This week’s episode is full of so many recurring themes that we’ve seen over the years on this podcast, from the unique struggles that SaaS businesses face, to the decision between bootstrapping and funding, and much more.
Derrick Reimer has had a long and storied career as a software entrepreneur, but he is perhaps best known as the technical co-founder of Drip, which he built alongside our good friend and former guest Rob Walling.
Since exiting Drip three years ago, Derrick jumped headfirst into his next project: a team-chat software named Level, which he ultimately chose to walk away from in 2019.
Today, Derrick joins us to talk about why he made the decision to shut down the product that he has spent a year building, as well as the details of his newest project, a sophisticated scheduling tool named SavvyCal.
Prisync is a competitor price tracking and dynamic pricing software that helps all sizes of e-commerce companies make great pricing decisions.
In today’s ultra-competitive e-commerce environment Prisync enables businesses to monitor competitors’ prices on a single dashboard, detecting each price change and seizing every opportunity to improve profitability. You can also set up dynamic pricing rules, allowing you to automatically match or beat any competitors’ price without spending a minute thinking about it.
Prisync is offering TMBA listeners a huge 50% discount for the first 3 months. Check them out at Prisync.com.
Do you have ideas for things you’d like Dan and Ian to discuss on future episodes?
Our producer Jane would love to hear from you at [email protected] or leave us a voice message using the record button below.
Derrick: If we were having this conversation 10 years ago, it’s kind of like sort of two choices. It’s either go big VC or totally bootstrapped and self funded, and really scraping by. And I think it’s pretty interesting now to have this third kind of third option.
Dan: Happy Thursday. Welcome back to the pod. Today’s episode, chock a block full of TMBA themes. Some things that jumped out at me – how to rigorously vet new business and product ideas, funding dilemmas and new opportunities therein, how long does it take to replace your income with your new product. We’ll talk a little bit about that. And why repeating success, even when stair stepping your way up, can be fraught and there are still challenges even if you have momentum.
Thinking back over all we’ve done over the past 12 months, we’ve filled over 300 jobs and inspired over 15,000 candidates to fill out DJ profiles, we’ve six times our average monthly revenue. We’ve recruited a CTO and two junior developers, we’ve recruited a senior recruiter. And we’ve launched three products – Business Pro, our remote recruiting product, and Candidate Pro, which is something for job seekers. Actually, while I was writing the job ad, I wrote a blog post. Remember what those were, I wrote a blog post at Tropical MBA. So if you want to read a longer version of what we’re up to head on over to TropicalMBA dot com this morning, this afternoon whenever you’re listening, and give it a quick read. So I thought it’d be fun to dust off the blog and put up a post.
Anyway, that’s it for news. Hopefully, we’ll have a lot more cool stories and lessons learned. I guess the lesson of this is just every once in a while you gotta put your head up, take stock. And looking back over the last 12 months has given me an opportunity to plan for the next 12. So anyway, let’s get stuck into today’s guest, which is relevant to all this because he’s got some momentum and some successes under his belt, but he’s also in the first year of a new project and a really exciting one at that. His name is Derek Reimer. He was the technical co-founder, along with Rob Walling, of ‘Drip’. And since exiting that three years ago, Rob has of course, founded the remote Software as a Service accelerator ‘Tiny Seed’, which is doing fantastic and has also invested in Derek’s new venture, which is what I called him to talk about. So I started this conversation by asking Derek about exactly that. The new SaaS product he’s founded called Savvy Cal, which has been up and running for around nine months.
Derrick: Savvy Cal is a scheduling tool. Basically, it allows people to create a scheduling link and send it to someone else, and present kind of their availability, automatically subtracting out when they’re busy, and then allowing the person on the other end to grab a time slot and put a calendar event on everyone’s calendar.
Dan: So Derek, you know, I have various selfish reasons for wanting to do this phone call, I think I can identify three. First off, I’ve heard your name on podcasts like a million times, you’re this man of mystery, the guy behind the guy in the Drip story. So I want to hear that. The second is that I want your advice on how I can grow a better business. And then number three, is we’ve been having trouble with scheduling across our company. One of the features that we found, it’s really difficult, like if you want to change your availability on unique days across times, the current tool that we use just doesn’t accommodate that. Is that something you’re building towards?
Derrick: That’s actually one of the big motivations for, I guess, UX challenges that I had experienced in other tools before, you know, embarking on buildings, Savvy Cal was kind of that ability to like, quickly preview your upcoming availability that you’re going to show to somebody and being able to make little modifications on the fly, you’re at that moment of: ‘Well, okay …’
Dan: I’m feeling lazy.
Derrick: Yeah. So tomorrow morning, like, I got this other thing. And even though technically, I have availability there, according to my preferences, ah not tomorrow morning, you know, and so, kind of a key part of our interface that’s a bit different than than other tools is you can open up your link editor. And immediately, what you see is a view of your calendar, very similar to looking at Google Calendar week view. If you see a range of time on there that you don’t want someone to book, you can just highlight it, and then click ‘block’, and it immediately blocks that out. Or you can vice versa. Like, if there’s a range of time that normally you don’t allow, but you’re like, ‘No I want to offer this, this piece of time up to this specific person I’m sending the link to’, you can drag on there and just click Allow. So it kind of lets you do those last minute modifications really easily. Something I’ve always wanted.
Dan: I want to work our way back here the long way. But I’m just curious at this moment, like, who are you to be solving this problem? It seems like one of these things entrepreneurs like this is an enormous thing. There is Google Calendar, like you said. What was that feature or sense of confidence that you have? What got you in the game of – maybe this could be something I work on?
Derrick: It’s definitely daunting, because there are a lot of established players in this market already. Some would say that this is a quote unquote, solved problem already. You know, you have Calendly, they’ve been kind of making the news cycles in the startup space in the last year because I think they famously grew by double during COVID. I think they’re at $100 million in revenue. In what a lot of people view is just kind of a feature like something that that a calendar provider could potentially build in
There’s a lot of people who are kind of seemingly satisfied with Calendly. But I kind of recognised some underlying issues that are kind of around using scheduling tools. One of them being that there’s this weird like, power dynamic issue, right? A lot of people are hesitant to use the scheduling link or, or even people receiving them, a lot of times feel sort of offended by it. And it doesn’t make a tonne of logical sense, because it is a more efficient way to to find times to meet with people, but something about it, it feels like if I send you a link, I’m kind of pushing the work on to you, or saying like, ‘I’m more important than you. So here, take a look at my calendar, and you find a time that’s good for me’.
Dan: It was like that dynamic that existed when people first started getting virtual assistants. Yeah, to be like, ‘Oh, just talk to my assistant about it’, like, ‘Wait a second, right. I don’t. I’m not good enough. Are you saying you’re better than me?’
Derrick: Yeah. Yeah. So how do you address this issue? And it says, really perceptive of you to pick up on that?
Derrick: It’s tricky, because it’s twofold, it’s both a people problem and a tools problem, I think. Now, some people would argue that this is not something that could ever be solved with a tool. You’re either dealing with someone who has too big of an ego or just is too sensitive or something like that. And no amount of product work could solve that. And I think probably there’s some people, yeah, they will always be offended by a scheduling link. Like, doesn’t matter how nice the experiences or whatever. So the idea was like, What if I could make the product feel more like a collaborative experience, as opposed to a ‘you are using my scheduling link’. And it’s subtle, but one of the ways that we’ve done this is making it so that if you want to put in a little bit of extra legwork and personalise the link, by pre filling the person’s name and email address for them, you can do that so it shows up right there on the link We kind of make it so like creating scheduling links is really cheap thing to do in the product. It’s not this big, heavy configuration lift to do, so you can just duplicate your link, throw the person’s name on there, it shows their name on the page when they view it. And we have this ‘overlay your calendar’ feature so they can toggle that and off their calendar really quickly and see their events overlaid on top of your availability. The idea is to kind of position this as more of a collaborative space. And hopefully they’ll recognise this as just an efficient way to hash out time as opposed to that kind of icky feeling of forcing someone to do work.
Dan: Can you let the audience know what scale the business is at right now?
Derrick: I’m a solo founder. And I raised a little bit of initial capital from ‘Tiny Seed’ actually, I think friend of the show Rob Walling behind that. And currently I’m kind of in charge of doing all the work on the product itself. I have some help from a marketer, Corey Haynes, actually from Baremetrics formerly. I’m kind of on the cusp of hiring someone to help with some support, because that’s starting to become a bit of a burden for me to have that kind of background thread of always needed to check the support queue, but also make progress on the product.
Dan: Are you making a living off of the product yet?
Derrick: I would say it’s, it’s kind of officially close to the default alive state where, where I’m able to pay myself a salary. And we’re, our expenses are still exceeding like, we’re not technically profitable right now. But like, I’m feeling the need to kind of push it a little bit.
Dan: You could be.
Derrick: Yeah, we could be if we pulled back.
Dan: Congrats. That’s fantastic. Are you going to make it? What do you think? We’re kind of there with our new startup to like, yeah, the exact financial description we could say. And I find myself some days waking up saying, ‘Are we going to make it?’
Derrick: Actually, we’re just running a product market fit survey, because I’m kind of, you know, looking for those, all those kind of solid SaaS indicators to show that we’re kind of, you know, achieving product market fit and kind of that escape line, like,
Dan: What are they?
Derrick: I’m most concerned with – are users who are paying are they activated and actually getting value out of the product, that’s what I’m kind of focusing on the most, because my big fear, and that’s why I’ve been afraid to even pre sell annual plans aggressively because I want to make sure that we’re not kind of building up a base of customers who we’ve kind of convinced them through through savvy marketing to put their credit card on file and sign up, but then they’re not actually using the product and have kind of big looming churn risk. That’s one of my big fears at this stage. But so far the numbers are looking pretty good. I’m happy with our churn. It’s sub 10%. On kind of on a rolling average, and, and we have kind of this nice property of the business where it’s seed based. if you get value out of it on an individual basis, and then you start inviting your teammates, we charge per seat so that expansion revenue kind of is essentially offsetting our turn right now.
Dan: So your product is $12 and $20, respectively, right?
Dan: And now traditional SaaS wisdom would say, ‘Oh, my gosh, that’s pretty cheap’. How do you contend with the idea that you ought to be building a much more expensive product?
Derrick: Having a low per user price is an attractive thing to me in the sense that, like, it allows me to diversify risk across a bunch of customers, right. But obviously, the biggest drawback is you have to somehow convert a lot more customers. If it was $50 a month, that’d be five times fewer customers that I would need in order to achieve the same level of revenue. So I mean, for me, I’m thinking about it is like, definitely our marketing efforts have to be scalable, truly scalable in the sense that I don’t have to be involved in converting people. If I have to give demos all the time of the product, then $12 a month is not going to scale, for example. And so I think a lot of this is yeah, it’s been an interesting journey for me, because my prior businesses have always had a bit higher tier, at Drip we started at $49 a month. And really, we are trying to target like that $99 a month tier was kind of our aspirational goal. But it was also a product that required a lot more hand holding to get on board.
Dan: That’s an interesting thing about Savvy Cal, you’re not asking much of your prospects because you don’t have to abandon your current calendar to try out Savvy Cal right? I think that’s a pretty cool strategic edge you have over something like Slack – I have a fear of getting rid of Slack even though I have issues with it.
Derrick: So kind of speaking to your question about like, your ‘Why do you think why do you think you’re in a position to tackle this space?’ I mean, part of it is like, I did a lot of soul searching on what’s the ideal fit type of business? What are the parameters that line up well with my skill set, and also my kind of desire in the type of company I want to build. And I kind of learned the hard way that it’s really difficult to enter a market where there is such a high degree of stickiness with existing products. And something like Slack, when I was trying to trying to sort of compete with them, I discovered, one, you have to convince an entire team to switch over, which is a big ask, even if you have one champion that champion probably doesn’t have the organisational pull to convince their entire team to to be on board with switching. And so something like this, you know, you can easily just start using it, and you can keep your other account running. And the cost of switching over is relatively low, which I think for my own sanity was sort of something I needed to have as part of the business.
Dan: Bring us back to your origin. Did it start with freedom with entrepreneurship or with development? What was a moment that was pivotal for you?
Derrick: I did kind of a typical, like, went to college, I majored in something that I wasn’t gonna actually end up using. I was good at math. So I majored in math, but I was really not sure what I wanted to do as a young adult. But I was a hobbyist software developer, my dad had taught me and we had a computer in the house when I was young. He’s a mechanical engineer. You just wrote scripts and stuff to make their processes more efficient at work. I had aspirations to kind of be my own boss, but I didn’t know exactly what that would look like. And I really actually didn’t have the mindset of marrying up my love for writing code with doing that. I just had this picture in my mind that, to be a professional software developer, you had to sit in a cubicle and write c++ and it was a drag. That’s the picture I had in my mind.
Dan: And it often is, not so inaccurate.
Derrick: I know. So I was like, I was thinking about being an actuary for a while, which sounds like it’d be a soul sucking job, honestly. By the time I graduated, I was like, Okay, I don’t think I think I know enough now to know, that’s not what I want to do. And I think it was around that time, I discovered, they were called 37 Signals at the time, but the Basecamp crew that were kind of doing this, they were building SaaS, and they were bucking the trend of having to raise venture capital. I’m sort of a risk averse founder. So I’ve never really been that attracted to the take a big swing and go to Silicon Valley and try to raise a bunch of VC. That just never appealed to me. And so to hear this kind of contrarian line of thinking about how to do things differently was really really interesting. And just thinking about the economics of SaaS, ‘Well, I think I could build a product and get a couple 100 people to pay me X dollars a month, and boom, there’s a salary right there’. It really intrigued me. And so I kind of started down this path of trying to build a couple things. I got involved in this competition in my local area that was called 59 days of code. You build a prototype of a product, and you showcase it. And at the end, and there, there was a cash prize, and it was sort of a hybrid like technology, competition and business, they wanted to see an actual business model behind it. And through that Rob Walling was actually a judge in that competition. And that’s how we met.
Dan: Wow, what was it like first meeting him?
Derrick: I was a little intimidated, to be honest, because I just read his book, I think he just published ‘Start Small, Stay Small’. And so he was another one kind of alongside like, Jason Fried, there was like, Rob was another, you know, person in the industry, I was looking up to, he was podcasting. And he was really cool. I didn’t realise he was in the area until we met at this, at this little, this little pre event for 59 days of code. And I remember, we were kind of standing in the circle. And everyone was kind of pitching their premise for their business. And there were a lot of people like, ‘I’m building a social network, I’m building a whatever’. And then here’s me standing there. I’m like, I’m building software to help people write documentation. It was like this very boring, line of business, b2b SaaS thing. But after that, Rob walked up to me, and he was like, ‘You’re a little different than some of the other people around here. Like, it sounds like we should talk more’.
Dan: What happened to that piece of software?
Derrick: I tried to make it into something for about a year and made all of the mistakes that you typically make, I got deep into the weeds on like, the product and didn’t really think about marketing at all, despite having just read Rob’s book and taking all this information, like it was so hard to get in that mindset. I remember sitting at my desk, like, ‘Okay, I think the product is about ready to launch, where am I gonna find customers?’ I remember this moment of like, I might have even googled, like, how to find customers for your SaaS app. So it was quite a learning experience.
Dan: So what happened next?
Derrick: I tried a couple more times and, and failed. But each time I tried to not make the same mistakes I did before. So I built another product and did a little more validation, started to play around with marketing a bit, started to play around with SEO. It took a couple years before I felt like I started to really get my stride.
Dan: What was the name of this product and what were those years?
Derrick: So the first product was called ‘Guide Kit’, and no one would no one would know the name.
Dan: Disappeared off the internet already.
Derrick: It’s gone. It’s gone.
Dan: Remember when we thought the internet would be permanent?
Derrick: I tried to look up a Wayback Machine rendering of it, actually a couple of weeks ago, and sadly none of the images are there, sadly. There was another product that I built that was sort of a clever idea. I was still, I think, very much in the phase of trying to come up with really clever things that no one was really asking for. I had to get that out of my system early on and learn that like no, building successful businesses is more about having your ear to the ground and listening for where are the problems really people are experiencing and expressing demand for. The next product was it helps you basically monitor Twitter for anybody who is expressing commercial intent for something like wanting to buy something and it would surface leads for you. So I called it ‘Lead Screener’. And it was built on the Twitter API. It actually worked pretty dang good.I ran it across big sample sets. And it was producing like, I mean, pretty good leads, I think. But ultimately, the Twitter API, that was around the time when they clamped that down hard, when Twitter was moving towards shutting down clients and trying to bring all the experience in house.
Dan: So, you made another mistake, like building on someone else’s platform.
Derrick: I got a strong introduction to platform risk there, which I mean, I’m once again exposed to it through calendar API’s right now. But as with most things, like, you just have to learn how to accept a certain level of risk, and every business is going to have that whether it’s, you know, platform risk, or customer risk, or whatever.
Dan: How was it that you came to be a co-founder of Drip, then? It might be worth describing what Drip is, from your perspective, before we tell that story?
Derrick: So Drip was I spent about five years of the last decade working on that, it started out as a simple kind of email marketing product. And it bloomed into a full scale marketing automation tool.
Dan: And what was your role at Drip?
Derrick: So I was the technical co-founder. But it kind of didn’t start out that way. That’s kind of an interesting story. I was building a couple of these products, and I was kind of reaching the end of my rope, and I was like, I think I’m gonna do some consulting, I just need to bring in some income. And Rob, we were still friends, we were meeting up every couple of weeks chatting about business, and Rob was like, ‘Maybe you should come work for me for a little bit’. And I was just like a part time contractor helping out with Hittail. That was a seo keyword tool that Rob had purchased and was rehabbing. And he was kind of looking for some help from someone to kind of do general product management stuff on it, work on retention, and build some email courses and do some marketing things. And through that, we actually built the first prototype of the Drip email capture widget, I just kind of hand coded that, and we put it on his tail. And it worked really, really well. I think Rob had been kind of chewing on this idea of entering the email space. But I think this was all a pretty interesting case study in how to basically add an email capture form all across your website, no one was really doing that at the time. And so we sort of sort of tested a proof of concept on Hittail. And then within a few months, Rob was like, ‘Okay, so here’s what I’m thinking about starting, do you want to be the guy who writes all the code for it?’ And I said yes.
Dan: How did you feel, were you at all conflicted because you had been on a sort of your solo journey.
Derrick: It definitely took a mindset shift for me to be willing to step back from being my own boss, but I knew Rob well enough, I knew this was definitely going to be a fantastic learning opportunity to learn from one of the experts. And as soon as we started working together, I mean, I just was, I was loving life, it was so cool to watch him and just learn how he thinks about business and collaborate with him on stuff and, and really be able to cut my teeth and get even better at building software products. And so I got to really go deep on the technical side. And it’s really fun.
Dan: There’s just kind of a concept. I’m just chewing on right now, as I’m listening to you. It’s like, kind of like, you’re only as good as your last job. I sort of feel like for a lot of entrepreneurs, I think I would even include myself in this category. Depending on how confident I’m feeling that day is like you’re just like to get to the next level you’re just your next job away. And I feel that a lot of entrepreneurs cut themselves off to the opportunity of taking gigs, too soon in their career. Instead of teaming up and learning at scale, like you did.
Derrick: I agree.
Dan: I guess one way to reflect on that is how different are you as an entrepreneur pre and post Drip? Reading your process for coming up with ultimately Savvy Cal, to me sounds like a seasoned entrepreneur. There’s such confidence in your writing, it’s almost like if Savvy Cal doesn’t work, I’m just gonna do the next thing like no big deal. Whereas I’m not getting that vibe, you were kind of lost before you joined Drip.
Derrick: I did feel lost because the truth is, this stuff is really, really hard. And I got a full taste of that, again, after the Drip journey ended. So Drip, we worked on it independently for about three and a half years. And then we were acquired by LeadPages. We were up to like a team of nine or 10. And then kind of joined this company of 150, I got to see, ‘Oh, so this is what it looks like to take a product and try to scale it with some venture capital dollars behind it’, which is interesting. And then finally kind of did my insert of my tenure there and decided to move on and was once again, like hit with just how difficult it is to create something out of nothing, and align it with a market.
Dan: I was so inspired by ‘Getting Real’, the 37 Signals, that was their first ebook. I read that book, and I was like, right away, I had like a mock up – it just felt so doable. Yeah. And I started running into roadblocks immediately afterwards, too. But I’m trying to figure out like, what was it that you learned through the Drip experience? Could you put your finger on some things that changed in you that were different from the Derek who was merely inspired and capable versus the Derek who’s actually shipping product that people are paying for and making a living out of it?
Derrick: I think the Drip experience was very valuable for me as a founder, because you see a lot of these stories now where people start things, and it appears on the outside to be overnight success, which we all know those don’t really exist. There’s always something that leads up to it. But there are, there are a lot of founders on the last who sort of, you know, right timing right place, things just seem to really pop for them, and it kind of looks easy. And you sometimes hear founders talking about, ‘Well, we don’t really spend any money on marketing. It just, we just kind of tweet about stuff. And then it just just kind of grows’ and those are fun stories to see. Because it’s like, ‘Wow, this is amazing’, like it. But the learnings are limited from that. Because if things if things just kind of serendipitously happen, or there’s too much right place, right time ingredient that goes into it, then you can kind of miss the fundamentals of what are the blocking and tackling manoeuvres that you need to execute in order to take a business from where it is right now and move it to the next phase? And I think in the Drip journey, nothing really came super easily that I saw. We launched and Rob obviously had a bit of an audience from his podcast and his book and just blogging over the years. So there’s definitely people in the circle who were following. And that got us to $7,000 in MRR and then we kind of we kind of plateaued
Dan: Not enough for 2 guys to live off.
Derrick: No, not at all. So then I got to watch and be involved in the problem solving element of that. It’s like, ‘Okay, what’s broken right now is it our positioning?’ And we did a bunch of testing to hone in on some positioning. And then we started investing in content marketing. And these things take a while. just watching these flywheels kind of build up. It’s better to have that kind of experience. And then the opposite, which is like, my business is growing, and I don’t know why. And therefore if it stops growing, I also won’t know what to do, you know, as opposed to really learning kind of the fundamentals and how to think about, you know, testing channels, executing on them, finding the right people to.
Dan: Why were you stuck at 7000 a month?
Derrick: Ultimately we built a product that just was not .. we didn’t have product market fit out of the gate. It started out as just really a simple email capture thing that allowed you to send a little follow up sequence, and then it sort of stopped there. In the first version of the product, we sent a few follow up emails and then we would push your subscribers over to your MailChimp account. We started with a hypothesis that, I think this is a compelling way to grow your email list. And we were super bullish on email marketing as a really powerful way to nurture people through your funnel. But it turned out that little capture widget was just not that compelling. But what people really were hungry for was kind of a way to do more sophisticated segmentation and more sophisticated personalization. And that only those learnings came from talking to customers and failing to convert customers and trying to learn why. And then we ultimately kind of mutated the product over time more towards marketing automation. And as we started doing that, that’s when things started to really break loose.
Dan: So, I was curious as to how Derrick handled that immediate aftermath of a big exit, specifically the one from Drip. As you know, I’ve also been through the roller coaster of emotions, motivations, exhilaration and exhaustion that can follow an exit because, the logical side of you says ‘I’ve got some cash in the bank, some experience, I’m going to crush it, right away’. Well, not necessarily.
Derrick: In retrospect, I would have done it differently. So my, my game plan coming out of Drip was you know, there was a very meaningful exit for me. It wasn’t like a wasn’t a never work again type of exit, in terms of magnitude. So I knew okay, I was hungry to kind of be ambitious and start on the next thing. Turns out I didn’t even take a week off after leaving Drip before I hit the ground running on my next business.
Dan: You were telling the story. Like the day you left Drip was the day you launched your next project. So you do have some insanity, because you’ve come across as pretty measured. You mentioned you’re just building a lifestyle business. The insanity of not even enjoying the exit at all.
Derrick: And it is a tricky spot to be in. In the months leading up, obviously, I was doing a lot of scheming and trying to figure out what that next act was going to be. Admittedly, it was pretty audacious to think that I could potentially be a replacement for slack for teams. I mean, and to do this bootstrapped.
Dan: And to be clear, that was what your next startup idea was. So Levels was designed to basically be a sane version of Slack. Sounds like a great idea. I don’t like Slack. So why didn’t this work?
Derrick: I still think it’s a really good idea, honestly. And there are a couple you know, companies doing it, there’s Twist from the makers of Todoist that is a pretty, pretty interesting product, I think, and has a lot of the same kind of goals of like, helping people helping facilitate better asynchronous work, more organised, you know, forcing things to be threaded. And so as a lot of the same kind of things are built in, I think, for them, it’s been watching their journey. It’s been a slog, like, I think they’re growing, I think they’re doing well, but it’s been definitely a difficult sell to get people to switch and that’s ultimately what I found. I spent about nine months building the product. I felt like I was doing all the right things. I felt like I was talking to customers. I went through a round of validations, did $5,000 in pre-sales. I had close to 5000 people on an email list that I had built up.
Dan: You did like the flight takeoff checklist startup perfectly, just like we are getting off the ground here people.
Derrick: I felt like I was nailing it. I think I’ve seen other founders kind of do this too, when you’re coming off of ‘Okay, I just finally put a bow on my previous business. I sold it, we made it through the kind of transition phase’, and you kind of feel like you’re riding on a high a little bit of like, okay, now, check. got that done. Now I can take on the world and I’m going to do something ambitious and I think it’s pretty natural, like feeling to be riding on that high. And I felt like I had good signals coming out of it – doing all the right things. I’m not gonna make the same mistakes that I made way back in the early days. Turns out, you can get a lot of bad information, despite all your best efforts.
Dan: I wanted to have you walk us through that concept a little bit. You mentioned this book that resonated with you called ‘The Mom Test’. Can you talk to us a little bit about what the mom test is all about?
Derrick: Yeah, it was a turning point for me, it was extremely eye opening. Because basically, the premise is that, well it was named the mom test because he’s giving you, the author’s giving you a framework for validating ideas, business ideas, but it really applies to anything. validating ideas in a way that’s so rigorous that you can even test an idea with your own mom, who is most likely to lie to you in order to save your own emotions. People naturally want to be helpful. They want to be encouraging. They don’t want to give you bad news. And so when you ask questions, like, ‘Hey, I’m thinking about building a Slack competitor, that’s way calmer. Would you use that?’ people are gonna be like, ‘Well, yeah, I would definitely check that out, yeah’. And I was, I was aware, like, you’re like, it’s always a bad idea to give a sales pitch and then ask someone, ‘Would you use it?’ if you’re trying to detect underlying demand, or an underlying problem, you don’t want to taint the well. And I knew that at a certain level. But I don’t think I fully internalised just how, just how hard it is to not taint the well.
Dan: What is a more rigorous approach?
Derrick: The key thing that Rob Fitzpatrick talks about in his book is asking questions, like, you’re kind of dance around the problem that you’re trying to solve, and figure out like, ‘Oh, have you ever struggled with such and such?’ And if people say like, yes, then you ask, ‘Well, what have you done so far to try to solve that, have you searched for products?’ So you’re basically trying to ask questions like, ‘Well, have you actually already taken steps to attempt to solve that problem?’ So if someone says, ‘Slack is the worst’. And it’s like, ‘What other tools have you tried?’, ‘Oh, nothing’, right there is a big red flag right there that they’re probably not actually interested in switching something. They’re just complaining, which is totally valid. We all complain about things all the time and do nothing about them, it’s helping to drill down on, ‘Okay, so do you actually have intention to, to spend money or time in order to actually solve this problem? Or is it really not that big of a deal?’
Dan: One of the things I really liked reading through, in one of your pieces, you were basically saying, ‘Why am I doing this?’ Because like, my motivation is a critical part. That resonated with me. But thinking to this Level, I kind of got to wondering like, so I’m getting to this point of founder fit, you at the right time with the right situation. And I wondered if we tweaked your situation and like, you raise this funding, say, a million or $2 million? Do you think you could have turned a Level into a startup that could pay that money back and operate at a high level? If you were building for another couple years?
Derrick: It probably could have gotten there. So one of the things that I don’t have a tonne of experience in that probably biases me against going that type of route is, I don’t have a tonne of experience building and managing teams. When you have funding, and so then you have a kind of a mandate to deploy that funding towards building out a team and delegating responsibility and getting more people on the boat and getting moving faster. I think I’ll probably eventually, you know, get there. I’m kind of thinking about expanding the Savvy Cal team very slowly, but like, but like gradually expanding that, and that’ll be new territory for me, new things to learn. I think Level, ultimately, is still solving an important problem and could have been made into a viable business. It Would have been a big challenge for me, because, yeah, like raising funding, that would have been new territory for me as a founder and building out teams and making all kinds of mistakes on that path. It comes back to risk, right? So if I were to go out and raise funding, it is a riskier proposition. Because if you don’t grow at the rate that your investors are expecting, they’re basically deploying funds in this asset category of like, high risk, high growth.. And so if you don’t, if you don’t align with that, we kind of know the stories about all the all the ways that those things can go wrong, I think of like Rand Fishkin with SEO Moz, when they did end up raising funding, and it’s like, well, it’s a $20 million business. And that’s not that’s just a failure in the eyes of investors, right, which is just crazy to hear that type of reaction to a business that has grown to that level. And so for me that’s just a huge risk in and of itself. I think that things like Tiny Seed have changed the equation a little bit. If we were having this conversation, you know, 10 years ago, it’s kind of like sort of two choices. Either go big VC or, you know, totally bootstrapped and self funded, and really scraping by. And I think it’s pretty interesting now to have this third kind of third option.
Dan: So basically, you don’t have to dig into your savings or retirement in order to build a meaningful startup for yourself and for investors,
Derrick: Right. Tiny Seed is recognising that, no, a lot of profitable businesses are built, but not on the, on the unicorn VC rocket ship trajectory. And that’s an asset class a lot of investors are willing to participate in.
Dan: Having been through an exit, I’m curious, like, you mentioned that one of the things that draws you to entrepreneurship is the unlimited upside of it. It’s not hard to imagine savvy Cal being worth 10s of millions of dollars, right? How do you think about cash flow versus cash pile? What amount of money like Jason Cohen says, ‘The Freedom Line’? It’s like where you can shell financial questions for a lifetime? Like, what would it need to be? What would the number need to be for you to walk at this point?
Derrick: That’s a really good question. It’s that kind of line of thinking that I think I’m constantly revisiting, something my podcast co host and I keep coming back to, I feel like it always, all questions lead to like, ‘Well, what do you really want out of this? What kind of business do you want to build?’ And it’s hard, because that’s one of the hardest questions to answer. For me, it’s always changing on scale of ambition. I kind of want to have my cake and eat it too. I want to build a company that’s calm and fun to work for and enjoy the work and enjoy the journey. But also, I want to be ambitious and drive towards that. That kind of the freedom line concept, I’m pretty inspired by that. Snapshot in time of how I’m thinking about it today is – so I have some money in the bank from the Drip acquisition, and I don’t have immediate needs for cash flow. If I’m gonna generate cash flow my best place to invest it is back into the business to grow it even more. And so I’ve actually been kind of morphing in my mind a little bit about how I’m thinking about growing the company. And it’s like, I might as well, at this point, optimise for making this asset, this company as valuable as I can. As opposed to thinking of it as, ‘Well, I’m just going to pull as much profit out of the business as I can’. Because then what would I do with that cash right now? Well, if I’m building this asset, it’s probably best to reinvest it. And so I don’t know,
Dan: That’s funny, my calculus on this has changed through two things. I mean, one is just watching how money’s behaved over the past year and a half. But two is it sounds like we had similar levels of exits, you know, and it’s sort of like, okay, I’ve sort of solved the cash flow problem, we can both be consultants, we get good jobs, like, that’s pretty solved. By the way, I can remember the version of myself that thought all this was very, very risky stuff. And now I feel very safe, as long as I can come to work. But now I’m putting all the cash back in the business too, because I’m thinking of it as an asset. They’re more legible to me as like, what it’s worth to other people. I see that cash is realisable, ‘Oh, yeah, I wish I could sell it to so and so for X number and like, get that cash back. But what would I do with it, I’d put it into an asset like this’. So now that I’ve got that first step, I want to get to that next step.
Derrick: So yeah, very similar line of thinking for me too. And, and I think something that I’m trying to break out of a little bit is, and I see this a lot in the kind of the bootstrapper realm, is sort of a scarcity mindset. ‘Okay, so I need someone to contribute to the product’, do I look on, like, outsourcing websites and try to find someone for $15 an hour, you know. Or, or do I look for someone more senior who’s gonna be really expensive, but maybe not have to deal with some of the challenges that come with lower cost labour where there’s like, a big language gap or whatever. The kind of conventional wisdom is to be as frugal as you can in order to try to conserve as much capital and grow very, very, very efficiently. And I think something that I’m trying to break out of is getting more comfortable with spending money to make money and being willing to just pay the full price tag for the kind or person or service or hire whatever you’re putting you’re investing your money towards.
Dan: I’ve been confusing scrappy with crappy my whole life, my whole entrepreneurial career. Part of it is maybe from the generation previous, if you have an established operative cash flow or whatever reducing your cost is the name of the game. But when you’re in a knowledge business, when judgments make asset value, we can be shooting ourselves in the foot. And I think we’ve done that a lot in my company over the years, essentially.
Derrick: I’ve broken the barrier now where I’ve taken some funding, and I’m actually taking a bit more funding right now from kind of an industry partner, it’s sort of a strategic investment, because we’re going to end up integrating with them, and it’s going to be a good co marketing opportunity. And so it allows them to participate in
Dan: Can you talk about that yet?
Derrick: I don’t think I can be. I haven’t cleared with them yet. So I’m not going to be too public about naming who it is.
Dan: Cool, well we’ll follow along.
Derrick: There will probably be some announcements soon about that. But yeah, it’s nice, because this is gonna be some funds that will give me some breathing room to be able to make another hire. And I think if I had been too rigid in my mindset about like, ‘Nope, I’m a bootstrapping purist, and I’m only customer funded’, then I think it would make my life a lot harder. And needlessly hard, right?
Dan: There’s another thing too, like we’re thinking about, you know, we have we’re both like gesturing towards this responsibility to get to a higher level for our own interest to stay engaged for our future. But also now you have a responsibility to investors. It’s not all bad to like, feel like, ‘Hey, these guys gave me whatever. I gotta go get it back for him’. It depends who you take the money from, and the terms you take it. And I’ve seen, personally, especially with founders who take like friends and family rounds, which is sort of close to what you’ve done here is it’s empowering to them, it’s motivating to them. This is a journey that’s important to more people than just like, what do I want to do this morning?
Derrick: Exactly. Yeah.
Dan: Finally, Derek, there’s a lot of listeners, most of our listeners are small business owners, but I’d say about 20% of us are, you know, probably, like just got finished reading something like 37 Signals or listening to your podcast or whatever, something inspired them, but they’re in those first couple failures, what sort of advice would you have for them?
Derrick: Keep at it, the best way to learn is by doing, do your homework, obviously, like there’s so many resources out there, to tap, but honestly, like the being involved in the community and, in conversations with other people who are trying to trying to do this hard endeavour is never more achievable than it is now. Our little corner of Twitter where founders are hanging out and places like Indie Hackers, like such supportive communities and very positive. So I think, you know, being engaged with the community and when you really do kind of show up and, and get engaged in the conversation, like founders are willing to tell you hard things like and call out mistakes you’re making. And so the best thing you can do, I think, is to kind of get outside of the basement. And stay and keep shipping and stay involved in the community.
Dan : Thanks for coming by the podcast. We appreciate it.
Derrick: Yeah.Thanks so much for having me.
Dan: Big shout out to Derek Reimer for coming by the show, and I can’t wait to follow his progress over at Savvy Cal. You can check out his wonderful blog at Derek Reimer dot com. Also check out his pod, ‘The art of Product’ and of course Savvy Cal dot com. That’s it for this week. Just want to give a shout out to our sponsor Prisync dot com and that’s it. Hope you enjoyed the show. We’ll be back next Thursday morning as usual.