16 Lessons I Learned Building a Million Dollar Startup 📈

0:00in this video i talk through 16 lessons i learned creating a million dollar startup and if you stick around till the end i'll give you a special bonus lesson that i think is probably the most important one of all i'm rob walling i'm a startup founder who's created multiple million dollar startups the author of three books and an investor in more than a hundred companies so let's start with lesson number one it's to start with a problem throughout this video i'm going to focus on my most recent sas startup that i sold a few years ago it's called drip and it started off as just a little

0:27email capture widget it became an esp or an email service provider and eventually became a pretty sophisticated marketing automation platform and so back a decade ago when i was coming up with the idea for drip it all started with a problem i was having it was my previous sas startup i was running it was called hit tail which was a sas long tail seo keyword tool that had a ton of traffic but wasn't capturing enough trials it wasn't capturing a lot of email addresses and so i wanted to be able to capture emails on every page of the hit tail website and so we went and built a

0:57custom javascript pop-up you had to do it custom back then and all told we spent close to a week of developer time trying to put this together that's a problem and i decided to productize that and then you know the rest the rest is history and we'll get into that throughout the rest of this video what's interesting is every year we do something called the state of independent sas survey and report and we ask folks how they came up with the idea for their startup and the vast majority just under 80 percent of people who respond say that their idea came from a problem that they had themselves or

1:27someone they knew or someone at their work experience a big mistake that i see startup founders making is getting a bit too clever and just building something new because it's novel but they don't start with a problem and that doesn't tend to work out so well lesson number two is to try to validate your idea before you start building i say try to validate because this is it's hard to do and frankly you're never going to get to 100 validation is it possible that you talk to a bunch of people they say they want it you build it and no one uses it of course it is because there's so many

1:54other variables in there depends on how you build it depends on exactly what you build depends on if the people are are actually telling you what they they really think the more people you talk to the bigger the launch list you build the more folks who say i really want that the higher that percentage raises right and maybe you only get it to 40 or 60 or 70 you never get to 100 but you at least increase that percentage the more folks you talk to so i spoke with 17 sas founders i got 11 folks who said yes i will at least try and that'll be worth

2:21between 50 and 100 you can do this in many ways you can actually have conversations you can send emails like i did there were warm emails to folks that i knew you can set up a landing page and drive traffic to it you can talk directly to people you can post in microconf connect indie hackers hacker news and get people to weigh in on whether they would use it it's not foolproof it only gets you so far but being a founder is making hard decisions with incomplete information you will never get to 100 but at least you can increase your chance of building something that people want and are

2:49willing to pay for lesson number three is to start marketing the day you start coding a big mistake i see founders make is they go in their proverbial basement they write a bunch of code for six to twelve months and then they come out and they expect the product hunt or the hacker news launch is gonna make their company that's a problem what you want is a massive launch list the bigger the better the bigger with qualified people the better during the time that we were writing the software which is about seven months i went on a bunch of podcasts i was actually running facebook ads to a landing page i was generally

3:17just promoting landing page and wound up getting 3 400 people interested in hearing about it and if you architect your launch well and you communicate with these folks along the way and you send them updated screenshots you can even survey the audience we sent a survey to folks to find out really what should we build next because i wanted a v1 that was helpful but we didn't want to spend two years building it so i actually used the audience to help us guide a little bit as long as that stayed within the vision that i had as a founder so again start marketing the day you start coding lesson four is to

3:44consider a slow launch you might hear about some startups that launch their product and they go out and they do the big splash right they email their entire list thousands of people come pouring in product hacker news reddit whatever it means to you to launch a product everyone comes in they don't have product market fit they haven't built something people want and are willing to pay for and so everyone just bleeds out and they churn most products in the early days are not great and so something we did because we knew our product was was decent but it was very simple and so we did a slow launch where

4:13i would email between three and 500 people on our list get them into the product they would play around with it and i would start talking to them emailing with them seeing what problems they had we discovered a few bugs we realized we needed to build more features so we would do a launch then we would build then we'd do a launch and then we would build and so it took us from about july until november it's almost five months to fully launch to that 3 400 person launch list and i felt so much better about launching because we had done that slow launch and taken

4:38our time i should insert here this is not a stealth launch you might hear people talking about stealth which is where they have a company name or product name but they're not talking about what they're building that's not what i'm talking about at all because i was talking all over the place about exactly what we were building but it was that from the day that we started letting people in until the actual day we opened the floodgates was five months and that's why i call it the slow launch lesson number five is to be willing to pivot said above being a founder is making hard decisions with incomplete

5:04information and that's what's likely to happen to you you're gonna have a thesis you're going to build a product you're going to slow launch it maybe you're going to have some people use it and you're going to find out that you haven't built something that people want and are willing to pay for it and then you're going to have to figure out what to do because oftentimes just adding incremental features is not going to get you there and so you have to take this these these muddy unclear signals and at certain point you may have to make the hard decision to pivot and that's what we did we were just an email capture

5:33widget that sent some emails and we realized we just weren't that valuable we weren't worth the 50 to 100 price point that i wanted to charge but it turns out we were adjacent to a market a very large a very competitive market with a lot of money in it i was told this by customers who were using drip and they started telling me have you thought about adding automations email automations to this we can click a link and send someone into this list or you can tag them and it took me a couple months to get over my own internal mental blocks and to decide to really

6:01pivot the product away from just this email capture widget to become a full service email service provider and marketing automation platform lesson number six is to stair step and when i say stair step i'm referring to the stair step approach to bootstrapping you can read all about it on my website we will link it up in the comments but stair stepping implies that you build something small you get some success and then you build on that until you own your time and then you have the resources the money the confidence the experience to build something complex and folks starting with sas often find that it's so hard to build it and

6:32maintain it and get the features right and find product market fit that starting there is hard and frankly with drip we wouldn't have been successful had i not had these prior startups that were kicking off cash i took capital from my other company 150 to 200 000 to get us to the point where we could fund drip to actually build an esp because let's be honest building an email service provider today it's a lot of dev hours because these are very complex products it's a competitive space and so without the stair step approach we wouldn't have been able to fund the development of it to get it to

7:00the point that it is today lesson number seven is to enter a large proven market with a hated incumbent and this one i want a caveat because this is not the only way to build a successful startup you can absolutely do it in a small market or an unproven market or one without a hated competitor but this was one way that we found hyper growth frankly this large proven market meant that a lot of money was already being poured into it and we found that there were several incumbents several competitors who were charging a lot of money and didn't have great products and so it became easy to come in build a

7:29great product slightly underpriced them we weren't trying to be the low price leader but we were able to be half their their cost and still be amazingly profitable and we pulled refugees off of those companies all day and all night people were quitting in droves and switching to drip and that wouldn't have happened had we not entered this large market lesson number eight is that an audience is good but a network is better having an audience when building a sas product is fine and it is helpful but if you don't already have an audience i would not spend the months or years building one in order to launch my sas

7:59product however having a network is amazing a network of people willing to give you feedback network of people willing to try out your product a network of people willing to refer you to joint venture partners willing to promote your product this becomes invaluable once you launch and you need assistance advice investment is something that i discounted as a solopreneur software developer for years and years but by the time i finally built up the network and we did launch trip i realized that the folks who who truly helped me along the way were those that i had built strong relationships with over the years lesson number nine

8:32is that growth is expensive in fact fast-growing companies are rarely profitable and that's something i'm not sure i realized when we you know when we were starting drip and we're doing seven eight nine thousand a month i remember thinking if we were just doing a hundred thousand a month all of this pain would go away and then we a year or two later we're doing a hundred thousand a month and all the pain didn't go away in retrospect i probably should have raised some funding and up until my current company tinyseed which is the first startup accelerator for sas bootstrappers i had never raised money everything was all bootstrapped five six

9:02companies depending on how you count i wasn't against funding i knew funding had its purpose but i didn't have the experience raising it and i didn't want to get on the venture track and today of course there are options to raise funding without having to become a venture-backed company without having that implied series a but back then this was 2013 1415 as we're growing faster and faster there really weren't any options to do that that i knew of and so keeping in mind that growth is expensive whether you decide to raise a small round of funding to help you with that or whether you just buckle down and hire

9:32junior people and train them up like i did know that if you're growing fast it's unlikely that you will be a highly profitable company lesson 10 is that success is a combination of hard work luck and skill drip being successful and having now built several companies into the million and multi-million dollar mark i realized that there is no one component to that success oftentimes there's a lot of hard work most people i know who build something incredible work hard it doesn't mean working 90-hour weeks but oftentimes it does mean putting in that 40 hour 50 hour week really focusing on what you want to do really focusing on the

10:08important things and having the skill or the experience to be able to decide what to work on and to execute on those ideas and finally there's always a little bit of luck involved in your favor or against you depending on how things shift you can imagine someone launching a startup aimed at schools and then coveted hits that's just a big stroke of bad luck and that's out of your control the things you can control or the hard work you put in and the skill set that you build over time and then hopefully you have enough luck that you will succeed one of the most successful american football coaches of all time is

10:42bill wahl she coached the 49ers in the 80s and the 90s and he says control which you can control and let the score take care of itself and for me i know that i can control the amount of hard work i put in i can control the skills that i develop and everything else i let the score take care of itself lesson number 11 is that building a great team is a superpower the startups that i see succeeding are folks who can recruit amazing talent and keep them happy and keep them all going in one direction you communicate that vision as the founder as the ceo it's

11:14hard to get great people to come work for you because they have a lot of opportunity and hiring so-so people doesn't get you to where you need to go especially if you're growing fast and you're moving quickly and so learning the skill set to hire great people to keep them happy and having that network that allows you to be able to you know circulate the job description when you have it or to go to the network and say who is the best person you know who has done this and then seeking that person out and recruiting them allows you to build that great team which is a skill

11:42unto itself lesson 11 is to fire yourself one of the biggest mistakes that i made was i did a lot of the internal operations work at the company so i was handling payroll in hr we were at 10 people and i've just kept doing the stuff that i shouldn't have been doing so realistically as the founder and ceo you're gonna have to fire yourself from jobs one by one and you should be setting the vision for the company you should be helping with hiring until you get really big and then you only help with key hires and you should make sure there's enough money in the bank to get stuff done

12:14and then maybe if you have skills in product or development you can weigh in there if you're a marketer or sales person you can weigh in there it depends on your skill set lesson 13 is don't be scared of funded competitors most of the time companies raising funding if you're skilled they don't actually have more experience than you and they don't know what they're doing any more than you do there are some exceptions to this but with drip we were bootstrapped we were in a tiny little office in fresno california not a startup hub and we were in the top 10 marketing automation tools in the world every competitor ahead of

12:44us had raised tens if not hundreds of millions of dollars in funding and we were doing it as this scrappy bootstrap team that focused on the right things i'm not saying that funding isn't a tool and isn't a weapon that can be used but if a competitor of yours raises a million or two million dollars what i used to do was set a calendar reminder in 18 months that if they weren't able to raise another round of funding that i wanted to jokingly come in and buy their assets you know buy their domain name and buy whatever else they had because once you're on the funding treadmill

13:11frequently you have to raise every 18 months or else you don't keep going lesson number 14 is if you catch lightning in a bottle consider raising funding i mentioned this above but i think it is a mistake that i made was to not raise 250 to 500 000 i was a little intimidated by it it didn't really have the resources to do it it sounded like a lot of work and a lot of headache turns out probably none of those things were actually true and we were growing so quickly that funding really would have been helpful for us as i said earlier growth is usually not

13:40profitable and my life would have been a lot easier as a founder if we had some money in the bank because i wouldn't have worried about making payroll so often and we would have had more senior team members who could really push the business forward lesson number 15 is to be wary of startups in your space not the large incumbents incumbents tend to be big and clumsy and slow it's the startups in your space that you really want to be worried about because those are the folks that are likely to see the same gaps and to see the same opportunities that you do and it was

14:08definitely the other startups in in our space that were really competing at the same level that we were pulling new customers i called them refugees from these large slow competitors with bad ux and an entrenched sales process it wasn't that hard but pulling them away from the other startups in our space was lesson number 16 is that recurring revenue is extremely valuable it's highly valued if you ever want to sell part of the company or sell the entire company as i did just a few years ago for a life-changing exit the exit multiples on sas companies or recurring revenue businesses is very very high you can pretty easily if you're north of a

14:41million two million dollars you're talking four to ten times your annual recurring revenue think about that every thousand dollars of mrr you add is twelve thousand dollars of annual recurring revenue and then just multiply that by five that's sixty thousand dollars in what the business is worth it's an incredible amount of money for one thousand dollars of mrr and while that may sound kind of crazy it comes back to the lesson that recurring revenue businesses are extremely valuable and selling all or part of your company is not as hard as it sounds one thing that i want to throw out it's only tangentially related here is that i wish i'd considered selling

15:15some secondary shares because i was worth millions and millions of dollars but it was all locked up in this private company i had no diversification and i was concerned every day that someday we might go out of business we might ride it over the top and i didn't want that to happen and if i'd been able to sell even 10 of what i owned in drip and take the money into my personal bank account i know that that would have made a difference to me mentally in a minute i'm going to tell you the bonus and perhaps the most important lesson i've learned creating a million dollar

15:42startup but before that if you enjoy this video i would love it if you'd hit like and subscribe to the channel we're putting out a video like this every week on super detailed and focused sas topics so the bonus and final lesson of the day is that the hardest part of being a founder is managing your own psychology so many hardships are gonna come your way and every day you're gonna have to ask yourself is this thing in front of me a roadblock or a speed bump is it just something i need to figure out and drive over or is it actually business ending is it actually as catastrophic as

16:13i'm making it out in my head because i think a lot of us as founders we can catastrophize things and we see the worst case scenarios and knowing yourself knowing your tendencies and being able to you know decompress at the end of a day and being able to have a clear vision of where you're going and stay sane while you're doing it is an absolute superpower for a founder so i hope you enjoyed my 16 lessons i learned creating a million dollar startup i'll see you in the next video

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