How to build a $5M SaaS with 3 people and no VC funding (With Esben Friis-Jensen)

After building a successful VC-backed company, Esben Friis-Jensen took a different path — bootstrapping his next SaaS startup to $5M ARR with just a team of 3.

In this episode, he shares why he turned down venture funding, how he built an efficient, product-led growth engine, and lessons on scaling smart without sacrificing ownership or speed.

• (00:00) - Introduction
• (00:32) - Meet Esben Friis-Jensen
• (02:30) - The Decision to Bootstrap
• (06:27) - Product-Led Growth Strategy
• (11:25) - Competing in a Crowded Market
• (18:54) - The Role of AI in Business Operations
• (22:08) - Efficiency and Execution in Small Teams
• (27:48) - Making Tough Decision
• (31:17) - Revenue Metrics
• (32:10) - Speed of Decisions
• (38:43) - Challenges and Benefits of Founder-Led Companies
• (40:49) - Joining a Bootstrapped Company

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Creators and Guests

Host

Mikkel Plaehn

Marketing leader & b2b saas nerd

Host

Toni Hohlbein

2x exited CRO | 1x Founder | Podcast Host

Guest

Esben Friis-Jensen

Co-Founder of Userflow + Co-Founder of Cobalt

What is The Revenue Formula?

This podcast is about scaling tech startups.

Hosted by Toni Hohlbein & Raul Porojan, together they look at the full funnel.

With a combined 20 years of experience in B2B SaaS and 3 exits, they discuss growing pains, challenges and opportunities they’ve faced. Whether you're working in RevOps, sales, operations, finance or marketing - if you care about revenue, you'll care about this podcast.

If there’s one thing they hate, it’s talk. We know, it’s a bit of an oxymoron. But execution and focus is the key - that’s why each episode is designed to give 1-2 very concrete takeaways.

Introduction
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[00:00:00]

Esben: We built a very successful business and we did it with VC capital. You end up building also a bit of a bloated company with a lot of people, a lot of, uh, politics, a lot of you know, management. You end up raising another round, you raise another round, you raise another round, and you constantly dilute yourselves as founders.

So in the end, you have a very small ownership stake. You can build this amazing company. And then you get very little out of it. When I wanted to do a new company, wanted to do it differently, still the smaller company, as few employees as possible, and not raise venture capital.

Meet Esben Friis-Jensen
---

Toni: Mikkel, whom do we have with us here today?

Mikkel: We have a, uh, wonderful Danish gentleman called Esben. A very Danish name as well, uh, just like Mikkel. Uh, and I'm guessing you're having, I mean, you have. An easier surname, but first name when you go out for dinner, do they always mess up your name? How, how's that looking out for you?

Esben: I try not to, uh, say my, uh, surname, uh, fry.

I don't think a lot of people would know how to pronounce it, [00:01:00] so, but even your first name, fry, sorry. Yeah. Jensen, they can do, there's actually a, a surprisingly many jenssen's and, uh,

Toni: but, but e even your first name, what kind of the, what are the worst butchering that happens with your first name?

Esben: Uh, so there, I live in California, right?

So, uh, the most typical, uh, mispronounce nation is Esteban. Yeah. And I do think, uh, I'm a bit of a Latino, but I don't know.

Mikkel: You're a bit of a Latino Jesus Christ. Well, happy we have Esteban here with us today. Uh, he's run both bootstrapped and VC backed businesses, which is pretty awesome. Pretty awesome, I gotta say.

Uh, and we wanted to get you on for a while. We've just been really slow on our end. That's how it goes sometimes. Um, and I think much of our audience, they're VC backed. Uh, pretty cool to have another OG I guess, in bootstrapping in here to maybe just share some of [00:02:00] the things you've learned along the way.

Uh, I wanna see maybe just if my co-host wanna kick us off with the first question because he did so much dicking and prepping for this episode, and I don't wanna take all the glory away from

Toni: him. No, exactly. So the, I think the, the first one is right, so for people to kind of understand this, the.

Previous business you've built, it's still operating. It's like, I think it's around 500 people or something like this. Um, you've raised a bunch of capital, um, and um, and then you left that and build the next one.

The Decision to Bootstrap
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Toni: Um, the first thing is almost like, why didn't you raise venture capital? I mean, it must have been easy to kind of step out of the previous one.

Hey, this is a success. Easy peasy. Give me 2, 4, 5, $10 million in pre-seed funding. Here's my deck. I mean, uh, why, why didn't you do that? Beating them away with a stick? Yeah. Yeah.

Esben: Uh, it definitely, uh, it's exactly how it was. I mean, when you don't want the money, they're all coming for you. Uh, so, uh, yeah, that's, uh, how life is.

Um, no, I think my, my [00:03:00] journey with, with Cobalt was of course, uh. I mean, we, we built a very successful business, um, and we did it with Visa Capital. But what I also learned over time was that, um, uh, I felt like you, you, you end up building also a bit of a bloated company, uh, with a lot of people, a lot of, uh, politics, a lot of, you know, uh, management and all sorts of things.

Um, so, so that's just from. From what VC money drives because VC money drives that. You hire more people and you often tend to overhire, uh, in many situations. Uh, which I think we saw. A lot of, especially during, uh, COVID, were a lot of businesses who were hired and then had to let a lot of people go, uh, which was unfortunate.

So when I decided it was also one of the reasons I actually left Cobalt was because I got tired of all, all of working with that many people. And, uh, and getting two decisions took [00:04:00] a, a long, long time. So when I wanted to do a new company, uh, I wanted to do it differently. So build a smaller company, uh. As few employees as possible and not raise venture capital.

Another thing when you, when you look at venture capital and, and the kind of business you build is that you, you end up raising another round. You raise another round, you raise another round, and you constantly dilute yourselves as founders. Uh, so in the end you have a very small ownership stake. And we were, uh, four founders.

So we already had a small ownership stake in the company. So in the end, you can build this amazing company and then you get very little out of it, uh, in the long run. That I also wanted to do differently with, with, with user flow. Um, so it was basically build a smaller company with fewer employees, but also have, um, a bigger share, uh, and a bigger decision power in what should happen with the company in the long run.

Mikkel: So it's. Greed and laziness. That's kind of, I don't wanna deal with all these [00:05:00] people. Wanna get all the ca No, sorry, I'm just messing with you.

Esben: Yeah, I ba I basically don't like people though. No, I, I love, I, I actually love building cobalt. Uh, we have a lot of, like, fun with all the colleagues and, and, um, great parties and all that stuff.

It's, it's fun. Build a big company as well. Uh, but I think it, it becomes very ineffective. Uh, in the long run, uh, to be honest,

Toni: and I also think from a founder's perspective, right? Um. Finding a really good exit opportunity for a bigger business is also just harder right there. There are only so many businesses that can pay.

I don't know what you would be looking for, but you know, I can guess there are only so many companies that can afford a ticket like this, right? So even then, the market, if this is the journey. Is a lot smaller than, um, than you basically kind of what he ended up doing with, with user flow, I would imagine.

Yeah, sure. But, um, you know, in, instead of jumping more into the, the VC and, and capital kind of side of things, kind of let's, let's make this, uh, applicable for some folks around here, right? Because the. The thinking really is if you [00:06:00] have been three or four people, kind of, uh, you know, maybe I'm messing an up now, you, you almost need to be hyper-focused on, you know, I wanna say, you know, efficiency and resource allocation and, and basically kind of you founding this company predates this whole AI craze of, hey, just, you know, one, one man, $1 billion company.

Right? It's before that, right? Mm-hmm. It's now, it's really cool. Back then, it was really weird, right? Um, we, we

Esben: did it before it was cool. Yeah.

Product-Led Growth Strategy
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Toni: And, and like, do you have some like stories to share on, um, you know, how, how you were able to, to run this thing so efficiently and especially kind of the go-to market side to run it so efficiently?

Esben: So it all boils down to basically product-led growth. And I think. Honestly, that's also how these AI companies are doing what they're doing. Uh, it's highly, highly product-led models. So our company was built on that foundation, uh, basically. Make everything self-service. Uh, so everything from finding us as a company, uh, to signing up, [00:07:00] uh, doing a free trial, experiencing the product, buying the product, upgrading in the product and so on, everything was built, uh, with that focus.

Uh, so we basically could, you know, um, be redundant of having people do all of that stuff. Um mm-hmm. So, so that, that was the, the, the main kind of, uh. Um, go to market model that we work with. Um, and, and that was very successful for us. Um, and then of course, on the operational side of things, you also stay very lean, right?

You, you don't do things, uh, that, uh, could potentially scale or you don't try a lot of, like different projects. You just focus on kind of what works, right? Mm-hmm. So, for instance, from a, from a marketing perspective, we focused a lot on two things. One was SEM as basically having Google ads. Mm-hmm. And the other thing was me doing, uh, thought leadership on LinkedIn and other places speaking about [00:08:00] product led growth, how we were bootstrapping and these kind of things.

Uh, so really basically focusing on those two, uh, marketing channels.

Toni: Did you, did you experiment with any other stuff or was it, was it really just like, Hey, those are the two things we're gonna do, and the rest we're just calling BS on kind of, how, how was that?

Esben: Yeah, no, I did experiment in, in Cobalt when we started and we started COBOL in 2013.

Um, we, our, our success was very much built on, uh, outbound sales in the beginning and also for a long time. Uh, but I sit, I, I did start to see diminishing returns even in COBOL as we grew as a company. Um, but I still wanted to try it. Uh. When, when we did user flow just to see could it have an effect? Uh, and it didn't, uh, outbound sales was really bad.

Um, we, we didn't really get, you know, any, any leads from that or, or the few leads we got. It was not the right timing that felt like just throwing energy down, uh, a pit basically. [00:09:00] Um, mm-hmm. So, so we did experiment with that, but decided that outbound, it's, it's too hard, it's too noisy. Um, so let's focus on other channels, uh, where, uh, we know we can drive success.

Toni: Did you ever feel restrained by the cash you had, uh, for like, oh, you know, we have this other big channel that we think could work, uh, but we don't have enough money in the bank account enough to do it. Um, did you ever run into, into issues like that where like, oh shit, should we, maybe, should we maybe raise some venture couple.

I mean, did that ever cross your mind?

Esben: No, I think because we, um, we focused on, on, of course, keeping the team small and, and also a lot on being profitable. Um, we always, uh, or actually from very early on, uh, had a lot of money in the bank. Uh mm-hmm. We didn't really need money. Um, uh, so we kept increasing our ads budget, for instance, uh, and these kind of things.

Of course, we could have. Increased it, like double and, and try these kind of things. And we also did experiments [00:10:00] like that. Uh, but we, we also saw that, uh, there is like a threshold that you reach, uh, when you just pour money into ads that the quality kinda falls. Uh, so we found that perfect threshold.

Where you can, um, we, we pay a lot of money, but, but not more than, uh, where we start to see the quality drop.

Mikkel: Google is really smart. They'll take your money Google. It's like, I've, I've experienced the same, uh, you can just keep on spending, keep on spending. And there's no guarantee that you're getting gonna get more out of it.

Yeah, no,

Esben: and, and I think that's, and another key thing to our operations was that everything, so of course from the customer perspective, it was very product-led, self service. But that also meant when you're building very product-led models, when you're building very self-service models, uh, you also build your internal operations in a very systemized way, uh, because nothing is out of the system.

Um, so you have all the data in, in the application in Stripe. In your [00:11:00] CRM, uh, you're not dependent on some sales person having to lock the right data, uh, with the right information. Um, so that helped us a lot to do these kind of analysis of, of quality. For instance, how many, uh, customers are we actually getting from ads?

What's our customer acquisition costs? What our payback period, and these kind of things. It, it became a lot easier, uh, because everything was just, uh, in a system.

Competing in a Crowded Market
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Mikkel: I'm also just curious, like, were you up actually up against vc. Business as well in your space?

Esben: Yeah, plenty. Um, so user flow, uh, for those who don't know is, uh, in-app onboarding, uh, no code, uh, onboarding tool, and it's a very competitive space.

Mm-hmm. Um, uh, I think, uh. Like 20 plus competitors, uh, and maybe six plus of them are venture backed. Uh, the big ones in the space is like, uh, Pindo and WalkMe. Mm-hmm. Um, which has been there for a while. Um, but you also have app queues and others that have raised a lot of [00:12:00] capital. I. Uh, and I think, um, that didn't really harm us.

It actually helped us, uh, yeah. 'cause we were a lot closer to our customers. They felt like they were speaking with the founders and they were right. So, uh, um, they, they got got a lot of say in how we developed the product and, and we stayed really close to our customers and, and could thereby build a better product

Toni: to a degree.

Right? You could almost argue that. This having been a busy space was good for you, right? Because you had all the other guys spend tons of money on, on creating demand, educating the market, and then when time came, uh, for, for those guys to seek a solution. You were part of that solution set, basically.

Right. And you know, I would assume some of them, I mean a lot of them obviously went for like, oh, you know, I know the big guys. But some of them are like, oh wait, wait a minute. Why? Why don't I go with that vendor here that does all of these things and probably cheaper, kind of, you know, other use PS around it.

Right. So I think there was almost for a. Bootstrap profitable [00:13:00] business. There was almost a benefit in having those big competitors around

Esben: for sure. Uh, I think it's actually a formula of success. I would recommend other founders to, to take, don't be afraid of, uh, red oceans. Yeah. Uh, it's actually better for you because you can, you, you don't have to worry that much about product market fit, so you just, you go into a competitive market, you know, it's, there's already a market there, and then the way you can compete is typically.

By offering either some unique feature set or, uh, in many cases better ux, um, is a, a big differentiator, uh, because a lot of these larger companies have become very bloated, uh, applications, bad UX and these kind of things. And then NewCom as a new company with a. Quick and smooth and nice, uh, UX and, and really impress, uh, impress the customers.

Uh, and you can also do it within a free trial where many of the larger companies, because they were older, have a very sales [00:14:00] led and archaic kind of way of, uh. Selling their product. Uh, so it's a very hard buy, whereas if you just allow them to try your product, uh, it is a lot easier. Um, mm-hmm. So I, so I think that's a, a great formula for success to go into a, a competitive market.

I, I think I learned that actually from Cobalt. Uh, so when we started Cobalt, we did something called Bug bounty programs, which was a completely new market. Nobody knew really what it was, and you had to like, educate the market. Uh. Um, and it, it was really a hard selling. We were four early stage startups trying to pitch, uh, this new model.

Uh, but still it was a hard model, uh, to pitch. And then, uh, two years in, we pivoted to pen testing, which was something consultants were already doing. I. And that changed the game completely. Uh, we suddenly grew, uh, a lot faster and our competitors actually ended up taking our, copying our model because we grew suddenly outgrew them, right?

[00:15:00] Mm-hmm. Um, and that just shows that it's often better to actually be in an established market, uh, that people know about. It's easier to do, uh, things like S-E-M-S-E-O, uh, and so on.

Toni: Yeah. Very cool. I mean, people listening and probably like, ah, you know, but. Having all of the competitors really difficult. Um, and uh, and I think, you know, another way to think about, like you say, is like, well, all, all of these demo requests where you have a competitor in the deal.

It probably wouldn't have happened without the competitor in the first place. So be thankful. Maybe, you know, it's like, yeah, exactly. It's, it's, it's almost kind of to also change a little bit your, your thinking around that.

Mikkel: I mean, you and I have had that conversation a couple of times mm-hmm. When it was like we were in the social media management space, super competitive, and we were like wishing we were in that industry where there were no competition.

And then Enterra Roblox, our second stint together was like new market. We have to create it all. God, I Miss Falcon and all the social media vendors. It's like there's always gonna be difficulties. Um, I think what I'm really curious about is when you look at, um, basically [00:16:00] growing the business, we talked a bit about, hey, did you feel restrained and you didn't, but do you feel like you were potentially leaving, not chips on the table, but revenue that you could have grown faster if you had cut that check with?

Uh, some VC firm or not? Not really, actually,

Esben: no. I think we always thought about it. We constantly look at like, should we hire an an additional employee? So we were three employees for, you know, the entirety of, uh, the company when I was there. Um, discussion we had was always, yeah, it could be great, but it's also gonna be more management.

Uh, and we don't really know if this person actually will deliver. Right. Yeah. So I think the way we looked at it was always we see money is just gonna bring some money that forces you to, um, hire people because the VCs are gonna expect that you use their money, right? Mm-hmm. Uh, you can't just take their money and then say, yeah, I'm not, we're not really using, we're just keeping it in the bank.

Right. Um, so, so you, you're not only getting money, you're also getting [00:17:00] a, a third party, uh, interest, uh, that we didn't want to have, right? Yeah. We didn't want to have anybody else. Uh, have a say in how we should run the company, uh, who we should hire and these kind of things. Right. Um, so, so I think we were consistently seeing really good growth rates.

We grew, uh, you know, uh, always every month we grew, uh, I mean, we took the company, I. You know, to almost 5 million with three employees in ar. We never like, felt that we were not growing or, or that we could grow a lot faster. Um, we always looked also at our competitors and we were actually growing faster than, than most of our competitors.

Yeah. Uh, so yeah, it, it didn't really make sense and it's kinda like the practical. Approach to it, right? Yes. You can always grow faster, but if you're growing, why try to mess it up? Right? Like why? Um, uh, it's, I think it's this VC idea that, yeah, this is growing, let's just pour money into it. Um, and, and then it will grow even more.

But [00:18:00] really what they're doing, they're pouring money into hiring people. Yeah. And then what happens is the company starts running slower.

Toni: Yeah. I think to a degree, it's almost like a bit of a misconception of bootstrap companies, which is like, and you mentioned this previously, it's. It's not like you didn't have money.

Uh, yeah, actually you had, like, you had, you know, you had budget to spend more money on ads. Maybe not on day one. Like, I think that's probably the difference, right? On day one. Maybe you have a, a VC check and you can spend it there, but you probably had it in month six or month 12, you know, to kind of add more money there.

So it's like, you know, just because your bootstrap doesn't mean you are, you're, you know, you're, you're barely making a profit. Right. Can I, I think that, you know, that needs to sink in a little bit. I'm, I'm also wondering, I mean Yes. Uh, the, the bar for the fourth employee to join. Like extremely high, right?

Extreme high. And then it's like, ah, you know, I don't think that person exists. We are all superstars. There's no other superstar. Right.

The Role of AI in Business Operations
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Toni: Then also in the last couple of years, kind of this AI hype started to kind of happen. Did you guys think about, [00:19:00] uh, deploying AI solutions like across, in order to, you know, not have another employee, but maybe use this new technology?

Was that part of you guys thinking?

Esben: Yeah, I mean, uh, so we always, uh. We're dogfooding our own product, right? So our own product was, uh, product led onboarding. So we used our own product to onboard, uh, people. Mm-hmm. Uh, so that both helped us do better onboarding, but it also helped us learn about our own products so we could build a better product.

One of the features we launched when the GPT-4 came around was, uh, AI assistant, uh, so similar to Intercom's Fi. We were actually ahead of them. Uh, we launched it, uh, one month or two before them, uh, uh, at chat, uh, driven on GBT form. So you could basically ask questions about, uh, your application. It's tied up to your knowledge base, and then it would answer questions and we were dark fooding that ourselves, uh, with high, uh, success.

Uh, so support was always, I think, support. Was a key differentiator for us because we were very high [00:20:00] touch, uh, really good at, uh, providing great support, uh, uh, via the chat and so on. Because we were the founders. We knew everything about the product, but it definitely helped us scale, uh, to the next stage that we could suddenly automate a lot of the support.

Uh, a lot of the easy questions, uh, and also harder questions.

Toni: Really cool. I mean, this is on the, on the cost side. Did you do anything on the revenue side kind of, you know, I mean, everyone now says like, Hey, we have an ai, SDR, but like, you know, any, anything in that direction?

Esben: Yeah, no. When we were, that wasn't really a concept When, uh, so we sold the company one year ago.

I left six months ago. I think Ai SDR started becoming a thing like six months. Yeah, approximately ago. We would maybe have tried it. Um, I don't know. I, I think. We kind of had given up on outbound. Uh, so having an ai SDR, uh, I don't think would've made a big difference, um, to be honest. Um, because it's still a noisy, uh, space.

Uh, and, and you, you're trying to target people. I. [00:21:00] Kind of randomly. Um, so, so I don't, uh, I don't believe a lot in that, um, to be honest. But what I do believe a lot in is, uh, that you can use AI in your, um, uh, internal operations. Um, for instance, if you want to make your sales people more effective. I definitely see a big market for, um, like having AI native CRMs, for instance.

Mm-hmm. Uh, that just. Locks everything automatically, uh, follows up automatically does all the things that an AE don't wanna do, right? Mm-hmm. Um, basically, um, and, and that I see a big, uh, future. And, and, and I don't think Salesforce is gonna do that. I actually think this is the time. This, the time for somebody to come in and disrupt Salesforce or get acquired by Salesforce.

Uh, I guess it will end up with, but, um, that, that's a, an area I'm, I'm very interested in myself. Uh, I think that's, [00:22:00] uh, yeah, it's too archaic how it works today. Uh, so, so, so that the ae part of things, um, I think could be smarter.

Efficiency and Execution in Small Teams
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Mikkel: One thing Aspen, I wonder about is. How do you look at, uh, basically efficiency and and execution when you're such a small team versus VC pac?

Tony and I have talked about some of the teams that are appearing now where there are like five, 10 people doing 10, a hundred million ar really fast. Um, I mean, needless to say, it must force you to execute very differently and operate very differently. And I just wonder if you can kind of maybe share a bit with our audience, how does that look like and what, what could they learn if they're operating?

With a slightly bigger team, what are some of the considerations they could make and learn from? From like the experience you have running a really tight ship?

Esben: Yeah, I think one of the. The key lessons is that, uh, in a small team, you're very close to your customers. Um, and uh, that's because, I mean, you, you're only three people.

We were only three people, right. But, uh, in a bigger company, what I [00:23:00] saw was that, uh, that the normal way to scale a company is that you build more and more departments, right? Yeah. You build more and more silos, really. Uh, you build marketing, sales, customer success. Uh, you name it, right? Um, and I think what larger companies could learn from, from smaller, uh, like employee wise companies, uh, is, uh, not to do that.

Potentially, uh, try to not build these kind of silos, try to actually have fewer teams. Um, uh, that are smarter built, right? Um, I think the SaaS organization has become, uh, bit too big, really. Uh, I think a good example is sales and customer success. As we're moving more and more towards inbound, uh, inbound, uh, kind of marketing and, and people coming to your app doing a free trial. Um, then really a, a sales process becomes very similar to a customer success process because you're answering questions, you are finding the right [00:24:00] fit, uh, for that customer. You are looking at where they should go, right? Um, so those two teams becomes almost the same function. Uh, so why is it then still two functions, right?

Mm-hmm. Um, I think that that's just one example of where I would make an uh. And a change. And I, I've advocated for calling a new department, like product experts or whatever you want to call it. So basically not, not sales or customer sales, but these are like product experts. Uh, they're basically like sales engineers or, or something similar, right?

That are able to answer the difficult questions because everything else will be self-service, but you just need somebody who can like, get them over the finish line, right? Um, uh, so that, that's just one example, uh, that I think you can. Kinda, um, uh, do so organization wise, I think there's a lot to do. Uh, the second thing is then, and that will come out of the organizational changes.

I. Uh, [00:25:00] that you, uh, allow everybody to be in touch with customers, whether that's having them on the support channel once in a while or, or whatever. Right. Um, it's super important that, uh, team members are knowledgeable about customers and, and who they are and, and how they think and, and what they're interested in.

Uh. I've seen too many times people who are too distanced from, from customers and come up with crazy ideas that don't make any sense. Um, uh, so, so that's, that's an important aspect as well.

Toni: But I would even say this is, this is not only true for the commercial folks, also true for the product folks, right?

Yeah. Uh, really be, you know, interfacing directly with customers and their problems and their issues, right. Of. Recently read something around a team, uh, I think five guys in, in, in product or something like this. And um, and, and they were the ones staffing the support channel. So they didn't have a support team.

Yeah. Um, and what happened then is like every time a question came out three times, I. They just went and fixed it. [00:26:00] It's like, it's like, I don't, I don't want hear this thing again. Like let, let me just go and do it now. And I feel like, yeah, that, that makes a ton of sense, right? And yes, we can rationalize our way out of this and it's like, ooh, no.

And those resources and their special and so forth. But I, but I do feel when you're a smaller team, you're very quickly call BS and all kinds of, you know, specialization thing that needs to happen, right? It's like, no, you, you're part of this team. You need to find the overall best solution for this. And applying your skillset is probably the best way to do that, right?

Esben: I mean, we have exactly the same mindset. I, I think we spent like 30% maybe more on UX issues. So whenever we got a recurring issue on the port, we always fixed it in the product because we didn't wanna, you know. Uh, keep hearing the same problem, and I send, I think people who are not close to support, they will often prioritize bigger features instead of UX issues.

Right. Um, and actually it should often be the other way around that you prioritize UX issues because that will make your customers happy and, [00:27:00] and you already, you should already have a great core product. Uh, so new features. Is just, uh, icing on top of the cake. Uh, but UX issues, that's something that can lose a customer.

Yeah, I think that's, that's a great mindset to have always. Uh, when you get recurring support issues, fix it in the product, um, as soon as you can. I,

Mikkel: I kind of wonder with a, uh, with a smaller team, it's also like. How do we avoid being like eaten alive by those customers and still building, building new things and launching new campaigns?

It's like, by the way, that's also true. I think for, for bigger teams, they feel like this limitation of what they can do because they have these day-to-day things that just needs to get done. Like there's a support request. It needs to get answered, right? Yeah. Uh, how, how, how do you balance that being such a tight team and having, you know, lots of customers as well?

Making Tough Decision
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Esben: I mean, you of course. Uh, so in a very small team, you need a excellent engineer. My co-founder's best is like 10 x if not 100 x type of engineer, right? Uh, so you can build stuff. Insanely [00:28:00] fast in, in insanely high quality. Um, so that helps. Um, but you also have to be super tough. And that goes for all product-led companies.

To be honest. You have to be a bit annoyingly tough. Uh, for instance, uh, I decided at some point into the journey, I no longer want to do demos if they don't watch a video first. Uh, so I started just sending them a video, uh, with a video demo of 10 minutes, and I recommended that they did a trial. Uh.

Because all those demos I did with customers who hadn't done a trial or hadn't like done research, it was just like they were not truly interested. They were just like out there looking. Yeah, this could be a fun project. And so you're kind of pushing back a bit, are you really interested in doing something now or not?

Um, uh, so that was just an example of where you could sometimes, you know, be a bit annoying to to prospects. And yes, we would lose. Maybe a good customer once in a while, but what we [00:29:00] won in the long run was that I didn't have to do meetings. Uh, so suddenly my calendar was completely free and I could focus on all sorts of other great stuff, like providing better support, uh, you know, helping build a better product and these kind of things instead of doing cookie cutter, uh, demos.

Right? That's the kind of toughness you need, uh, both as a bootstrap company, but also as a product-led company. Uh, because they, if you start to. Be too high touch. Always jumping on a call whenever they have a problem. You know, you have these type of customers who will write on the support. I have a problem, can we jump on a call?

That's the first thing they write, you know? And then you're like, uh, what's the problem? Right? And then they will. Uh, write it. And it's simply something super simple you can answer in like, uh, in two seconds, uh, with some text, right? Um, and then you avoid it, like scheduling a call, uh, sitting on there for 30 minutes and all this stuff, right?

Um, uh, so, so [00:30:00] toughness. You need that as well. So a great engineer, uh, who can build stuff fast, but also a bit being a bit tough with your customers.

Toni: But, but I think here there's a really cool learning actually, which, which I'm not sure is applicable for anyone listening, which is, which is really, um, you know, if you imagine, um, you know, hey, there's, there's a spectrum of revenue that is profitable and then there's spectrum of revenue that's not profitable.

It's a little bit like, okay, we are manufacturing chairs and, and those chairs we are selling with a profit, and those chairs we're selling with a loss. Yeah. It's like, should we keep selling? Those chairs were the loss. And the answer is no, you should not. You should not do that. Right? No. But in venture capital, like, yeah.

Oh, does that mean we sell more chairs? Yeah. Okay. Well then let's sell more chairs. Right? This is so absolutely true, but it's also hard to apply, uh, I wanna say, right? So number one, the, the VP of sales doesn't necessarily carry the profit and loss there, or carry the cost. So it's like what's his or her incentive to do that?

Right? But also the overall [00:31:00] company, when you sit in the boardroom. That's not the measure you're being held up against, right? Kind of. No one necessarily kind of cares about this. Right. So do you have, besides, hey, being tough and actually thinking about the business as a whole. Do you feel like any clue how someone could try and, you know, walk in this direction or kind of try and implement something like this?

Revenue Metrics
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Esben: I think what we're seeing is the, everything always boils down to metrics, right? And the, the biggest metric, uh, popular, uh, a metric that's becoming more and more popular is revenue per employee. Mm-hmm. Um, and I think that's something more and more sales businesses should adopt, right? Mm-hmm. Uh, and they should be measured on that in the boardroom, uh, like.

Yes, you're doing great on sales, but what's your revenue per employee? Right? Yeah. Um, uh, because otherwise you end up building these like huge sales teams that are where. Uh, 80% are not performing, right? Mm-hmm. Um, so, so, so I think that's, that's, uh, one way to do it. Uh, uh, by having [00:32:00] less employees, basically.

Uh, yeah. Then, then you'll start to be more tough, uh, uh, and you'll have higher quality employees who knows how to be tough, right? Um, yeah.

Speed of Decisions
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Mikkel: Yeah. I think it's also like one of the things, uh, Tony and I discussed is just when you need to make a decision in a company where you're, uh, 200 people, there are probably like three layers at least.

Yeah. Uh, you need to go through versus. We're three people is, you know what I can probably write out on Slack, or we can take it in our weekly whatever to decide. So I feel like surely there's also something, um, you gain in the other end, which is like speed and and so on, right? Yeah. I

Esben: mean, we, speed of decisions were Slack.

It was just me and Best and like, should we do this? Sure. Should we increase pricing? Sure. Uh, let's do it like this. Boom. And we increased pricing by $100 and nobody budged, right? Like, it was just like, whoa, now we're earning more money. That's great. Uh, you know, uh, where a big company, they would probably have spent like six months making a pricing case like that.

And I've lost a [00:33:00] lot of revenue. In that time, right? Because I think that that is a big benefit of being a small team. Uh, and that also, uh, going back to your previous question, I mean, I think yes, having a small team is great, but, but also if you have a larger team, really think about how you do the departments so you don't end up with a lot of managers who have to agree.

Uh, I think I've often especially seen this go to market consult, you know, customer success sales. Uh, marketing and the CEO, those four people who has to agree on something and it takes six months for them to agree on, uh, what should the revenue goal be? How should we do it, what should marketing bring in, and these kind of things.

Right? Um. Really think about like, could we make that smarter? Um, uh, because there's a lot of wasted effort in making those plans.

Toni: I mean, when you, when you think about it, you have 50 people, or a hundred people, or 200 people, like 20% of your workforce is probably only there to manage just 200 people, right?

Yeah, yeah, [00:34:00] yeah. Uh, you know, the different managerial layers and then you, you know, the finance team and an HR team and what have you, right? And just, just to kind of manage this whole thing. Right? So I think it's not only, you know, speed to decision is also just. Efficiency as a whole. Actually that's impacted by this,

Esben: I think.

I think another problem with the many managers is also that's how a company, uh, grows to too many employees because every manager Oh yeah, I know. I've seen this. Like you hire a man, somebody to be a manager or a team lead. And they expect a head count. 'cause otherwise they're not a manager or, or a team lead, right?

Yeah. Uh, but really what they should be in charge of is some kind of, you know, initiative or something, you know? Yeah. A change. They shouldn't be in charge of a head count of something. Right. Like the, you typically Heisman say. Yeah, I need five people. Yeah. What, what do you need five people for? Right? Like that's, um, it's, but that's how it is in many companies like that.

You, you are a manager, so you need five people. Uh, and that, that's how you grow a company artificially.

Mikkel: I also feel like [00:35:00] if I. You're now the manager. If all three of us become managers at the same company, we have five FTEs each. Yeah. And we meet up for lunch and go like, so what's uh Greg doing on your team?

He's like, I don't really have any projects for him, actually for the foreseeable future. I'll, I'll give him something to keep him busy. It's also like you're gonna cling. To those resources and that budget, uh, to make sure you don't lose it as well. Right. There's that kind of inefficiency. 100%.

Esben: One of, I've seen that many times in budget discussions, people would put 10 people because they knew they're gonna lose five in the budget discussions.

Right. Uh, I mean, that makes no sense. That's not good for the company that people are like, uh, putting a wrong number, uh, on the paper end,

Toni: but also to a degree. Right? So it's, it's not only that, but it's also, oh, Greg, uh, on my team. He wants to grow, he wants to develop. No, so, so he now needs to become a manager.

And if he becomes a manager, I kind of need to become a director. And if I'm a director, I need more than one manager and just like, you [00:36:00] know, just keeps rolling and rolling and rolling. But, um, I, I think

Esben: luckily, I feel, I feel like we're going in the right direction now. Like it's definitely a new, I think a lot of people learned a lot from the Covid experience, like, you know.

Yeah. Where growth, uh, I think people, people reacted in the wrong way to the strong growth numbers. They were over hiring instead of just saying, Hey, we're growing. Yeah. And maybe we don't even need to hire to grow even faster. Right? Like they, instead they thought. Let's hire more people, maybe we'll grow even faster.

Right? Um, uh, and I think a lot of people learn from that, uh, because they had to let people go, which was not a fun experience. Um, and now we are seeing this new group of companies that are, uh, building in a lot leaner way, smaller teams. Um, think about revenue per employee. Potentially not raising capital.

I'm actually surprised how many of the AI companies are raising capital. Like if you look at lovable, these companies, they have, what is it lovable, have 17 [00:37:00] million in AR in, um, in four months. Why did they raise capital? It makes no sense. Like what do they need the capital for? Like, that's just to me. I mean, congratulations to the investors.

I know some of the investors congratulations to them, but I honestly, I, I, I don't understand the lovable team. 'cause they could have full ownership and have a very profitable business. Right? Yeah. Um, why have somebody else disturb that?

Toni: We, we just today discussed, um, uh, 11 x I'm not sure. Maybe kind of, I'm not sure if you part of the LinkedIn bubble, but uh, obviously there was stuff to be discussed.

Um, yeah. And um, uh, you know, one thing that kind of stood out for us was, um, and one of the replies of the CEO, he was like, well, uh, hey, we are kind of financially healthy company. You know, the 70 million we raised is pretty much all still in the bank account. And I think that's good for insuring employees, but then for people like us, like.

Well wait, why did you raise 70 million then? You know, what's the point? I just don't understand.

Esben: Yeah. Uh, because they [00:38:00] could, I think it's because they could. Right. Uh, but what they're forgetting is when you have that money, you also need to sell your company at a certain level. And that's what many forget is like the valuation.

Yeah. It's great to get a high valuation, let's say 1 billion or whatever. Right. Great. Now we are unicorn. But if you actually want an exit Yeah. Then you also have to sell the company for more than that because the VCs want their money back. Right? Yeah. And that's super hard to find a, a buyer that will pay, uh, 1 billion, right?

Yeah. Uh, you see it once in a while. What? But it's more the exception than the rule. Right?

Toni: I had like, um, one, maybe, maybe one last question actually, kind of looking at the time here. You mentioned being tough on, uh, you know, on, on the resources you spend and so forth. Um.

Challenges and Benefits of Founder-Led Companies
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Toni: But you know, it's, it's three founders, um, or four, actually three operational, I guess.

Um, and lots of ideas of what could be done, you know, on the product and the go-to market and so forth. Like, um, how did you maintain the discipline to shoot all of those [00:39:00] ideas down? Because like, you only had so many things you could do, right? Yeah. And I'm thinking specific about product and, and the only way, you know, to kind of get more product ideas in is to maybe hire someone in, right?

And, and you must have had that conversation many times and always walked away, you know? No, actually no, let's not do that. Um, how, how, how did you, how did you manage all of those egos, all of those ideas? How did you shoot it all down?

Esben: So we, I mean, first of all, we were just two co-founders and one employee.

So we have three. Oh, there you go. As two co-founders, we made all the decisions. Uh, so it was easy, uh, to, to shoot down idea. I mean, we were, we were pretty good with each other, Sebastian and I, to, uh, if somebody has an idea, we'll say okay. Yeah. Maybe that could be a good idea and then we'll do it. Um, or if it's something that, ah, let's just park that for now.

Uh, let's, let's not do that. Right? Uh, and then we, we have a, of course, like many companies do, like a list of all the feature requests that we're getting, uh, how many customers are requesting the features. So we can constantly like, look at that [00:40:00] list and see, okay, what are, what are the things we should probably work on?

Um. How many customers are requesting it and so on. Uh, and then of course we also get unique, like the AI system. Nobody had like requested that, right? Mm-hmm. But it was just so interesting and now you can build something super cool, uh, let's just try it, right? Uh, and it was a big success. We, we really increased our revenue, uh, from, from launching that, right?

It's just basically boils down to having fewer people, uh. Make, uh, come up with ideas, but also make decisions. Right? Yeah. So it doesn't end up in a lot of discussion. Yeah. Uh, I would say even with four co-founders as we were in Cobalt, we had a lot more discussion, uh, right. Than Sebastian and I would have, um, because we were four, right?

Yeah. Um, that's why I mix it up and it actually, it made us move slower.

Joining a Bootstraped Company
---

Mikkel: I actually also just wanna ask a last question. I'm sorry. We both get one. We have to, um, because I'm also just wondering, like there are quite a few, let's say non VC backed business out there. Some have done really great, made [00:41:00] it really far, like base camp, MailChimp come to mind, et cetera.

So obviously you guys, right? Yeah. There's gonna be some of them that actually do hire go for that like fourth employee. Yeah. Uh, and maybe that employee is coming from a VC fact. Company, what do you think, uh, they should prepare themselves for? What are they walking into if you consider like going for an interview with, uh, some of those business and going in that direction?

What's actually different there? Uh, from, from your point of view?

Esben: I think that depends a lot on the, the company itself. Actually. I don't think there's necessarily gonna be a, like a big difference in terms of like how, what work you do and so on. But it, it is definitely more founder led typically in bootstrap companies.

Uh. So you gotta be prepared for that. But I think even in small VC-backed companies, it's also more founder led. Uh, but as you grow, you tend to hire more and more managers, as we said, right? Mm-hmm. Um, whereas in a, in a bootstrap company, the founder led model kind of keeps on. If you look at Basecamp, it's probably still very much, [00:42:00] uh, Jason and DHH who are running the show, right?

Um, and is, uh, deciding what to do. Uh, so you gotta be ready for that as an employee, that the founders will make a lot of decisions. You might not like those decisions, but the founders, uh, know, hopefully know what they're doing. Right. Um, uh, and I think that that's just something you, you gotta be prepared for.

But many, what I've seen is like many employees actually like that. They like those early founder days, so they wanna. Keep that on. They don't want to just start reporting to somebody who can't help them progress and, and stay close to the customers and so on.

Toni: I think that's a great place to end it here actually.

Aspen, thank you so much for spending the time with us and I would say enlightening the audience on, on how to be, you know, resourceful, I guess. Yeah. Uh, and, and calling BS on things and shooting things down is being tough, you know, being tough on things. Uh, Aspen, thank you so much for spending the time.

Mikkel: Yeah,

Esben: my pleasure.

[00:43:00] I.