Build Your SaaS

Competing with ChartMogul and Baremetrics, whether you should "go big," and why the market is important

Show Notes

Patrick Campbell just sold his startup, ProfitWell, to Paddle for $200 million.

Highlights (go straight to šŸ”„ for the best stuff):
  • 0:00 ā€“ "My problem is I'm always curious if other people are living a better dream than me."
  • 1:30 ā€“ The major downside to bootstrapping is the lack of network
  • 2:20 ā€“ Selling ProfitWell to Paddle, and integrating the two teams.
  • 4:15 ā€“ How ProfitWell got started (2012)
  • 6:00 ā€“ Initially three co-founders (Crunchbase)
  • 7:20 ā€“ Patrick's background (what he did before ProfitWell)
  • 10:10 ā€“ What did bootstrapping ProfitWell look like? (How much did each founder invest?)
  • 14:15 ā€“ Do you want to be a lifestyle company or a "big ass company?" šŸ”„
  • 15:55 ā€“ What salary did Patrick pay himself? (Tweet) šŸ”„
  • 18:25 ā€“ Differences between Patrick (ProfitWell) and Josh Pigford (Baremetrics) šŸ”„
  • 21:45 ā€“ Should bootstrapped companies go freemium and try to "win the market?" šŸ”„
  • 26:40 ā€“ The characteristics of your market determine most of your outcomes šŸ”„šŸ”„
  • 29:24 ā€“ "Don't underestimate the velocity and size of your market." šŸ”„
  • 34:35 ā€“ What doe the average SaaS company spend on sales and marketing? šŸ”„
  • 37:39 ā€“ Pricing your SaaS discussion šŸ”„
  • 42:45 ā€“ Why competitors entering a new market can be better for your company. šŸ”„
  • 47:10 ā€“ Should bootstrapped companies try to "own the market?" šŸ”„
  • 52:10 ā€“ "We're in the second phase of SaaS: here's what's coming next." šŸ”„
  • 61:53 ā€“ Did ProfitWell employees have equity?

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Creators & Guests

Host
Justin Jackson
Co-founder of Transistor.fm
Editor
Chris Enns
Owner of Lemon Productions
Guest
Patrick Campbell
Founder of ProfitWell

What is Build Your SaaS?

Interested in building your own SaaS company? Follow the journey of Transistor.fm as they bootstrap a podcast hosting startup.

Justin:

Maybe my problem is I'm I'm always curious if other people are living a better dream than me.

Patrick:

That's probably a therapy therapy point you have

Patrick:

to figure

Patrick:

out. Yeah.

Justin:

That's why you're here today.

Patrick:

Dude, if we can be each other's therapists, I'm down for it.

Justin:

Hello, and welcome to build your SaaS. This is the behind the scenes story of building web apps in 2022. I'm Justin Jackson, founder of Transistor, And I just finished chatting with Patrick Campbell who recently sold his bootstrapped SaaS company, ProfitWell, To Paddle, the payment processing billing platform for $200,000,000. Unbelievable story. I'm not gonna say too much before we get into it.

Justin:

It was just an incredible conversation. You if you are bootstrapping right now Or you are about to bootstrap or you have been doing it for years, you will get tons out of this conversation. Let's get into it.

Patrick:

You know what I realized with bootstrapping? One of the major downsides is network. Not because, like, You don't have a network. Right? Because but I think you have to actively build it or actively, like, discover the podcast, like, all that kind of stuff.

Patrick:

When you're venture backed, You just like, oh, here's like, I'm gonna introduce you to 3 other, you know, portfolio company CEOs or founders or whatever, and it's like Yeah. Kinda given to you, which is interesting.

Justin:

Yep. Yeah. It's true. It's part of the it's more part of the the culture.

Patrick:

Yeah. I mean, they're both I think they're both, like, obviously, terribly difficult. And The whole should you or shouldn't you. I don't know if it's worthy of debate, like, in terms of funding, but, like, yeah, it is one of those things that it's a downside that I thought of.

Justin:

Yeah. No. I think we should debate it.

Patrick:

Alright. Fine. Are we jumping in? Are we in? Are we in this the episode, or are

Justin:

we in? Yeah. Let's let yeah. Let's let's let's talk about it. So I've got Patrick Campbell here.

Justin:

Patrick, welcome.

Patrick:

What's up, man?

Justin:

You just sold your company profit well

Patrick:

I did a thing.

Justin:

To paddle.

Patrick:

To paddle. And I have now I don't know if the video, but I don't know if we're using the video, but I have pedal gear behind me. All kinds of stuff. I'm wearing pedal

Justin:

shoes. Quick.

Patrick:

I got pedal. Wow. Black and yellow sneakers now.

Justin:

Was that that part of the deal that you wanted some sneakers with it too?

Patrick:

Yeah. These $80 sneakers were were like, That was the deal point that we were going back and forth on. No. I'm an all in guy, man. Like, once I'm in, I'm all in.

Patrick:

So, yeah, it's one of those things that, I'm excited about. But, yeah, Sold the company, joined Paddle. I'm actually in their London office right now. They've been here for about a month. Oh, okay.

Patrick:

Yeah. Yeah. And so, Yeah. This is the new studio. This is why I couldn't figure out focus and stuff like that before we started recording.

Patrick:

But, yeah, it's been been a good time so far.

Justin:

So you're already getting stuff done there. You're like, we gotta we gotta get the content machine running.

Patrick:

If if only you knew. Yeah. There's a lot. There's because there's a there's, like, integrating, you know, which is, like, we brought everyone on board. So thank and thankfully, I mean, we're bootstrapped, so there wasn't a lot of, like, Extra, if that makes sense.

Patrick:

So it wasn't like we had a huge finance team. They had a huge finance team. That's everything. But then there's, like, A lot of storming and norming in probably good and bad ways. Like, good ways in the sense of like, oh, we're good at this.

Patrick:

Like, Let's bring that over here. Oh, like, they're really good at that. Let's have them take over this. And, Yeah. And so it's been it's been kind of an interesting month, like, You know, that, that we've been cranking and lots of fun, like, trust building.

Patrick:

Like, I don't think a lot of people with integrations realize, like, You kind of just assume you have this trust because you have it with your team that you've built over so long, and it's like, no. You're like in an arranged marriage now. You kinda have to rebuild it all, which, you know, which is not so fun.

Justin:

So let's go back a bit. For people who aren't aware, you founded ProfitWell in 2012?

Patrick:

Yep. So started 2012. Yeah.

Justin:

It wasn't always, yeah, it wasn't always in, like, SaaS metrics. Right? You started doing something else first. Yep.

Patrick:

So we were then called price intelligently. We still have that brand and product. It's part of the profitable suite, but We wanted to help folks, with one of the biggest problems a lot of b to b folks have, which is their pricing. We have this little software app. A lot of people don't realize it started off as pure software, and then, basically, people asked us to do services on top of the software, And we were like, no.

Patrick:

VCs don't like that. And then they basically said, we'll pay you a lot of money. And we were like, okay. So, yeah, that's kinda what started this Tech enabled services it's called. And then, a year or so into that, we knew we wanted to get to, like, a more ubiquitous type of software, and, We were helping a company that's about to IPO with their pricing, and they were calculating MRR and churn incorrectly.

Patrick:

And so, we wanted more data. That was kind of a good moment of, like, clarity, and, you know, that's kinda when we started building our subscription financial metrics product. And we've now evolved into a number of different products that help You basically plug it in, and it helps reduce your churn, as well as some other stuff that we've been working around our own pricing and stuff like that.

Justin:

And When you started the company because it wasn't just you who founded it. Right? There's there's quite a few of you, I think.

Patrick:

No. It's actually kinda complicated. So It was it was I had part time cofounders, which is not I would not suggest, although I think you guys kinda did that. So I I will I will it doesn't it does it's not a, it it is not a built in, key for success, I think. I think you guys knew each other beforehand.

Patrick:

I didn't really know these guys, and, everything's great.

Justin:

I see 3 names besides you on the Crunchbase profile.

Patrick:

Yeah.

Justin:

Yeah. It says there was 4 of you total.

Patrick:

No. So here's here's kind of, like, the the clearer way. So, it was myself and these 2 other guys. They were on our board the entire time all the way up to the sale. They were advisers, but they never really came into the business and, like, worked full time on the business.

Patrick:

And There was some there was some misaligned expectations. I don't I don't think anyone's nefarious. I think, like, you know, I was a first time founder, so pretty naive and all that kind of stuff, and they were, like, You know, they had never founded anything before, like, seriously founded anything before. So I think that, like, it was one of these things where we're all kinda mixed together, and Everything worked out. We're brothers, all that kind of stuff.

Patrick:

But I it was it was just me in a room for, like, 18 hours a day for the 1st, like, 9 months, and then That's when Peter was brought on, who might be listed in the Crunchbase article or wherever you're looking. And then Facundo was brought on a little while after that. And so I think that, like, it's complicated, but, like, if I'm referring to my cofounders, I typically am referring to Peter and Facundo even though they weren't there, like, day 1, and then, the other guys

Justin:

are more

Patrick:

advisers and board members, if that makes sense.

Justin:

Got it. And and what were you doing before price intelligently, Before 2012.

Patrick:

Yeah. Totally. So I started right out of school. I worked at NSA. I worked in the Intel community, which is fun to say, but it's it's not as sexy as it sounds.

Patrick:

I was an intel analyst.

Justin:

You a Boston grad? Like, a Boston University grad?

Patrick:

No. I went to school

Justin:

You were in Boston, weren't you?

Patrick:

No. Not then. So I went to school in Illinois and then was in DC or in Maryland for that.

Justin:

What what did you take? What did you take in university?

Patrick:

I studied econometrics and math. So a lot of friends. A lot of friends as a child. I had no. Yeah.

Patrick:

That's my joke with that. But,

Justin:

What is econometrics?

Patrick:

It's I think a better way to describe what I did was was more like applied math, like, like, using math for some sort of outcome, if that makes sense. Using economics for some sort of outcome. Honestly, like, Probably 90% of what I learned and studied was just not applicable, but it kinda taught you how to think, if that makes sense. Or Okay. It it's it's kind of the the way I describe econometrics to some people is, like, you know how, like, in elementary school I don't know if they do this in Canada, but in the States, like, at least they used to.

Patrick:

When I was growing up, they would teach you that, like, Columbus discovered America in 14/92. Right? And then Yeah. When you get to high school, they're they're like, actually, it was a bit more complicated. There was, like you know, maybe these folks came down from the Nordics.

Patrick:

And then when you get to college, you, like, learn Columbus was kind of not great, you know, or very debatable, like, and all these other things and also the Native American tribes coming off the Bering Strait, and you learn, like, how complex it is. Econometrics is basically like that, but for economics. Meaning, if you take a basic economics class, you learn supply and demand are these 2 straight lines. As you get into econometrics, you start to learn none of them are ever straight. They're all over the place.

Patrick:

They they backward bend. They do all crazy stuff, so it's kind of like getting deeper. Little tangent that

Justin:

So it's more 4 people in the same

Patrick:

boat for shit. Yeah. Yeah. Yeah. Exactly.

Patrick:

And then, like, if you love that, you go get a PhD. If you hated that, you don't. And so I was gonna go get a PhD, but then I was like, I don't know. I'm not that into it. That's what led to, working for the Intel community.

Patrick:

And then what brought me to Boston was, I wasn't really enamored with, like, the bureaucracy of, Like the government, basically, even though it was one of the most fulfilling jobs. And so Google, I thought, oh, a 30,000 person tech company, that'll be That won't be bureaucratic at all. And so yeah. And then after that, I jumped in the startup community. Basically, I worked at a venture backed startup right before ProfitWell.

Justin:

Okay. And so you start ProfitWell, eventually so and, officially, you've got Peter and Facundo as your cofounders.

Patrick:

Yeah.

Justin:

What does what does bootstrapped mean in this context? Did you each Put in a bunch of money. Did you were you very lean? Like, what what what did that actually look like at the beginning?

Patrick:

Those guys, you know, thankfully, I've always been paid. They didn't necessarily so they didn't put in anything except probably not getting what they truly could get on the open market, if that makes sense. Yeah. For me, it was I cashed in I I had a small four zero one k. I think it was, like, $14, like, because I was pretty I was in my mid twenties or early twenties still.

Patrick:

Cash it out, giant tax. Like, there's a 40% tax on that those dollars, something crazy I can't even remember. And then basically lived on that for, like, 6 months and told myself If I couldn't, like, get revenue or some sort of revenue within, like, 6 to 9 months or, like, very clearly see a path towards it, I could always find a job, and that was, like, a really big realization for me, especially coming from a very, like I come from a very blue collar family. Like, the fact that I had left the government, let alone left Google, My parents thought I was insane, and then, like, when I jumped out, they were like, what is going on? And it it and I internalized that, and I was actually worst case scenario, I can go be a construction worker.

Patrick:

I could go work at a Starbucks, something like that. Yeah. But that was kind of our our

Justin:

Even though you could have probably gone back to the government Of course. Yeah. Google or somebody else. Yeah. Yeah.

Patrick:

But I had to put my mindset in, like, I can always find a job. It might not be a job I want, but I could feed myself, which, you know, was supposed to it's a big thing.

Justin:

Yeah. Yeah. That's funny. That's like the I've had a version of this, which was A lot of founders will say, I could never now I'm unemployable. I could never go back to having a job.

Patrick:

Yeah.

Justin:

And for a long time, I was like, what are you talking about? Like, if I needed to feed my family, I would go work at a Starbucks. I would do a double shift like The of course, if you had to, you would go back to employment, but there's a, psychological trick there, which is, You know, if you can imagine yourself going back to Starbucks and going, well, that's the worst case scenario is is me working at a Starbucks or whatever. Wouldn't be awesome. Yeah.

Justin:

But, you you know, there's it's still like, there's still be ways for You didn't make money. And the truth is is that, you know, most founders are actually more employable Yeah. Than they think they are, really.

Patrick:

Yeah. It's a happiness thing, I think, too.

Justin:

Right? I think that's what people mean

Patrick:

is that Yeah. Yeah. Yeah. Of course.

Justin:

It's a happiness thing. Although, I think they also think they could just never have a boss.

Patrick:

Yeah. Yeah. Yeah. And I'm

Justin:

like, well, I don't know. I I think I think you could. The right boss, you definitely could.

Patrick:

Yeah. It's kind of the thing I worry about because I have a boss now. Right? It was really interesting about it is that I think if you're running your company properly and you're not like, like, you're trying to, like, grow. Like, you're trying to be a big company, and you're running it properly.

Patrick:

That's The caveat because not everyone's trying to, like, grow really quickly or anything like that. I think that you have to run your team as if the team is the boss, meaning, like, your exec team or Your cofounders, your partners, whatever it is. It's like that team of rivals concept. Like, Bob Iger, the Disney CEO for a long time, I think he talks a lot this, like, everyone at the company or everyone at exec team, like, what makes it great is theoretically each one of them could be CEO or could be a CEO. Right?

Patrick:

And that's kinda how I really felt about Peter and Facundo. And then when coming to Paddle, that was, like, a really big thing. There's a lot of founders on the exec team, like a lot of founders.

Justin:

Yeah.

Patrick:

And so part of that's great, but part of that's probably not great depending on how you look at it. But that's how I the whole boss thing kind of, like, allowed me to kind of, like, Be comfortable with that? Because it's very, it's very exec team, which is is is better than, like, a very top down structure, if that makes sense.

Justin:

Yeah. Yeah. This actually brings up a question I've always had about you and your company, Which is, I think I you you're you somewhere I heard you talking about this decision you made, Whether you wanted to be a lifestyle company or a big ass company.

Patrick:

Yeah.

Justin:

And you talked with the team and you wanted alignment around this idea that We wanna go big. Yeah. Why did you wanna go big? What was it about going big that was motivating for you personally? And what did and what did going big mean?

Justin:

Does going big mean capturing all the market? Does going big meaning having a big exit? What What was the discussion around that with you and the team?

Patrick:

The reason we had that discussion is because It's so crucial in how you make decisions, and I think that we we like to think that it's not. We like, we the the royal we, you will. Like, we like to think that, like

Justin:

Yeah.

Patrick:

Oh, like, where you wanna go as a company, it doesn't matter as much. Just make decisions along the way. But, like, The way you make decisions around sales, the way you make decisions around team structure, who you hire, all of these other things, like, is very much predicated on, like, The type of company you want. Like, if you want and and I don't know what the other word for lifestyle like, lifestyle businesses, I don't think it should be a pejorative, but some people are, don't use it as a pejorative. I I I think it's like, if you want a great business that, like, you know, gets to An amazing lifestyle, and that's kinda what you want.

Patrick:

It's you're gonna hire more contractors. You're gonna hire you're gonna hire less people. If you wanna create, like, a large company, like, you're gonna hire people. Like, you have to. Right?

Patrick:

And you need leaders. Right? And those are expensive. Right? Like, those and that takes money out of the business.

Patrick:

And, You know, for for us, it was it was also around, like, you know, I think the average amount I made over the past 10 years, like, the average was $71,000 a year. In more recent years, I was making my my salary before the acquisition was 1.50, annually.

Justin:

Which is quite low For like, I was surprised when I saw that. I I saw you tweeting about your salary, and I was like, wow. Like because you've built this big company, this big brand that is quite recognized. And in some ways, that salary kind of structure was more similar to my friends who have been at Funded startups. Like, the funded startups and the the investors are like, hey.

Justin:

You gotta grow. Like, keep investing this back in. Don't take too big of a salary. You know? And a lot of successful bootstrap people I know who are, let's say, over the $1,000,000 ARR mark

Patrick:

Yeah. Yeah. Yeah.

Justin:

They pay themselves

Patrick:

Really well.

Justin:

Well. Yeah. Like, 200, 300, 400, not even up to a1000000. So And I was surprised by that.

Patrick:

That's the thing. Right? Yeah. Because if we wanted to be a lifestyle business and, again, not pejorative, Like, that's what we were gonna do. We're gonna be like, great.

Patrick:

Let's set you know, let's do profit first. Let's do distributions. Let's do these types of things. Like but if we're trying to create a big ass company, it's like, that's not what we're gonna do. We're gonna, like instead of, like, paying myself, You know, that extra $50 or something like that, we're gonna hire a BDR.

Patrick:

You know what I mean? Like, that type of thing. And there's a point where it's detrimental. Like, I think that We probably should have increased the salary sooner because I do think it actually caused detrimental decisions. Mhmm.

Patrick:

But I think it's one of those things where that's That's the reason we had to have that conversation because it it affects so many decisions, and I think on the again, like, Where we stayed when we went to conferences. Like, the team one of the biggest jokes was, like, going out of this transaction was, Patrick is never gonna book our travel again. Thank God. Because I would book travel, and,

Justin:

like, you

Patrick:

know, I wouldn't book the Super eight. But I wasn't booking, like, the 4 seasons or anything by any means. It's not like paddles doing that either. But it was like, I would book like, if there was a Spirit Airlines And it was not a long flight. You were going on Spirit Airlines.

Patrick:

Right? I was but also me. Like, I was going on Spirit Airlines too. Right? And so I think that was a big thing.

Patrick:

Now Now why a big ass company? Like, you're asking. You know what's funny? Like, I Josh bear BearMetrix Josh tweeted, you know, the other day about How like, Josh and I are very similar in so many different ways. When he tweeted about his glowforge, I was like, I have a glowforge.

Patrick:

Like, there's a lot of these little thing like, he likes the west wing. I like the west. Like, there's a lot of these things. We're also just, like, you know, white guys of the same age, basically, so I think that drives a lot of it as well. Mhmm.

Patrick:

But one of the things that he tweeted that I'm just, like, So the opposite of. Not in a judgmental way. It was just like, he has a lot of side projects. He has a lot of, like, things. He likes to start things.

Patrick:

I think he he learned that, you know, he needs to treat his main thing like a main thing, you know, based on his tweets. But for me, I can't I can't I can't do that. Like, I'm all in. Like, I'm all in, and Yeah. I think it I don't think it's healthy always, but I'm, like, All in to the point where, like, I can't have, like, a side hustle.

Patrick:

I can't have some of these things. I need to, like, go go go go One thing, and and maybe I learned to kind of, like, relax a little bit, but I'm very much like a singular focus. And so Yeah. I I didn't necessarily want a lifestyle business because I think a lifestyle business, it's not that there's people listening to this where it's like, it is all in, and it's a lifestyle business still, and that's fine. I'm not saying that.

Patrick:

What I'm saying is is, like, if we got to a certain 0.8 figures in revenue, and I'm treating it like a lifestyle business, like, it's I think that'd be really hard for me. And thankfully, the guys are are are similar thinking, and so it was more of an all in. And I and I also, like, Believe, and this is not a judgmental statement. This is a very personal statement. Someone described it as, like like, like, there's there's almost just, like, David Goggin's nature of sass, like, how I approach things in the sense of the struggle.

Patrick:

Like, I'm very much like, if it's not a hard thing, then why are we doing it? Right? Like, if it's not hard Yeah. Like, that's that's the purpose. Like, that's why we're on this earth is to, like, do hard things and grow.

Patrick:

Right? Which is, you know, I the David Goggins thing is almost like, think he's mass a masochist with some of these things. I'm not quite on that level, but it's more of, like, I I think that there's this this this view I have of, like, Trying to do something hard because it's worthy of doing it. And that's kinda where my values sit, if that makes sense. So it's a very personal decision, I guess, the way I'm trying to say it.

Justin:

Yeah. And, I mean, some folks it's just unavoidable. The fact that Barometric sold for 4,000,000, and You've sold for 200,000,000. Now that must be a mixture of stock and cash. Right?

Justin:

That's not all cash, is it?

Patrick:

It's a mix. Yeah. Yeah. I I

Justin:

don't think Paddles even raised Peddle's raised maybe just under 300,000,000 or something. Yep. So there yeah. There's no way they were given paid out 200,000,000 in cash. That that that, that's most of their

Patrick:

Their stores.

Justin:

Their, in their bank account. Yeah. Okay. So you've got a you got a mix of of stock and cash, But still, the exit is it it there people have been saying, like, wow. This is a 50 times exit, And some people have you know, Josh himself is like, well, here's why I think that happened.

Justin:

And he said, well, maybe it's because I treated barometrics Too much like a side project. And there was some other things too. He got he got locked into Stripe.

Patrick:

Yep.

Justin:

And, he was not freemium. You were freemium. Do you think that part of your and in some ways, I'm, I'm asking this selfishly too because Another comment has been, around the acquisition of ProfitWell has been It's better to try to go out and own the market.

Patrick:

Mhmm.

Justin:

Right? To try to become the dominant player. And, you know, you guys were clear that you wanted to be a big ass company. Was that part of being a big ass company? Was that you really wanted to own as much of the market as you could?

Justin:

Was that strategic? And is the strategy there like, once you own the market, then you just have so much more leverage? Or, like, what was some of your thinking around that? Or was it simply the challenge? Like, let's just see how much of this this nascent category can we Develop and then, you know, become dominant in.

Patrick:

Yeah. I think there's a couple things. I think that so for 1, I do think Josh is right in his analysis on a couple of things. Like, you have its you have someone treating it like a side project, And then you have me who's insane. Like, you you don't like in terms of, like, focus.

Patrick:

Like, assuming the same intelligence, Like, 1 will win. Right? And even without luck and stuff like that. Right? So I think that that's that's really tough, and I think that that's helped him.

Patrick:

And I'm I'm an investor, and his next thing maybe. And so I think that, like, I I think that's a really good lesson for him, and I think it's it's a hard one because think of the introspection that he has to have to, like, look at that, which is so hard. Right? And I think that the other thing is, like, the lockup with Stripe. I think it points to an interesting situation because some of these markets are not big enough.

Patrick:

Like, they seem big. Oh, subscription companies everywhere. It's like there are a 150,000 max subscription companies in the world. That includes subscription media. Yeah.

Patrick:

Includes Subscription memberships, subscription SaaS, subscription consumer, enterprise subscription. There's a 150,000 max. Like, we're not talking about e commerce startups Where there is, like, millions of stores and millions are coming on board, like, every couple years. Right? And so Mhmm.

Patrick:

What we did is we looked at that. We looked at all the competition, and we basically said, okay. Like, analytics products inherently kind of suck to build because no one appreciates the work that went into them, And they're not willing to pay anything for them. Like, we did our pricing research on on metrics because we were gonna charge for it. Like, it was originally gonna be a paid product.

Patrick:

And Yeah. In all this context, we said we have to go upmarket, which that means hiring a lot of people and being a funded company, or Mhmm. We have to do free, which probably should have meant we raise money. Like, we probably should because we thought, oh, how hard could accuracy be? You know, which was was famous last words.

Patrick:

Right? So I think, like, that's what guided the decision to go free, and then the thesis became, We we really like this concept of do it for you. So retain the beauty of retain is that we do it for you. You plug it in, and it's done. You don't have to write emails.

Patrick:

You don't have to and It's not because, like, we don't want but it it is kinda because we don't want your input. Like, it's because we're studying everything, and because we have all this data, We can understand exactly what's good or bad, and then we do it for you. And you just you you don't wanna become an expert in credit cards. You wanna just understand, like, Great. It's fixed.

Patrick:

Right? I made more money this month than I should have because or than than I was going to because profit will fix it with retain. And that's where the data mode. Yeah. Like, It wasn't a network effect of users and customers.

Patrick:

That's what a lot of people think. Like, oh, they get upgrade pass. Like, we certainly get that, and the brand really helped, But it was a network effect with the data when we're able to study that data and input that into products so we could build products that do it for you, like lowered your churn automatically. And so I think the mindset it was just a mindset and a focus where it's hard to sell a product that's underappreciated just in general, Like, metrics in general, it's hard to sell that in a market where there is a viable free alternative, where even if you're like, You didn't really like the design as much because people love Josh's design or maybe shirt mobile had a couple extra features than we did. Like, it's really hard to compete with it unless, you know, your product, like, is 10 x better, and there wasn't gonna be a 10 x better product in the market because We were gonna keep moving, and I just don't think there can be a 10 x better product in analytics in general.

Justin:

Yeah. And then there was also the risk, which ended up coming true, which is, You know, Stripe added analytics. Even PayPal added analytics. And Recurly and other there it wasn't like this category was completely new. Like, with Hurley and other products had, some of these analytics before.

Justin:

Your your comment about the market being small So interesting because this this gets back to something I mean, people are tired of me talking about this, but The the characteristics of a market, the size, the shape, and the dynamics. And so maybe we could get into this a little bit. So you said a 150,000. Yep. And so, you know, let's say, you know, $99 A month, if that's where you start.

Justin:

I think that's where ChartMogul starts. And then, you know, if you captured 20,000 Of that 150,000, which was that's a fair chunk. Yeah. You know, that's $2,000,000 a month or whatever. Not not a bad business, but, and we don't know what ChartMogul's metrics are.

Justin:

Do you have any idea of size? And, like, if you guys were out to own the market, was ProfitWell number 1 by a large margin, or did ChartMogul have a significant portion as well?

Patrick:

We have 30,000 subscription companies on ProfitWell to now more than 30,000. And then ChartMogul has 1 to 2,000. Parametrics had about a1000. It might be a little bit more. But yeah.

Patrick:

So I I think Wow. I think the other thing To point out here that you kinda brought up is the physics of a market guide so many things.

Justin:

Like Yes.

Patrick:

And a lot of people don't real like, even if let's say we just wanted to be a lifestyle business. We wanted a great business that, Like, guided you know, all of our lives made us all very wealthy. Everyone was, like, you know, had really great profit from the entire company. We are a great company to for etcetera. Mhmm.

Patrick:

20,000 customers paying $100 a month. Oh my god. What a grind. Right? And I can tell you right now for most of the market, $100 a month is too expensive.

Patrick:

Like, it's it's insane. Right? And so Well, we we basically like, honestly, the worst thing like, the thing we got wrong was the market. Like, that's the thing we got like, it worked out, so I'm not complaining. But, like, we knew, like, as we started getting into, like, we're trying to be a big company, like, we knew our TAM was not big enough.

Patrick:

Like, our the way we monitor and even though we are monetizing our leads better than anyone else in the space because with retain, Someone who wasn't willing to pay $50 a month for metrics is willing to pay $300 a month because it's purely pay for performance. Right? So they're like, I wouldn't have had this money, and you're not you're only taking, you a portion of the money I would have gained, and I get to keep all the all the money later. Right? So it's one of those things, like, even though we're we're squeezing more out of this this lemon than anyone else, It was one of those things that, like, that's where this multiproduct concept came to be and also why, like, it was kind of appealing to sell too because The billing systems just have an ability to monetize even better than anyone else because they can monetize the throughput.

Patrick:

Right? And so Yeah. There's a lot we can do with that with, like, retain as well as some of the other products we're building. But the advice to anyone else listening is, like, Don't underestimate the velocity of your market because even if you're building something that, like, is in a super competitive space, Especially if you're building something in a competitive space. If the market's big enough, that's fine.

Patrick:

Like, you can make a great, like, again, lifestyle business. But if you're in a market That is squeezed, and it has competition. Ugh. Like, going to another market. Yeah.

Patrick:

Unless you're really just glutton for punishment.

Justin:

Can we get into this a bit more? Because

Patrick:

Totally.

Justin:

I it feels like this is the area That that gets misunderstood a lot. And, so you said TAM, which is total

Patrick:

Addressable market.

Justin:

Addressable market. That's right. And so that's the the idea there is how many, companies are in this market total. Right?

Patrick:

Essentially. Yeah. Yeah. Yeah. It's Yeah.

Patrick:

You can define it a little bit different.

Justin:

Participants? Or

Patrick:

Well, so there's a little bit that, like it's like all metrics. Like you can kinda fudge with the definition depending on what you're trying to do. Right? So Yeah. There's a 150,000 subscription companies.

Patrick:

Maybe that's our total addressable market, but, like, our realistic addressable market, there's other, you know, acronyms people use. It's like I I can tell you out of those 150,000, 75,000 are just not addressable for us because they're they're enterprise companies. They're too Big. They're you know, they don't fit our billing systems we support. Small?

Patrick:

Yeah. Totally. Like, all over the place. Right? And so Mhmm.

Patrick:

It's it's more about, like, I think in an investor pitch or just in an adventure backed company or trying to be a big company, you want a very large TAM because that means that the future like, if I just capture x percent of the TAM. Right? I think in a bootstrap company or a lifestyle business, You don't necessarily have to worry about, oh my god. I have to pitch something that has a huge adjustable market. But if you have a very large adjustable market, It's probably an indication of, like, the ease of your go to market strategy because Yeah.

Patrick:

Everyone already has one of these Things, and I'm just gonna sell a different one. You know, that type of a thing versus I'm trying to invent a market.

Justin:

Yeah. And and you also talk about the velocity. So what do you mean by velocity? When you're when you're when you use that as a descriptor or the physics of a market, what are you talking about there?

Patrick:

It's the number of logos in the market, like number of potential buyers. And, again, it's not like like, if we're selling into subscription, it's not every subscription company. Or if it's like, we're selling a consumer product. It's not every consumer. It's people who fit some sort of a segment.

Patrick:

That's our addressable market theoretically. And the bigger that segment is, just the number of humans that theoretically will go to your landing page has just increased, And the number of humans you're able to, like, market to. Right? So the reason our strategy for marketing is what it is, It's not because Patrick has a big ego and really likes to do podcasts. The reason that it is is because we need a brand.

Patrick:

We need people to know who we are, and you don't get that through paid media. You get that through content. You get that through community. You get that through events. You get that those types of things so that when you're talking to someone, Justin, about, hey, I need metrics for my subscription business.

Patrick:

You go, Well, you know, there's a couple, but I know is free. Right? And so, you know, when Patrick's on the podcast, and, like, you should check it out, but also bare metrics and whatever. And then that's all I need. I just need you to refer to it.

Justin:

Yeah.

Patrick:

Because when they get into the product, they're gonna compare and contrast it, and the product is good enough, if not better in certain ways, that they're gonna stay. Right? And so that's that's what I mean is, like, if you are selling to, like, a fitness product, your TAM is huge because So many people are trying to get healthy, and you can drive that through paid and through, you know, display ads and all these other things. You don't really need a brand. Don't really need content unless you're doing an SEO play in that case.

Patrick:

And so that's what I mean by the physics. It's like how many people can you get through in a very quick manner, into your funnel, basically.

Justin:

And how important do you feel the because even in your example, The physics there are that some people are already in motion. Yep. And so, I have this feeling like most of the success of a market of a product in a category has to depend on how many people are already in motion. And I it feels like many founders feel like you can motivate, people who are not in motion to buy the product. So what's your take on that?

Justin:

Because in your example, there's 2 people in Slack, and somebody is looking for SaaS metrics, which means they're already in motion. They already have a company. They already like, think of all the things they have to do to just get to the starting line of profit well. Right? So what's your take on that?

Patrick:

Another huge mistake, from us. Again, huge mistake. I'm I'm not trying to be a jerk. It's just like These are things that I know, like, if we had adjusted our thinking, we could have done better. Right now, in, like, the average Subscription or SaaS company depending on how you wanna slice it.

Patrick:

The median expenses that go to sales and marketing is 60%. 60%. So if I take 1200 companies, I think the study was, I add up every dollar they're spending on everything. Toilet paper, ads, everything in between. Right?

Patrick:

And 60% of those dollars are going to sales and marketing. Now you throw in operations, you throw in, like, the desks and everything like that. How much money do you think is left over for retention and pricing, which are 2 paid products? There's not a lot.

Justin:

Yes.

Patrick:

And so we're literally like, we spent 10 years yelling about pricing and yelling about retention, And Mhmm. People get it. Like, people find it important, but, like, we are constantly educating, and we're fighting this inertia of Yes. There's 5 there's 15,000 different sales and marketing pieces of software. Right?

Patrick:

So there's a huge a hugely different problem there. But that's another thing. Right? Yeah. Like, we're not selling something.

Patrick:

Like, it's rare that someone, like, is looking for, like, Dunning or credit card failure software. Right? And we try to own those places, obviously, but it's a lot of education, and I think that You're better off finding people in motion with something. So if I was just trying to, like, create oh, I'm gonna work on something for 6 months, and I wanna get it to $100 a year in, like, revenue. Right?

Patrick:

Mhmm. I would focus on things where people are already in motion. Huge TAM, meaning lots of people. We don't always build these things for money. I actually love, like, the SaaS and subscription community, like, a lot.

Patrick:

Like, I've I've you know? And so it's one of those things where, like, it's not all about the money. It's not all about the TAM. But it's like, If I wanted to make it easy, those are the things that I would look for. And then the the 3rd piece is lock in.

Patrick:

I would try to build a product that had lock in. Like, Mhmm. What's amazing about billing systems, there's so much lock in. Like, people, like, they install it, and they're like, there's only a couple Points in their history that they they wanna change it or thinking of changing it. And that's a whole Yeah.

Patrick:

New problem for for Paddle now that or I'm discovering a Paddle, but It's also the brilliance Yeah. Of, like, the Stripe Atlas program. Like, the brilliance of the Stripe. I always thought, oh, that's just them being nice and, like, You know, giving back to the community. And and part of it is but another part of that program is once you got that Stripe account, like, why would you why would you, like, do anything else?

Patrick:

Right? And then Normally, we see people who reach, like, 700,000 a year to about 1,000,000 a year. That's the next like, then they're looking at Chargebee, Recurly, Paddle, etcetera. But, Yes. Yeah.

Patrick:

Lock in, if you can get lock in, is is the third thing I would look for, but it's not as crucial as the first 2. I don't know.

Justin:

Yeah. The physics. I love that idea, that metaphor of the physics, Because I I'm trying to describe so many of the metaphors we use in start ups, but especially in bootstrap start ups, are incredibly two dimensional. And so there's this idea of, like, this binary of charge more. And I've always been saying, no.

Justin:

There's Way more nuanced Yeah. In in pricing strategy. Like, when I actually read academic papers on pricing, there's a ton of math Super competitive. Do not understand With super tons of variables. And even if you wanted to if you're a dumbass like me and you wanted to look at the price that like, should I charge more or should I not?

Justin:

There's a lot of places I'd have to look like

Patrick:

Yeah.

Justin:

How is pricing anchored by the existing competition? Because If Mailchimp is charging $49 per month, for whatever a 1000 subscribers, ConvertKit can't come in and charge 2,000

Patrick:

Yeah. Yeah. Yeah.

Justin:

Unless there's something significantly different. And, You know, Nathan's always anchored his pricing, I think, within 10% of Mailchimp for that reason. It's like you can't be too much higher. Right?

Patrick:

You know what's funny is, like, I think your statement of, like, the binary nature of a lot of advice is, like, something that We all need to learn sooner than later in our trajectories. Right? Like, you and I are baked. Like, we're we're like you know, thankfully, we learned it, but I think, like, teaching that to some of, know, if you're early in your trajectory, like, learning that is so important. It it gets me it it grinds my gears about some of the Twitter bullshit that you see, like, the advice and stuff because it's like It's the equivalent of, like, drink 8 water 8 glasses of water a day.

Patrick:

Stay hydrated, guys. Like and it's like yeah. But it's really nuanced. Like, I'm a large human. I need more water.

Patrick:

You know? Like, I you eat a lot of salt. I don't know if that's true or not. You need more. Like and I think it's like Yeah.

Patrick:

A lot of this advice is, like, pithy Baloney, but all advice is more nuanced. It depends like, I think freemium is the future, but should every company use freemium? Of course not. Right? Like, of course not.

Patrick:

Like, maybe in some way over the next decade, but that's that's a big thing for women to latch on to is, like, You have to take in the advice and then filter it through a framework for your business, and I think not enough of us do that.

Justin:

And understanding that, Again, the the idea of the physics of a market, I just love that idea because, the podcast market, Podcast hosting market, has similar physics to web hosting

Patrick:

Yep.

Justin:

But different in some notable ways, but we are most like web hosting. So when Ruben Gammes was giving me advice early on, He said, if I was you, I would look at web hosting because they're 2 decades ahead of podcast hosting, And likely what worked there, the dynamics that work there are also going to apply. And so for That's

Patrick:

good advice.

Justin:

Example, affiliates. Affiliates

Patrick:

That's really good advice.

Justin:

Is big, and it was big. Now the dynamics of the podcasters and he was also clear to say, And we knew this from the beginning. Like, the paid podcast hosting market is maybe a 100,000 Yeah. 200,000, something like that. And with a much lower average revenue per user than you know?

Justin:

Well, we're high at our entry level, and our entry level's nineteen. Yeah. Libsyn's entry level's 5. And so we knew that the physics of our market are defined by those boundaries. Yeah.

Justin:

And no matter how much I wish like, I could wish and wish and wish that this will be a $1,000,000,000 company, There's just no way it's happening. The the the the dynamics in this market are they're it's impossible. It's impossible the way it is right now For this to be a $1,000,000,000 company. Now the physics change all the time. Like Sure.

Justin:

We found with, you know, Anchor, we were There's a worry with Anchor. Anchor's ended up being an incredible lead gen for Transistor in the same way that Substack's free email newsletter Has been unbelievable for Nathan and ConvertKit.

Patrick:

Yep. Yep.

Justin:

Yep. So all of a sudden, the physics change. Now instead of 500,000 podcasts in the world, 1000000 or 4,000,000 or something like that. And what does that mean? You know?

Justin:

The physics change. At the same time, you know, even with 2 and a half 1000000 podcasts in the ecosystem. Yeah. But if you if you ask me to place a bet on whether any of us were gonna be a $1,000,000,000 company even in 10 years, Yeah. I would say no.

Justin:

Yeah. I wouldn't make that bet. Now would I make a bet that, Paddle could be a $10,000,000,000 company in 10 years. I might make that bet because the The the dynamics of that market are so much different.

Patrick:

Are different. In terms of physics, like, never underestimate the entrant of a competitor on What it like, competitors entering your market historically make the market better. Like, it's it's you're you're always scared. And One of the things we would always say is, like like, again, nothing against our competitors, but, like, we haven't thought of them that much in the past couple years because, like, you know, 30,000, you know, then 20,000 or 25,000 versus 1 to 2, and they're monetizing differently. Our Monetizable products are growing pretty rapidly, but, like, it was one of those things where we were, like, we need a really big competitor.

Patrick:

Need a big one, like a serious big one because that trains the market in a way that you can't. Like, I can't train the market fast enough as Stripe's metrics actually being like, Stripe's metrics are not I'll say it. Like, I love those Stripe.

Justin:

They're not great.

Patrick:

They're not great. Like, They're inaccurate. Like, they make some very obvious accuracy issues, but it is the bare minimum. They needed the bare minimum. And, like, It's just one of those things that that wasn't, like, amazing, and so it was one of those things that, like, it would be cool if, like, HubSpot got into Space.

Patrick:

Right? Now I say that, and then they get in the space, and they have all the money, and we're like, oh my god. Right? But, like, it that's one of the things that, like, when you have competitors into the market, it changes. The market changes.

Patrick:

The the the throughput Yeah. Is, like, now higher because all of a sudden that SEO you've built, people are starting to search for it more, or your ads are getting more traffic or, like, those types of things. Now I will say though that, like, in the podcast hosting space, like, 1 question that's useful, if you wanna build a big company or even if you're just a bootstrap company, you're thinking like, hey. I wanna, you know, I wanna, like, just be bigger. What would it take My market to have a $1,000,000,000 exit, whether it's me or someone else.

Patrick:

Right? That's a big thing, and that's what guided us a little bit In the free conversations because we knew it wasn't gonna come from metrics, and we knew, like, what would it take? Well, we have to solve these 6 problems and blah blah blah, that's sort of where guiding where product basically went, but it's a good thought exercise.

Justin:

How much do you think I mean, again, The dynamics of every market are different and could change Yeah. Literally 1 week to the next Yeah. Overnight. And and, you know, founders, I think I think we think in bets. The question for me is, like, for example, should transistor try to go out and own the market?

Justin:

Like, right now, We we have maybe 1.5% of the paid podcast hosting market.

Patrick:

Mhmm.

Justin:

That's my guess. Sure. But, You know, we're doing we have a 4 person company. Yeah. Everybody's paid very well.

Patrick:

Yeah. Yeah. Yeah.

Justin:

And, You know, there's certainly, threats.

Patrick:

Sure.

Justin:

This was a debate I was having with, Dave Zohrab at Chartable, And it his answer changed depending on how things were going because that we started our companies at about the same time. He went venture capital. Yep. He raised money, And we didn't. And so the 1st 6 months, he was doing better because he had money in the bank, And he, you know, he wasn't suffering as much as John and I were.

Patrick:

Yep. Yep. Yep. Yep.

Justin:

But then, you know, 12 months in, John and I are both full time. We'd both quit our previous things. We're already making probably Maybe even a better salary than Dave is at that point.

Patrick:

Yep.

Justin:

And then since then, it's you know, maybe Dave was looking at us going, man, I wish I'd done the bootstrap thing.

Patrick:

Yep.

Justin:

But then he just sold to Spotify, and maybe it changes again. You know? Dip dip dip. The the calculus. So how do you think through that Stuff when and and and and then also and Dave was raising money because he wanted to own the podcast analytics Space.

Justin:

Yep. Not a huge market, but Sure. Sure. He wanted to own that space. And arguably, he accomplished it.

Justin:

Arguably, his Timing was better than the 6 podcast analytics companies that had come before him, and so it paid off. How do you think about that calculus of And, clearly, Chart Mogul's gone a different route. They they don't wanna own the market in terms of market share.

Patrick:

Yep.

Justin:

They're they're doing a different way. So how how should people be thinking about that calculus? Is it is it a strategic thing? Is it a personal thing? Should bootstrap companies try to own their market?

Patrick:

I think there's 2 really important questions you have to ask yourself. 1, The personal thing. What do you want? Right? Like, Dave, I don't know Dave, but, like, I could see a world where if I was in his shoes and I raised money and I went balls to the wall, and I failed.

Patrick:

Let's say someone else came along. Spotify came out with their own stuff. You know, they have to shut the company down.

Justin:

Yeah.

Patrick:

There's a world where he learned those lessons, and half the time, you or I would learn those lessons with a bootstrap company. Right? Because money money is speed. Right? And so Yeah.

Patrick:

I think it's like, what do you want? Like, what do you do you want the quickest path to learning? Right? If you want the quickest path to learning, maybe fundraising is the right way to do it. Right?

Patrick:

And it's it's never like, we were talking about before, it's never a binary thing. There's not, like, one thing you want. Right? But there's a set of values Yeah. That you want, And those are the values that you like, even us.

Patrick:

Like, we didn't wanna grow at all costs. Right? Like, we didn't wanna be a large company at all costs. We wanted to, like, protect certain aspects of our culture. We wanted to protect certain aspects of, like, the value people were getting, etcetera.

Patrick:

And so I think that's the biggest thing. It's, like, the personal and another question is is, like, is it the right time for funding? So there might be Mhmm. Funding might be off the table for a bunch of things, for a bunch of the the personal reasons, but then it's like, no. I wanna build a big company, and then is it the right time?

Patrick:

ProfiWell Mhmm. Did not raise money at all, but we should have raised money probably 4 or 5 years ago, Like, 100%. And the reason is is because, one, one point we should have raised money is and this is Sure. Hindsight, we wouldn't have known at the time, so we wouldn't have done it. We should've raised money when we realized we're doing a free product in a financial space The required accuracy Mhmm.

Patrick:

Should've raised money. Mhmm. Would have shaved probably a year off of our trajectory. And then the other time we should've raised money is, like, We started getting really good repeatable growth out of our sales team just to raise money because that's, you know, the speed. You know?

Patrick:

Dump the money in, Speed goes out, and our metric we were, like, really proud of, like, our LTV to CAC ratio. And it was like, no. Like, that's super cute, but it also means that, like, We're not growing fast enough because we're not investing as much, you know, because we're we're getting all this, like, you know, this low cap. Like, we're not investing. So Those are the 2 things I think are really important, and I don't know.

Patrick:

Ultimately, like, you gotta be at peace with your decisions, and I think if we do those proactively, It makes the journey that much harder or that much easier. Sorry. Because if Dave theoretically had that thought process before he started chartable or, like, right in the beginning, If it blew up Mhmm. He did the thing he was supposed to do. If he sells it, great.

Patrick:

He did the thing he was supposed to do.

Justin:

Yeah. How how did how do you do the calculation? I mean, obviously, it's hard. Yeah. But it sounds like you recognized the the threat And the opportunity of the billing side.

Justin:

I I think I read another interview or no. You said this in your in your acquisition Blog post that you had met the people from Paddle, and you had said to your engineer like, hey. If we're gonna build billing, we gotta do it now because these guys are doing it the way I would ahead.

Patrick:

Yep.

Justin:

So, obviously, you were thinking about that threat and opportunity. And there's, like, this threading of the needle of, like Yeah. If we don't move now, like, we either we either partner up with somebody else, get acquired, whatever, or we may miss Our window of opportunity here

Patrick:

Yeah.

Justin:

Or we have to raise money and build it ourselves. How how do you think founders should be thinking about that, about the threats in the opportunities and the timing. Yeah. It's very possible John and I could hold on to transistor longer than it we should. We should.

Patrick:

Yeah. It's really hard To come to peace with some of these things when like, before you should, but that's what you should really focus on. So what I mean by that is, like, You and John, like, I don't know what your conversations are like, but maybe it's like, hey. We wanna keep growing. Here are some of our nonnegotiables, though.

Patrick:

We don't wanna raise money. That changes the stakes. That changes our outcome, whatever it is. We Yeah. I don't wanna work more than x hours a week.

Patrick:

You we both don't wanna work that much or or whatever. I mean, not saying you're not working, but you get what I'm saying. We don't wanna work 80 hours a week. Right? Yep.

Patrick:

Whatever those are, and We will grow at the pace that sustains these 4 things. And if that means that this is a 10 year product or if that means that this only a 3 year product because someone comes in and eats us up. Totally fine. You know what I mean? That's getting a piece with that.

Patrick:

I think for us so the conversation that you're reading, I had interviewed Christian, CEO of Paddle. This was actually 4, 5 years ago. That's when that that took place.

Justin:

Yeah.

Patrick:

And We think about the world, ProfiWell and Pedal. We think about the same way, like, in a very, I would say, unique way. And the way that we think about things is And I think it's true. 1st kind of 10, 15 years of SaaS in this market was all about creating products that, like, Just kind of, like, helped me show my boss that I was doing work or, like, gave me this, like, infrastructure To kind of do the work. And what I mean by that is, like, you were the expert.

Patrick:

You were the expert sitting in your chair, and they just enabled you to use your expertise. Right? I think this next wave that we're in is the software creator is choosing problems where they should know better because I don't I I think we were tweeting about this. Justin

Justin:

Yeah.

Patrick:

I don't know how to get podcast subscribers. You know more about podcasts than I do. Just do it for me. Yeah. Same with hosting.

Patrick:

Right? Like, I don't like, even that part, like, I don't know how to, like, host everything. I don't wanna figure this out. Just do it for me. Right?

Patrick:

And that's what transistor does. It was just so beautiful. And so Long story short, when I met Christian, I'd never heard someone talk that way except us. We were the ones who always talked about the way he, like, finished my like, literally finished my sentence. He's like, yeah.

Patrick:

Yeah. Yeah. And it it was like a moment, and I literally left and called Facundo, and I was like, hey, man. This this is the 1st person I've ever met that gets it. We should build this.

Patrick:

Like, if if we're gonna build it, we should build it. But to answer your question, I think that it's really hard. Like, you have to have that thesis, And then I think you have to have those pre preconversations about what is the outcome you want, and then be very open to those outcomes. Like, And it has to be like I mean, we've all heard the fable about the the the guys in the boat or the guys stranded, and, God, why wouldn't you help me? And God's like, well, I sent you the boat.

Patrick:

I sent you the person. I sent those 4 people to help you, and you didn't take it. Right? So you do have to take the opportunities. Right?

Patrick:

It's not gonna just come to you. Yeah. But, like, if you have those conversations upfront, like, we had slides in our board deck. Here are potential acquirers. Here's where statuses with all those conversations, and we had that slide in that conversation for years before we actually, like, did anything about it.

Patrick:

Like, we for years before we actually, like, did anything about it. Like, we understood. Like, here's where the market was. Here's where we could go. Right?

Patrick:

We also decide about who we could acquire as well. And then in terms of identifying the market, a lot of the market will come to you. Like, you'll be big enough. Like, You'll have made those relationships with the right people, and then all of a sudden, like, hey. I was thinking about this.

Patrick:

Like, we have this new strategy for the next year. Like, You guys would fit into it and wanna talk, and then you can make those decisions based on that.

Justin:

Yeah. Yeah. When I think there's also I mean, it's tricky because there's so many dynamics. I I'm in my forties. And Which I never believe.

Patrick:

I think John still don't believe it. John She looks so young. You look such like a Dialed. No. I'm just kidding.

Patrick:

Yeah.

Justin:

I think I think John has the same feeling though of we are kind of an old school company. You know? We're like an like, Transistor's a a a fairly simple product with a very small team. And if if the next generation of SaaS, for example, is instead of Paying for Canva where you go in and you create these things, and they've done some for you. They have templates.

Patrick:

Yeah.

Justin:

But the next Version of Canva is some sort of AI that just takes all your inputs and generates

Patrick:

What you need, yeah.

Justin:

You know, All of these assets for you and then shows you how to deploy them. You know, the next version of podcasting would be Like, the hardest part is content. Right? And that's where we've the dynamics of the market really rely on people being Incredibly motivated. Yeah.

Justin:

Creative. Most of our churn happens, you know, when I email people, and I email them manually still.

Patrick:

Yeah.

Justin:

When they cancel, I say, hey. Just noticed you canceled. You know, what's going on?

Patrick:

Wanna do it anymore.

Justin:

And Yeah. The and it most of the times, they have 0 or 1 episodes. That's the that's the biggest one. And, you know, if they get 10 episodes, they're much more likely

Patrick:

Yeah.

Justin:

To stick around. If, you know, if they create an episode and submit it to Spotify, more likely to stick around. If they create an episode and then figure out how to submit to Apple, Very likely to stick around. Like, it's just these hoops are but the next version of podcasting Could be all AI based. It's like you don't even need to

Patrick:

Yeah.

Justin:

Do anything anymore. You just, Like, get it to generate the the content for you. It has your voice. It automatically, spits it out, and then you just get to upload it. And it's based on like, let's say, it can create a podcast for you automatically based on your tweets and your blog posts from the past month And everyone you interacted with, and it just and it just does it, and it's done for you.

Patrick:

So I think

Justin:

that's the next version.

Patrick:

Yeah. I would say that that's I don't think that's the next version. I think that that's so the the one part of the thesis that I didn't talk about is that I think that the product and the team and the customer are still going to be reserved by whoever You're, serving whatever type of business or whatever type of customer. So, like, in your case, I'm still gonna wanna create The podcast. Right?

Patrick:

Now there's a bunch of things around the podcast creation that, like, Riverside should do more of. There's a lot of things around that I think you guys should do more of. Like, there's a bunch of automatable things around that that are probably up there. I don't think I do think some people will do, like, some automated podcasts, like Siri Frankenstein monster kind of a thing, but, like, I think it's more Yeah. What I would do if I was trying to, like, look into this thesis for how it could better, you know, Help my business.

Patrick:

I would do all of the steps between pre idea All the way through to, like, successful podcast. And I would just line those out, and I would categorize them based on Probably creative, preproduction, postproduction, during like, I'd categorize, like, 5 or 6 categories, 5 or 6 colors on all those steps. Then I would look at the color that most aligns towards transistor and be like, these 3 things, They're, like, right next to what we're already doing. They don't really require that much lift, and they would be a differentiator. These 3 things Yeah.

Patrick:

I have no idea how we would solve those problems. If we could, that would be genius. But, like, I have no idea, so we're gonna put those in the back burner. Right? That's how I would look at this, like and I think that's that's how you can fix that.

Patrick:

Yeah.

Justin:

Yeah. There's a there's other there are probably adjacent things. And, again, the nice thing is you get to fit that to, Well, then you get to decide on the trade offs. Do we wanna hire more people? Do we wanna raise money?

Patrick:

Here's my transistor idea. I want you to create an ad campaign right from whatever episode, and you can use the cover art, and you just I don't know. Like, you just automatically spit it out. It's probably a 1000000 times more complicated than I think it is. And then just give me a button.

Patrick:

Hey, man. Just click this button, and I'd be like, okay. Like, I'm gonna set this up because I think that that's Yep. Like, I'll I'll manually do it on my end, but, like, There's something there for, like, podcast distribution, and I don't know. There's there's there's something there beyond what you're doing, but that's what I want.

Patrick:

That's what I want as one user.

Justin:

Like like, you want an automated, promotion campaign for a podcast?

Patrick:

Yes. I don't know what because I there was a good thread. I'm sure you saw it. I think it was NPR or something like that that talked about where most podcast promotion, like, For charting and for a bunch of other things comes from, like, good ad campaigns where, like, they do ad campaigns because Apple, Spotify, etcetera, they value, like, the new users or Whatever. I couldn't remember all the the details of it.

Patrick:

But it was one of those things when I read that, and I was like, that's great because I can get all the users already on my list, but I want other users. Right? So I've run, like I can't remember what's the podcast platform. It's got really simple ads you can grab.

Justin:

Overcast?

Patrick:

Yeah. I've done overcast ads, and that works pretty well. But I know that there's, like and again, I'm not an expert in Facebook, LinkedIn, all these other stuff, but, like, Just give me a button. Cool. There we go.

Patrick:

The episode's out or the podcast or whatever it is.

Justin:

Well and certainly, the the most fertile ground for that would be, dynamically inserted ads in other podcasts

Patrick:

Great.

Justin:

That have a similar audience to you because that's where most of the uplift happens. The reason that all the networks are advertising each other's shows, you know, like Malcolm Gladwell, I'm I'm guessing 80% of their, like, lift for a new show Just comes from promoting other

Patrick:

Yeah.

Justin:

Other podcasts and even in their own network because you're reaching people where they're at.

Patrick:

Totally. Well, that might be that idea I'm realizing now I think about more. This might be beyond the values you and John have set. Like, in terms of, like, we're gonna need 7 people just for that one feature, but Yeah.

Justin:

No. I think we're actually on that one, I think we're close because now we have

Patrick:

Interesting.

Justin:

A simple dynamic ad insertion tool.

Patrick:

Oh, that's cool.

Justin:

And so we can create a layer on top, Which says we will help you guys cross pollinate.

Patrick:

That's great.

Justin:

And, we can do it manually at first Just saying Yeah. Yeah. Okay. This is just for shows that have more than a 1000 listeners, and then we'll we'll match you up.

Patrick:

That's great.

Justin:

But, eventually, that could be That could happen for sure. Yeah. One question I have because we're dealing with this right now. Did do your employees have equity? Do how do you guys figure that stuff out?

Patrick:

Yeah. So I think I'm gonna do a thread about this tomorrow, or at least this week. What's funny is The previous startup I was at did not, in my opinion, handle equity in a great way. Like, everyone got equity.

Justin:

Mhmm. They

Patrick:

were really cagey about the Value of that equity. Like, they would be like, you get this many shares, but they wouldn't describe, like, what that was worth. Right? And this was 10 years ago where that was more common.

Justin:

Yeah.

Patrick:

So with PropellWell, we very much focused on, like, okay. Like, if there's an exit, Am I supposed to get 80% of this thing? Like, is that how that works? Right? Like, I think I should get a really large chunk and prob maybe the biggest chunk probably the biggest chunk.

Patrick:

But, like, I don't know. The story is, like, the Mailchimp story. I mean, Mailchimp's, it's it's it's obviously a great success, but, like, it felt And I don't know how it felt to them. Like, me I think they set expectations with their team really well, but, like, it probably felt weird that, like, The team or very few people in the team had equity. Like, they got a bonus, but, like Mhmm.

Patrick:

It was an $11,000,000,000 exit. Like, It's Yeah. That that feels weird. Right? Like, I don't know.

Patrick:

Like, in in it it's emotional and personal thing. So what we did is, Interestingly enough, when we were talking about this, Andrew Mason, the Groupon guy and the Descript guy now, he published this article when he was Doing detour, which was, like, an actually really cool idea. And, he ended up talking about how, like, They did this progressive equity system where it was, like, basically, the the founder would definitely get the most, but it was, like, not egregiously the most. So We didn't do something specific as that, but, yeah, everyone had equity. We accelerated everyone's vesting as long as they were with the company for more than a year.

Patrick:

We did a bunch of things to, like, help basically make sure that

Justin:

So was this stock options? Like, you you you you gave them options? Or

Patrick:

No. What's kinda cool is, like, they had what are called, LLC profit interest, basically, or membership interest.

Justin:

Oh, okay. You're an LLC.

Patrick:

Yeah. And so which was a whole another complicated thing to figure out. But I think that was Yeah. That was kind of the benefit is, like, Once you had your shares, you technically owned them, which was kinda cool. Like, you didn't have to there was no strike price, anything like that.

Patrick:

They were basically founder shares, which is kinda great. And so Yeah. They, didn't have to exercise them. They didn't they if they left, we had plenty of people get, You know, good amount of money, like, that don't work here anymore, you know, which, you know, I think is great. Now at the end of the day, like, I got a lot.

Patrick:

So so I'll totally say that, bluntly. I have more money than Many generations of my family will ever need, and so it was one of those things that, like, it still is weird because even though we did this, it's like I don't I don't wanna say there's guilt because I worked my butt off for it, but there's a little bit of guilt of, like, well, I have this much this person like, did I really do x more than they did. Like, I don't know. Right? Like Mhmm.

Patrick:

And so, it's an interesting and I think this is also a very personal thing. Like, Don't leave Yeah. That exit. I wanted to make sure everyone was, like, not necessarily happy because I think, you know, people can be unhappy. Like, we had people Cry over $10,000, like tears of joy.

Patrick:

Mhmm. Like and then we have people pissed off. They were only getting $100,000. Like like, money is a really weird thing with people. And so long story short, just be just make sure you're like you know, you don't regret how how how it looks or not how it looks, but you don't regret how it all shakes out, at the end, I think that's an important thing.

Justin:

Yeah. Well, congrats, man.

Patrick:

Thanks, brother.

Justin:

To have an to have an exit, I've always felt like it's okay to start a company for money.

Patrick:

Yeah.

Justin:

And, I also came from, You know, quite meager means. Am I Yeah. I'm not a wealthy family. I also lived many years of my life, Like, working a paycheck, but working hard Yeah. And trying to feed kids and pay for a mortgage and everything else.

Justin:

Yeah. And I think okay, and it should be celebrated when 100%. Founders have a good exit. So congrats. I think it's great.

Justin:

I think it's great that that you, That you did well, and now that you've got this new adventure with, with Paddle. It's Yeah. It's pretty awesome.

Patrick:

I'm pretty excited.

Justin:

And Yeah. And, Yeah. I'm sure you'll I'm sure there'll be a lot more well, we'll see a lot more content out of the paddle, I'm guessing. Is that is that the next part?

Patrick:

Yeah. There's there's, I I think I tweeted rather cheekily in it, but I mean it. Like, if you ever wanted to see what we could do with funding, get ready because it's it's gonna be exciting. Like, We like, people don't realize, like 1, people don't realize we're the only bootstrap company in our space, but also, like, to do some of the ideas we did, we were, like, Scraping by and doing, like, terrible decision making around, like, you know, oh, we have to squeeze this amount of this or that, and Now we don't have to worry about all of those decisions anymore, and so it'll it should be a good time.

Justin:

Yeah. Yeah. That'll be interesting. The For you you to experience the other side of that. Because if you were quite frugal before you know, there's pros and cons to everything.

Justin:

But Sometimes, certainly, the disadvantage of frugalness is that you're not willing to try more experiments that could just waste $10, for example. Are we willing to make this $10 bet? Yeah. No. Well, maybe we should make that $10 bet because that $10 bet might Turn into a $100.

Patrick:

Yeah.

Justin:

That would be a good bet. You know?

Patrick:

There'll be a lot of good bets.

Justin:

Yeah. That's great. Yeah. Congrats again. Congrats to you and your team.

Patrick:

Thanks, Ben.

Justin:

All the best. All the best luck.

Patrick:

Appreciate

Justin:

it. Let's let's chat again in, like, 6 months and see how are things are going over there. Thanks again for listening. Be sure to follow Patrick on Twitter. He is Patakis.

Justin:

All of the links are in the show notes, and let me do some shout outs to Our monthly supporters on Patreon, we have Jason Charnes. By the way, Jason, thanks for mentioning Transistor during your Rails POC that we really appreciate that. Mitchell Davis, Marcel Follett, Alex Payne, Bill Kondo, Anton Zorin, Mitch, Harris Kenny, Oleg Kulig, Ethan Gunderson, Chris Willow, Ward Sandler, Russell Brown, Noah Priile, Colin Gray, Austin Loveless, Michael Sittver, Paul Jarvis and Jack Ellis, Dan Buddha, Darby Frey, Brad from Canada, Adam DuVander, Dave Junta, And Kyle Fox from get rewardful.com. See you next time.