May 27, 2015

Welcome to Episode 41 of the Apply Filters Podcast.  Today we’re very excited to welcome Rob Walling on to the show.  Rob talks about his Stairstep Approach to building a business, the challenges and benefits of SAAS, and his journey in creating Drip.

This episode was sponsored by WP Ninjas, the creators of Ninja Demo and the highly popular Ninja Forms plugin.

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This episode is sponsored by DreamHost.  DreamHost now has a managed WordPress hosting service, DreamPress 2.  They offer SSDs, PHP 5.5 with OpCache & HHVM, and email addresses, which is a bonus for most typical managed WordPress hosting providers.

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Rob is the a co-founder of the Micropreneur Academy, Microconf the popular self-funded startup conference, and the Startups For The Rest of Us podcast.  Rob is also a serial entrepreneur, including DotNet Invoicing, longtail keyword research tool named HitTail, and a lightweight email marketing tool, Drip.

We talk with Rob about his Stairstep approach, which advocates starting with a small, manageable product and building on quick, early success.  Often times this starts with a one-time software or information product and repeating that process until you have replaced the income from your day job.

A new trend in this has been to start Productized Services businesses, like Craig Hewitt and Brian Casel have started.  These businesses are quick to set up and achieve product/market fit without the expense and time investment of a software product. WordPress products are a great way to get into this type of model too.

In fact, the WordPress space this is evolving as more plugins are adopting an annual recurring revenue model.  In order to effectively make the move to build a profitable business though, all developers need to learn how to market their products.  Developers can choose to sell their products on a marketplace like Envato, but with that comes the sacrifices of marketing channels and a portion of each sale going to the marketplace.

So why SAAS?  If you’re looking for a good recurring revenue model, then SAAS is at the top of the food chain.  Some WordPress based companies are now moving away from just having plugins and themes, and going to full fledged web apps.  EventEspresso and OptinMonster are two examples of how the WordPress space is maturing beyond just plugins and themes.

Drip is Rob’s first SAAS product.  Drip offers email marketing automation, which many believe to be the future of email marketing.  To hear the backstory around the big pivot that Rob and Derek had, take a listen to the Startup Stories Podcast.  This story tells how Derek and Rob realized that the product had to make a significant move from just another email marketing tool, to a smarter automation tool for email marketing.

Rob talks about how they did things that didn’t scale initially in order to get the first handful of customers, getting rapid customer support response, and the challenges of building out a scalable app.

Rob’s parting advice for founders:  If you’re launching a product in the future building an email list, and using email marketing will help your next project be successful.

You can reach out to Rob directly on Twitter @RobWalling and listen in to his podcast, Startups For the Rest of Us.

Transcript
INTRO: Welcome to Apply Filters, the podcast all about WordPress development. Now here’s your hosts, Pippin Williamson and Brad Touesnard.

BRAD: Welcome to Episode 41. Today, Pippin and I have a special guest. Rob Walling will be talking with us about transitioning from developer to entrepreneur and how WordPress developers are very well positioned to make this transition. But first, a word from our sponsor.

PIPPIN: This episode is sponsored very kindly by DreamHost, one of the premier hosting companies for WordPress. They just introduced a brand new managed WordPress product called DreamPress 2. You can go check them out at DreamHost.com. They’re offering HHVM, OPcache, PHP 5.5, SSDs, and more. If you are looking for a managed host, either a new one or just want to try one out, it looks like a really great product.

One little perk that is kind of cool that you actually don’t see them offering a lot in managed hosting companies is that they’re also including email addresses with accounts. It seems like a minor feature, but I’ve actually never seen a managed WordPress host that has it. Go check them out. You can find it at DreamHost.com/hosting/WordPress — DreamPress 2.

BRAD: Awesome. Back in 2008, Rob Walling took the leap from software consultant to working on his own products, but he experienced a serious lack of resources and community, so he and Mike Taber founded Startups For The Rest of Us, the Micropreneur Academy and MicroConf, a podcast, an online school, and a conference all for self-funded startup founders. He also wrote and published the book Start Small, Stay Small: a Guide For Launching Your First Self-funded Startup. And he’s the founder of Drip, a SaaS app that does lightweight marketing automation.

Rob has helped form a much needed community for myself and many other self-funded startup founders. I’m grateful for what I’ve learned through the podcast and the friends I’ve made through MicroConf. I thank you for all of that, Rob. It is my pleasure to welcome you to the show.

ROB: Wow! That’s quite an intro, sir. Thank you, guys, for having me. It’s my pleasure.

PIPPIN: It’s awesome to have you.

BRAD: Yeah, a pleasure. Rob, can you start off by telling us how it came about, like what you were doing at the time you decided to go from consulting to products? What was the thought process there?

ROB: To give you a timeframe, I was working as a salaried developer from early 2000, late ’99, 2000, until 2003 or ’04. Then I started doing consulting. I had some salaried gigs after that, but, for the most part, I was in and out of consulting as just a full-time software developer from 2003, 2004, until about 2008 when I transitioned to products.

I had gone through the process of figuring out how to market my skills. I had coded in a bunch of languages, including PHP, ASP.NET, all that stuff. I eventually focused on .NET as my niche.

My thought process for doing products was that I looked 15 years down the road or even 10 years down the road, and I thought to myself, “Do I really want to be running on this hamster wheel when I’m 40 or 50 or 55?” It started getting old for me, the process of running to the next client and always trying to finish the last project and trying to find the next one. Then it just didn’t suit me or really enjoy working with less technical clients. I felt like if I wanted to build some type of flywheel and have some equity in something that I wanted to have something that was able to be sold multiple times, written once and sold multiple times.

BRAD: That’s what you mean by flywheel.

ROB: Yes.

BRAD: Right.

ROB: Exactly.

BRAD: Cool.

ROB: And so, I looked at both software products and my book, kind of knowledge that I could share as well.

PIPPIN: That sounds very familiar for probably just about anybody that’s gone from consulting to products.

ROB: Sure.

PIPPIN: Very similar experiences, very similar reasons. In that transition, what do you think one of the biggest challenges was? And, was this something that was ongoing? Did it take a long time, or was it a pretty quick jump?

ROB: It took a long time. I think I launched my first kind of real effort where I spent several months of side time developing it in 2002, 2003. I launched another one a couple years later. None of them got traction. They were just really bad kind of B2C ideas because you read Entrepreneur Magazine and Fast Company, and you read just kind of the press’s impression of what you need to do to start a software company, and it’s way, way off.

BRAD: Right, because they’re always talking about the consumer apps, right?

ROB: Exactly.

BRAD: That’s the ones that make the headlines.

ROB: Those are the sexy ones. Yeah.

BRAD: Yeah, exactly.

ROB: Once I learned that, that’s when I was like: I need to start talking about what I’ve discovered. As soon as I started making a little bit of money from a little product called .NET Invoice in 2005, I started blogging about that experience. That’s really where the community started building around that.

BRAD: Nice. With .NET Invoice, how did you get into that? Did you see a need for that, like a problem there that you needed to solve? How did that come about?

ROB: .NET Invoice was a product I stumbled upon. There were two developers who were building it, and it was essentially in alpha at the time. I had already had these failed B2C ideas that were not niched down. They did not charge money. I was trying to have ad revenue models. For a bootstrapper, that just really doesn’t work very well.

I was already thinking, “I want to start a product that sells kind of to small businesses and that actually sells. You pay me money; I provide value.”

I stumbled upon these two guys building this thing, and they were asking for marketing help. I had already started building up my marketing chops a little bit with my other failed efforts. And so, instead of partnering with them, I asked if they would just sell me the code base. It was written in .NET. That’s really what happened. I just liked that it was selling into businesses.

PIPPIN: You said that you basically bought it from them. When you did that, how long did you spend reworking it? Was it pretty much, okay, we purchased it and now we’re immediately rebranding and launching it? Or, was there a really long lag time where you dive in, you start to get more and more familiar with it, and then relaunch? And, was it the same product at the end?

ROB: It was essentially the same product, but there were a ton of bugs in it, and that was actually my lack of experience in acquiring products and the lack of information out there on doing this. In 2005, no one was talking about buying a $10,000 product, a tiny, little, software product.

It’s kind of the Wild West type thing. They presented it to me like, “Yeah, it’s launched, and it has $700, $800 a month in revenue every month.”

Once I acquired it, it was full of bugs. All the customers were pissed off. They were not providing support. It really had about $200 or $300 in revenue. They had had a couple months of $700 or $800, but it was a short spike due to some relaunch. It was that kind of stuff.

The further I got into it, the further I was like, “Oh, crap. I just wrote an $11,000 check, and I need to figure out how to make this right. How do I make that investment worthwhile?” And so I did.

That’s the beauty of being a developer is that I could dig into their code, and I fixed something like 25 pretty hefty, showstopper bugs over the course of a couple weeks, as I ferreted them out and customers reported. Anything customers reported, I fixed right away, and I was trying to build confidence back into the customer base. It took me a few weeks of essentially working 60-hour, 70-hour weeks because I was working a day job at the time. I should say, like, day consulting.

I fixed all the bugs and relaunched it under the same name and the same website. It already had some SEO traffic. Then I was kind of off to the races. I actually raised the price shortly after that, and I did get it up, like, the second month after I acquired it. I think the first month it did $200. The second month it did $900. Then I raised the price and it was up over $2,000 a month within a couple months.

PIPPIN: That’s awesome. Were you able to continue growing it to the point where it was sustaining you alone?

ROB: No.

PIPPIN: Did that stay as a side project?

ROB: It stayed as a side project. I got it. It was always between about $2,000 and $5,000 a month, which is a nice side income, but not enough to support the family. I was married with a child and a mortgage at the time, living in California no less.

PIPPIN: Right.

ROB: There are some expenses there. I spent time trying to grow it. It had a couple really good traffic sources, basically organic search. I did some AdWords, and then it had some good referrals from some .NET forums because we give away the source code or include the source code when you purchase, so really a good thing for, like, a developer or a freelancer to buy and then customize for clients. That was the big difference because, why would you purchase this one-time sale product rather than go and use FreshBooks for $5 a month? That was really the differentiator.

Trying to branch out beyond those traffic sources and the fact that it’s a one-time sale made it really, really difficult to grow past the plateau point, which really it was between about $2,000 to $3,500 is where it plateaued. I had some peaks up into $5,000 when I do one-time promotions. It was not a business that, after spending several months or, frankly, a year and a half trying to grow it, I realized, “Oh, this one-time sale thing is really kind of a killer. How can I start thinking about recurring revenue because then you can build and grow over time?”

BRAD: If you were starting over today, if you were just transitioning now, would you do things differently, do you think?

ROB: I think I would do a couple things differently. The first is, today it’s just a different landscape, so I would find a community of people. There was no community around this self-funded kind of mentality.

Today there’s our community with MicroConf, Startups For The Rest of Us. There is the Tropical MBA Community, which are more digital nomads. There’s the WordPress business community where you guys and John Turner, Phil Derksen, Dave Rodenbaugh. These are a bunch of guys who are doing this similar bootstrap thing.

I would have found that. I would have found where I wanted to be and learn from those people because there’s all the stuff that took me–whatever you want to call it–eight years to learn, I think you can learn in, like, a year now if you get some guidance and you get out there and start launching. The pace is accelerated.

I also think that, these days, productized consulting or productized services is a good way to get started. We were just talking offline about Craig Hewitt with Podcast Motor. I think that’s a great example. I think Brian Castle is another example of folks who have done that well.

I would consider doing that and transitioning out of consulting. I think it would have gone a lot faster for me than truly trying to jump right into selling software products because there’s so much time investment upfront to get those going.

BRAD: Right. Do you think you would have been able to avoid the shiny idea of selling software or software as a service, though, versus productized services, coming from a development background?

ROB: Yeah. I don’t know. It’s kind of like you have to ask yourself what’s more important to you. If you really want to stick in the code and you really want to sell software, then do that. But, for me at the time, I really just wanted to get out of consulting. I did not like the hamster wheel, and I didn’t like dealing with the clients.

I actually owned .NET Invoice. Then I acquired an e-commerce website that sold beach towels. It was a drop shipping website. I cranked that up to a couple grand a month. Then I acquired an ebook about bonsai trees, and I cranked that up to $1,000 a month. That’s eventually how I quit consulting.

My number was $8,000 a month that I needed. I was making between $20,000 and $25,000 a month consulting, but I didn’t need that much to live. I talked to my wife and said, “What’s the least amount that I can make and still hit the budget?” My number was, like, $7,500 or $8,000.

I was trying to cobble that number together by any means necessary, so I do think that my motivation was to kind of do what it took. But, it’s to each his own of deciding what are you willing to do and what’s the most important thing. If you want to take longer time and just do software, that’s totally cool.

BRAD: Right, because it takes longer to do software than most things.

ROB: Yep, that’s right.

BRAD: You’ve talked about the stairstep approach to starting your own business or becoming a self-funded entrepreneur. Can you tell me and us a little bit about that and what it’s about?

ROB: Sure. Yeah, the idea behind stairstep is just not to start with the most difficult product type. Typically I consider the hardest type of product to start is a recurring revenue product that has a lot of different traffic sources because you’re just in deep, deep competition. It’s hard to get folks to buy. It’s hard to build something people want.

You have to learn a ton of stuff all at once, and it’s hard to maintain. Whether it’s SaaS, software as a service, it’s hard to build a SaaS app compare to a WordPress plugin. It’s just going to take a lot more engineering time, and you have infrastructure and all that stuff.

The idea behind stairstep is that there are three steps. The first step is to find a product that is a one-time sale and has a single traffic channel. That channel could be organic SEO. It could be paid advertising. It could be the WordPress.org repository. It could be on Amazon. There’s a bunch of different ways to find that, but learn how to essentially learn how to rank. Learn how to get traffic that converts from that single traffic source.

Then, once you have that dialed in, you’ll have some income. Then repeat that process. Moving to step two is essentially doing that multiple times. The example, of course, here might be to build a single WordPress plugin and get that up to $1,000 a month. Then repeat that until you have enough money to buy out all of your time. Step two is basically buying out your consulting time or being able to quit your job and having the time to really focus on your products.

Step three is moving to recurring revenue. I don’t necessarily think it’s for everyone, but having been through this for the past 15 years, finding something with recurring revenue is really a nice way to even out your risk, to diversify, and to have something that can grow over time rather than just plateau.

BRAD: Right. When you say recurring revenue, do you mean monthly recurring or annual recurring? Does it matter?

ROB: Yeah, that’s a good question. I think of it more as a monthly recurring, like a SaaS or a subscription e-commerce. Annual, unless you can really get that pump primed and every month you’re getting that annual revenue, so it’s not a once a year thing, but you really are getting it every month.

BRAD: Right.

ROB: I think that monthly is a better way to go for boostrappers. Yeah, it’s more consistent.

PIPPIN: I think monthly would generally be, yeah, what you just said, more consistent. It’s a lot easier to predict where you are month-to-month.

ROB: Yeah.

PIPPIN: Whereas, if everything is annual, it’s going to take a little bit longer before you can really accurately predict where you are when the next set of recurring payments comes through.

ROB: That’s right. You’re going to have more spikes up and down, and you’re also going to have a lot of credit card failures, which is a real bummer. We have some annual plans with one of my SaaS apps called HitTail, and some months we’ll have 50% of those annual plans will fail due to credit cards either being expired or they’re rejecting them because it’s this once a year cost that the credit card company doesn’t recognize. There’s a pretty substantial failure rate.

BRAD: In the WordPress space, it’s pretty typical to do annual recurring. Basically, you sell the code, a zip file of the code, but that’s really not what you’re selling. You’re really selling support. What else, Pippin? What are we selling?

PIPPIN: Access to updates.

BRAD: Yes, access to updates. Yeah, annually, if you don’t renew, you don’t get new versions of the plugin, and you don’t get access to email support. There’s an incentive to renew, but it’s definitely a lower renewal rate than if you’re running a SaaS and, if they don’t renew after a month, the lights go out.

ROB: Right, right. Yeah, because you don’t have them on actual annual subscriptions, right? You have to basically try to ping them via email.

PIPPIN: Right, it’s a manual opt-in.

BRAD: Yeah.

ROB: Yeah, so it’s a lower percentage.

BRAD: I was actually talking to some people about that at MicroConf a few weeks ago. They told me. They were wondering why the hell I’m not doing automatic billing after the first year, why I’m not automatically charging people’s credit cards.

I really didn’t have a good answer for them. The only answer I could say is, well, most other WordPress plugins don’t do that. That’s not a very good reason.

PIPPIN: No.

BRAD: It would actually be convenient for a lot of people if they didn’t have to do anything after a year.

PIPPIN: That’s an area that we, my whole team and I, are right now actively diving into. We had a conversation with some other product owners at PressNomics, WordPress business conference, back in January. They casually mentioned their renewal rates because they had opted in to do automatic billing. Then we were comparing it to ours, which were manual renewals.

The difference was like a 60% difference. Theirs was up in like 85%, and ours was down below 20%. It was just crazy, and so that’s exactly what we’re working on.

ROB: As long as you make it clear to folks upfront that you’re doing it, I don’t see any reason why that would be a bad thing.

BRAD: Yeah.

PIPPIN: I don’t either.

BRAD: Exactly. Like I said, in the WordPress space, what I’ve experienced is most people just copy each other when it comes to business because I think the people that are doing business in the WordPress space are just so green when it comes to business. They really just copy what they see other people doing. I’m personally saying this because that’s what I did when I started.

PIPPIN: I did it.

BRAD: Yeah.

ROB: For sure.

BRAD: I looked at other companies. What are they doing? What they’re doing is working, so let’s just do that.

PIPPIN: I think, in a way, though, it is a good testament to building a WordPress plugin or a theme is that good first step into building a productized business. It’s an easy way to get into that kind of business is to build a simple product like that. Most people that are taking that first step; like what you mentioned with the stairstep approach, most of these are people that are not familiar with building a product business from the start.

When there is a company that comes in and builds a new product, usually you don’t see them mimicking what everyone else is doing the same way. But, when we see independent developers come in and build their first plugin or their first theme, it is very similar. I think these are people that are new to business, and they’re working on building their business out.

With that, do you think that in order to really make this transition from consulting to a productized business, do you think you need to learn marketing and sales to truly make that transition, or is that something that will just come as you go?

ROB: I think that marketing is a critical skill to learn for developers or for anybody launching a software product. I don’t think sales necessarily is. The difference there is marketing is being able to write decent copy to communicate a value proposition and to drive some traffic and then convert that into money, essentially convert it into buyers. Whereas sales, I view more as like one-on-one conversations. I think, if you’re a consultant, you already know what sales is. It’s having the conversations with the clients and doing higher dollar stuff.

I would never say you always need this, but I will say 99% of the successful developers I’ve seen make the transition from developer to entrepreneur, they definitely learn how to market. You don’t need to learn how to market through every channel because you’re not going to use, you may not use paid advertising. You may not use television and radio ads. But, you do need to learn how to communicate your value and then how to drive traffic through some channel. Again, whether that’s something like SEO or just how to rank well and be noticed in the WordPress.org plugin repo.

BRAD: Right. One thing some developers do to get started and kind of avoid this, and I think we’ve talked about this the last episode, Pippin, is that they just put their plugin on a marketplace. Then they have that traffic. Even if their marketing is pretty weak, they still can do okay because they have that traffic from the marketplace.

Do you think that’s a good way to go? Would it be better just to go out on your own straightaway?

ROB: Well, I think that I would almost view that as– A marketplace like Envato type of thing?

PIPPIN: Yes.

BRAD: Yeah.

ROB: I’ve never put something on one of those platforms. I do know that they take a chunk of your revenue and that the price tends to go down. You can’t charge as much. It’s the app store dilemma, like Apple app store. You can charge $0.99. You can’t charge $20 like we used to be able to for utilities.

I think it’s nice. Maybe it’s the 0.5 step before step one.

BRAD: Right, right.

ROB: I think it’s great to get some recurring revenue, to get experience supporting a plugin or a theme, to get experience just having someone in the real world use it and to understand what it’s like to have a product and maybe make a few hundred bucks a month. But I think it would be really hard. You would need a whole bunch of plugins in the Envato marketplace to actually make what someone in the U.S. needs to quit their job. Let’s say it’s $8,000 or $10,000 a month. That would be a lot of $10 and $15 plugins.

Going out on your own, we all know that you can charge more. You keep more of it for yourself. You can grow that market more.

BRAD: Right.

ROB: I think it’s up to how fast you want to move, but I don’t think it’s a bad approach. I do feel like it’s maybe training wheels. It’s kind of a step on the way.

PIPPIN: I’ll pose this question to you coming from someone that was actually able to use Envato as a point where, at my peak, I was at $8,000 a month through the Envato marketplaces. That was primarily from two plugins.

ROB: Nice.

PIPPIN: Now, I don’t sell there anymore, but do you think that someone who was able to build it up to a success and to build it up to where they can sustain themselves, is there a really significant reason for them to move away from that? Basically the question is: If it works for you, why move?

ROB: First, I’d be interested to find out why you moved or why you don’t use them anymore.

PIPPIN: Sure. I personally chose to move because I wanted more control over pricing, over customers, over marketing, those kinds of things. Now, there are other people that I know who stuck around, and they do very well for themselves. They can be up to, say, $10,000, $20,000, $30,000 a month.

ROB: Nice.

PIPPIN: I think it’s an interesting question of: Are you potentially throwing away a lot of revenue by staying?

ROB: That was going to be my answer was that I don’t think this is a yes or no question of, yes, once you learn it, you should move up to step one, two, or three. I think it’s, as you put it. Know that you are leaving revenue on the table by doing this. If you really don’t want to learn marketing, and you just want to write the code and put it on Envato, then that’s your choice.

I’m Mr. Make-Your-Lifestyle-Choices. I’ve designed all of my business around being able to spend time with my kids. I live where want to. I live in a non-tech hub. I haven’t raised funding. I don’t answer to anyone. I’m a believer that you should do what you want to do, as long as you really understand what the plus and minuses of those decisions are.

PIPPIN: I think that’s an excellent answer.

BRAD: Why is SaaS the next step after a WordPress plugin? Why not keep building plugins and maybe have some recurring revenue from those plugins?

ROB: Yeah, I actually really like this question because I had this stairstep model that I’ve talked about. It’s not the only way to go. It’s just the way that I’ve seen a lot of people going. It’s a way I see people kind of level up their experience and not try to dive into the deep end.

I put SaaS at the top of that because, recurring revenue, it’s just really cool. It’s really good to have monthly recurring revenue. It’s so much easier to grow a business, but it’s not necessarily the end-all-be-all. If what you want to do is WordPress plugins, then having a suite, a portfolio of 10, 15, or 20 of them, it’s not a bad way to go. You get a similar diversification across a lot of customers and a lot of revenue streams.

I think that the biggest hang-up I’ve had or that I’ve seen with folks who come and ask how they can level up, and they have several WordPress plugins, is no one has been able to crack this nut of getting WordPress plugins to have recurring revenue. There is a flat amount of money you can make each month, but it’s all one-time sales and then those kinds of annual renewals. But I haven’t heard of any nice — I haven’t heard of enough monthly recurring revenue success stories to make me feel like you could totally go to that third step with a WordPress plugin.

BRAD: Right. I guess it ties into what we were talking about before about annual versus monthly recurring and the advantages of monthly. I guess that’s also why we’re starting to see some WordPress plugin businesses actually go to SaaS. Event Espresso has just launched SaaS. Opt-In Monster just launched a SaaS, like, last week. And so, I think that’s showing kind of a maturity or a maturing of the people in the WordPress business space, so it’s interesting.

PIPPIN: Absolutely.

BRAD: Yeah.

PIPPIN: Rob, let’s talk about Drip for a little bit now. As you built several products over the last few years, at what point did you start working on Drip? Actually, maybe before you even answer that question, maybe tell the listeners what is Drip.

ROB: Sure. Drip is a SaaS app. It started as an email marketing app, kind of a competitor to, let’s say, MailChimp or aWeber, but it’s now leveled up itself into this space called marketing automation, which is essentially email marketing plus a bunch of other stuff added on. It’s being able to tag subscribers and move them in and out of lists and basically do behavioral email, as well as lead scoring and all that kind of stuff. It’s kind of this next level. I believe it’s where all email marketing is headed. I think we’ll all get there eventually, but that’s what Drip is now.

BRAD: Right, so this is your foot in the door, I guess, is it?

ROB: Yeah, in essence. Yep.

BRAD: A bit of an advantage.

ROB: That’s right. Yeah, and we started working on Drip about two and a half years ago, and we launched it. Boy, I’m trying to think. It’s like 18 months ago, I think, is when it went live.

BRAD: Right. You’ve gone through several pivots, haven’t you, through that process?

ROB: Yeah, one. It was really one big one. Actually, if you’re interested in hearing more about this, we recorded nine hours of audio over the course of about ten months all taking place. It’s behind the scenes conversations between my cofounder and I. His name is Derrick. He’s the technical cofounder.

We talked every week about what we should be building and why. You can just hear the agony in our voice of not knowing what we’re building. The pivot happened and then, at the end, success. That’s at StartupStoriesPodcast.com, if you’re interested. It’s just one two-hour episode that we edited down.

In essence, the pivot was from this kind of email marketing/auto responder provider. The UX and the UI was phenomenal. Derrick is really good at UX. It was a super simple onboardings. We did concierges for people, you know, a really easy setup, but it just wasn’t differentiated enough from the myriad of other email marketing providers out there.

The pivot that you were talking about was learning that a lot of folks, kind of our more advanced folks, were requesting automation features. How can I tag someone with this? Maybe that they bought this plugin or maybe that they’re interested in the topic of SEO or of Pay Per Click. Then being able to move them into different campaigns, different auto responder sequences based on that information and that kind of stuff, just more advanced interactions.

We started building that out. By the time we launched that, everything turned around. Churn went way down, and signups went up.

PIPPIN: Those automation features are some of the most powerful I’ve ever used in any kind of platform that really lets you do really awesome things. As a developer, and as an entrepreneur and a product creator, do you still write code for Drip now, or are you more of, I guess, the vision behind Drip?

ROB: Having been a developer for a decade or more professionally, we decided to use Ruby on Rails. I don’t know Ruby on Rails, so I don’t write correction code, and I know it just well enough to break things, to be honest.

PIPPIN: Nice.

ROB: Yeah. I love to code. It’s how my mind works. I started writing code when I was eight years old on an Apple 2E, and so it is who I am. I will write code until the day I die, but I don’t write production code right now. That’s just a matter of for me to learn Rails and get good enough at it to push stuff into production would take so much time away from where I can provide more value, which is more of the marketing side, the vision, talking with customers, and that kind of stuff. Regretfully, I don’t write much code anymore.

PIPPIN: I think that’s somebody that anybody who goes from a developer, whether you’re working on products or consulting, to being the person or one of the main people behind a business, whatever the structure of that business is, is something that we all kind of go through. This is something that I’m finding in my personal work over the last couple years as we’ve been building up our team that I’m finding myself writing a lot less code. Sometimes it makes me a little sad because I really love code, I love the problem solving, and then other times I can step back and realize maybe I’m more valuable in other areas, and that’s okay.

ROB: Yep. Yep, and I don’t think everyone needs to move away from code. I don’t think because you start a product business and then you hire some help that you have to step away from code. I quit the consulting in 2008, and I was writing code pretty consistently up until very late 2013, and I could have kept doing it. There’s no reason I stopped.

I shouldn’t say there’s no reason, but there’s no reason I had to stop. The reason I did stop is because I wanted to tackle this much bigger, harder problem. I went from basically being a solo founder with no employees to now there’s five of us full time. I made a very deliberate decision in 2013 to do this. That was just to step away from the code and hire folks to do it.

BRAD: Yeah.

ROB: But you certainly do not have to do this if you want to–

PIPPIN: On the flipside, you could also hire people to do the other things so that you can focus on the code.

ROB: Yeah.

PIPPIN: It’s definitely a choice that I think everybody has.

BRAD: Yeah, that’s a good point, Pippin, because I still see your name popping up in the commit logs for EDD and Affiliate WP, whereas myself, I can’t. I’ve hired all developers, so I have to do everything else. I did it that way because I felt I could pick a good developer, but I wouldn’t be good at picking a good marketing person or something like that. That’s kind of the corner I painted myself into just out of necessity. What are the roles that you filled, Pippin, that are non-developer?

PIPPIN: The longest standing role that I’ve had that is still very much a primary role is customer support. I believe pretty firmly that people that are maybe the leads behind projects or products, I think having their face and their voice in support is very valuable for branding. That’s one.

The biggest one is just overall management, so building the company from the administration work to working with lawyers to working with accountants to figuring out how and when to hire people. All of that overhead is kind of the role that I’ve stepped into mostly. Beyond that, then also some of the overall–I don’t know if I would say marketing, exactly, because I don’t do that much actual marketing, but maybe–figuring out how to market and then working with the people that produce the actual marketing material.

BRAD: Right. What about you, Rob? What roles have you filled that you don’t do anymore?

ROB: Yeah, the first one that I always fill with a new product is support, Tier 1 email support. When we launched Drip, I did email support for somewhere between 30 and 60 days, just enough to learn what the common questions were, and then had someone fill that in for me.

PIPPIN: Do you do that because you think it gives you a better understanding of how people are receiving the product?

ROB: Yeah. In the early days when you’re building something, it’s so much in flux that the feedback is not just, “How do I do this?” It’s, “Why can’t it do this? Can’t it do this other thing?”

And being able to be that close to it and move this quickly to where it’s like, literally, we’d get a support email, I’d look at it, and I’d turn around to Derrrick and say, “Can we build this by noon?” He’s say yes, and an hour later or two hours later, I’d email the guy and be like, “Yep, we have that in now.”

PIPPIN: Nice.

ROB: If you have one or two layers of support between you and the customer, that doesn’t happen.

PIPPIN: Right.

ROB: That doesn’t scale. You can’t do that forever, but especially when you’re building something that’s kind of new and still trying to figure it out, that’s helpful.

PIPPIN: I think it’s a really great way to build very loyal customers from the beginning.

ROB: For sure.

PIPPIN: If you can build five loyal customers in the first month or two, that’s way more valuable than 15 that are just going to move on.

ROB: Exactly, yep. If they love your support and they love the product, they start telling other people.

PIPPIN: It snowballs.

ROB: Yep. The first 20 to 30 customers we had with Drip, I not only handled all the support, but I personally would either jump on Skype calls with them. I would import their lists for them. I was doing everything. Completely not scaleable, but it really made them advocates of Drip and got them onboard.

PIPPIN: Right.

BRAD: Nice. Are there any big, technical challenges? I know you mentioned earlier about SaaS and how the infrastructure can be a big challenge. Did you run into that with Drip? Was that a big part of building Drip/

ROB: Yeah, there have been a lot of scaling challenges because it basically does real time analytics. It’s not a typical CRUD app where you’re just creating, reading, updating, and deleting stuff from a database, like an invoicing software would be. You actually install JavaScript on your website so that we can detect when your subscribers are cruising around, if they see your pricing page, if they click a link, if they do stuff.

We have 500 requests per second hitting our server to track that for all of our customers, so it’s a nontrivial application. About every, I’d say, three to six months, we have to come back and either optimize queries, upgrade database, partition stuff, just do stuff to make everything work. I think there’s more technical challenges than a typical SaaS app, and a typical SaaS app is still fairly complicated to get up and running and maintain.

BRAD: Right. Are you guys using AWS?

ROB: We are. Yep, we’re on EC2. We looked at Heroku. We were on Heroku Postgres for a while, but it’s quite expensive. And, at the scale we’re at where we have tens of millions if not hundreds of millions of rows at this point, it becomes pretty expensive. Just being able to be near the bare medal is better for us at this point. I would love it if someone had a platform as a service that made this all easier, but it always seems to be a little too limiting for what we wanted to do.

BRAD: Right, right. You sacrifice flexibility.

ROB: Yeah.

BRAD: Yeah.

PIPPIN: I think this is related to technical challenges. I think this is something that people always want to hear about and something I’m always interested in. Was there ever a technical challenge or mistake or anything like that that was so severe that it just about killed everything? If so, what was it and how did you survive?

ROB: Yeah. There was a time really early on. There were two things. One, there was a time where we had maybe an eight-hour delay in email sending. So, at like 2:00 in the morning, Sidekick, which is queuing mechanism, went offline. I guess it wasn’t eight hours because at about probably 7:00 or 8:00 in the morning, so it was like six hours, no emails sent. That is catastrophic for an email provider, right?

PIPPIN: Right.

ROB: Now, luckily that was when we had 30 customers, and I knew all the customers because I had onboarded all of them. It turns out that we were so small and it was so early that we only had, literally, maybe 100 emails that should have sent because it was in the middle of the night. We figured out who should have sent, and I emailed them by hand and said, “Look, this is what happened. Twenty-two of your emails did not go out last night. Totally sorry. We’ve put stuff in place to fix it.”

That was really a big deal, though. That stressed me out. Now we have safeguards in place.

The other one was we started having database performance issues. Kind of the first time it happened where reports kind of slowed down more and more, and we just couldn’t figure them out. This was also early. We put a checkbox in our admin area where we could basically turn off all the visual reports for a single account. And so, as people would email us, we would say, “We’re going to turn off your report so that you can use our app.”

That was a hack and it felt awful, but it was what we had to do to keep the app up. It took us almost a week to get everything fixed, and so there were people who had data. They could send emails. They could do everything. But they didn’t really have the visual reports that we have. Again, that was, like, 15, 18 months ago, but I thought I was pulling my hair out.

PIPPIN: I remember we had a similar reporting glitch. We had a bug at one point that basically it would just take a site down if you had over a certain number of records in your database. Our solution was, well, disable your reporting. You can take sales. You can send out product emails, and you can deliver to your customers, but you can’t see what you earned.

I definitely sympathize with you. It’s not a good solution.

ROB: No, it’s like a temporary.

PIPPIN: Yeah.

ROB: And you have to say, “Look, this is a temporary hack. Please don’t be mad. We’re going to fix it. This is our number one priority right now.”

PIPPIN: Yep, absolutely.

ROB: And everyone is working on it.

PIPPIN: Yeah.

BRAD: Right.

PIPPIN: Rob, it’s about time to wrap this up, but I’m going to give you a chance right now. Is there anything that you want to pitch about Drip, anything you want to say, any comments at all? Now is your chance.

ROB: No. I would say that if you are launching a product of any kind that one of the biggest things that has moved the needle in my products over the year is some type of email list. It’s building a list. You don’t have to use Drip. Drip starts at $50 a month, so your first day it’s probably not worth doing, but MailChimp is great. I’ve used MailChimp for years. If you’re not doing email marketing, I would say start building a list because the only regret you will have is that you didn’t start doing it sooner.

PIPPIN: That’s my regret.

ROB: Yep, my regret too.

PIPPIN: I honestly didn’t start doing it until– I did it a little bit over the last few years, but didn’t start getting serious about it and serious about getting automation in until, I don’t know, eight months ago. The difference it made was just phenomenal.

BRAD: I think there was a while there it felt like email was the bastard child of the Internet or something where everyone kind of hated it, even the people that should have been using it.

PIPPIN: Yep.

BRAD: I don’t know. That’s how it felt to me. Then it’s kind of, at least in the business community, it’s really surged in recent years. I don’t know.

PIPPIN: I just remember at one point having 20,000, 25,000 people on a list and realize I haven’t emailed them in eight months. What are we doing? Why? I’m so glad that changed.

BRAD: Yeah, no kidding. Rob, where can people find you online?

ROB: I’m on Twitter at @RobWalling. If folks like listening to podcasts, I talk about this kind of stuff, the business of software and self-funding, over at Startups For The Rest of Us.

BRAD: Awesome.

PIPPIN: Awesome. It’s been great having you.

ROB: Yeah, thanks for having me on, guys. I really appreciate it.

PIPPIN: One more quick shout out real quick to our sponsors, DreamHost, and their new product, DreamPress. Go check them out and also our permanent sponsors, the WP Ninjas and their awesome product, Ninja Forms, which you can find at NinjaForms.com. Thank you to them for helping ups get this show off the road.

BRAD: Thanks, everybody.