Ruben Gamez (Bidsketch)
Covers the whole spectrum of Ruben’s journey from side projects to a newly-minted self-sustaining bootstrapped company.
Corey Maass (The Birdy)
Corey’s story is impressive and shows the efforts required to bootstrap.
Ted Pitts & Harry Hollander (Moraware)
Some real truths. Great story about two seasoned micropreneurs building a biz slow and steady.
Michael Sliwinski (Nozbe)
About how he was able to bootstrap a “scratch your own itch” side project into a successful startup that employs a dozen people and services tens of thousands of paying customers.
Amy Hoy (Freckle)
About how she was able to free herself from the shackles of full-time employment and escape the stress of the freelancing hamster wheel by developing her own online product empire.
Rob Walling (HitTail Part 1)
Original episode about the acquisition of HitTail.
Rob Walling (HitTail Part 2)
Post mortem of HitTail’s success.
Bootstraporn might be another way to spell it!
PayPal to Stripe in 2 Days
Stripe.com is a dream for any developer wanting to build payment processing into their site.
In fact, the API is so easy to use it leaves me wondering why many other API’s make such a mountain out of a molehill. Stripe goes one step further by making every part of website payment integration stupidly easy.
App Store Approval = Days –> Stripe Approval = Instant
For example, have you ever tried to get approval to join the App Store and start making money? It takes hours
of form filling and fact checking, then days of waiting. With stripe you only need to fill out a single form with your company information and tax ID. Then click a button and – bada-boom bada-bing – you can start collecting money online instantly.
(Assuming you live in the USA and have your company papers in order.)
PayPal Sandbox = Hours –> Stripe Sandbox = Instant
Another example is with PayPal, if you want to use the sandbox to test your application it takes hours of fiddling around setting up a sandbox account loging in and out of various vendor, seller accounts etc. But with stripe it is as simple as clicking a swich that says “test” and using a pre-assigned test API key.
Even better than that, all the documentation auto inserts a working test API key into any example code so you can literally copy/paste from their site into yours and things work.
Merchant Account = Headache –> Stripe =
You probably already know this, but just in case you didn’t, stripe does not require a merchant account. Simply enter your existing bank routing and account number and stripe sweeps money into your account on a daily basis (with a 7 day lag per sweep). Setting up a merchant account usually takes weeks and requires hours of paperwork to be filled. Most other payment gateways require merchant accounts.
The subscription side of things is also super easy. Just add a few subscription plans in the stripe control panel and sync the plan ID’s with the ones you are already using on your site. When a customer switches plans stripe does all the annoying prorata stuff for you out of the box (so your customer doesn’t loose money and you don’t have to fiddle around with PayPal partial refunds).
They also have a nice and simple way of getting invoices out the API into your system so you can show customers exactly when what they paid for.
How I Switched in Only 2 Days
The trick here was to keep my infrastructure exactly the same. The only change I made was to the PayPal endpoint (i.e. the PayPal IPN script). At the top of the IPN script I check to see if the request is from PayPal or Stripe. If it’s from stripe I convert Stripe JSON parameters to PayPal IPN POST parameters. Hey presto everything works in an instant.
To get going the only new stuff I needed to add was a credit card form and a cancel button and test, test, test for a day or so.
Nuking Test Data
I was just about to write to the stripe team to suggest it would be awesome if they had a way to nuke all my sandbox test data… but then I wondered if they already had it. In the settings control panel I found a button marked “Clear Test Data”. Simple as that.
Due to the above PayPal IPN trick, ease of testing, ability to erase test data and instant go-live approval I converted my subscription site from PayPal to stripe in only 2 days. I switched it live on day 3. Not too shabby.
I don’t usually rave about this kind of service but they built something in a way that I would have loved to build myself. These guys really thought this through from business to UI to documentation to technology.
Awesome job guys!
Conventional wisdom says SaaS apps should have three pricing plans. You should raise prices until you find a price the market can bear and then stick with it… I tried that. It didn’t work out.
I then tried a different experiment. I segmented my site into three separate marketing sites each with its own Plans and Pricing. As a result, I saw signups for higher plans skyrocket.
My Plans and Pricing Sucked
I was lucky enough to be invited to speak at Microconf 2011. On the second day of Microconf, just after I had spoken, I ended up having lunch at a table with Hiten Shah and Ramit Sethi. Our conversation was immediately focused on Pluggio. To my surprise, both Hiten and Ramit felt my Plans and Pricing were completely wrong.
The thinking at the lunch table went like this:
We (Hiten and Ramit) only have one Twitter account yet we are power users with large followings. We can sign up and get huge value from your product at a price point of $9.95. That’s crazy because power users like us should be at a much higher price point! At that time my Plans and Pricing looked like this:
Time for a New “Magic Lever”
As always, I spoke about my problem to my trusted network on StartupGuild and discussed it with Jason Roberts on Techzing. During a few of those discussions some people suggested I needed a new metric. A way to determine a user’s level of success on Twitter, “something like number of followers”. Hmm, but how could I determine someone’s level of success on Twitter? I thought long and hard about it. Hmm. “Something like number of followers”. What could that be?
Holy sh*t! It could be number of followers!
What a great metric! I could make a low price plan for someone with less than 500 followers and high price plan for someone with more than 25,000 followers. And I could give both of them access to the same power features.
After an even deeper look, I discovered a few more possible pricing levers:
- Number of buffered/scheduled messages
- Number of automated RSS feeds
- Grow your following – YES/NO
- Spreadsheet scheduling – YES/NO
- Post to Facebook – YES/NO
- Local Search – YES/NO
Find out What Your Customers Need
During the same Microconf lunch, Hiten and Ramit advised me to use survey.io to get a clearer idea of what my customers need from Pluggio and price accordingly.
The survey results were confusing. One of the most important sections asks – “What is the primary benefit that you have received from Pluggio?” – the answers varied widely. Here are some examples:
- “Even flow of tweets on my power tweeting account.”
- “Manage all of my client accounts perfectly!!”
- “Web based. Nothing to download, therefore nothing to slow my machine down.”
In short, 72 survey responses seemed to describe four completely different products.
Too Many Products, Too Many Levers, Too Few Plans
This left me in the rather unfortunate position of having four products, eight pricing levers, and only four plans to make it all fit.
In another brain storming session with Jason Roberts he suggested the idea of splitting the Pluggio home page by user type, “the way Dell does it”. (When you hit the Dell landing page, you need to specify what kind of user you are: Home, Business, Public or Enterprise. After your initial choice the site remains segmented to your market from that point forward.)
Jason asked if I had any such user types.
“As a matter of fact I do,” I responded. “I have Power Users, Business & Agencies.”
This meant I could split the marketing site into three different perspectives. Even better, I could architect each version of Plans and Pricing to be perfectly relevant for each user type rather than having to knock square pegs into round holes.
Three Dimensional Plans and Pricing
I had an epiphany. If I could think of a way to make it easy for users to flip between each “user type” of Plans and Pricing it could create a new type of vector. User type itself could become a magic lever.
I quickly mocked up a page with three simple links above the Plans and Pricing matrix to make it easy to flip between them.
Now, instead of trying to think of each user type’s Plans and Pricing as its own page, I began to think of three intertwined Plans and Pricing pages as part of a larger three dimensional matrix.
This is what I came up with:
This gives the user a new axis of upgrade possibility. A vertical axis to jump from one user type to another.
The low-end upgrade path has been calculated to move from $9 -> $19 -> $29 -> both horizontally (within a user type) and vertically (jumping between user types). The plans also jump in increments of 10, 20 and 30 in each direction. So which ever way you look at it, it feels like a natural upgrade path.
The chart below is a breakdown of new Pluggio signups for the past ten months (I introduced the new plans from 9th September onward).
|$9 pricepoint||$19+ pricepoint||Paid Signups|
|Mar||41% / $298||58% / $429||48|
|Apr||47% / $298||53% / $349||47|
|May||49% / $308||51% / $319||45|
|Jun||40% / $218||60% / $329||38|
|Jul||36% / $99||64% / $179||20|
|Aug||36% / $89||64% / $219||33|
|Sep 1st-8th||44% / $79||56% / $99||12|
||15% / $81||85% / $461||28|
|Oct||31% / $144||69% / $318||30|
|Nov||18% / $90||82% / $405||27|
|Dec||12% / $81||88% / $602||27|
(Please allow for a small margin of error due to rounding and plans prior to September 9th being $9.95 versus $9.)
Overall revenue is better in recent months, however in earlier months revenue was also good due to the product being shiny and new. The main goal was to get the product out of the revenue slump n July & August which seems to have been achieved.
Start Small, Get Big – No Investment Required
When I posted I had no idea the amount of interest it would generate. Viewed over 50,000 times, I received a flood of emails from people supporting the main thesis and calling for action.
The massive interest in the post served to solidify in my mind that there is need for one (or more) systems that can facilitate many thousands of entrepreneurs to “start small, get big” without the requirement to chase limited VC funding or incubator placements.
My idea is to create a system called The Startup Guild that is somewhat like a distributed and virtual version of YCombinator. The Startup Guild would use game mechanics to help track and match up participants into self supporting mastermind groups. As an analogy, if YCombinator were client-server, the Startup Guild would be a torrent tracker.
The main premise of the guild would be to help entrepreneurs build their first profitable business via the unfunded route of bootstrapping, however there would be nothing about the guild to exclude participants from seeking funding or placement at an incubator.
Problems The Guild Would Try To Solve
- How can I build a start-up with no investment?
- How can I meet like minded entrepreneurs to bounce ideas off?
- How can I keep motivated and be held accountable?
- How can I find a business partner?
- How can I build a startup if I’m not based in Silicon Valley?
The Startup Guild – Potential Components
news.startupguild.net – A reddit style link rating & comment system dedicated to articles related to “no-investment, start small, get big”
blog.startupguild.net – A “guest post” blog with articles from people who have had success with “start small, get big” approach
toolkit.startupguild.net – A toolkit with information & resources about “start small, get big”
tracker.startupguild.net – A system to publicly track entrepreneurs progress and match up mastermind groups
In my mind the key to making a distributed human network like this become successful would be to facilitate the creation of self supporting micro-groups. Mastermind groups.
The entrepreneur tracker would use game mechanics to match up mastermind groups and ensure that each group had a spread of experience. For example, it wouldn’t make sense for a group to consist of 1 person making $100k/month and 6 others just starting out. I had in mind the idea of each person within the system having a current status badge. Using game mechanics the system could also encourage competition between mastermind groups and individual entrepreneurs.
Here is a very rough example of what I’m talking about:
- Apprentice – Just starting out (A1)
- Novice – Have 100 registered users (N1)
- Mentor Level 1 – Already earning $1000/month (ML1)
- Mentor Level 2 – Already earning $5000/month (Ml2)
The tracker would match up a group like: A1, A1, A1, N1, N1, ML1 – The group might then be called “The Big Lebowski” and be tracked against performance. Think baseball league.
If you would like to follow the progress of the Startup Guild as it pops into existence sign-up to this mailing list. If you would like to help build the tracker or curate the toolkit please send me your ideas, passion level, commitment level & experience.
After the Entreporn controversy, I was mildly insulted by the readers that took my words to mean “be a micro-entrepreneur and have no ambition”.
Nothing could be further from the truth.
The truth is I’ve “swung for the fences” all my life.
My arrogance always lead me to believe I was too good for anything smaller.
I’ve tried to build a venture backed Google/Facebook/Groupon 4 times in my career.
- All Channels, a human powered search engine (2000)
- NanoFlirt, a real world meets virtual world dating system (2006)
- Woyano, Mahalo meets wikipedia meets digital content marketplace (2007)
- MashAPI, a cloud based programming language combined with metered transport layer (2009)
During the ride I also built an open source PHP database layer that is the backbone of WordPress, and prior to my startup career I spent 5 years trying to be a world famous rock star, with burning passion to be as big as the Smashing Pumpkins.
Repeatedly “swinging for the fences” has been the most costly entrepreneurial mistake I’ve ever made.
It wasted huge amounts of my life and delayed my ability to be a self sustaining businessman. I was so focused on big exits, and grand ideas, that I never learned the fundamentals of building a profitable business.
If I had been less big headed, and the very first thing I had done was to built a sensible micro business instead of – “swinging for the fences” – I would have had a better chance of fulfilling all my entrepreneurial goals.
- I would have had a more rounded understanding of “business”
- I would have been financially free sooner (and able to pursue my larger high risk ventures)
- I would have proven my business chops and been more likely to get funding
- I would have retained more control of any deals I tried to initiate
My delusions of grandeur, mixed with Entreporn’s promise of glory, kept me on that 0.001% path.
Of course that’s my story. You may be one of the 0.001% who “swings for the fences” and gets it right first time.
If that’s your story, more power to you.
But don’t, for one second, think that I don’t have the intention of swinging for the fences.
A lot of people have responded to my article about the merits of building a lifestyle business looking for answers on how to get started.
Here’s a hastily compiled list of resources to help you get started on your journey:
- How to Start a Successful Bootstrapped Web App Business
- DHH Talk – Startup School 2008
- Amy Hoy – Thoroughly non-magical advice for creating and selling your own products
- Rob Walling – Lessons Learned by a Solo Entrepreneur
- MicroISV on a Shoestring
- The Micropreneur Academy – Startups For the Rest of Us
- Andrew Warner – Mixergy
- TechZing (My Weekly Podcast with Jason Roberts)
- Startups For The Rest of us Podcast
Entreporn, a term brilliantly coined by Amy Hoy holds us back from our true potential.
It works to the advantage of almost every player in our industry that we “believe” in chasing the next big thing. They need us to keep chasing it. In the truest sense – the next big thing – is a carrot on a stick that keeps us occupied and keeps them in business.
I wish I could point the finger at one specific company, person, or party and say – it’s “their” fault – but there is no conspiracy here. It simply “is” because each player (VC, corporation, media) has become so good at optimizing their part – that the system as a whole keeps us distracted and chasing after a shimmer in the dessert .
It behooves the likes of Techcrunch, Time magazine and 60 Minutes that we care about Mark Zuckerberg’s outlier story because that’s how they sell advertising. It works out for VC’s that we keep chasing investment because that’s how they make their daily bread. It’s awesome for corporations that we chase very-unlikely-to-succeed break free strategies because then we don’t leave our job.
What they don’t publicize, and what they scoff at, is the concept of the “lifestyle business”. You’re lead to believe that it’s a waste of time, and in fact the category was recently derided by a VC talking to Mike Arrington as “dipshit companies”.
But here’s the truth.
If every developer was to focus on the very achievable goal of building a lifestyle/micro business – the entire house of cards would crumble.
And they know it.
The absolute truth is that each and every one of us can build a business that can support us. We don’t need to build a million dollar business to survive. We just need a regular paycheck. Just like the paycheck that we already get working for someone else, except it’s a paycheck we pay ourselves.
If you build a micro business it means you’re your own boss, you make your own rules, you live life on your own terms.
If you genuinely have the spirit of an entrepreneur inside of you, it’s perfectly possible to build a $10k/month webapp business that can set you free.
But even better, once you have the knowledge that comes along with building a succesful $10k/month business, you also possess the exact same knowledge that it takes to build a $100k/month business.
The chances of building a Google, YouTube or Facebook and scaling to the millions of users required to be “considered” for VC investment are vanishingly small. We’re talking in the region of 0.001%.
However the chances of building a $10k/month webapp business is pretty high. In truth, there is no reason to fail – other than failing to learn from your mistakes.
Imagine if we all did that. We would be free.
A lot of people have emailed me asking how to get started with this, so I’ve quickly put together the Bootstrappers’ Kickstarter Kit – No Investment Required
After recording 87 episodes of TechZing it occurred to me that we now have a goldmine of audio information about how to start a successful bootstrapped web app business. I’ve assembled our best shows on the subject into an 12 hour audio seminar!
If you are really serious about going out on your own, leaving your day job, and starting your very own successful web app business you owe it to yourself to listen. Each show is an interview with a guest about their successful business. As they tell their story each entrepreneur teaches us valuable lessons. I’ve grouped shows into over arching themes to make them easy to navigate.
Deciding on an Idea
If you’re just starting out and need to decide what your new business will be these shows have some very useful information. Also check out the Patrick Mckenzie interview in the marketing section.
Building Your Idea
One of the reasons why web apps fail is because they look bad and are difficult to use. This interview with Luke can help you build a product that is more likely to be successful because of a better UI.
Launching & Marketing Your Idea
Once you’ve built your app you need to start bringing in customers. These interviews have lots of information about how to go about that!
Turning Your Idea Into a $1m+ Business
Once your app is turning over a few thousand dollars a month you might want to think about turning it into a larger business. Here’s two interviews with entrepreneurs who did exactly that, and share their lessons learned.
What To Do After You’ve Made Millions
Once you’ve built a company and sold it for more than $20 million what do you do? Derek Sivers muses on this question with us in this excellent interview.
Something that non-entrepreneurs rarely understand is “The Madness”. It’s the obsession that fills our every waking thought. Like 28 days later “The Madness” is an all consuming rage.
It comes into our life just after THAT Eureka moment. The one when we realize we’ve stumbled upon an idea so big that we KNOW it will make us unimaginably wealthy. This idea will bring us respect. We will be hallowed as the new Gates, Brin, Page or Zuckerberg.
When “The Madness” sets in, romantic candle light dinners break down. As our loved one looks us in the eye and whispers sweet nothings, we try to hide the fact that we’re thinking about scaling Couch DB on the Amazon cloud.
Then start the late nights as we obsessively code our new baby into existence. Along with the distance between us and the rest of the world. Later and later to bed we go, until two weeks into “The Madness” our hours are topsy-turvy. We’re sleeping from 4AM -> 10AM. Living off Coke and Starbucks.
There’s only one way out of “The Madness”.
We have to think our idea through from every possible angle. We have to imagine every tiny twist of it. We have to gorge on it until we are full. We have to become disgusted and completely bored with our idea.
Then, and only then, can we come back to reality. To our friends, and to our partners.
Such is “The Madness”.
There’s a new phenomenon taking hold. This is the era of the “Tiny Software Company”.
Indi-developers are are starting their own “mom-and-pop” software companies all over the world.
And they’re leaving work. And they’re making a full time living.
Peldi started a million dollar industry with one simple Adobe air app. Patrick Mckenzie is making a full time living from his ridiculously nich app Bingo Card Creator. I’ve been pulling in $1000/month for the past year with Pluggio. Taylor Norish makes a great living from PrintFriendly. Pete Michaud became financially free at 25. The list goes on.
So what this all amounts to is…
“If you’re a software developer with an idea… GET OFF YOUR ASS and MAKE IT HAPPEN! There’s never been a better time! ;)”
(p.s. Post links to your projects in the comments below)