The Freelancers' Show 105 - Building and Running a SaSS Company with Bryan Helmkamp and Anthony Eden

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The panelists talk to Bryan Helmkamp, of Code Climate, and Anthony Eden, of DNSimple, about building and running a SaSS company.

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ERIC: Bonus content! CHUCK: There we go! [Hosting and bandwidth provided by the Blue Box Group. Check them out at BlueBox.net.]  CHUCK: Hey everybody, and welcome to episode 105 of the Freelancers’ Show. This week on our panel we have Reuven Lerner. REUVEN: Hello. CHUCK: Curtis McHale. CURTIS: Good day! CHUCK: Eric Davis. ERIC: Hi. CHUCK: I'm Charles Max Wood from DevChat.tv. We also have a couple of special guests. We have Anthony Eden. ANTHONY: Bonsoir, [inaudible]. CHUCK: And Bryan Helmkamp. BRYAN: Hello. CHUCK: So we brought you guys on today because you both have successful SaaS businesses. I know several freelancers that they kind of dream of starting a business on the side, and with the particular skill sets that we, in general, on the show, have, it’s usually some SaaS product that serves a particular market, particular purpose. And so I thought we’d give you guys a chance to introduce yourselves and then we’d talk about that and how you got started and things like that. ANTHONY: Sounds good. CHUCK: Anthony, do you wanna introduce yourself first? ANTHONY: Absolutely. I'm Anthony Eden. I am one of the founders of DNSimple. I am located in France right now but originally from the US. I was a freelancer for the beginning when we first started DNSimple, and then also worked as a full-time employee for a company while continuing to develop DNSimple. So I kinda have both aspects of that, that we’re part of the development of DNSimple that helped sort of shape how I approached it, as well as past experiences, developing startups for various people. CHUCK: Awesome. What about you, Bryan? BRYAN: Hi, yeah sure. I am one of the co-founders of Code Climate. We’re based out of New York and we’ve got about four full-time people these days. My background is in software engineering. I started Code Climate while I was the CTO of a previous startup, and then I did a bit of freelancing in the time between I left that job and then started working full-time on Code Climate. So I have a little bit of experience in terms of bridging that gap and doing both at the same time, and I'm really happy to be here. CHUCK: Awesome. One thing that I'm really interested in is how you got things started. Do you guys just wanna talk about how you made the decision to make the transition into running a SaaS product or project, or whatever? ANTHONY: Sure, right. I can go first, if you like, on that. CHUCK: Okay. ANTHONY: So at the time when I started DNSimple, I was just finishing up a startup that was sort of – it was kind of stagnating. We figured it wasn’t going anywhere. I was out in Hawaii at that time living out there, and a couple of us had started taking freelance gigs. I said, “You know, I've been doing software development for other people for a long time, and I know the DNS and domain industry pretty well. I said to myself, “It’s about time that I start building something.” So I spoke with my brother and said, “Hey, do you wanna work on something together?” and we agreed to build DNSimple and that was kind of the genesis of it. We looked around – at that time I had a domain or two at GoDaddy and every time I went in, I just wanted to punch myself in the face repeatedly to stop the pain. And I said, “You know, there's a big opportunity here.” And that was sort of the genesis of it. Then we took three years to build it up and during that time, like I said, just did other things until I was able to go full-time on it. CHUCK: What about you, Bryan? BRYAN: When I started Code Climate, I was the CTO of a startup that was actually doing pretty well at the time, but had always been really interested in developer tools. I've done a lot of open-source software, so I couldn’t shake the feeling that it’d be really interesting to figure out if I could work on tools for other developers to use and be able to make a living off of that. So I started poking around at different ideas in that space, had maybe one, small, kinda false start, and then settled on the idea that became Code Climate. I did a lot of research around that product idea before writing codes in terms of interviewing other developers, doing mockups, getting feedback and surveys – that kind of stuff. At the time, it was just me, actually. I have a co-founder now; he joined maybe a little around a year after we were up and running. Still very small at the time, but I do have a little bit of kind of both the experience of doing something solo as well as doing it with a partner, which I'm very happy to have now. So I actually took two days off of work, to launch Code Climate, from my day job. I just put in for a couple of days of vacation, and used that as the opportunity to start accepting public signups. And then we’ve been kind of rolling forward from there. We started charging on day one, so it was always a matter of looking at the data in terms of whether people seem to be buying it and happy with it – that was the driver for figuring out, “should I spend more time on this, or should I change it, or should I just scrap it?” and over time, it gave me enough confidence to be able to quit my full-time CTO job and then move on to Code Climate as my primary thing. CHUCK: Awesome, that's really cool. So, it took two days to build Code Climate? I guess not to the point it is now, but –. BRYAN: No, two days to launch it. Many more days than that, at night,  to build it on the side, and then it got to the point where I was like, “Okay, this thing’s almost ready to go,” but I really need some extra time to push it over the edge and I wanna be available when I launch it in case anything goes wrong, and also to respond to people’s questions and that kinda thing. So it was to launch that took two days for, and then I built it on the side before that. ANTHONY: Hey, Brian. How long has it been that it went from inception to launch? BRYAN: That’s a good question. I would say about three or four months for that very early product that we launched, which was –. Looking back at it now, it is cringe-worthy for us. I mean, I can’t believe that anybody would find it usable or anything like that, but I felt like I needed to launch something as soon as possible to be able to continue to justify spending time on it. I think it was about three or four months, just on the side, nights and weekends kind of thing. ANTHONY: Yeah, our story’s pretty much the same. The first product was started in April 2010 and we launched in July, so it took around four months. The goal was to launch it at Rails Conf in 2010 and we ended up having to delay it to just after Rails Conf, which is typically what happens. You planned to launch something and then you getting always the last details done, and you just miss –. These launches are hard because there's all these little things you wanna clean up, but at some point, you just gotta push it out there, and I think that's one of the key things that if you're going to do a service, you just gotta do something at some point. At some point, you gotta stop playing around and you gotta say, “Okay, I'm going to watch something.” REUVEN: And charge for it. ANTHONY: And charge for it. Yeah, we also charge from day one as well, which is I think is the only reasonable thing to do if you respect your customers. CHUCK: So I guess the question is, it sounds like you guys talk to customers and worked on the product simultaneously. What kinds of things are you looking for in feedback from customers? BRYAN: What I was doing at that time, actually I was using –. It’s funny you should mention conferences – I was using conferences as a way to do some testing out of concepts, so when I found myself at conferences around other developers, that was kind of the most high-value time for me to just –. People aren’t really fully booked up during that time; they kinda have some down time, so I'd just grab people in the hallway and say, “Hey, can I buy you a beer at the hotel bar? Spend 15 minutes giving your thoughts on some stuff.” And what you're really looking for is something that resonates with them without you having to really sell it to them, right? You want something where they're kind of pulling you through the conversation, because it would be really valuable to them, rather than you kind of pulling them, leading the horse to water, “Wouldn’t it be great if you had this thing that did that?” Like, “Yeah, that would be interesting.” They're not going to buy anything like that. One of the things is if somebody tells you that they're not going to buy it, they're not going to buy it. If somebody tells you that they will buy it, they may buy it – or probably not. So you really want something that kinda makes them light up in terms of, “Yes, we have that problem and this seems like it would be a solution for that.” Early on, you're focusing much more on the problem than the solution, right? For us, the problem was even experienced teams with good intentions often run into maintainability issues with their software over the long term, and what we’ve heard from a lot of developers that had been on projects that were up and including like a year and longer running, was that they had these issues; they all identified with that. So that gave us some sense that, “Well, if there's something that we can do that helps with that, then we can probably find a way to make money on it.” But I think it was important to be more attached to the problem space than the solution, because a lot of – if you're too attached to the solution, you end up trying to invent the problem that it solves, and that’s the wrong way to do it. REUVEN: Bryan, in your case, and I guess also yours Anthony – both of you decided to start businesses that had to do with technology problems. These were problems that you personally had experienced issues with and that you're familiar with the marketplace and what customers are like. Did you still, despite that or in addition to that, go out and talked to people, tried to find out what were their paying points were before launching? ANTHONY: Honestly, we didn’t. So when we said that our initial launch was for the DNS product only, it was just something that we said, “Okay, we can do this and start with something, and let’s see how it goes.” And the launch was kind of, it was okay. We launched to some people; it was basically the people that we knew, that we’re friends with, and so on and so forth. What really happened was afterwards, we started saying, “Well, what happens if we sell domains?” and talked to some of our existing customers as well as other people on Twitter. And we said, “Would you guys like it if we sold domains at this price?” The response was pretty overwhelming, it was just like, “Yes, please do it. Get us out of whatever we’re in right now.” So that sort of pushed us along. So we talked to customers. I never intended DNSimple to be a product for non-tech people in a lot of ways. The audience has always been developers, because that’s who I know, that’s the people I can sell to, that’s who I can talk to. Whether that means that we’re limiting our audience – it probably does, but I'm okay with that, because I'm okay with having an audience that’s sort of primed and ready for the product that we’re offering, as opposed to a general audience that doesn’t even know what they want out of the product. So for us, it was a pretty easy decision to just stick with developers and talk to developers directly through conferences, through Twitter, and then directly to email, and things like that. BRYAN: Yeah, I think for us, it was pretty similar. There are a lot of people now who have ended up using Code Climate who are not really developers. They might be people like project managers, or non-technical managers, and we think it’s great that they're able to get a lot of value out of the tool, but from day one, we’ve always said that our product is by developers, for developers, so that’s where our focus is and the extra – that’s just an addition that’s been a happy coincidence. ANTHONY: And if you believe that developers are sort of leading the way – I truly believe that software developers are going to define a lot of how we do business in the future, so it seems like a pretty good audience to sell to, because computers are the core of so much of what we do now, and the people that control them and know how to tell them what to do have a distinct advantage. So why not make them your customers and you advocates, as far as I'm concerned. BRYAN: Yeah, I generally agree with that. I think one thing to be aware of is that in our experience, developers tend to have a much smaller amount of buying power than people in say, sales and marketing type roles, and one of the reasons for that is every business, if you ask them what their biggest problem is, I think if you ask Anthony and I what our biggest problem is, it’s probably growing the business. Finding more customers is always going to be towards the top of that list, so if you have a product where you can go to people and say, “Well, this will help you find more customers” there is kind of a built-in budget for that where you have a product where you're going to developers or operations people and he’d say, “[Inaudible] going to help you do technology or operations better.” There are definitely tons of sales that get made there, but the average price point for the sales, I think, in general, is considerably lower than selling into sales and marketing functions, for example. REUVEN: So if I do a SaaS product of some sort that’s aimed at developers, I might know the market and there might be a lot of people out there, but I'm not going to be able to charge, let’s say $200-$500 a month, which is what some of these SaaS products can do, I guess. ANTHONY: Well, we do have plans, there are $200 a month and $400 a month. We have a number of customers on both of those, but as a contrast point, for example, we use a CRM system in order to stay in touch with our customers and it helps us do things like keep notes about our conversations with them; it has a click-to-call function, so if we’re going to call somebody we can do it right from inside this app, and they charge the order of I think $60 per person per month. So if you have ten people who use this app, it’s $600 a month; if you have 20 people who use the app, it’s $1200 per month, and just goes up and up and up and up from there. And so, you can definitely do, in my opinion, depending on what you're selling, you can sell products into technology portions of a business at hundreds of dollars a month, even a thousand dollars a month. New Relic has a very strong business at a pretty high price point, for example, so that’s really nice, but in comparison to the size of the contracts that you can get for things like CRM software, that’s one or two steps down from that. ANTHONY: Keep in mind though that there are tradeoffs for when you're selling to the higher price point, then you have these higher-friction sales channel that you have to go through, which introduce a whole different set of problems. And so the other thing you have to deal with also is the market. I mean, the market that we’re in has a very specific price point that people are comfortable paying, and the gap between what's at the bottom and what's at the top is huge, but the group at the top is they have dedicated sales teams – they have to, because they're selling the businesses where they're charging thousands and thousands of dollars a month or a year for their service, and with that you have to have – assume a sale cycle that’s going to probably be six months or  year to get a sign off on that. There's good size to each type of models and you kinda just have to decide what you want as you're business owner. As the business owner, what do you wanna get out of it, where do you wanna focus your energy, what kind of market do you wanna sell into. And there's nothing that says you can’t eventually cross over from one into the other, and that may be the right approach. Maybe you start off initially at the low-end, and then you move your way up market, or maybe you start off up market, get a few big customers, and then slowly work your way down market – there's a lot of different approaches. BRYAN: Yeah, I think that’s exactly right. We’ve seen companies like GitHub, when they started, they didn’t add anything with enterprise. Now they have this whole line of the business, GitHub enterprise, much higher-price point, much larger sales, much longer sale cycle. I think, Anthony, what you said about how the price point affects the business is spot-on. One thing that I think about regularly and talk about with people who are talking about starting a business is, you can almost – everything kinda falls from your price point. So if you have a price point of a $1000 a month and up, that is going to basically dictate not only how long your sale cycle is and which companies you're selling to, it’s going to dictate things like, ‘what is the ration between sales people to developers in your company?’ Whereas if you have a price point of $10 a month, then you pretty much can’t afford sales people no matter what. The economics of that just don’t work, so you're going to have probably, effectively, zero sales people and so it’s a huge question in terms of what type of organization you wanna run, and that is almost defined economically by that price link, because when you put the numbers at the back of an envelope, there's only certain structures that work at certain price points. CHUCK: Is there a good way to determine which one fits best for you? BRYAN: I would start with whatever you're most comfortable with. If you are somebody who is comfortable selling and maybe your background is in –. Sometimes I joke that there's only two jobs in a startup – that you're building shit, or you're selling shit. And if your background is in selling, then you may want to focus on a business where you can have those interactions – high-touch, higher value interaction with customers on an ongoing basis. I mean, everyone has to be at the beginning; it doesn’t matter if you're giving the thing away for free – you're going to have to spend a lot of time dogging your customers. But as your business goes up, it’s a question of whether you can – whether economically, it makes sense to do that. So if you come from the selling side, then you might want to do something that involves a little bit more selling; if you come from the building side, like I did, and like Anthony did, then you're going to find it a more natural fit with something where the price point’s a little bit lower, and you're spending a little bit less time at scale talking to every customer. ANTHONY: Yeah, and it’s also going to be set somewhat by what the existing market looks like. So whether your product is something that is relatively new – Code Climate in a lot of ways was kind of new in a sense that it was a developer-oriented service that targets the quality of code that’s done as a SaaS as opposed to a tool that you get either open-source that you buy that you install locally. So that’s kind of a unique model, or was when it was launched in a lot of ways. Take that and compare it to the domain and DNS industry. It’s been around for 20 years and hasn’t changed that much. And so the market, like trying to sell into that market in a different fashion is very challenging. We found a lot, a lot of friction initially, just trying to get people to sell us so that to buy our DNS service, to agree that DNS is a product in itself that has enough value that they're willing to pay for it. So you're influenced somewhat by the existing markets, assuming that there is one. BRYAN: Yeah, for sure. I think that part about the advice that I was giving was if someone’s looking at – they're not sure what market they're going into yet, definitely researching the market and [inaudible] out how it’s sold currently will be a big factor in figuring out what your business will look like if you are successful in that market. CHUCK: Yeah. So one other thing that I run into – and you kinda said you're either building stuff or selling stuff – the selling stuff is kinda hard sometimes. I mean, how do you get those initial customers and how do you get them to tell their friends? ANTHONY: Well in our case, I went to the audience that I knew. Essentially, the sales person can either try to do a cold sell – so that means calling up somebody that they don’t know that they may have gotten a little bit of information about, but trying to sell them – basically that’s the ability of the sales person to sell the product. If, on the other hand, you're selling to a community that you're already comfortable with, which, I think, was both my case and Bryan’s case, we’re not selling something that they don’t know anything about. We’re selling something that we already basically launched the products out there and they have some knowledge of it, so we’re not just trying to pitch them from a cold call sort of perspective. We’re actually – there are people we know, we have a bond with them in some way, and we’re basically saying, “Hey look, I built this, you should try it out and it’s going to be awesome for you.” Honestly, you have to have a good product if you're going to sell that way, and a good product is a good thing to have no matter what. There are people that can sell crappy products, but it’s a lot easier selling something that’s great. Getting their friends to talk about it – that’s a matter of, again, building a great product. And I think one of the things that I'm learning now more than ever is that the way that you get people to talk about your product, in addition to great product, is just to ask them. I mean, it’s so hard for us to ask people to talk about it, but if you give somebody a great experience, just say to them, “Hey, if you could tell your friends about us, that would be awesome.” CHUCK: So I guess the other question that I have – well I have two more that’s kind of pressing for me. One is, how much balance do you give to building your product versus talking to your customers and finding out what they need? Because sometimes it’s kinda hard to find people who are – you kind of tapped out the folks that you’ve talked to for a while, and so you do have that type of opportunity to work on the product, but you might be working on the wrong thing. BRYAN: The way that that’s worked out for us historically is it tends to come in phases. So we started, and at the time we didn’t have any idea what we’re going to build, so we spent a lot of time talking to people. Once that those discussions seemed to coalesce and we started hearing the same things over and over again by changing the questions we were asking and performing some hypotheses about what we taught was going to be useful to people. We got to the point where we said, “Okay, we think we understand this pretty well. Let’s spend some time building something and then we’ll go back to our customers – potential customers – and get their feedback on that.” At the beginning, those loops for us were quite small. We would do something as simple as design a single email. I went up to a number of people at conferences and said, “Well what if I could send you an email report that looked like this every week? There's no website, you couldn’t click on anything, it was just this email. How would that affect you?” And then as we got a little bit bigger, our cycles are probably a little bit longer now, but we still definitely have periods where we go out and we say, “Okay, we guys really need to be heads down and deliver these features that it sounds like we’re confident we’re going to be valuable to our customers,” and then when that’s done, we’re going to spend a bunch more time figuring out what we need to be focused on next. ANTHONY: Yeah, in our case, I think I'm with Bryan on this. I think it’s cyclic –  I think that you start by asking questions, and then you build something small, and then you launch that, and then you start asking more questions, and then you iterate, and then you basically continue that cycle indefinitely – and that’s building a business. It’s basically just iteration after iteration of the product then the following questions: What needs to be added to the product? What needs to be removed from the product? How do you sell the product in a way that’s different? There may be times where you have small iterations; there may be times where you have significant changes because you realize you’ve learned something along the way that requires a big change. But you gotta do both – you gotta be out there talking to people at conferences, at local events, through different channels, depending where your audience is – through Twitter, through communities. If you're a developer, StackOverflow or Stack Exchange [inaudible] there, and not pitching your product, but helping people around the concept of your product is a great way to sort of get out there and meet new people that might be interested in your product, and you do have to be doing that on a regular basis, especially in the early phases of the business. REUVEN: I'm sort of curious to know, how long did it take you guys to reach the point where this can be the full-time thing you did for your primary income? ANTHONY: It took about three years, and part of that’s because I decided – well I mean, I have a family. I've got kids, I've got a wife, I have mortgage – I have all the things that the trappings of, I guess you could say, middle America, but middle world at this point if you're in a first-world country, and all of these trappings come along with the bills that go with them. And so I said, I'm not going to put everyone in my family through this huge pain; I'm going to take on as much as I can and so the company just sort of grew from day one. It took three years to get to the point where I can say, “Alright, I'm done with my other day job. I'm done with any other sort of consulting. I'm going to focus solely on this product, and it’s going to pay me well enough that I don’t have to worry about my finances.” And I actually wasn’t the first one that came on full time. My brother and our other partner who joined, who we acquired this company in 2012, they were both full-time before I even joined. BRYAN: I just pulled up the date of the first commit into the Code Climate repository, and it was basically almost two years on-the-dot between that first commit and when I was able to take enough salary – not nearly as much salary as I had when I was a CTO, but enough salary to be able to pay my rent. One of the things about subscription businesses is there is a double-edged sword, and one side of that sword is that once your subscription business is up and running, and you have lots and lots of subscribers, it is very stable and predictable, and you can grow it in terms of – it can compound in itself especially if you have good things like word-of-mouth going on. But the other side of that same sort is that it just takes forever to get started. Sometimes, if I occasionally hear somebody talking about how they're looking at launching a SaaS business and they're hoping that it’ll pay their bills within a few months – I don’t know anyone personally who has been able to do it that quickly. It’s just a very long slog to build up those subscriptions from nothing. ANTHONY: I agree 100%. I don’t know anybody who’s done that. Essentially, if you want a paycheck from day one, you're probably going to have to take funding and then most investors don’t really want you paying yourself that much anyways; they want you putting everything back in the company, building up a team, and things like that. It’s just – if you're building a subscription product, it takes time is what it comes down to. REUVEN: So in some ways it almost sounds ideal to do it on the side while you're freelancing, because you can build it up over time. You can say, “Okay, I'm just going to take a year, two years, three years, until this can be my primary income.” ANTHONY: Freelancing, or with a company that you have an agreement where they're okay with you building on the side. Either one of those cases I think is the optimal way to do it. The trick though is you have to still commit to building that thing, because it’s really easy to spend all your time doing the freelancing work, for example, and then not spending enough time on developing and building the business that you actually want to sustain your life. You still have to be driven; you can’t get away from that. BRYAN: Yeah, I totally agree with that. I would emphasize that it is very – while it might be an economic necessity to split time between a job or freelance while building up a subscription business if you're not, well you don’t have the funds to not be working for an extended period of time, it is really challenging. I had a freelancing engagement between my full-time job and working on Code Climate full-time. It was supposed to be 20 hours/week, and that was about what I was working, but it felt like when you added in the time it took to wake up in the morning, walk to the office, get settled in, work a full day, or half a day, whatever it was, and then leave, come back home – I felt like I've spent 70% of my energy on this in terms of available energy to get work done on a job that was supposed to be 20 hours/week, so in theory, half-time. So it was very hard. One of the things that I would definitely recommend, if there's any way that you can possibly do it would be to save up some money so that you can have a period of time where you are working full time on the business before the business is paying you. I was fortunate enough to be able to do that, but there was a point when I was freelancing where I was able to look at the numbers for the business, project forward a bit, and say, “Okay, this is working. I'm going to cut off all the freelance; I'm going to spend 100% of my time on Code Climate. It’s not going to pay me a dollar for at least three months, but I can cut my spending back quite a bit and live on a shoestring budget for that time, and then at that point, I’ll be better off for it. I think when your business is at a key time like that, being able to just work on it at least for two or three months is a really big deal. CHUCK: That makes a lot of sense. One thing you guys both mentioned was that you said, “I'm the co-founder of my company” and this is really kind of close to the nest. I had a partnership worked out with somebody, and I broke it off yesterday, for a SaaS product, and the reason was that basically – and he kinda spelled it out too – was that, though he said it was that I didn’t value what he brought to the table, and essentially, yeah, I didn’t see that what he brought was worth 50% of the business. So when you're co-founding or setting up a partnership, what recommendations do you have regarding that? Who should you find and what kind of arrangement should you pick up? BRYAN: When you're picking a partner for a business, it is very much like picking a spouse – you are going to spend more time with this person if your business is successful than you probably will with your spouse. My co-founder knows more about me than, I think, my parents do at this point easily, and I trust him completely. We had worked together at two previous jobs, totaling probably around three years, and we’re personal friends outside work as well. And the reason – I think I mentioned that I was solo on Code Climate for a little bit over a year before he came on – is that I never intended to run Code Climate as a solo business and that was pretty awful in many respects. However, I was very uncompromising in terms of who I would work with as a business partner, so I had a small set of people who I kind of knew in my network where I flagged them as ‘if this person wanted to do it, I would really consider that.’ But I wasn’t out there trying to meet somebody who is interested in doing it, because I just didn’t feel like there would be any, that there would be a high chance of success if our relationship was just starting at that point. As it turned out, the few people that knew who I would consider for that sort of thing were not available at the time; they had good things going on at other companies and the timing just didn’t quite work. I said, “Okay, I'm just going to do this solo for the moment, and keep re-evaluating this,” and eventually, it became the case now did have some availability. It was pretty soon after that that he was kinda full-time, working as a co-founder, full-time, not getting paid at all, which is kinda my best definition when people ask me what's a co-founder. It’s somebody who is working full-time and not getting paid. CHUCK: [Laughs] BRYAN: And it’s been good. We’ve been fortunate in that regard. I definitely have friends who have had people that they’ve known, that they’ve gone into business with, and there's been – just like marriages, there are issues that come up, and people deal with that in different ways. ANTHONY: Yeah, I think no matter what you do, there's always the chance that things are going to sour in any partnership, so there's just nothing that you can really do to stop that from happening. You can definitely try to mitigate it by one, working with people that you already have sort of a trust relationship with. I think that what Bryan pointed out about having worked with somebody previously on multiple jobs is a good starting point, but ultimately, you have to be prepared. I think it helps a lot to have as much in writing early on as you can that sort of sets the boundaries and sets the expectations. In almost every case where you're going to have issues is because you didn’t communicate it up front, and it wasn’t clear what anyone’s expectations were. And then when you hit those problems, if you look back on it you start to go, “You know, we didn’t really spell this out, and that's why it caused the problem.” So I think preparation and ongoing communication is the only way to try to mitigate that. You're still going to run into cases where it just doesn’t work out, and so depending on where you are in the business, there's a lot of ways that you can deal with that, but you have to kind of be prepared for it to happen at some point. CHUCK: So did you bring your co-founders in because they had certain skills that you lacked, or because you thought that they would be, in some other way, a good asset to bring into the business? ANTHONY: In our case, it was because I knew that I was going to be – I could develop software, but I didn’t – I knew that operations, system operations, was going to be a big part of our success. Our ability to keep the systems operating 24/7 with as little down time as possible when it comes to DNS is a big piece of what we have to do, and so that pushed my decision when I decided to ask my brother to work with me. I was like, “Hey, I really need somebody who really understands how to operate systems, and he was the right person to do it.” BRYAN: For me, my co-founder has a relatively similar background in terms of coming from the engineering side, so we weren’t one of those partnership arrangements that you see sometimes, we might have one person more on the technical side, one person more on the business, selling side of things. It wasn’t really that, but I knew that it was incredibly valuable to have somebody else who had the business kind of internalized and could bring their ideas and critical thinking to beat the problems that we’re facing, that it wasn’t just me. And I also knew that my co-founder is very good at solving problems and thinking about things in a very clear and measured way. So we have a similar background, but we have different styles, and I think they complement each other really well, so I knew that the business was going to be better off if there was a blend of those different styles managing it and not just me. CHUCK: Very cool. One other question I have then is now that your businesses are somewhat established, what strategies do you use in order to grow your customer base? ANTHONY: We use a lot of different strategies. The first and foremost is that we continue to try to build an amazing product, provide just superior support, and really care about our customers’ needs, and that in turn gets our customers to basically be our biggest advocates. What we want is we want our customers who are constantly amazed at how we do things, and therefore go out and tell other people, and you guys gotta use this because the power of a recommendation is – it can’t really be matched by any other sort of advertising. Now for sure, we also do other forms such as we do a lot of content, so we publish various posts, we try to do educational materials, we work on a support site that includes materials about what we do and how it gets done. I launched a drip course, an email drip course for the basics of DNS – things like that. All those are good things to do as well, and on top of that, we often have sponsored conferences, especially ones where we can put somebody on the ground at the conference, who can just go out and talk to people. So those are the kinds of techniques that we use right now. BRYAN: Yeah, I think for us it’s very similar – the backbone of our customer acquisition is our product, and that’s definitely reflected on the way that our organization is built up. We’ve got three people with engineering backgrounds, we got a user experience and user interface designer, so together, a lot of our energy is invested in the product. We do content marketing like Anthony does, as well as kind of community-relations type stuff, being at conferences where it makes sense, and speaking at conferences from time to time. And we’re starting to play around a little bit with some online marketing as well, but it’s very small compared to the first things I mentioned. CHUCK: Cool. REUVEN: Both of you guys I think, at some point, [inaudible] Bryan you were a CTO of a company, but I think both of you, at various points were doing freelancing before and during while you were working on your SaaS products. I'm sort of curious to know if you miss the variety, because one of the things that I love about consulting and freelancing work is that I'm constantly meeting new people and new problems. And while I love the idea of doing a product, I kept thinking, “Yeah, but focus on only one thing? That seems so hard and even boring” and I'm wondering what you guys think about that. BRYAN: Yeah, I have some thoughts on that. It’s funny you should say that about focusing on one problem because as soon as you step into running a business, especially if you have other people or employees that you're working on with it, you have a huge array of many different problems. [Chuckling] That’s so true. And you have to talk to new people all the time, because you got – whether it’s prospective customers, existing customers, potential employees that you're recruiting, your staff, vendors. And there's always problem-solving that you have to engage in all of those things all the time, so I think it depends on –. It’s certainly a lot of variety – I mean, I know more about, a lot more about things like marketing, sales, accounting, legal, ops – all of these different facets now that I did when I started because I had no choice. You had to kinda learn it or you die. But in terms of the difference between – I had been consulting in the past, where we had a new project every few months –. The biggest difference to me, I think, is between how narrow or broad your problem space is, right? So usually, with consulting or freelancing, in my experience, you're kinda – you're doing engineering or you're doing design or something else like that for a bunch of different clients, whereas if you are considering starting a business, if you want to program –. I would almost go so far as to say, if you're a programmer and you're thinking of starting a software business, you should not do that if you want to program the majority of your time. I would be interested in Anthony’s take, but I would not recommend that. If you wanna program the majority of your time, you should join a business, not start a business. You join an early stage one and there can be a lot of variety there, but you start it, you're going to have some very significant restrictions that are going to be kinda forced on you in terms of the way you manage your time, whether you like it or not. So it’s really about, one, do you wanna focus more on one area and be the best user interface designer that you can possibly be, or do you wanna be an entrepreneur – and yes, you may have a background in design or software, and that’s a means to an end, but you're going to be doing a whole lot of different stuff whether you like it or not. ANTHONY: Yeah, there's no doubt that I spend less time programming now as a business owner than I would if I was a developer for a company. Having said that, the neat thing that I like is as a business owner, I like to think in terms of how can I use computers to help me do a better job at all those other aspects of business? So you're going to end up doing all these different things, but you can use your skills as a programmer, as a developer, to automate a lot of those things. And there's really a lot of interesting problems. Now, whether you're a hardcore believing that you should spend all of your time focusing just on your product or not may change whether or not that’s something that you want to do. As your company grows though, you'll find that you'll start to hire people that are going to focus on the product part of your product, and therefore you go off and do other things, and again, you can reach back into being a developer as a skill that can actually make your life as a business-owner even better and more fulfilling. And I'm totally with Bryan in that the amount of problems that you'll see as a business owner are outside of programming. You're going to experience everything; at some point you're going to have to play lawyer, you're going to have to play accountant, you're going to have to play matchmaker, you're going to have to play friend, you're going to have to play devil – it doesn’t matter. You’re going to have all these roles you're going to play as a business owner, and I think, as a developer, if you know that you're okay trying to do that, then you're okay trying to start developing a business. If you really just wanna focus on working with computers all the time and building systems, then I agree – you're probably not quite ready to build a business. You should instead join one where you can have a significant impact on how that business grows – a small business or a small, bootstrap startup. That’s a great way to do that. There's nothing that says that you have to go do your own bootstrap from day one. You can go and join somebody else’s bootstrap as employee number one, you know? BRYAN: Yeah, and to really drive that home, I would strongly recommend that anybody who’s thinking about starting a business, as almost a prerequisite, work for an early-stage startup or a bootstrap company, talking about certainly fewer than ten people as a way to get experience before that. For me, that was a huge part of why I was able to kind of survive doing Code Climate, is that I had worked at small startups before where I didn’t necessarily get pulled into all of the other areas of the business, but I was sitting in the same room with people who were doing all these aspects of the business, and it rubs off. And it certainly helps you have a network of people to draw on. I remember the first time when we sold that Code Climate license, like a large license for our software – at that point, I didn’t really know what a purchase order was. And so I called up the guy who did sales at a previous company I worked at and said, “Hey man, I think – I don’t know, are they sending me a purchase order? Do I send them a purchase order? How does this work? They bought it, but I don’t actually know how they're going to pay for it. Can you fill me in on how that works?” and that was because of a connection that I had from a previous company. ANTHONY: Yeah, I'm totally 100% with that. If you can, before you start any sort of a business, I firmly believe one go work for an early stage company, and that’s being one of the first few people in there. Two, go work for a big company. Go understand what it’s like to work for a company that has 2,000 employees, 3,000 employees because those two ends of the spectrum are so different that it takes a difference of understanding to sort of live in those environments, and the other thing that’s a nice benefit of after you work for a big company, you realize how much you never wanna do that again. REUVEN: Absolutely. ANTHONY: It’s a good incentive; it teaches you. So do that, absolutely. REUVEN: Oh my God, my first job, both during college and then after college, was at HP. It was a great company, I learned a lot, but I'm so glad to be done with the bureaucracy of large companies and it’s a great feeling when I go to a client that's a big company, and then I leave there at the end of the day, I think, “Hah! I was here for one day and they have to stay here forever.” ANTHONY: Yeah, one of my best experiences was with a government contracting company that had 100 employees. And I used to go into the Pentagon and work with the DOD and [inaudible] I have the biggest organization in the United States, pretty much the US government. And I'd tell you that the amount of the things that I learned from that was incredible, and I never want to do it again. CHUCK: [Chuckling] BRYAN: I have also worked in government briefly, and maybe there's some correlation there that if you work in government, you'll end up far on the other side. CHUCK: Yeah, I've known a few people who worked in government. So, are there any other things that we didn’t ask maybe because we’re just getting started, or things like that? ANTHONY: Let’s see. One of the things that people often ask about is do I need to pull money in to start the company? Do I need to capital on hand to make the business run and things like that? The short answer is if you're a builder of things, then you have a distinct advantage, because you can build those things and basically the capital you're putting in is your effort. If you're not a creator of things, you have a much harder time at this point, because you have to go find the people that can create. So I think all of the software developers out there, when you're looking at what are your advantages, why are you well-suited to create a business, keep that in mind. You have these skills that are in-demand, and more importantly, you have this knowledge inside of you of how to create things. Be a builder, and you will find that you can learn a lot of the other things, and you can do it with a limited amount of capital. And capital is a big piece of starting a business in many cases. I think developers have a huge potential advantage if we can get past the fact that building the business also involves dealing with other people. We have to be willing to go out there and deal with other people and communicate and sell and build relationships as part of the process of building business as well. BRYAN: Yeah, I would agree with all of that. Although I would also add that a little bit of capital, if you can bring it in – especially if you can bring it in yourself – certainly makes things a lot easier. I'm talking about very small sums of money, maybe if you got $10,000 that you could put in the company bank account on the first day, you'll stress a lot less in those very early months than [inaudible] balance and starting at absolutely zero. But that’s much, much lower than it would need to be for many other types of businesses and I think what Anthony hit the nail in the head where if you have the ability to create the software yourself, that's going to be a great advantage. If you don’t have the ability to create the software yourself, you should probably learn to a certain extent how to create software. Not necessarily production-grade software, but at least some prototypes that you can code together, build a blog in 15 minutes, Rails type of stuff, and use that for testing out your ideas. ANTHONY: Yeah, one other thing I wanna bring up as well is that if you're just getting started in building a business, there's a lot of – especially right now, there's a lot of places that you can go, communities that you can join, where you can learn about a lot of these things in the early stages of business from people that have already done it. There's the term ‘Masterminds’, which is sort of going around right now and is gaining popularity. It’s a good one to understand; Masterminds is a group of maybe three, four, five, six other people that are at where you're at or a little bit further along, so sort of slightly different levels. But you can meet with them once every two weeks and talk through the challenges that you're experiencing and set goals that they could hold you accountable for. So I highly recommend that if you're getting started building a business, or thinking about it, look for the communities out there, try to find a Mastermind group that’s maybe local, or maybe online – it doesn’t really matter. Join that group and sort of have them push you a bit, because being pushed by the people around you is a good way to get your butt in gear and to actually deliver. BRYAN: Yup, and we’ve definitely made use of that sort of approach at Code Climate, definitely and formally. There is one other thing that I think would be interesting to talk about a little bit for people thinking of starting their own business, which is that when you get started, there's going to be a ton of things that you feel like you need to, you might feel like you need to do like setting up a bank account and creating an LLC, and designing a nice logo, and all that stuff. And really, none of that matters. All that really matters is whether you can get customers to buy your product. Everything else is very solvable down the road. I made a list of this at one point, like all of these things that we did not do when I started Code Climate that I probably should have done. In some cases, it came back to bite us, in other cases not, but it didn’t really matter because I knew that if I couldn’t get the product to be successful where people would buy it, then the fact that I never properly filled out paperwork to register an LLC in Delaware or whatever was never going to matter. I’ll tell you, in multiple cases it went so far as us getting fined by government. I was like, “I can either deal with this paperwork, or I can get fined later. I'm just going to – how much will be fined? Okay, whatever. I don’t care. I’ll deal with this later, because my focus right now is entirely on building a product that’s going to resonate to customers. [inaudible] the business worked, and we paid the fine, and we’re done. So it’s interesting how much you can delay if the business is on the right footing. CHUCK: I feel smarter now. ANTHONY: Well that’s a good thing; it means we did something right. CHUCK: Alright, well, let’s go ahead and do the picks. Curtis, do you wanna start us with the picks? CURTIS: Sure, might as well talk at some point during the show, right? Today I'm going to be a little self-serving and I'm going to pick two things that I recently wrote. First is a pricing series I wrote, which is about 7,000 words on pricing our services for freelancers, and the second post that I just did today, so it’ll be a week old when the show comes out, is five tips for the overworked consultant. CHUCK: Awesome. Reuven, what are your picks? REUVEN: Okay, so I have two types of picks tonight. I have, first of all, I mentioned before one of my favorite blogs is Political Wire, which follows what's going on in US politics. They have a podcast I also mentioned called Political Wire Conversations where they're talk to political consultants. And then a great interview about a week or two ago, I guess, the beginning of March, was with Sasha Issenberg, and he came out with this book I think The Victory Lab or Inside the Victory Lab. I've read about what all of his findings were, and basically the science of how you can win political races. And basically, it was this very long, fascinating interview about how the Obama team, he claims, won the election, because they did tons and tons of AB testing. And I thought that it’s, especially for people like us who are doing online businesses and services and trying to test them, and he said there was even, in the Obama campaign in 2012, there was a director of experiments, and that person’s full-time job was come up with new AB tests and just do them all the time. So I strongly recommend that everyone try that. The second thing is, as I'm sure you’ve all heard the Cosmos TV Show for 2014 is out. I remember very clearly watching it, because I was around then in 1980 when the original Cosmos came out, and I don’t think that Neil deGrasse Tyson is quite up to the level of Carl Sagan in terms of poetic text. It had only one episode that’s come up and so far, I've been super impressed. So I'm picking the new Cosmos, and also for those of you who like more poetic science and beautiful writing and pictures, if a little dated, then both the original Cosmos book by Carl Sagan, which is great stuff, and he came out with a sequel to that called Pale Blue Dot, which starts with a picture of the earth from I think it’s Voyager I from beyond Jupiter, sure enough, the earth looks like a pale blue dot – that’s the name. Great, great book, good writing, lots of fun stuff. Anyway, that's it for this week. CHUCK: Alright, Eric, what are your picks? ERIC: Alright, one pick that’s kind of relevant for this topic, it’s a business’s [inaudible] of 2012. Gail Goodman gave a talk: it’s called the Long Slow SaaS Ramp of Death, and she’s the CEO of Constant Contact. It basically goes through their entire company history; I think they started in ’99, and has revenue numbers and it basically tells how long and how hard and how much work it takes to get a SaaS to start growing; that's not an overnight thing, which is pretty relevant to the stories here. In two or three years you kinda get where you can take a salary out of it. CHUCK: Interesting. I guess I’ll go next. I've been reading a couple of books. I don’t remember which book this came out of, but it seemed to come out, but some people who were successful block out their time, so that in a given week, or in a given day, they’ll spend so much time getting certain things done. Basically, I kind of been approaching that and I found some calendar apps that I'm really, really liking. The first one is called Fantastical – these are both Mac-only or Mac and iOS – but Fantastical basically allows me, the thing I'm using it for is it gives you a quick view of what's going on for the day, and then the other thing that it does, it allows you to type in when you want a new even to show up in your calendar, and so I can type in basically, “Meet Reuven for lunch on Thursday at 11 am at McDonald’s” and it would fill in all the right fields on the event so that it’ll actually line everything up. And that way I don’t have to go in and click the field, click the calendar, and click whatever – it just knows that Thursday is March the 13th, and it knows that at McDonald’s is something that it puts in at the ‘where’ and I really like it. The other one that I'm using, I've been using Google calendar for a long time, but I don’t love the view mainly because it’s a little bit ugly and it’s not very customizable. You can do some things with it; there are plugins that you can use for it. but I picked up an app called BusyCal and it actually allows me to set a week. So I've got it set so the week is eight days long, so basically it’s from today till next Tuesday – we record this on Tuesdays – so it shows me the entire week and then one more day. And it has all my to-do’s on the side, which is also really nice and just a bunch of stuff like that, and the view is pretty easy to read and see, so I'm really, really, really happy with it. The other thing that it does is it puts the weather forecast at the top of each day, so I can look outside, or I can look at the calendar and see that it’s cloudy outside, but the next few days are going to be sunny or partly cloudy, and it’s just nice; it’s nice to have that there. So those are my picks. Bryan, what are your picks? BRYAN: So I've got three picks today. The first is a blog post that was written by my colleague, Michael Bernstein. It’s called Sales or Engineers, and it’s 50 points that he came up with targeted to help engineers think about engaging in sales, because sales is something that I think, for a lot of engineers, is intimidating, not necessarily natural, maybe even so far as distasteful. But Michael has been interacting a lot with our customers and our prospective customers at Code Climate as of late, and some of the learnings that he had through that process, he’s documented in this post which he just published. And so that’s my first one. My second pick is a book that I read recently called Secrets of Power Negotiating, 15th Anniversary Edition: Inside Secrets from a Master Negotiator by Roger Dawson, which is a really silly-sounding book, with a really silly-looking cover – like, two people shaking hands on the cover – but it’s actually a fantastic book. It has very practical advice for how to interact in negotiating-type contexts in a way where you can both achieve your desired outcome and do it in a way where both sides are feeling like they have had a successful negotiation. So if you ever feel like you have friction, talking with a prospective customer about the price of your freelance services or your product, there's a lot of very practical tips that you can pick up very quickly form this book just by giving it a scan. It’s an older book, but it’s all very, very true to this day. And my third pick is DNSimple, because Anthony is probably too humble to pick his own service, but we have used DNSimple from the beginning for Code Climate, as well as I use it now for all my personal domains as well. We’ve just had a fantastic experience and basically no issues with managing all of our DNS and doing all of our domain name registration in there. I think if I log in right now, I can still see the first thirty names that Code Climate could have been called before Cold Climate, where I register domain names [inaudible] sitting there, doing nothing. But the service just works, and has removed that from a concern. We never wanna host that stuff ourselves; we wanna leave it for experts like Anthony and his team. So we love their service and we highly recommend it. CHUCK: Awesome. Anthony, what are your picks? ANTHONY: I'm last up, huh? I got one book and one podcast, and then I will give you a little story. So the book is called The Referral Engine: Teaching Your Business to Market Itself. I'm still in the process of reading this book, but it’s pretty fantastic because essentially, it speaks a lot to the way that I want our business to develop and grow, and I think that it’s important reading for anybody who’s interested in using referrals as the mechanism for growing their business. Every time I read it, I did something with this book that I don’t usually do, which is I've highlighted quite a bit in this book using my Kindle, and that’s pretty rare. It’s really spoken to me. So that’s the first one. The second one is a podcast, and since we’re talking about business development and things like that, I wanna point you all, if you haven't heard it, to the Tropical MBA. It’s a fantastic podcast that’s released every week. So Dan and the guys who are essentially behind it have a physical product business, and there's the listening to them in how they’ve developed their business and the stories behind it is incredible. They also travel a lot, they're pushing sort of this nomadic lifestyle and I just love that. So, the Tropical MBA is a really good thing to listen to, and I highly recommend [inaudible] listen to that. And then of course, since we’re rubbing each other’s backs here, patting each other, we’re big fans of Code Climate. Quick story: Code Climate, the beauty and pain of it is that it constantly nags you about how bad your code is, if your code’s bad. And we recently started a new project internally, and we set up Code Climate from day one, and the thing that’s great about it is when you set it up early, it keeps you on your toes from early on so you don’t get down this path of sort of dirty, messy code, because you're seeing your code over time. And as soon as something starts to get bad, you go in and think, “Okay well, what am I doing wrong here? How do I refactor this so that the code is going to better?” and to me, that has been extremely powerful. So we use it all the time, we have it hooked up to our hip chat room and it’s constantly telling us when we’re doing things right and wrong, and I think that’s just awesome. And so that’s my third and final pick, obviously, Code Climate – good stuff, I highly recommend it. CHUCK: Very nice. Alright, well, thanks for coming guys. I really appreciate you taking the time. I know you're busy. BRYAN: Thank you. ANTHONY: Thanks for having us. CHUCK: Alright, well I don’t think we have any announcements this week, so we’ll wrap up then we’ll talk to you all later

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