear from you. But your tweet, I think it was a
couple of weeks ago, you said building an audience first while it's still good advice when selling
info products. It's much less so good advice when you're selling a SaaS product. And that's because
ultimately people buy info products and SaaS products for different reasons. So why don't you
talk to us a bit about that? What does that mean and why do you think it's not super helpful to
build an audience when you're trying to launch a SaaS product? Yeah, I mean, I think such a big
part of this is info marketers, which I've, hey, I'm an info marketer too. I market information.
I have three books. I run a conference and events I would think of their community, but there's
information aspect to that. I used to have an online course. I don't really anymore. But so
I've done both. And by far having the audience with when I'm selling books or information or
education is incredibly valuable. And that's probably the only way I would go, you know,
if I was going to again, sell books courses and stuff like that with SaaS hour for hour,
dollar for dollar pound for pound, there are so many better marketing channels that when you're
selling a tool that helps someone get something done, because really quickly, man, if you build
an audience of 10,000 email subscribers, for example, you can sell a book to 1000 of those
people. That's not out of the question. And whatever you sell the book for, you know,
$30 you sell the course for $100 each. And suddenly you're talking about, you know,
$100,000 launch to 10,000 people is that's not even that hard to do. I bet you could sell,
you know, to more than 10% of your list. With SaaS, it just doesn't wind up that way. Because
in general, your audience, they don't all have the same pains that need to be solved month over
month at a price that makes sense to charge them. So there's Yeah, there's just a big difference.
So again, if you already have an audience, of course, it's an advantage. But if I was starting
today with your audience, and I wanted to launch a SaaS, that would not be something that I would
be doubling down on. I think it's an interesting point when you're talking about like what
percentage of your audience actually wants the thing that you're building. And for SaaS products,
it's usually much lower than info products, as you mentioned. And I wonder why that is,
because when I look at people who are building info products, they're often cultivating an
audience specifically around a topic that they know their audience is going to want to be
interested in that they're going to buy. So Adam Wadden is a famous example of this. I had him on
the podcast last year, he grew his Twitter account from something like 1000 followers to 30,000
followers in a year, just tweeting out these helpful design tips targeted at developers.
He's got super good at being helpful about this stuff. Tons of people joined his mailing list,
tons of people followed him on Twitter. And then he wrote a book about design tips for developers.
And he made something like 400 grand and his first day and a million dollars in his first month,
which are just outrageous numbers. But it's because in my opinion, a huge percentage of the
people who bought the book were also people who enjoyed his tweets. Like he wasn't tweeting about
random personal stuff in his life. He wasn't like, you know, you didn't have a random hodgepodge of
topics. He was only tweeting about this one topic that he wanted to write a book about. And now for
future info products, he can write other books or other courses about kind of a similar topic. And
it makes sense. Like his Tailwind CSS product is again, kind of like design for developers.
And I wonder, you know, in your experience, you've got a lot of experiences, SaaS companies,
most of the companies you've invested in, have not built an audience before they started their
SaaS products. But for the few who have, like, were they building an audience in the direction
of their SaaS product? Or were they building an audience that had really nothing to do with
their SaaS product ended up being? Yeah, no, that's a good way to think about it.
I think a specific example is there are so few people who build audiences specifically for SaaS,
they often do build it for info products, and then they stir-step their way up to SaaS.
So that could be a way of diluting it, you know, to your point that the reason that audiences may
not work as well is if they're not designed specifically for that. One big example I can
think of, and it's only an N of one, but it's a big name infomarketer who we would know his name
if I mentioned it. He built this list of I believe it was half a million who were following him. And
it's something there's something about when you build a really big list, there's a lot of aspiring
founders, there's a lot of people who want to do something. And so they're willing to buy a book
about doing the thing, and then never read it. So that's a big part where you can sell a course for
$100 or $1000 by promising this is going to show you the way because a lot of people will buy it
and then never consume it. And they don't, you don't then get a cancellation because you've
already sold it. And that's where the moment you introduce an ongoing tool of like, hey,
this tool will now help you put in the work and get it done. Within three months, everyone gives up
or the you know, a vast majority give up. I do think that's a big piece of it, right? Is it info
products in general have that? It's that there's an aspirational aspect to it. And there's a one
time sale aspect to it. And so anyways, I watched this info market to build this massive, massive
list. And he was making like, you know, hundreds of thousands of dollars on these launches, maybe a
million bucks. And then he went to launch a WordPress plugin. And he tried to do it on
subscription. And it didn't didn't work because people would sign up and they'd cancel because
no one actually wanted to put in the work. Then he went to a one time fee and he made
boatloads of money again, and said, well, now I can go to SAS. So then he launched a SAS and
got his ass handed to him. Because again, the people didn't want to put in the work and they
didn't want to stay subscribed to something. He was educating people how to make money online.
And so it was like landing page builders and Stripe integrations and this and that. And when
you were telling people, here's the ebook to learn how to do it, they were buying it WordPress
plugin, maybe they're willing to take a leap. Once it was SAS that they were trying to buy,
they didn't want to put in the work to actually build the business, you know, and they and they
let it go. So I think that's maybe the paradigm I'm thinking in. And I'm trying to think there's
so few people, you know, I think Ben Orenstein is one who built a list. He runs tuple with his
co-founders and he built a list that is developers. And then he launched a pair programming tool,
but that pair programming tool was already built and acquired and shut down by Slack,
the exact same idea, you know, was that was done two or three years ago. So the market was validated
and that was a huge gap that they entered into, which is a huge luxury, you know, and they did
a good job and they implemented well. But I would, I would venture to say that if Ben had zero
audience, he'd probably be approximately at similar, you know, order of magnitude as he is today.
Maybe it was some advantage, but should he have stopped and spent a year building an audience
while they were writing code? I would say that, you know, this is for sustainable SAS growth,
cold email and SEO chops and a network and integration. They're just way more valuable
than having this audience because you burn through the audience. That's another big thing,
right? You burn through it quickly. You don't launch five SAS products in a year,
but I've seen people launch five info products in a year. And the reason is,
is because you need new stuff for that audiences because audiences tend to be static.
Yeah. And you mentioned earlier, Nathan Barry, uh, as being someone who had built an audience,
like I was subscribed to Nathan Barry's list many years ago. I was reading his blog,
he's putting out so much stuff for aspiring founders. And then he launched ConvertKit,
which is this basically like, you know, email marketing software. And like you said, he stalled
his revenue stalled. And I had him on the podcast, like right after I started the Indiana podcast,
and he told me the story of how his revenue stalled. And it didn't really matter that he'd
written this ebook and built this audience and had a lot of, you know, his email subscribers.
And like the way that he broke out of that was kind of like, number one,
appealing to his actual network, which is not quite the same thing as an audience. It's people
that he actually knew that he could have, you know, one-on-one conversations with,
whereas an audience is kind of like, I think it's more of like a broadcast channel. You send an
email to thousands of people. You write a tweet to tens of thousands of followers,
but he also did a lot of like another tactic that you mentioned that, you know,
doesn't work quite as well anymore. But like just cold outreach. He would just email
individual bloggers and people and say like, Hey, what do you think about this? And he just
got so much feedback by doing the sort of thing that didn't scale. And so many like sales from
doing that that it kind of kickstarted his growth. And that was kind of the main lesson from my
podcast episode with him was like, what kickstarted his growth was just this cold outreach. So again,
you know, despite building this huge audience, it didn't really translate into success for his SaaS
business. And yet this advice to build an audience persists.
I think it's because a lot of people that are saying it are tend to be information marketers,
like there's very few Silicon Valley SaaS founder, like look at the big Silicon Valley
companies or anybody that gets venture funding and is growing a SaaS company,
you don't hear them saying build an audience. You typically hear it from the
Twitter sphere and the bloggers and the info marketers. I mean, that's, you know,
and building an audience again is not a bad thing to do. You and I have both done it,
right? And it's amazing. If you want to build a podcast in a community, yes, build an audience.
You know, if you want to build a SaaS company, I would say, yeah, again, I think it's just a
little less. But earlier, I mean, do you feel like, can you think of an example of us that,
you know, of a SaaS founder who built an audience beforehand and really, and I don't mean a launch
list because I, you know, when I was launching drip, of course I built a launch list of people
who wanted to sign up for this new ASP, whatever. But my audience who was following me, the podcast
and my email list and my blog and everything, they were more, they're startup founders, right?
And I was definitely targeting drip at startup founders, but it's not like I cultivated the
whole audience around email marketing. I was not the email marketing guru. And I'm having
trouble thinking of anyone, anyone who has done that. Can you think of an example?
I mean, this example kind of blurs the line between what you would consider an info product
in SaaS, but I think Peter Levels has done an undeniably phenomenal job building an audience.
He's probably the best person when it comes to building in public. He'll sit down, put up a
Twitter poll for like, what should I build next? Put up his mockups in public, just tweet every
step of the process. He's not embarrassed. He doesn't care if it looks crappy. A lot of people
like seeing what he's building, and he ends up attracting lots of different makers. And then he's
kind of building for these makers. And his first product, Nomad List, I don't know, maybe you would
call this an info product, but it's essentially a bunch of information about like, which city should
you travel to? Except rather than being something that he manually updated himself all the time,
it's kind of this living, breathing website where the community members themselves are constantly
updating this data. And he doesn't have to do like a crazy amount to keep it fresh, because it's kind
of crowdsource data. And he sold access to his community. And then off the back of that, since
he had so many digital nomads who are using this, he built Remote OK, his job board. And if you are
basically a developer looking for remote work, or pretty much any job looking for remote work,
you can go there and find a job. And it works the same way as any other job board, which again,
is not necessarily an info product. It's not a course or an ebook, but it kind of is just like
this marketplace connecting two different people. And it's not quite like a SaaS product with a ton
of features. I would lean towards calling it SaaS, but like, I think he did a pretty good job
converting his audience into users. But I also think a lot of his users just come from like
search engine optimization, and these other channels. And I'm not sure how much of his
Twitter following, which is substantial at this point, it's close to 100,000. I'm not sure how
many of them are actually Remote OK users. Right, at a certain point, the growth has to turn from
your audience to these flywheel channels, the SEOs, the cold outreach, the advertising, because you
just, no matter how big your audience is, you tap it out. And when I look at Nomad List, does he have
a, like when I think of SaaS, I think of someone paying a subscription, usually for a tool. I mean,
two-sided marketplaces, they're on the line, as you said, of if one site is paying, then maybe that's
SaaS, but it's more subscription software. But is there, is Nomad List, do they monetize with
advertising? Aside from the job board, do they monetize with advertising or is there a subscription?
So yeah, there's advertising and there is also a subscription. So he's got kind of a community.
It's similar to like, let's say I had made any hackers paid from the beginning. You know, you
have to pay, I think he just started charging like a dollar a month or something just to filter out
spammers from the community. But then it turned out like having a community was a very natural
thing to do for like a bunch of digital nomads who like want social connection when they're
traveling. So it actually makes a decent chunk of change from people paying a monthly subscription
to this community. I think they get, you know, access to each other. They can, you know, leave
comments on these different locations, just meet up with each other, which is, it makes sense. But
again, I'm not sure like, would you classify that as a SaaS company? So personally, I wouldn't,
I think of that like, that's like the dynamite circle or like micropreter Academy, which I,
a community I launched in 2011 or founder cafe or e-commerce fuel as a community.
I don't, I mean, they're recurring subscriptions, but it is to be around other people. It's not a
tool that I log into to manage my projects. You know what I mean? I think of SaaS more as
tool based. And this is interesting. You and I could probably go down a whole philosophical
rabbit hole around the definitions of what is SaaS, like is subscription software SaaS or does
it have to be a tool to solve a business problem or, because communities and do side of marketplaces,
I do think are kind of on the line there. So I don't know that it's, you know, necessary that
may be another podcast episode that we want to dig into it.
Well, this reminds me of what I would consider to be another trend. I find myself talking endlessly
in the podcast nowadays about these info products about educating other people. And it seems like
among any hacker types, it's just becoming increasingly popular to make money through
info products. And so like Peter levels is a good example, because he's so inspiring to people,
he just posted a tweet the other day. He's like, year one, I was making 10 grand a month year to
20 grand a month. And it goes all the way to year six, seven, read last year's making like 80 grand
a month. And this year's up to 120 grand a month. And like he's got these like borderline info
product community type things. And you see a lot of people, you know, doing the same thing
with sub stack, you see people following an Adam wadams steps with launching online courses.
It's like info products are a new thing. But I think for a lot of people, when they look at the
advantages between building an info product, and building a SAS business, it's starting to look
like info products might be a better deal. And there's a lot more buzz even in Silicon Valley
nowadays about info products, and about like people with these sub stack mailing lists,
and these people with these huge Twitter followings, than I think there ever really have been
in the past. And when I look at like why people want to start SAS companies, often, especially
if you're a developer, it's this dream of just having like not having to not do a ton of work.
And yet, you get this recurring revenue, right? You build this like money making machine. And of
course, you and I know, like it actually is a ton of work. And you don't get to sit down and rest
on your laurels. But like the dream is like, yeah, you create some widget, you build something,
you go to sleep, it keeps making money, the code keeps working for people. Whereas if you're doing
a paid newsletter or subscription thing like that, you've got to keep putting out content forever.
And you're never going to be able to like chill, which sucks. And if you're doing an info product,
it's usually this transaction that's upfront, people pay for it once they don't pay for it again.
And so you've got to write more books and courses in the future. And so it just seems
like super effortful. And yet, people are really into it this year, just because of how much money
you can make and how quickly you can make it. So what do you think about this sort of dichotomy?
Like, should any hackers be thinking more about info products? Or should, you know,
is SaaS still viable despite being super competitive and taking a while to get started?
Oh, SaaS is still super viable. But I mean, this is the stair step approach to bootstrapping,
right? It's like, just Google that phrase if you haven't. But I wrote this post,
I've done a conference talk on it. And it's start small with one time sales products,
whether it's a WordPress plugin or an info product, there tends to be less competition,
you tend to be able to gain confidence, you make your first dollar online,
again, building an audience is isn't that hard compared to building and growing a SaaS company.
And so, yeah, I mean, the info product phase or the info product attraction from our communities,
our developer and early stage founders has been around for as long as I can remember,
there was patio 11 launching his email marketing course back in 2011, I wrote a book in 2009,
and launched an online paid membership site in 2010, Amy Hoy did something in the I don't
remember what is the early 2010s when she launched, you know, what's it called 30 by 500? Is that
right? Yeah, there are but I mean, there's, there's legions, you know, of us and we've been
doing this for a long time. I think the probably rise in popularity has come around because of
well, a couple things. One is it SaaS is more competitive. But I also think that, you know,
there's more and more people on the internet all the time. And there's more and more people in
these communities all the time. And I do think that it's easier today. Well, it's competitive,
it's easier today to build an audience than it was pre Twitter, you know, when it was just
blogging and dig, in essence, for those who remember dig, I do think it's a perfectly
viable, it's a great place to start if that's your thing. And now some people don't want to
build an audience, they don't want to build info products, and they really do just want to run a
SaaS. And they look at stair step and they think, oh my gosh, I don't want to build this thing for
now, get up to 100 grand, then I quit my job. And then next I build a SaaS after that. To me,
that's the most repeatable, most reliable way to do it. But I understand if you just don't want to
do that, I have many, many SaaS friends who just have zero desire, and they really just do want to
build, you know, build the company. But multi million dollar info product empires are they've
been around for as long as I couldn't remember from back in the, you know, the I'm trying to think
there's like Derek Halpern. And there is there's just that whole there's a whole crew that was in
the 2005 to 2015. And they're all still around, but they you know, they've shifted what they're
doing. And this is now, I think, entering our sphere more, I think it's always been around,
though. I'm curious, why do you feel like it's more popular now, or it's become more on your radar?
Seems so. I think the point you made is a really good one that there's just more people online
doing this kind of stuff. Like there are more people who can consume the content that you're
putting out. Yeah, Twitter is bigger than it's ever been. Like the tech industry is more
participants than it's ever had. There's this whole no code movement. So now you have people
who don't even code, who are talking about starting like SaaS companies, which is crazy.
But it just expands like the circle or the market of people that you can target,
which I think allows for the people to just have more room to produce info products. There's also
more platforms for producing this stuff. So I mentioned Substack a couple times, and you've
got this whole creator economy where like people from the non tech world, ironically, been using
these tools created by people from the tech world to make a living online for many years now. There's
like a lot of famous YouTubers, a lot of people get getting rich off Patreon or Etsy, or all these
different platforms where they can just kind of be creators. But there hasn't necessarily been this
platform for people from the tech industry. In what way did people from the tech industry
really make money by using some sort of platform to put out content? Like really like nothing,
to be honest. They have to usually create their own sort of business, like Ben Thompson from
Shitekri, for their own blog, and they roll their own like Stripe integration. But now we've got
like Substack and like Ghost recently added pricing. And I think it's just becoming more like
en vogue for people to use these platforms to put out content and build an audience.
So that might be bolstering the numbers as well. And I think just like the success stories are
crazy. Like when you see how quickly people can make money doing this stuff. Drew Riley was on
my podcast a few weeks ago. He started his newsletter Trends earlier this year. And he's
already at like over 25 grand a month in revenue. I had a founder who wants to be anonymous, but like
he had a couple months this year where he made over 500 grand in revenue from like a video course
that he made. Like there's just so many people who want to learn how to code or who want to learn
different skills and who are willing to like shell out money for like these info products.
And I think when you look at even a lot of the SaaS founders I've interviewed,
they frequently like get to higher revenue multiples. And it's a little bit more scalable,
obviously. And it's like, you know, they can kind of hire out and then, you know,
take a step back as a CEO. And they're not like sitting there writing code forever in the same
way these info product people are like working kind of to the bone. But at the same time,
it just takes so much longer to get there. Most of the SaaS founders I talked to who are in
millions of revenue have been working on their products for half a decade or a decade. Whereas
a lot of the info product people are like, they started this stuff like last year. And they're
already building up to like, yeah, so I think there's something just inspiring about it. And
it seems like, as you said, like with your stair step approach, if you're going to get into
this, it's a really good first step to take. Yeah, yeah. And I totally agree. It's a way to
get there way faster and not do the long slow SaaS ramp of death. And then if you can build that
confidence, the tool belt, the marketing chops, and then you make money. I mean, if you do make
hundreds of thousands a year and how launching a SaaS that becomes a lot easier, right? And that's
in essence what I did. And I've seen other folks do it. The thing that I will say is most people
who I've seen do info products, they eventually get tired of it. Nathan Barry, you've interviewed
him. Why did he stop writing his books? He was making hundreds of thousand dollars per launch.
Well, he says it was a hamster wheel. Why did I, you know, lean further into software? It was also,
it was like a the value, the long-term value, the scalability, and the revenue multiples. If I ever
wanted to sell, there's no value in, I can't sell my personal brand. I can't sell, start small,
stay small. I can sell drip from, you know, many times the revenue. And that became a new goal for
me when I hit 35 or 37. It was like, yeah, I just don't want to be cranking out content anymore.
So that's the flip side. But I also think that that info products and courses and stuff are
an amazing business. I do, I would say, if you look at Substack and Patreon, and you know, these
other tools that enable the creators, those tools are that they're selling picks and shovels,
right? To the miners in essence, they're selling the tools to get it done. And those companies
will become worth way, way, way more than almost all the creators using them. You know what I mean?
Or not almost, but all the creators using them. And so the real money, if you, if that becomes
the goal, like if you, Hey, I want to, I don't want to be make a million dollars a year that I'm
paying income tax on. I want to sell for a hundred million dollars and pay long-term capital gains on
that because I, you know, built this, this Substack to 20 million in annual revenue or whatever.
So again, it does depend on your face. If I was in my twenties, my goals are different than if I'm
in my forties, you know, or just depends on the face of life and goals and, and really what you
want out of it. But I love that we have these options. I think it's own, it's only positive
for our community that we do have the option to do info products and that they are shortcuts
overstating it, but that they are definitely a shorter cut than trying to build SaaS and Scratch.
And the line between, you know, what's an info product on like what's a SaaS company seems to
be blurring a little bit, or at the very least I could say that info products look a little bit
different than they used to be. Because back in the day it was like, you do an ebook or you do like
a course. And like, that was kind of it. It's pretty much like the only info products. Whereas
today I would say like, you know, obviously Nomad list is kind of like this weird blur.
Like what even is it? Is it an info product? And the hackers itself, arguably an info product.
It just started as a blog, but it kind of morphed into a community and then like a lot of other
like tools and resources for people. And so like, if you're like me and you like coding,
quite frankly, I would also get bored doing nothing but interviews all day, every day.
And that's the only thing I do. But like, I spent a great deal of my time like coding
actual tools and utilities for indie hackers. And I think there's kind of this easy way to move
from an info product into more of a tool. And Adam Wadden did the same thing with Tailwind CSS,
where it's like, okay, I'm writing books, but like, what if I created my own CSS framework,
and I charge like a subscription for the community attached to that. And that's working really well
for him. A lot of the people who have gotten into this are at that kind of like early phase
of being an indie hacker where they're like, they don't have an idea and they're not sure what to
work on. And because we're like the SaaS markets are so mature, I feel that people feel pretty
intimidated. And they look out there and they're like, I just can't find a niche to build a SaaS
company in like, I just don't know what I'm going to do. Whereas when they look at info products,
it seems like pretty easy to come up with an idea, I could teach people this, it's crowded,
but it's so like, not winner take all that you can be like the 45th person to teach people react
and still make seven figures a year from your react course. You mentioned earlier that you
don't think SaaS has gotten to the point where it's too competitive or there aren't new ideas.
How do you look at this? How do people who are trying to decide what to do,
how do they find a niche in a SaaS space?
Yeah, I mean, there's obviously a bunch of different ways. I like to think of it in terms
of just different frameworks or mental approaches, mental models to get in. One thing that I've seen
a few people doing well, Craig Hewitt did this with Castos, which is podcast hosting, is first he
started a productized service, which was podcast editing and production services. And he got that
up to, I don't remember, 20, 30 grand a month. And it requires people to be involved. It's not
software, right? It's a bunch of people doing stuff, but productized X hundred dollars a month.
Then he was in the space, he was talking to people and their WordPress plugin came for sale
that was called Seriously Simple Podcast Hosting. And it is a plugin that you install in WordPress
and you can have a podcast. So he acquired that for a very small amount of money. And then he
built Castos, which is just a straight up SaaS. It's platform agnostic. It's not only WordPress,
it's subscription and it's podcast hosting. It's what I use for tiny sea tails and startups for
the rest of us, microconfaunaire. And that's how he got into it, is through this through-line of
kind of these other businesses that he started. And he didn't have, with podcast motor, which was
the editing service, he didn't have the long, slow SaaS ramp at death. He got up to 20 or 30 K
within 12 months, maybe 18 months tops. But then the real avenue to get into Castos,
because starting Castos from scratch would have been really hard, was this acquisition very,
I think he said it was on my podcast, it was like mid four figures or mid to high four figures.
So it was like less than $10,000 I'll put. And if you have this productized service doing 20,
30 K a month, dropping five or 10 grand on something that allows you to basically get a
leg up, get tens of thousands of free users that you can then learn from and build a SaaS on.
That's a very small price to pay at that point. So I think purely just looking for avenues to
like acquire something or adopt something if you don't have the money, I think is a really
interesting idea. Yeah, I think that's super interesting. I hadn't thought of that because
essentially the problem is that the markets are too competitive and like everything's already been
done before. Let's say you believe that. Well, then you can just buy something that's been done
before and now it's your thing. And if you can get into that by selling an info product or by
having a productized service, like in your example, that seems like a really good place to start.
A lot of people who are considering being indie hackers have the funds, even if they don't
already have an import product. A lot of people are developers and they're like, well, I'm making
a lot of money working for Google and I want to build something on the side and earn my own
freedom for my own product, but I have to quit my job, et cetera, or I have to work on the side.
And I think often the answer is like, no, you don't. You can do exactly what you were doing
12 years ago, work a job, use your savings from your job to basically buy a SaaS company.
You don't even have to take this first step of having an info product or a productized service.
You can just use your developer salary to basically buy something.
So I think that's a cool way to break into the market. But you've invested in like quite a few.
I mean, in Tiny Seeds 2020 batch, I think almost all of your companies are SaaS companies and like
most of them are B2B. How are they getting started? How do they find these niches?
Yeah, that's a good question. I was actually just going to mentally run through them. There
are several where they were scratching their own itch. So there's like two of the companies
are in the construction or related to construction and both of the people who started them were
in the construction space and the software is this downloadable Windows software. So they
wanted to scratch their own itch in terms of making something better.
So I think you do have to decide, do you want competitor pain or customer pain?
So competitor pain is when you build an email service provider because you have competitors
everywhere. It's a feature race. It's like, oh my gosh, every day MailChimp and Drip and
Klaviyo are launching stuff that I then have to compete with. So competitor pain is where it's a
mess. Customer pain is where it's much, much, much less crowded. Like in the construction space,
in the legal space, the software is shit. It's terrible. But now you have customer pain because
these are folks that are non-technical. They're pretty hard to sell to. They tend to be a little
price sensitive. The margins, especially in construction aren't great. And the support is
relatively high. Or if you're selling, you could build software for insurance agents,
right? Independent insurance agents. And it's like, cool, there aren't that many competitors
and the software is really bad. You can build great software, but now you're taking that burden
of a competitor or I'm sorry, of the customer. So anyways, a couple of them are scratch your own
itch. There are a couple that are subject matter expertise. So there's one called in batch two
called deal forma. And it is a database of M&A and fundraising in the pharma, in pharmaceutical
big companies, big companies and companies that are raising funding and all types of people buy
this right. Pfizer might want to subscribe to this so they have info on who's raising money,
who we might want to acquire. And then there's some brokers that buy it because they want to know
what deals are happening or whatever. So Chris, the founder was kind of in the space and was looking
around for this kind of data and realized he had a real expertise in processing this data and being
able to produce it. So it is a SaaS subscription service, but it does border a little bit on the
info. But they are, yeah, I mean, they're going out and pulling and sanitizing the data and
there's a lot of technology behind it that makes this thing really valuable. So there was a little
bit of industry knowledge there. And then I'm trying to think of what else? Oh, like Squadcast,
you know, what you and I were talking about before we hit record, I guess they saw, I wasn't,
I think they were going to start a podcast they never did at the time. And so it wasn't necessarily
scratch your own itch, but it was seeing a need in the market of like, there really wasn't a high
quality way to record, you know, and so let's build this tool out.
That's a good way to break it down. And I think the first two both require some degree of expertise,
because if you're solving your own problem, ideally, you're an expert in at least in having
that problem. Yeah, like, you know what it's like to have that problem and what you need
solved. And like, if you're not lucky enough, and I'll put lucky in quotes here, because like, you
know, there's ways to just like be dedicated about identifying your problems. But if you're not lucky
enough to have a problem that hasn't been better solved by competitors, then I think it can be tough
because a lot of people say, well, I'm trying to solve my own problem, but like, I just don't have
any valuable problems. Because they don't happen to work in a nascent industry, like construction
where tech is not really, you know, tech is nascent in that industry. And tech hasn't really taken
over. Right. I've interviewed other people who are, you know, building SaaS for, you know, real estate
brokers and all sorts of industries that are just a little bit slower to adopt tech. So that seems
to me like pretty similar to this idea of having industry knowledge. And then squad cast, I think,
what's really cool about them is they're taking advantage of like, they found a gap by taking
advantage of new technology that didn't really exist before. So before I use squad cast or
indie hackers, I use Zen caster. And the founder is in caster basically saw the same thing like,
hey, there are these new browser API's where you can actually like record live audio on the browser
and upload it and like this did not exist a year ago. And now I can take this problem and I can
basically or take this new technology and I can basically build a product for podcasters that
doesn't exist. And that can be super early because no one else is doing this. And then I think squad
cast in a way leapfrogged Zen caster because one of the big issues with Zen caster is that you can't
see the person you're talking to during the podcast. And so squad cast is like, well, you know,
the browser is making video chat better than it's ever been. Like this is an opportunity. And so I
think that's another great way to find ideas. Like what's actually new, what's possible that
wasn't possible five or 10 years ago or even last year. And we're seeing a lot of this also with
AI, like I just talked to a guy who's got an AI generated media company. And he's able to interview
like 1000 founders in three months with like an AI bot basically. And like you see GPT three and
people producing like these, these blog posts that you can't even tell they're not written by a human.
And so like, who even knows what kind of companies are going to come out of that. But I think as a
founder, when you're looking out into the world, you're trying to figure out, you know, what am I
going to work on? And you're dealing with this, I love the way you phrase it, like competitor risk
versus customer risk. Both of those seem super scary, right? Oh, I got to build something like
no one's ever built before. Like, I don't know if customers are going to like it. Or I got to find
like some crazy super niche that like, you know, I'm not even sure where to even start looking to
find one of these niches. Versus I got to build something that's already been built before. And
that company is crushing everyone. And they have a million features going to take me five years to
catch up. Both of them seem pretty challenging to deal with. Yeah, but they are except for
competitor pain. These days, personally, if I were to build another sass, I'd probably go after
that. I know I do have the experience and some assets at my back to be able to do it. But I love
the bigger markets. And oftentimes with competitor pain, all you do is find out why does everyone
hate this competitor. So Salesforce is huge. You know, there are people out there that don't like
it. Why not? And can I build a product that is basically the opposite of Salesforce? Infusionsoft,
back in the day, they're marketing automation provider. They were big. They were growing fast.
But there were a bunch of people that hated it. So when we pivoted drip away from just being a
little email capture widget, it was what is Infusionsoft doing poorly? And what can we just
just truck them on, right? QuickBooks. Everyone hated. Not everyone. Some people hate QuickBooks.
Zero came in and said, what do you hate about QuickBooks? Oh, it's not online. Oh, it's not
easy. Oh, it's not this and that there are space and those are really competitive spaces. But again,
I wouldn't do it as a first step on my stair step. If it was a very first app, I launched like play
high school, but I was using analogy play high school baseball, then play college baseball,
then play single A, which is minor leagues and then double A, then triple A, and then go to the
pros. I would not go and compete against Salesforce or Infusionsoft or QuickBooks today. If I had not
played high school baseball, you know, and I think stair stepping your way up can be a way to get
into those more complicated spaces or more competitive spaces, I should say. I actually
just pulled up a page from the state of independent SaaS report from last year. And it's about how
people developed or found the idea for their SaaS company. And you want to hear the state of
independent SaaS report is the giant survey you send out to SaaS founders to try to get
all the information on how SaaS founders are coming up with ideas, starting companies, how
much money they're making, how they're hiring, how they're distributing the products, et cetera.
Yep. Yep. And so we actually, we changed this question this year to have fewer in the other
category because last year we had almost 13% said other. When I said, how did you develop the idea
for this product or company? But 50% said it was a specific problem I was experiencing.
So that's scratch your own itch. 23% said it was a problem at my place of employment.
So I was working there. There was a problem. It wasn't being solved well. I figured I could go
and do it. And 15% said it was a problem a friend or relative was experiencing. And then of the 13%
other that most of those were either, I didn't, I didn't build this. I bought it. I acquired it.
I inherited it. I, you know, uh, you know, adopted it. Or several people said it was a product that
I saw working, but was being done poorly. And I basically copied it and tried to do it better.
It was really interesting. So those are kind of the five ways that we're seeing. I think there's
danger in just scratching your own itch. It's really easy to scratch your own itch and find
out no one else has that itch to scratch. It's also very easy to scratch your own itch. Find
out there's 10,000 other people who have it, but that you can't reach them and sell to them. And
they're not willing to pay for it. So there's a lot you have to validate when people say I'm
scratching my own itch. I'm always like, but have you validated the next two or three steps, you
know? Yeah. Scratching your own itch is a good way to like generate an idea, but it's not validation.
That's right. And that's a whole nother step you need to do after that. Yeah.
I love this idea of targeting a competitor who people hate. Like I interviewed the guys from
Honey Badger and I think they were like competing with this company, Hoptoad, or like Hoptoad
existed and it was like this air tracking for your app. So if you build a website, you want to know
if there's bugs in your code. And when users run into bugs, like you don't want them to have to
report them. You want like an automated email that's going to tell you or like a dashboard you
can go to and be like, Oh, someone's so into a bug on this page. But it sucked. It like somebody
built it and I sold it and then the person who bought it sold it again. And it just got kind of
fell in disrepair and everyone hated it. And so for the Hoptoad, the Honey Badger founders,
it was kind of like scratching their own itch because they were using it too and they hated it.
But they can also see that like, number one, like this is a validated product. Lots of people are
using it. In fact, the company that was big enough to be bought and sold several times.
And so you kind of remove both the competitor risk and the customer risk. Like the competitor sucks
so you can beat them. And the customers are already there. They've been validated by the
existence of a competitor. So I love the idea that you can find a place where people are really
complaining about something and build there. And I've also seen, you know, situations where
people aren't complaining about something so much as they're just not super happy with it.
So if you look at like the, let's say like job search industry where like developers are trying
to find jobs at companies and companies are trying to hire developers, like no one's ever been like,
this is the last word in hiring and interviewing developers. We're so happy with this tool. We'll
never use another tool. Like every year there are new tools that come out and people have their own
different approaches. And like there's just never going to be like one winner take all products in
that market. Same with education. Like no one's ever going to be like, this is the school to end
all schools and we'll never, you know, everyone's going to go to the school and no one's going to
go to any other school or everyone's going to read this book and no one's going to read any other
book. So these industries where I think people, you know, aren't overjoyed with what exists,
even if they're not complaining, can also be an interesting place to look for sort of eliminate
both competitor risk and customer risk. Yeah, I would agree. I mean, there's a reason there's so
much HR software coming out is that it's not a solved problem yet. No one's nailed
the job search to your point. No one's nailed like remote employee happiness. You know,
there's 15 five and there's a bunch of other tools, but it's a really challenging
problem to solve, I think. And some of them are really idiosyncratic. Like it's impossible to
nail the best way to teach somebody how to code because everybody learns in different ways. And
like, that's really good if you're an indie hacker trying to get started because it means that like,
okay, you've got it validated that people have this problem. But like, no matter what, there's
always going to be a space in the market for you to do things your own way and target some niche of
customers you prefer slightly differently. Yeah, I would agree. So what do you think about
the importance of being early to a market? Because again, you've invested in a ton of companies and
they've gotten started in different ways. And in my own experience, the indie hackers, like any
hackers would in no way be where it is today. If I wasn't kind of early to doing what I was trying
to do, but indie hackers are not a SaaS company, right? How important is it for SaaS companies today
to be earlier first to their markets? I mean, it's amazing if you can do it.
It's a lot of luck or a lot of trying a lot of ideas and landing on one that works. People,
again, coming back to Josh from Baremetrics, he was early to the Stripe OAuth analytics and he
took off real quick in terms of the MRR growing. But he had three or four apps before that that
just never got traction. And he just kept putting them out, putting them out, putting them out and
finally hit one. I'm not sure I've ever seen anyone be early to like three markets. It's just
too, a little too much of a luck shot because think about like being early in WordPress,
for example, meant that you were launching stuff between 2005 and 2008. That was early. And it was
really not clear that WordPress was going to be the winner among all the competitors because
WordPress was forked from another. There was Joomla, there was all this other stuff going on.
Being early, I look at the Jamstack, which is like static site generation today. If you're going
to be early to that space, if you were building maybe a form endpoint, you need to be out like
two, three years ago. And if you're building advanced CMS capabilities, you need to be doing
it today. There's a huge amount of risk to that. You and I could go build a CMS and take six, nine,
12 months. Is static site going to grow like WordPress? We don't know. So that's the risk you
take there. It's not customer risk, not competitor risk. It's market risk or it's wave risk. Is the
wave actually going to get big? Or is it just going to always be, hey, there's just two, three
percent of the internet using it and you're just never going to get traction. So I would love to
be early. I've never been early to any market because it is either it's a skill or it's luck
and I'm not sure which of those it is. It's interesting too because even if you are early,
it's not necessarily a recipe for massive success. You can be the first and you can get
it all right. You can be a super smart innovator who just sees this wave coming and you can build
a product and start acquiring customers before everybody else. And then you can just get the
problem a little bit wrong. Or you get the shape of the wave a little bit wrong and somebody else
comes along and they learn from all of your mistakes and they eat your lunch. It turns
out that being early wasn't super helpful. You just proved out the market for everybody else who
then capitalized on your mistakes. So when I think about what companies actually succeed
from being early, it's often companies with network effects where it doesn't really matter
what you do as long as the quality or the value of your product is directly proportional to the
number of people using it and you're getting people using your product before anybody else does,
then it's really hard to assault your position. So it's almost like you want to build,
the earlier you are, the more important it is to build some sort of moat and there aren't that many
moats in software. If you build a super technical product, guess what? Somebody else is going to
come around next year and they're going to have better developers with better tools and they're
going to build the same thing that you did way faster than you did. And so I wonder when you
look at your companies and they're all SAS tools, do you think about moats and do you think about,
okay, if they are early to the construction space? So they are early to the healthcare space.
What's stopping other companies from coming in and just doing the same thing?
Yeah, we don't, of course I'm aware of moats and I think about them, but with TinySeed,
we don't invest to become, to have these billion dollar outcomes. And so there's a lot of room to
build a lot of five to 30, $50 million companies. You don't need as large of a moat. If you're going
to win or take all, you need a moat. If you're going to build a $10 million SAS app, there are
just so many spaces you could do that. With that said, oftentimes the moat is not what we would
traditionally think of or not what Silicon Valley would consider as the moat. Oftentimes just having
a founder that's a subject matter expert, deep, deep industry knowledge and a co-founder that is a
like really good technical founder and you just have a two, three year headstart on anyone.
That's actually, of course, it's not a moat in the traditional sense, but that is an advantage
and it's a headstart in a way that even if you took people who didn't really know what they're
doing and gave them $5 million in venture capital, they wouldn't catch them. How many venture funded
ESPs, email deliverability things did we see crop up? I can tell you a lot because I was running
scared as we were running Drip and yet there were four or five of us in this closet bootstrapped in
Fresno and we were in the top 10 marketing automation providers. It wasn't because we had
a bunch of money. We didn't really have much of a moat aside from integrations and some brand
equity because Drip started to get a name. We were just ahead of people and we cared more
and we had probably a little bit more industry knowledge because I'd been doing email marketing
since 2005. Yes, of course, we would love a moat, but a lot of times you look at like Docsketch,
I'll bring him up again, Ruben Gomez. He doesn't necessarily have a moat. It's e-signature. It's
electronic signature. It's a commodity at this point, but his moat is just a really good marketer
and he takes these channels and to try to beat him at, let's say, SEO, content marketing,
lead generation, very, very hard. How many people in the world are better than Ruben at these things?
I don't know. There's probably hundreds, but what are they working on? Are they working in the
e-signature space? You don't have to be the best marketer in the world. You just have to be better
than the people you're competing against. Again, it's not winner take all. What if you only take
5% of the e-signature market? It's still quite large and big enough to build a really profitable
and life-changing SaaS company. The last trend I think that's worth talking about is this idea
of the microSaaS. I did a tweet. It was kind of a poll a few weeks ago, just asking, here's a few
different industries, three different trends. What are you most excited about? MicroSaaS won hands
down. MicroSaaS is this idea that you are targeting just a super niche market. It's a company that's
usually run by a solo founder or a very small team, not hiring an army of people. And again,
as you're saying, you don't care about entering some winner take all market. You don't care about
being a unicorn. You're happy making 10, 20, 50 grand a month and resting on your laurels there,
maybe growing even further from there and figuring out what the next step is. And it's obvious why
this is inspiring to a lot of people because people like taking these baby steps that are
meaningful life changes for them and they don't need to jump up to 1,000X their salary right now.
They're happy jumping up to 5X their salary. That's a huge life changing event. And just to
give like an example of a good microSaaS company, there is Jordan O'Connor, who I really need to
have on the podcast because this company is super cool. But he's got this company Closet Tools.
He's kind of motivated by just being in a ton of debt from college. I think he had like 100K
of debt from college. So three years ago, he learned how to code. Two years ago, he made his
first sale from Closet Tools. And now two years later, he's doing like 40 grand a month in revenue
as a solo founder with no employees, which is amazing. And he did this while he had a full time
job. He's married, he's got two kids, and he's a solo founder. So it's one of the more impressive
like ideas of a microSaaS story. And it's Closet Tools is basically just this browser extension
you install that helps you make sales on Poshmark, which is this social commerce marketplace where
you can kind of buy and sell your clothes. So he's helping consumers make money and, you know,
attaching himself to this much bigger platform. And he's able to carve out like a really small
niche, and a pretty good living for himself. So what are you seeing with microSaaS? And is this
something that, you know, as an investor is even interesting to you, because maybe these companies
can't get big enough to be investable. Yeah, I mean, first, I'll say I love microSaaS. I invented
the term micropreneur back in 2009. You did because it was pre SaaS was just coming around.
So I wasn't going to say microSaaS because it just wasn't a thing yet. But my whole thing was,
I want to be a solo founder and run these really small software companies that throw off a ton of
of income and it's net profit. And I had one small SaaS app, then I had hit tail, which was a SEO
keyword tool that was just me and a couple contractors, it was doing 20 to 30 grand a month
at its peak. And then drip was originally going to be probably microSaaS, it was going to be me
and one or two other people. And of course, we got into a space where it became very competitive,
and I, you know, had to ramp up. So I love I love the idea. I love going into a tight niche,
you read my first book, start small, stay small, a developer's guide to launching a startup is all
about find niches, there's power in niches, no one's there. It's so much less competitive,
you don't have to be as good a marketer, you don't have to have all the chops, because you can just
go in. And back in the day, I was talking about launching a lot because the book was written in
2008 to 2010. It was a lot of like, there was some subscription, but a lot of one time sale stuff,
but this is just SaaS is just the new one time sale, right? I mean, that's it's software, it's
all software. So yes, love the idea to did it myself, three wrote a book essentially about it,
you know, before it was called this. So I'm a fan, I think there's a ton of advantages to it. And
frankly, if you read the first two or three chapters of the book, you'll hear all of my
thinking on why I believe that it's a great step one or step two business in the stair step approach,
it's just so much less competitive in traction. As an investor, yeah, it's to your point,
we tend to invest in apps we think can hit at least seven figures in annual revenue. And usually
it's 123 million bucks is probably going to be a floor for us somewhere in that range,
just because if we're going to put in money at x valuation, something that gets to half a million
dollars, $800,000 in revenue, you know, that's a great business and it can throw off some cash,
but it doesn't necessarily it's maybe you've heard this term, it's maybe not an investable business,
you just shouldn't raise capital, you know, so maybe someday there will be a fund that launches
try to invest in micro sass. There's a challenge there in that I think you'll have to take too
much equity or I think the terms will have to be so founder unfriendly. And these micro sasses are
so easy to launch, I say easy, they are, they're not that capital intensive if you are if you use
that code or if you're a technical founder that I'm just not sure that you need, I would encourage you
maybe don't do it with investors the first time do it on your own, get out there, get into a
community to have support, get in a mastermind to have support, taking investors for what you think
is going to be a small app, I almost think you should just learn it, get the experience, get the
cash, they're so profitable, right? You can have 80 to 90% net margins. That's what a hit tail was
85 90% net margin was so great. And yeah, so that's those are my thoughts on it. I love that
that this exists is the best I keep saying this is the best time in history to be a startup founder
or to be a developer who knows how to market. I mean, there has literally, you know, maybe 10
years ago, it was less competitive, but the tools weren't as good. And just with the advent of easy
to and all this stuff, it's so much easier to get started. Is there a path from a micro sass to,
let's say a full sass, like, do you see companies that are generating, you know, eight figures in
revenue, and they started off with something that didn't seem like it could get a much bigger than,
you know, seven figures? Well, I mean, I would say drip started that way, right?
drip was going to be this micro sass, it was just an email capture widget. And then we added
auto responders to it. And then we're like, Oh, we should just become an ESP. That's a great space.
Oh, now we should come marketing automation. And then we grew, grew, grew. And we sold it before,
obviously, before we hit eight figures in revenue. But I also think I don't, I don't know that you
need to turn. When I think of like hit tail, I sold hit tail when it was it was doing maybe in
the in the 20k, I could have just started adding more SEO stuff on it was a long tail SEO keyword
tool, I could have added all the functionality of Moz or Ahrefs just started stacking that on and
turned it into it. It turns out I just wasn't that interested in the space. And I was off to
I was off doing drip that way. So yes, I think you could take a micro sass potentially depends
on the niche depends on what the app is. I also think there's a huge advantage to having
this asset that is throwing off a bunch of cash to help you maybe launch the next one that you
might maybe more interested in maybe in a more competitive space, you know, maybe taking
advantage of some of the things that we've said earlier, or some people want to some people don't
you can you can exit these things because they are immensely profitable. If you have an app doing
20 grand a month in net profit, which for a micro sass, I mean, several, I've known several
that do that right 20 grand a month. So that's almost a quarter a million a year, you can get
just under let's say in the forex net profit range, you're selling for almost a million dollars in
cash. And if you've owned it for more than a year, that's long term capital gains. So you're not
paying income on that you're paying long term capital gains smaller. So you're walking away with,
depending on the state you live in, let's say $700,000, $800,000 in cash, that is a hell of
a way to angel invest yourself to friends and family fund yourself. Yeah, you know, and the
next thing. So I'm just saying these are the options. I don't know that you need to turn you
can turn your existing app into it, or you can just use it to, you know, to kind of fund or give
yourself the freedom to launch that next thing that you really are interested in doing.
Um, another example that's not quite micro sass, but I do think it fits in this category of
being something that's trying to sort of avoid the competition, not going for world domination,
but just like trying to find a market where you've got almost this natural moat by ditching down
are these real world businesses where it's not just pure code, but like you're selling to like
a local area. And I had Sam Eaton on the podcast, he has a company called crave cookie,
where him and his sister were like, let's bake cookies and sell them to people in our town.
And they're doing like 100, 200 grand in revenue a month with 50% margins with a cookie delivery
company. And like not even one of the biggest cities in California. And it's pretty like
remarkable to see and he's writing a lot of sass. He's doing something like internal delivery tools
because he doesn't want to use Uber eats or any of these other services that just like crush
restaurants with their crazy cut of revenues that they take. But they're able to grow like
through word of mouth. They're able to grow through PR with like the local media. So they're
not like, Oh, I need to get to the top of SEO. I need to be at the top of Google. I need to like
outfit everybody on these like Facebook ads. They're like, no, no, no, we just need to do cool
stuff to get in like the local news station, which is way, way easier than the sort of like
global competition. What are you seeing with companies that are basically, you know, building
with a foot in the real world? Is this like a trend that you think is sustainable? Or is it
even something on your radar? Oh, I mean, it's, I'll say it's not something that we have tended
to invest in because oftentimes like having something in the real world means the margins
are lower or that it's more capital intensive, but I'm almost thinking of like manufacturing
your own, you know, device, a hardware device or something. So, and I just don't have expertise
there, but absolutely the trend at the moment that that subscription boxes became a thing,
whether it was subscription meal kits to subscription loot crate type things for every,
you know, for Star Trek and Star Wars and Dungeons and Dragons to the, I think the,
kind of the organic food movement and the slow food movement and the more natural health food
movement, fresh food movement, the CSAs from, you know, the community supported agriculture,
all of that getting internet enabled is incredible. And yes, absolutely. It's a trend. And I think
that the advent of these pop-up kitchens as well. Have you heard about, you know, that where you can
just, you and I can just like rent time in a commercial kitchen. This was not possible
five or 10 years ago. It was really, really hard to do. And now they're all over the place. There's
actually a startup called the food corridor that is SAS for cloud kitchens and you know,
selling picks and shovels to these kitchens. And I think that that shows you that this,
this trend is not going down because I'm going to want to buy my artisan cookies from my local
purveyor of cookies rather than, you know, go to Whole Foods or go to fresh time or whatever
and get something that's been sitting on a shelf for even, even a few days. So yeah,
I think the more we, we can get back to those, what is it? It's there is, it's this artisan,
it's this free range, organic, local, you know, it's bespoke. Yeah, it's a good,
it's a big trend. And I think it's, it's cool because it's, it's, it's adding more personality
and individuality to, to business. It's no longer like the kind of like everybody wants the McDonald's,
you know, made for everybody experience. People want like the more individualized experiences.
And in a way, even though these aren't like directly tech businesses, they're more like
tech enabled businesses, the tech part of it helps them kind of niche down because you can
find them online, you can find them on Instagram, there's an infinite number of distribution
channels, and there's no sort of gatekeepers, as there were like, you know, 30 years ago before
we really had the web. So I'm excited to see this. And I think, you know, your insight that
people are building SaaS businesses for cloud kitchens ties into what you were saying earlier,
which is like, Hey, you don't actually have to be, you know, the original sort of innovator here,
you can just build technology for other companies that are innovating. And when you see like a shift
in the market, like if you're trying to catch a wave, like perhaps you see people are starting
more of these businesses. And so you figure out what's the tech only SaaS business that you can
build to support them. That's another good framework to think about. I think of, you know,
the Loot Crate boxes, the subscription boxes, there are now several SaaS that just help you
manage, you know, that I forgot what they're called off the top of my head, but it's software
to do that. And any of these new movements, you know, that's something that you can jump on board.
Again, the risk is well, shovels, totally picks and shovels. The risk is, Oh, maybe the movement
doesn't take off. Maybe the movement only lasts a year, maybe the whatever, but that's the risk
you take. There's always a risk with with any of this, you know, launching a SaaS.
And then finally, promises the last topic, you are running a company when you're investing in
bootstrappers. And this is not something that like when I started indie hackers four years ago,
I thought was going to come to pass. It's pretty new. The whole model, as I understand it,
is very dependent on being able to have a very high hit rate. Traditional venture capitalists
don't care as much about having a high hit rate, because there are such outsized gains from these
unicorn companies that, you know, take over these one or take all markets that they can cover the
losses from all the other companies that fail. And so they try to drive you towards, you know,
moving fast and breaking things and hiring as fast as you can. And they don't really care
if you have this sort of binary outcome where you're either going to succeed wildly or fail.
Whereas with what you're doing, like, you don't necessarily push people to go that hard,
which is great, and which makes it attractive if you're sort of an indie hacker minded founder.
But also that makes it harder for you as an investor, because if you need
almost all of the companies that you invest in to succeed in order for you to get your money back.
So the question I have for you, like, is this working? You know, is this a trend we're going
to keep seeing? Are investors like yourself figuring out new ways to invest in these previously
uninvestable, slower growth tech companies? I think so. I mean, when we launched Tiny Seed
in 2018, the only fund that was doing anything even remotely similar, and we have quite a few
differences, was indie.bc. And we announced Tiny Seed, and we actually said in that announcement,
we expect more to follow because this is a wave that is an underserved iceberg in the software
industry. And, you know, within the last three or four months, I think I've seen three or four funds
launch, you know, with similar hypotheses, maybe not exactly, but it's a lot of people starting
to look at this, the non-venture track stuff, right? It's the non-traditional VC. So yes,
I think the trend will continue. So far, is it working? Yes. Based on revenue growth and internal
rate of returns and calculations, early signs are that our models are accurate or under predicted.
I mean, you know, we had a worst case, best case and a middle of the road, and we are
definitely above the middle of the road. Oh, cool. 16 months in, you know, 18 months in.
But the growth of these, that's a thing, these, it's capital efficient, they're ambitious,
capital efficient, SaaS companies, they have recurring revenue, there's a lot of proven
channels, there are playbooks and blueprints to do this. And you're right, we don't, we're not
going to have, or we don't need that Dropbox or the Facebook or the Google, and we're probably
not going to have any of the, you know, the Uber, any of those companies. But the hit rate on these
companies from my experience of watching these companies for the past 10 to 15 years, launching
a couple of my own, is it is so much more of a repeatable approach to launch this,
again, one to 20, one to $30 million ARR company. Yeah, I think we're, again, I think it's the best
time in history, because we have options now. Hey, if you're an indie hacker, and you don't
want to deal with taking $120,000 from TinySeed being part of the batch, that's cool, then do
something, then do what we've always done, you know, or if you want to go venture, then go do
that too. And I think that's a big kicker of this investing in bootstrappers is, we, and I think
some of the other funds really want to keep your options open, right? That's what I wanted when we
were growing drip is I want some funding without the strings attached. I want to raise $100,000,
$200,000, $300,000 without having to then raise a Series A, B, C, and have an IPO. I really wanted
to still maintain control, maybe be able to take out dividends, maybe be able to, you know, exit
for millions or tens of millions, but not have to become a unicorn and have that not be a failure.
And so that's really, I think the goal and the shift. Shift is too strong because it's not like
venture capital is going away. It's just another option in between. There's bootstrapping, there's
venture capital, and then there's this independent funding or, you know, whatever term we want to
come up with. I call it now bootstrappers and mostly bootstrappers because, you know, a TinySeed
company that takes $120,000 is still mostly bootstrapped because they're extremely capital
efficient and they're really just like a bootstrapped run company. They're not suddenly
going out and having launch parties and hiring 20 employees. They're still,
they're using that capital to grow, you know, in predictable fashions.
Well, I'm pretty excited about the whole ecosystem and in particular what you're up to. I think
we're heading toward a world where it's going to, it's looking very different than the world looked
20, 30 years ago. I think it's just increasingly common for people to kind of build things and get
rich and control sort of their own fate as any hackers and founders. Ours is just creators using
other platforms built by others and it's pretty exciting to see that this funding model can
actually work because that just means it's going to be easier. It's just another avenue for people
to actually get into this. And I'm hoping, you know, 10 years from now we look back and the world's
completely unrecognizable and we're wondering why so many people work jobs they hated in the past
rather than just, you know, getting online and being a creator of some sort and figuring out,
you know, how to build a successful business. And I think people who are getting started now
might feel a little bit late to the game. They might feel like SaaS is competitive and crowded,
but like I think as this conversation is shown, it really isn't. There's a lot of different ways
to start. And again, 10 years from now, people who didn't start today will probably think,
oh man, that was the golden age. I really should have started, you know, in 2020. That was the best
time to start, which is what they're saying now about 10 years ago. And that's what they were
saying 10 years ago, about 10 years before. Like that trend is never going to end. So Rob, thanks
a ton for coming on the show. Let us know what you've seen in the market. Can you let listeners
know where they can go to learn more about what you're up to at Tiny Seed? Absolutely. So if you're
a founder and you might be interested in applying for our next batch, we should be opening applications
in January of 2021. So head to tinyseed.com and you can just get on the email list and we'll let
you know. If you happen to be an accredited investor and are interested in investing in early
stage SaaS, we are raising fund two right now. And that's a way to take an investment and have it
invested across hundreds. It's diversification across hundreds of early stage B2B SaaS companies.
And you can see an example of the 23 we've invested in so far at tinyseed.com. But our
whole investment thesis is about just the value of this space and just how much we want to raise
all the boats in essence. So tinyseed.com slash thesis, if you might be interested in doing that.
All right. Thanks again, Rob.
Absolutely, sir. My pleasure.
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