You've put together a great deck here, thanks for sharing it!
Can you give us a few rough details of what your initial customer acquisition strategy was? (Or even something a bit more current, although I realise that might not be information you'd like to share).
From what I can tell, Sifter is in a very, very competitive market, and I'd be fascinated to know how you gained customers - and potential customers' interest - when there are so many choices out there for them to choose from.
I answered this in a little more detail further down the page, but the short version is that I didn't really have a customer acquisition strategy. I just had a little overlap from my blogging and a product that I wanted to build. The rest was pretty basic. Do things and tell people. By talking about it, I was able to reach a fair amount of people who were interested and start from there.
In terms of a competitive market, I really just kind of went the opposite direction from the established options out there. The truth is that those other apps were and are great for some teams doing large complex software development projects, but there was a whole other group of smaller teams that didn't need all of the advanced features that those big players offered. I thought the world need something between a todo list and those options, so I tried to fill in the gap.
You cited early advertising as a good idea, and that continued advertising was a bad idea. Can you talk a little bit about your paid advertising strategy?
Where did you advertise?
Are you willing to share your daily advertising burn?
Any insight as to why the first $5k in advertising was worth it, but everything after that wasn't?
"Spend" is a very misleading and even distracting metric. Before going to deep into this, it's worth noting that you should never rely on advertising as your sole source of traffic generation when bootstrapping. It gets expensive, and it generally doesn't generate immediate returns. Pay-per-click can be an exception, but that's also an expensive game to get into.
Unfortunately, much of our advertising experience isn't going to be relevant due to how long ago it was. We advertised primarily on FusionAds and Daring Fireball, which has increased from $2,500 to $8,500. We don't have a daily advertising burn, and we never really have as we just dabble in advertising from time-to-time.
I'd be willing to bet that advertising has at best contributed 10-15% to our growth. Given the amount that we've spent, that's a very high cost of acquisition. However, it did help generate some awareness. There's a whole lot of context with advertising. The first $5k was relatively more effective because Sifter was so new. It was great for generating awareness. However, after that initial awareness is generated, unless you're going to spend heavily (more than $10k a month)on a branding campaign any additional impression-based advertising to the same audience generally won't be as effective.
That wasn't time tracking. That was just the number of hours in a year. :) I was pretty bad and really worried about things almost non-stop. So it was a bit of an exaggeration--but not much.
No problems yet. (Knock on wood.) We never had any ambition plans of raising money or going public, so we just wanted the simplest structure that wouldn't require extra costs or overhead. There might be tax implications, but that's more the realm of my business partner, so I'm not really qualified to offer any extensive advice there beyond the fact that you'd want to consult an accountant in addition to a lawyer when incorporating.
I will possibly bootstrap a software product in the near future, but the hard part for me is to decide in which market I can find a niche.
I find it hard to develop a new solution in a crowded market. I want to develop a product I am convinced of, but doubt often gets in the way, especially if the market is crowded.
I also wonder how these services get their first paying customers.
I bootstrapped my company over 2012, and we now employ three full-time people and adding more.
What we did to get out first few users was simple: we wanted to build cool software, and we had a few ideas. We took our favorite, built a cool landing page that spelled out the features with a demo, and then set it free on Twitter. We had 1500 early beta signups before we went into private beta. We now have over 100,000 users and we never spend money advertising.
In terms of getting our first paying customers: we just charged for it. People will pay for things that they think are valuable. However, pricing and the pricing "model" have been the #1 source of missed opportunities and optimization points for us (though we have fixed a lot of that), so they are really important to think about.
I am going through the same thing. Everyone says enter an existing market because you already know people are willing to pay for it. But I am afraid that the existing solutions have soaked up all the customers. How am I supposed to get those customers?
Thanks for the links!
Do you know of communities of self-employed/micro-entrepreneurs? I'm not interested in a booming startup scenario, rather looking to build a sustainable business.
I've seen a few people ask this, and a few efforts towards building an online forum for bootstrappers to hang out. But they all tend to fizzle out.
The community is scattered around the web on blogs, Twitter, Mixergy and here. I think that's a good thing - don't seek yet another place to shoot the breeze. Just get stuff done, and when you have a specific question, seek answers from experienced people in existing forums.
"existing solutions have soaked up all the customers"
Please think of a case where this has happened to you as a customer.
As an example: I've been leasing servers for over a decade. The industry is mature, is worth billions each year, and has plenty of competitors. I've leased servers from many companies, big and small.. one even that had 2 people working there.
Sometimes I had requirements that only large companies met, and other I did not have such requirements, and considered smaller companies.
Customers are constantly leaving and signing up at all of the large services (for a variety of reasons -- customer service problems, fees, inability to meet a new requirement, etc, etc, etc). I challenge you to find a provider that does NOT have some unhappy customers. You'll get your chance when they leave and are looking for a new provider.
Going after a new market often require much more resources than going after an established market. You'll need to spend a lot of time branding yourself and educating your users about your services.
What often works well for people is to enter a market that already exists and to understand the problem the existing solutions don't address.
By focusing on these problem and solving these extremely well, you'll be able to attract a small subset of users who will want to pay for your service rather than your competitors.
You'll have plenty of opportunity to steal customer from your competitors (there's no way someone can address 100% of the market).
There are plenty of markets that are ripe for disprution.
I've gone through this dilemma as a solo founder and experimented with both (existing & new market). I ended up choosing an existing market. Some thoughts:
Make sure that the market you're going into is growing and not shrinking. In a growing market, there will always be new customers.
People like choice. You don't have to compete feature to feature with your competitors. Stand out somehow. Identify how you truly differentiate and make sure that everybody knows this.
The good thing about an existing market is that people are already looking for what you're selling. All you have to do is be there, be different and be findable. The bad thing is that the competitors are mature and it takes a lot more effort to actually compete.
The most important thing which matters to customers is the kind of support you provide to them. Just take an open source bug tracking software and provide "incredible" support to your customers and that will be a win. This has been proven time and again. And when I say "incredible" support that also means proactively solving problems/pain-points for your customers.
Most corporations spend a big part of their IT budget on "Support". Think about it for a bit and you will start to get a clear picture of what really matters.
> But I am afraid that the existing solutions have soaked up all the customers
I used to think this aswell, and I was proven wrong. I think this assumption is almost always wrong. Unless you are building a facebook competitor, you will find customers, regardless how crowded the market is.
I hear this question a lot. Unfortunately, there's not a simple answer. In my case, it was a matter of blogging for years, building up a modest, but interested, audience, having about 2,000 Twitter followers at the time, and spending about $5,000 on advertising once we had been live for about 3 months. I also blogged extensively about the process of designing the application and some of the other steps involved.
Really, though, it's not the first customers that are hard. It's maintaining and continuing to work on it and grow it during the time where growth isn't amazing and it isn't yet a full-time job.
Great slides! In one chart he shows what the level of his pre-Sifter salary was and it seems that the current app hasn't quite met that level, or am I reading it wrong? It would be great to see some actual revenue numbers here, but I can see why the OP wouldn't want to disclose that.
This deck is over a year old. A lot has changed. I'm not really a fan of disclosing actual revenue numbers because that opens a whole other can of worms.
As such, I chose revenue and how it related to our ability to pay me a salary.
If you don't mind me asking, have you hit your goal of earning your pre-Sifter salary yet? In the slides it looked like you were close.
Also, is your partner on full time as well or still part time in your venture?
I have a co-founder that I'm starting a small business with and we frequently talk about what level of reduced salary we would accept to come on full time to grow the business.
I have finally hit my pre-Sifter salary. We could have technically afforded it a while ago, but we only recently decided to make the adjustment. Of course, that was my salary 5 years ago, and from what I've gathered, I'm still way under what I could be making elsewhere--especially if you factor in benefits.
Keith, my partner, has never been full-time. He's always been involved at about 5-10 hours per month, and that's still the case these days as well.
You do you decide Keith's salary? I'm not looking for numbers, more like the logic behind it (number of hours put in?, something else?). I will have this "problem" soon.
Keith doesn't draw a salary at all. His equity is large enough that he's simply banking on the day that we stop re-investing 100% of our profit and start paying out some sort of dividends.
Wonderful! My favorite was the 1-month rise/fall in revenue (scary), followed by the context. So true!
Questions re the pricing tier slides: (a) did you experiment with the prices & number of tiers? It would be interesting to hear your experience with that. (b) The lowest tier had the highest churn and demands ... but they were 25% of revenue ... which is too big to ignore, no?
There wasn't much experimenting. I've always been so heads down on the product, I've been terrible about running tests. I probably rely way too much on my gut feel with decisions like that.
That said, removing the $14 plan did not hurt us at all. Since the $14 plan was half the cost of the next plan ($29), we were simply hoping that 50% of the people that would have signed up at the $14 level would go ahead and be willing to pay $29. At that point, the decision means we make the same revenue on fewer customers. My theory was that would help me stay on top of providing sub-30 minute email response times to all of our customers without going crazy. :)
While I don't have exact numbers, based on our growth after the change, probably 75% of people that would have chosen the $14 plan simply signed up at the $29 level and the other 25% didn't sign up. So, the net effect was great for us.
I really like his point on the premature scalability having a big effect of a startup's failure proability. It's really a hard thing to make sure you are not growing too fast or too slow. It's much easier when you are bootstrapped, since you only scale when the profits tell you. The problem arises when dealing with startups that aren't bootstrapped and have that extra capital laying around that is supposed to be used for scaling, but there is no indication on when to start the process.
I can't tell from your question if you're asking for a simple "performance" or "redundancy" answer or if you're asking for a deeper explanation about application architecture. So, I'll try to answer both.
The short answer is redundancy. With virtual servers, problems on the host machine due to neighboring virtual servers can be frequent. This can slow down the application server and lead to performance problems. With two load-balanced application servers, this isn't as much of an issue.
For the database, I'd suggest reading up on replication. In addition to the master/slave databases, we also have hourly, daily, and weekly snapshots stored offsite because a slave database isn't enough protection from some types of data loss.
Application architecture is a whole beast unto itself, and my real recommendation would be to find and hire a professional to handle this kind of stuff for you.
I was just curious. I would hope RoR would be able to handle more than 60 requests per minute. Nowadays I don't bother with manual replicated servers, cloud servers handle a lot of those problems, but I understand everyone has their reasons.
Thanks a lot for this. The point about not going open-source probably just saved me 6 months-1 year of potential time spent. I knew something was bothering me about making my idea open-source at the same time I am making it. Although I'm an idealist, and like open source software, having money doing what I love was my whole goal in the first place.
Focusing on shipping the product with all desired features instead of worrying about which features to include/exclude in each version. e.g. not wanting to include a very unique/new/proprietary feature in the open source library , that nobody else had. I was creating 2 versions for each of my projects, and had planned on continuing as such.
It's both. The upside is that I didn't need to find a designer or developer to build it, but the downside is that it's a lot of work to keep up with all of the skills that I need. Ruby, Rails, design, front-end development, MySQL, servers, etc.
Fortunately, as we've grown, we've been able to contract work to friends who are experts in each of the areas, but it can be rather daunting at first.
The other downside is that when designing, I always begin to think about how design decisions will trickle down the front-end to the application to the database and sometimes even to the server. As a result, it's hard to just design and implement. I'm always caught up thinking about implementation even when I'm working in Photoshop.
These days, the biggest benefit is that even though I'm far from an expert in any of the areas, I can competently navigate all of the topics and maintain a pretty holistic view of both the business and the product. That makes it much easier to effectively coordinate everyone as the team grows.
Unfortunately, there's not a recording, but I'm doing my best to expand on the slides and add in the year's worth of lessons learned since this deck into a book.
Pretty sure bootstrapping has less to do with the size of the strap and more to do with the fact that you're doing it yourself. $16k of your own money is a lot different than $16k of someone else's.
Happy to answer any questions anybody might have.