
Ten Years of Bootstrapping: Lessons Learned - cabinguy
http://davegooden.com/2013/08/our-story-10-years-of-bootstrapping/
======
zach
TEN years of bootstrapping. This just got removed from the title for some
reason. Good thing Gabriel García Márquez didn't have the same editor.

Wow. This is interesting on its own, as others mentioned, but it's _really_
interesting to me personally, as the co-founder of a bootstrapped local real
estate referral company.

One thing I didn't see mentioned much was the 2008 housing crisis, which was
disastrous for us. We were in acquisition talks in late 2007 which were
suddenly canceled, seemingly in anticipation of the horrors to come. Our
revenues were devastated and I went back to consulting for several years.
Basically, our site was on autopilot until January of this year, when the real
estate market showed signs of long-term strength and we started our current
development drive.

We're still bootstrapping off consulting revenue, so it hasn't exactly been
fast-paced, sadly. Let me say, still running a business you started after
Startup School 2005 gives you a much different perspective than the usual
startup narrative. When you bootstrap, you can press pause instead of eject.
You're not on fire, so you don't turn to ashes the instant you run out of
fuel, but you sure do have to keep smoldering.

For those who aren't familiar, I would describe real estate startups as being
similar to a closed game of chess. Lots of long-term possibilities and plans,
but not a lot of good moves available. The market is sharded, guarded,
scattered and smothered.

We haven't explored (or had an opportunity for) an agency conversion, so it's
really interesting to read this account, thanks. Instead, we are trying to
rework our regional site into a niche national site. I'll share how it goes,
hopefully before our company's own tenth anniversary. Congratulations and
thanks again for writing this history.

~~~
anoncowherd
> the real estate market showed signs of long-term strength and we started our
> current development drive.

It's not long-term strength, by the way. The US economy[1] is in shambles, and
ready to implode any moment. What you're seeing in the real estate market is a
new bubble. The buyers are investors, and the current craze started when
people thought the bottom was in. The zero-interest rate policy "helps" too.

Just thought you might want to know. Be careful.

[1] Not only the US, but pretty much all Western economies (+Japan) are ready
to implode.

~~~
anatari
Sigh, I'll bite. Tired of cable news quality comments presenting very
debatable opinions as fact, especially without any concrete arguments,
evidence, sources or otherwise real facts. On top of that being tangential to
the post. Here is just one indicator that points in the opposite direction of
your claims.

[http://data.bls.gov/timeseries/LNS14000000](http://data.bls.gov/timeseries/LNS14000000)

~~~
nhebb
The U6 unemployment rate is more indicative of the current state of the
economy:
[http://research.stlouisfed.org/fred2/series/U6RATE](http://research.stlouisfed.org/fred2/series/U6RATE)

------
marcamillion
Wow...Lesson #1 is SOOO on-point. I think that is what is missing from the
free-to-paid conversion narrative.

The only people that will convert from free to paid is those that have
received value. SaaS apps need to start paying attention to the 'value
indicators', and provide an upgrade path on that - rather than a time limit.

This is one of the reasons that companies that charge per transaction are so
awesome - because the only time you pay, is when you make money (which is the
implicit value there).

This concept needs to be blown into a blog post - I just may do it - because
this is so important and so easy to miss.

Your conversion rate may suck, not because your product sucks....but because
your internal value metrics suck. You aren't measuring the right thing.

------
SoCool
This is interesting article. I was the initial and primary developer of
another lake realty discovery site, that used some NLP to process MLS feeds
and discover lake based properties. Lakeplace.com was the main competitor and
our goal was to make sure that we have more accurate listings and more
listings then Lakeplace. It's nice hear the lakeplace side of story.

~~~
cabinguy
Author here. So in your case, we were "the enemy" who's head you wanted on a
stick. Great. ;)

~~~
livestyle
Question for you in regards to your 3phase goal setting.

What does that look like on day to day basis.

How do you make all three phases work together.

Great READ!

------
j45
Great post. Going to add this to my list of ones to pass around to people who
think killing and crushing it gets things done. Learning to survive and then
thrive is just as important.

How many entrepreneurs are willing to commit up to 10 years to find their
path? Supporting this is what we need more of, and not as much echo chambers.

To the author: write more. Experience over time speaks volumes.

~~~
GotAnyMegadeth
Do you actually have a list of similar stories? Could you share that list?

~~~
taude
I think most businesses that aren't TechCrunch headlines follow similar paths
and time lines. Today everything seems to be MVP and pivot, which really isn't
accurate for long-term Entrepreneurs/business owners.

~~~
j45
I think MVP and pivoting fits Bootstrapping just fine -- adding the mix of
doing an idea that lets you charge from day 1 to finance it over the long term
is the key difference in my mind.

------
unono
Good story, great lessons for entrepreneurship.

The big thing I couldn't help noticing was how inefficient the real estate
industry is. There's so much regulations and people taking a huge slice out of
the consumers pocket.

Even the notion of ownership by consumers is at odds with modern times, after
all, we hackers are finding it too onerous to even maintain physical servers
and off-loading that to the cloud, while most people are still plopping down
huge sums of money and mortgages to lay claim to small patches of land, in a
clumsy procedure where we fork over almost a tenth of that large sum to people
who provide little value (real estate agents, lawyers, city fees).

PG should put out a call to kill real estate like he did with hollywood.
There's huge profits for hackers if we wrestle it away from the current
players (bank, agent, lawyers), and a lot of good for consumers.

AirBnb's a good start, further steps might be to unify it with Uber, Shopify,
SpoonRocket, Exec, and Mechanical Turk and reduce consumers experience down to
a few button presses. There's a big opportunity for a company to offer
complete life management in an app.

~~~
akramar
As someone who has been in the RE industry for 6+ years now (loan officer and
now processing):

> how inefficient the real estate industry is. There's so much regulations

My biggest time consumer are boilerplate disclosures and astonishing
conditions, which have become nightmarish since the housing crisis. That 10
day delay in closing? Someone mis-dated and now we have to wait out Dodd-Frank
before proceeding. That 41 page package of forms you need to sign and return
before we can even begin underwriting? Sorry, required. The $150 you received
from your grandmother for your birthday? Yeah, we're going to need a gift
letter. I wish I was being facetious.

> people taking a huge slice out of the consumers pocket

Unfortunately, RE and mortgages are just high-touch industries. People need to
be re-assured that someone is working on their behalf. Look what happens when
PayPal shuts down an account and gives a generic response? Or Google does the
same when blocking a Gmail or AdSense account? People have a complete
meltdown. Imagine if that is someone's home purchase (doubly worse for first
time homebuyers), and they receive an email stating "Sorry, your loan was
denied" with a link to "File an appeal". The ones I work for receive calls all
day every day from buyers and agents wanting updates and peppering with
questions and concerns.

I automate as much as I can in my workflow (thank you Python and C#) and have
considered outsourcing it, but it's a job that is 95% edge cases and one-off
situations. The best targets for efficiency improvement are lenders' and RE
agents' internal procedures, but that's another discussion.

~~~
unono
Thanks for that insider perspective, that will be useful to hackers attacking
the space.

An approach would be completely abstract the process. I believe the ownership
model is a completely broken process that's pushed by the nefarious banks
(It's easy for them to just conjure up money from thin air and indebt us for
30 years - reserve banking. This is the root cause for the relentlessly
growing, but almost entirely useless, home ownership industry).

Hotel 2.0 revolution is needed. Airbnb, but with professional, heavily
computerized, management of much larger property portfolios.

------
robomartin
Excellent post.

Entrepreneurship is hard. You, the entrepreneur, can easily become your own
worst enemy. In many ways it is a mental game far more so than anything else.
The tech scene sometimes highlights the "built it over a weekend" stories. It
is easy for the uninitiated to get a feeling that they, too, ought to be able
to spin something up over a weekend or a few days and have success. The truth
is that overwhelming majority of entrepreneurial ventures look far more like
what Dave Gooden describes than the "look Ma, I built a business in seven
days" crowd.

The other element of note here is that your business doesn't have to be sexy
in order to succeed. There are plenty of people out there doing very, very
well, with businesses that lots of techies would not even think of
approaching.

And, of course, a big exit is not the only definition of success.

------
tnorthcutt
His notes at the end do a good job of distilling his lessons down into
memorable chunks. #4 seems especially relevant to this audience:

 _Know your customer. Your customer is the person who gives you money in
exchange for your product or service. It’s easier than you might think to get
confused about this one._

~~~
hemancuso
I really enjoyed "There are riches in niches."

It doesn't take millions of dollars in revenue to have a wildly successful
small business. An incremental $250,000 in annual revenue doesn't move the
needle in a 50 person shop, much less a public company. But if you're a 2
person shop filling a niche, your year just became awesome.

There are a ton of profitable niches in software that people need filled.
Markets that aren't big enough for a huge company to bother with. Markets that
are huge opportunities for a few dudes to make something awesome to serve a
dedicated base of customers.

~~~
sologoub
And don't forget that even though it's a niche and you probably have some
awesome skills in the niche that are needed for running the business, BUT if
you structure it correctly, you are also building up equity that can be sold
if you decide to try other things or simply want to cash out.

For a recurring revenue net of $250k, it's not unreasonable value it at $750k
to $1.25 mil depending on how likely you are to keep that cashflow going and
how much ongoing investment is needed. (DISCLAIMER: this is napkin math,
nothing more.) Although, after tax that doesn't sound like all that much, it
is life-changing for most people. If you can for example pay off your mortgage
and other debts, your lifestyle changes overnight.

------
soundlab
Great article and advice at the end- the author correctly identifies that
perseverance in the face of uncertain market conditions and lots of "no's"
from investors or other so-called experts is a key quality for entrepreneurs
that have the guts to stick it out over the long haul.

The story also conveys about how important it is to put in _TIME_ in a
marketplace. Everyone wants to quickly flip for the big exit but the real
value comes over the long and arduous process of iterating, growing, and
especially uncovering unmet customer needs regardless of if it's product /
service

------
hkarthik
> In 2006, at the height of the real estate boom, some of our 600+ real estate
> advertisers were closing 6-8 transactions per month that could be directly
> attributed to LakePlace.com leads. If you multiply that number out, the top
> agents using our website were clearing $30k+ per month for a $59/mo
> investment.

This statement was interesting as it gives the reason for the first big pivot.
I have to ask though, why didn't you just change the pricing model and enforce
a few limits to capture more from these transactions?

------
kposehn
Very good read. I like his approach and how his company has evolved over the
years from one thing to the next.

We went through similar transitions, starting as a mobile app shop, getting
more into innovative web apps powered by our own stack and now as an ad-tech
company with our own proprietary DSP.

Quite a transition and a lot of what he said rings true...and I wonder if the
experiences he had ahead of where we are will occur for us as well.

------
lscharen
Thanks for the writeup. I live in the area you serve and grew up at a family
resort, so I saw your marketing efforts play out first hand over the past
decade. Very interesting and insightful to hear the back story of your
company.

I happen to work just up the road from your Crosslake office in the Liss
building. Stop in if you're ever passing though.

~~~
cabinguy
Wow. We'll have to grab a beer the next time I'm in town.

------
sejje
At what point are you no longer "bootstrapping."? This seems more like 1 year
of bootstrapping.

Still a good read. I can only imagine the acrobatics OP's stomach was doing
when their newly-found CEO backed out.

~~~
jonnathanson
On a broad level, "bootstrapping" simply means building and growing a business
without significant external investment. In other words, the business is
entirely self-sustaining and self-growing.

Bootstrapping doesn't mean getting by on ramen and futons, _per se_ , although
that's strongly implied in the early stages. Fiscal self-discipline is a nice-
to-have in any startup, but it's the difference between life or death at a
bootstrapped startup.

Achieving a certain level of profitability, and reinvesting those profits in
the business, is still bootstrapping. Walmart, for instance, was bootstrapped
until the day it listed on the NYSE.

------
gxespino
In my mind the founders could have really sped up the process by figuring out
something that added new or even true value to their users. By going the route
of simply aggregating listing info and posting information easily accessible
on other sites, they relegated themselves to being just another real estate
listing website.

Their growth was then limited to how many phone calls and connections they
make - in other words, no one was beating down their doors to list on their
site and only after years of growing this way did they command some semblance
of a home buyer audience that made it worth while for the sellers.

The model these guys implemented is tried and tired and brings nothing new to
the table. That's why they resorted to the traditional broker model in the
end.

------
jcampbell1
This is a really interesting story. It seems like the lead-gen sales were
probably being under-reported, since they went from 2 to 53 sales in the same
market. I am surprised that lead-gen in the real estate market is not easier
to audit.

------
pjg
Dave and Cam - you go!! I launched my startup in ecommerce/payments and can
totally relate. Entrepreneurship is tough but the joy of doing it and success
at the end is totally worth it

------
blaireaug
#9, Pick a fight, is one of the best sales mindsets I've ever read. So true
when you're scrapping and bootstrapping. Thank you for sharing your story!
It's especially illuminating on what a successful business trajectory is away
from the usual startup hype narrative. I wish more founders would tell these
honest stories.

------
dpatru
I'm a bit disappointed in the story. It seems to me that businesses of this
type represent an opportunity to disrupt the real estate industry, and it's
sad to see them end up joining the industry.

------
nasalgoat
The outcome of them trying to build a central place to look at listings turns
into them becoming what they were trying to work around, and end up still not
having a central place to look at listings.

------
robgough
Interesting and useful article, thanks. If the original author turns up, I'd
be curious to know how you felt about their being two of you in it together
and not just a single co-founder.

~~~
cabinguy
Author here. I wouldn't have made it through without my co-founder. A co-
founder is great support during the bad times...and added responsibility all
the time. If I don't give it 100% every day, his family feels it, and vice
versa.

Some people can do it on their own, but our partnership/friendship works well
for us.

------
shanellem
I really liked the part about everything scaling. I hate when people say, "It
wouldn't have scaled." It would have. You just weren't thinking of it in the
right way.

------
tocomment
Is he saying for the rentals that they entered rental properties onto their
site without the lister's permission, and then contacted the lister to offer a
paid version?

~~~
gknoy
I think rather that he offered to do the data entry, and then later on once
listing agents started to get hits through his service, started to charge them
a fee. I may have misunderstood.

~~~
cabinguy
You're correct. Sorry for any confusion.

~~~
tocomment
Thanks for clarifying. I'm still a bit confused and since I've thought of
doing this same thing at a potential startup I'd love to know the details.

So you searched for lake listings on other sites, contacted the lister and
offered to add them into your system? What kind of response rate did you get
for that? I'd imagine you wouldn't hear back from most of them?

How about adding them by default and then contacting them and saying "I've add
your listing to our site so you can have an idea of how it works. If you
choose not to join, let me know and I'll delete it."

------
ffrryuu
Lesson: traditional brokerage selling houses turns out to be just as
profitable as they were.

------
dsk139
enjoyed the read

~~~
why-el
Not really a direct response to you, just a remark, but I don't know why
people downvote this type of comments. "enjoyed the read" is real feedback for
the writer.

~~~
smartwater
It's redundant. An upvote says the same thing. Feedback needs substance, and
without substance, it's just noise. People come here specifically because
there isn't much noise. It all comes down to respect. Respect my time by
providing insight, value, knowledge, or a unique perspective, and I'll do the
same.

~~~
gknoy
An upvote might mean "This is important", or "This has good lessons", though,
and specifically saying that you enjoyed reading it, or that it was written
well, is a slightly different compliment.

~~~
smartwater
There is no value in a thoughtless "enjoyed reading" or "nice read." If that's
all someone has to say, I would recommend waiting until they have more to say.
If they want to spend 5 minutes explaining their thought process and why they
enjoyed it, that's a different story, that's something I'm interested in
hearing.

Personally, I enjoyed the post because it has a chronological order, specific
names, dates, and numbers. Dave's transparency is refreshing and gives me
confidence in his opinion. As for readability, it could use more of a contrast
of the text and background, but I appreciated the increased line-height, which
helped me to scan the article quickly.

Anyone can type a couple of words, this is the internet after all, but that's
not why people come here.

------
marincounty
I have never understood the huge commissions Realtors make! It has never made
sense to me. I would love a Realtor to explain their expenses on the sale of a
1 million dollar house.

~~~
dasil003
Showing it to 200 people before one actually agrees to buy it _and_ makes it
through the loan approval process for starters.

Imagine you're a contractor and had to spend 95% of your time pitching and
doing spec work. What would your "hourly" rate be?

~~~
w3pm
Irrelevant. How valuable is the work you do? You could go around 'pitching'
your window washing services and land 5 out of 100 potential clients but you
still aren't getting more than a few bucks per wash.

~~~
taybin
Totally relevant since all that extra time needs to be paid for or people
wouldn't go into the business.

~~~
UweSchmidt
Irrelevant, since people are in window washing services despite the low pay.

Reasons for huge commissions:

1\. Restricted field: you need a license, and in general these kinds of
licenses are difficult enough to get to create artificial scarcity.

-> seek employment in such a field, if you think you can get in.

2\. High stakes: A lot of money is moved around so it doesn't hurt so bad to
give an important service provider a large chunk.

-> seek work where the money is. -> when dealing with Realtors etc., try and negotiate over the price anyway, just out of principle.

3\. There is probably more to this profession than is visible from the
outside. I don't know what, but usually people underestimate the complexities
of professions they don't know much about.

-> ...? Maybe talk to Realtors and find out what it is like.

