💰 You Need A Cash Machine

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To bootstrap or not to bootstrap?

Let’s dive in…

We know most of you are founders (57% to be exact), but curious about what type of companies you’re building. Click below and tell us how are you funding your companies.

It’s all over the headlines, our investors are talking about it, and about 50% of our newsletter editions have mentioned it— raising money in 2023 is hard AF. Along with that, acquiring new customers and paying your team are also hard AF. And if you’re not feeling this as a founder, then I’m sure you’re feeling this in some way as an investor or executive at your organization.

For those reasons, plus what Jason Lemkin said here about good founders don’t fail, and how Ayana Parsons from The Fearless Fund talked about a $1B exit without having a $1B company here, we wanted to take a look at bootstrapping— what it means and how others have done it.

Transparently, while we’ve raised some capital, we are proactively working on turning our business into a cash machine so we don’t need additional investment.

This week, we’re we’re tapped into MicroConf. The entire conference is dedicated to folks who are bootstrapping/self-funding their companies. We’re breaking down one of our favorite keynotes from the event– Bootstrapped to a $200M+ exit: The story of Profitwell. The videos are behind a paywall but don’t worry, we paid for it so you can get the notes and access the deck.

Hit reply and let us know what you think of this week’s edition! If enough people dig it, we’ll profile the story of a self-funded entrepreneur who exited at $1B+ that few people in the startup world know about.

💚 Amy & Bryan

Zoom out: MicroConf

First, for definition’s sake: Cash Machine = predictable acquisition of recurring revenue with annual prepay in a good market. This was defined by Jason Cohen, a bootstrapped founder with 2 exits and 2 unicorns, and a 2013 Microconf Speaker.

Second, raise your hand if you’ve heard of MicroConf.

Not gonna lie – I hadn’t, but then I got excited after learning that the entire conference is “The Original Community for Bootstrapped SaaS Founders,” as described on the site.

Since 2011, they have hosted thousands of founders across 19+ events and touted 200 speakers, many of whom are bootstrapped founders sharing their learnings and insights. This past year, the conference took place in Denver, where about 250 founders gathered. While they have a conference coming up in Portugal, the overall atmosphere of the experience is well…micro, but with intention. With long tables and laptops up, micro-excursions, beers and food on tap, and hallway tracks, it’s designed for community, exploration, and deal-making.

I appreciate that they have a little something for everyone:

• Local conferences (upcoming in Seattle and Miami) are geared towards early-stage SaaS founders ($50-75). These are 3-hour meetups, including one 30-minute fireside chat with a SaaS founder.

• Flagship conferences (upcoming in Lisbon) are best for founders with $10K+ MRR ($1,100-1,400). Each event has 4-6 keynote speakers, delivering 35 minutes of content + question and answer. They host workshops, roundtable conversations, and offsite activities during these events.

• Remote conferences (upcoming Nov 1st) are designed for everyone ($30). This is a two-day, one-and-a-half-hour-per-day event that includes a series of 30-minute conversations focused on one of two topics: Early Stage SaaS Sales or Marketing.

MicroConf Growth 2024 will be hosted in Atlanta, GA April 21-23rd.

Zoom in: Patrick Campbell

Patrick is the CEO and founder of Profitwell, a revenue automation product that reduces cancellations, optimizes pricing, and gives you accurate, free revenue reporting. Patrick bootstrapped Profitwell to a $200M acquisition to Paddle, where he is currently the Chief Strategic Officer. His talk at Microconf this year was funny, personal, and extremely instructive. His talk will…

1. Challenge you to reconsider how you think vs. what you think

2. Provide 6 frameworks to leverage as you build a cash machine

3. Help you rediscover the value of freemium

🖼️ Frameworks on Frameworks

Patrick Campbell, even after a life-changing 9-figure acquisition for his business, was still faced with remarks from his father that he should instead become a doctor. As Patrick puts it, being a founder means you’re placing yourself in line for the Trinity of F-Us. Whether it’s the market, technology (hey AI), or personal life, there are a ton of things working against you as a founder and even more so as a bootstrapped founder. Knowing how to think is the key to success and Patrick shared 6 frameworks to help us get there.

1. Where are you going– The Journey Framework

• There are 3 paths that you can take as a founder– Low payoff, Medium payoff, or Big payoff.

  • Each path has a significantly different set of expectations and requirements. If you aim for a low payoff (the equivalent of owning a series of corner stores), you should not be working 70 hours a week. If, instead, you are aiming for a big payoff (disrupt an industry so you need VC money and GTFO my way energy), then a 40-hour work week won’t cut it.

  • While there are exceptions to the rule, align your actions with where you’re going. Most importantly, make sure your partners (life and business) are aligned with this destination too.

2. How will you get there – The Operating Framework

• There are two main components to focus on: Growth and Operations.

  • Growth = customer acquisition, pricing & packaging, and expansion revenue. These are all of the things that push you forward.

  • Operations = finance & billing, compliance & tax, churn. These are all of the things that hold you back.

• When planning, evaluate all of your initiatives through this lens: is it something that is pushing us forward, holding us back, or cleaning up something that has held us back? It’s imperative to leverage this to help you focus your time and energy in the right places at the right time.

3. Who is going with you: The People & Alignment Framework

• You’re not that clear: “Founders like to think that we are the most clear and articulate in expressing the mission and goals of the company, and everyone is aligned.” But the reality is, is that everyone comes to a conversation and into a relationship with their own history, understanding, and goals, and thus their interpretations are more likely to be skewed than perfectly aligned with your mission.

• Get clear: You have to quickly realize that the goal is actually to move people along in the same direction, generally. To do that, be simple and specific about your

  • Mission: what does the company do? Example: Paddle exists to grow subscription revenue automatically. Their mission also comes with a Core metric, or Mission Metric as they call it, which is subscription revenue on ProfitWell. Be a broken record about it!

  • What: Decide and communicate what your guiding principles are to get there. Example: Paddle’s first guiding principle: Do it for you. Their second guiding principle: Be the most helpful brand in SaaS.

  • How/How much: As teams come on board, get detailed and specific about how they will feed into the mission, impact the mission metric, and abide by the guiding principles. The often-overlooked keyword here is detailed. This means telling your new Marketing Director exactly how much you want them to do and when. Example: Marketing at Paddle knows that they need to produce 6 shows per year, 1 product launch a month, 1 brand video per month, and optimize SEO to the max.

4. How do you move people to buy your product: The Demand Gen Framework, creating rivers and pools

• River = things that move people from not knowing about you to awareness, and ultimately to buy. This includes cold emails, inbound marketing, ads, influencer marketing and social media.

PRO TIP: Build your river up first before building a pool. You need to have a strong system that is generating and adding to your funnel.

• Pools = building up the middle of the funnel so that when the timing is “just not right” for a customer to convert immediately, they have a place to “pool” so you can be there when the perfect timing hits. This includes leveraging Freemium and Content.

  • Freemium doesn’t have the same bad rep it once had particularly if you look at it as an acquisition model vs. a revenue model. Freemium provides an opportunity for a potential paying customer to receive and understand the value of a portion of your product without paying for it. All along, you are learning how/when they are using the product and can be targeted and personalized in your nurture to get them to become a paying customer.

  PRO TIP: Measure the effectiveness of Freemium by tracking cohorts over 6 months (when did they join the freemium pool, how many have dropped off, how many have purchased).

  • Content helps you switch your thinking from building lead volume to building an audience– a group of dedicated target (or near target) customers who are deeply engaging in what you have to say. Profitwell has a regular show that generates at least 75K views per episode. Don’t aim to go viral, aim to consistently get in front of your target audience.

5. How will you keep your customers: The Retention Framework, value is not binary.

• There are two main types of retention: The most commonly known is: Strategic Retention, which accounts for 60-75% of your retention and is focused on maintaining and increasing the advocates while shedding the critics. Less common: Tactical Retention, which accounts for 25-40% of retention and includes all of the ways you can move someone from canceling to not. Optimize your Tactical Retention by:

  • Optimizing your term length: Get more annual signups by asking people to become annual subscribers every 30-60 days. Send a note including a discount if they sign up annually. Longer-term plans have 200-800% higher lifetime value.

  • Implementing cancelation flows: According to Patrick’s internal data, you have about 8-13 secs before someone gets annoyed when they are attempting to cancel. Within that window, ask 2 questions to help lower cancelation flows by 10-20%:

    • Why are you canceling? This gets you helpful data when you offer multiple-choice answers.

    • What did you like? This helps put the customer in a more positive frame of mind and primes them for a salvage offer like a maintenance plan: “We’ll save your data for 10% of the price to ensure your data is here when you get back.”

  • Check your payment failures: It’s simple but detailed. Here’s the deck to view more of how he suggests approaching this.

6. How will you make money: The Monetization Framework, understand your buyer personas.

• Know the pricing evolution. This is a typical product pricing journey as you become more and more familiar with your buyer persona. The main hacks are…

  •  Shadow Tiers: Most customers should only see 3 tiers, which should be named based on the persona. However, as you realize you’ll have more than 3 buyer personas, implement shadow tiers. Shadow tiers are even more dialed in and specific to a type of buyer.

  • Add-ons: These are features that were once bundled, but you see that less than 40% of people are using them. Use this as your indication that you should pull it out and charge an add-on fee for it.

  • Localization: Your price in one country may be completely different than your price in another. Charge based on the willingness to pay.

PRO TIP: Don’t be afraid to raise your prices. In his deck, Patrick provides a templated email you can send to current customers whose prices you need to raise.

Don’t want to leave us just yet? Here are some ways we can work together. 👋

1. 📈 Looking for design sprints around sales, revenue, and community growth? Well, our agency Marble Design Studio is a leader in the space. We help design programs and systems for leading companies and startups. Learn more here and book a call to get going.

2. 💰 Looking for $500K or more of sponsor dollars for an upcoming conference? We have a proprietary database of over 10,000 brand sponsors looking to partner with high-aligned community builders and conference organizers. Get in touch if we can help connect the dots.

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