CC008: the first startup accelerator designed for bootstrappers // a Coffee Chat with Rob Walling (TinySeed)

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Rob Walling: 00:00:00

What’s funny is I had this idea in 2011 as I was growing hotel and I wrote it down in a notebook and I wrote it as YC for bootstrappers and I thought, why isn’t there a, an accelerator that caters to us like my people, my micro MicroConf startups for the rest of us, the founders who, who kind of want to really bootstrap and don’t want to do the institutional thing. They may want to run the business forever, you know, may never want to exit, or if they do it, you just don’t. You don’t want all the baggage of, of all of that. And, and vc won’t back. If you’re going to do, let’s say 10 million, 20 million a year ARR, but that’s it. That’s a crazy profitable business. If you build a SaaS APP. To that point,

Jay Clouse : 00:00:35

The startup investment landscape is changing and world class companies are being built outside of Silicon Valley. We find them, talk with them and discuss the upside of investing in them.

Jay Clouse: 00:00:48

Welcome to Upside.

Jay Clouse: 00:01:03

Hello, hello, hello and welcome to the upside podcast, the first podcast finding upside outside of Silicon Valley. I’m Jay Clouse accompanied by my cohost, Mr. always bet on black himself. Eric Hornung.

Eric Hornung: 00:01:15

That’s right. Jay, you always bet on black unless red hits or zero or double zero or you’re playing blackjack in Vegas,

Jay Clouse: 00:01:24

in which case there’s no chance of winning.

Eric Hornung: 00:01:26

Right? There is no chance of winning if you’re playing blackjack with Jay Clouse in Las Vegas. I played the night before. I won a good amount of money. You play with Jay Clouse, the dealer flips nothing but 21s.

Jay Clouse: 00:01:36

Unbelievable. She had the best luck of any dealer I’ve ever seen and so we waited her out. We said, okay, let’s wait for the dealer change, and I said, I’m going to follow your lead here, Eric. I’m going to try to bleed less slowly. Wait for a dealer change. We get a dealer change and more of the same.

Eric Hornung: 00:01:54

So did she have the best luck or do you have the worst luck? Because there’s one changed variable from the night before and that night.

Jay Clouse: 00:02:02

That’s a great question, but you guys went to a different casino that night.

Eric Hornung: 00:02:04

That’s true to change variables. That’s a good call. That’s a good call. So would you say that venture capital is a bit of a gamble?

Jay Clouse: 00:02:12

Oh, interesting. For the entrepreneur or for the venture capitalist?

Eric Hornung: 00:02:16

Well, for the entrepreneur I would definitely say it is, but what about for the venture capitalist? Is it a science or is it a house always wins kind of thing? What happens?

Jay Clouse: 00:02:23

Great question. Well, you know, traditional venture model, they’re kind of playing a numbers game thinking. I think traditional venture capitalists think of themselves like the house, they think of themselves that with enough investments following, they’re fairly loose dcs that they’ll win out in the end.

Eric Hornung: 00:02:43

Yeah, I kind of agree with that and I think it’s based on this idea of hitting home runs, but today we have someone on who’s making a different kind of gamble.

Jay Clouse: 00:02:52

That’s right. Today we’re talking to Rob Walling, who is the founder of TinySeed fund, TinySeed fund is a year long remote accelerator focused on SaaS companies software as a service. Before TinySeed, Rob was the founder of drip, a marketing automation software, hybrid email service provider software, competitor of mailchimp and convert kit, which he found a lot of success with and was sold to leadpages, I believe in 2016. He’s also the founder of MicroConf, the world’s biggest conference for the world’s smallest self-funded software companies, and he hosts a couple of podcasts themselves from startups for the rest of us in zen founder. He’s been active for a long time here, Eric, and he’s somebody in the. The circles that I run in which our freelance bootstrapping, he’s a known name and his products are widely used.

Eric Hornung: 00:03:43

Yeah, I feel like we’ve been. We’ve had discussions off the record about him and this whole evolving community for some time. Mostly because here at upside we like to kind of play on the fringes. So what’s new, what’s interesting in venture capital from both a topics perspective, a geography perspective, and a organizational model, financing kindness perspective. So anything that’s new, changing, evolving. I think we find that interesting here on upside.

Jay Clouse: 00:04:11

Yeah. Looking at innovation in the venture space, you and I have been looking towards this for this since we started this podcast and there are a shockingly few names that seem to come up both of companies and, uh, folks in that space, so there are known and Rob is one of them since announcing tiny seed earlier in or A. Yeah, about mid 2018. He announced it at the last microcomp. So really cool to have rob on the show today, especially given the timeline of tiny seed. The applications for TinySeed opened this past Friday on the 18th. It will be open for the next several weeks. So good timing on our part here to bring rob on the show.

Eric Hornung: 00:04:54

There you go with the timing and the timelines. And here we go with the interview. Let’s jump in.

Eric Hornung : 00:05:01

Hey guys, wanting to cut in here real quick and let you know about something. Jay and I have been getting ready behind the scenes in 2019 when we started this podcast. Jay and I said that you, the listener, will have an opportunity to learn in real time to think like venture investors with us as we meet a wide variety of personalities, examine a wide range of industries. Well, now we’re going to share something new and it’s a little different. This new idea is called the update. It’s a carefully curated quarterly publication of editorials, trends, and stories happening outside of Silicon Valley. Jay and I will be writing stories about what we’re learning about on the podcast, have guests editorials on interesting topics and share news and updates from our podcasts and some cases we may even share some exclusive content or first looks. Our goal is to stay at the cutting edge and of course bring you along with us. We’re super excited about it and know you’re going to love it. If you want to be the first to hear about our q one launch in subsequent letters, go to upside.FM/update to get on the mailing list.

Jay Clouse: 00:06:10

Rob, welcome to the show.

Rob Walling: 00:06:12

Thanks for having me on.

Eric Hornung: 00:06:14

Rob, on upside we’d like to start with a little background on the guests. So can you tell us about the history of Rob?

Rob Walling: 00:06:21

Sure. You know, I’m a software developer by training. I learned to code on an apple to eat when I was eight years old and I was just struck by the fact that I could make things in and I’ve always been like a creative person in that respect. Not necessarily. I mean I do play guitar and I’ve written songs and such, but I really been motivated by, you know, creating technology. And so after getting out of college and working in construction for a couple of years, I was wondering why I was doing that. And so I became a professional developer for a consultant firm that was building .com websites. So this back around 2000, 1999, 2000 and it was Super Fun, Super Fun just to be able to get paid to build things was like, ah, it was, it was invigorating and that fun lasted for a couple years. And then I realized it was, it was kind of a slog, building things for other people, you know, and kind of the fun one out of it for me because I realized I wanted to create my own things. And so I started doing that nights and weekends and every night and weekend that I worked, I thought to myself, I just want to do this full time, you know, I want, how can I do that? And it was that, you know, the stretch of like the realization that I need to own my own time if I’m going to do that. And you know, so that’s when I decided to start building products. So 2005 was kind of the first little success I had.

Eric Hornung: 00:07:38

So you mentioned you’re a musician on the side, construction worker, musician, software developer, true renaissance man. What do you do in the music field?

Rob Walling: 00:07:46

I don’t play much anymore, but I learned to play guitar in college. I was in a couple bands. One was in Irvana cover band that was pretty dope. And um, the whole damn. But, and then I was in an original group in Sacramento. It was like a folk rock acoustic folk group and had a lot of fun. I was in it with my wife and so I would read psalm right about half the songs I would sing and play the guitar.

Eric Hornung: 00:08:10

Did you meet your wife in it or did you join it with her?

Rob Walling: 00:08:14

Joined it with her, yeah, we met. She and I met on the track. We were both runners.

Jay Clouse: 00:08:18

There’s so many parallels. Well, I mean musicians are consummate entrepreneurs, so I find myself drawn to musicians and artists in that same way because similar to you I’ve really found an appreciation for making things and doing whatever I can to build a life of my own design where I own my time and make things around that. I’m curious how you got access to or were introduced to the idea of software development so early.

Rob Walling: 00:08:42

MMM. Yeah, that’s a good question and it was a little bit by accident. My Dad and mom had heard of the new computers would be a thing and this is 1982 I believe. Yeah, I think it was the early eighties and apple too. We had just come out and we lived in the East Bay area and my dad was an electrician and somehow I think just being around as an electrician, you work on these jobs and then he would build buildings for apple and then build a data center for whoever and then build something for genetic. Like he just was around the technology even though he himself still is not good with it, you know? And so he and my mom talked and they dropped a lot amount of ,money. They drop, like four grand in 1980 $2 on know an electrician salary basically to get my brother and I this apple TV. So yeah, it was, I mean that was, that was the game changer for us. Right. And the fact that games were really expensive. We wanted to play games. We like dungeons and dragons and that kind of stuff. And so we had to build our own because we couldn’t pay the 50. It was 50 bucks apiece related by the, by game. So we just started figuring out how can we make our own stuff and it was a bit of luck and then a bit of of the fact that it fit our kind of maker personalities, you know.

Jay Clouse: 00:09:52

So we’ll fast forward back to when you started building your own products. What did those first products that first products look like?

Rob Walling: 00:09:59

They were terrible and not only were they terrible, they were just. The ideas of them were terrible. It was all. There was no one talking about bootstrapping. There was no one saying like all the common knowledge that’s today or even the common, not like I wrote a book in 2010 cold start, small state, small developers guide to launching a startup. Everything in there now seems obvious, but no one was saying it at the time. So my ideas were like, hey, let’s build a social network or whether it was social news website for personal finance because hey, dig is successful and personal finance ads are expensive and therefore you get a lot of money per click. So I’m going to build that. Having no idea that you just can’t do that as, as an individual like that, the odds of that happening are slim to none. Right. So I launched, so that will called [inaudible] dot com. I launched feed shot, which was that it was, you could take your. So when you used to post your blog, used to have to go and notify you, don’t you ping out to all these services and I built a service to do that and charge. Tried to charge like a dollar or $2 a month. So I learned from there. Well you just can’t make any money doing that. There aren’t enough people. There’s too much churn.

Jay Clouse: 00:11:00

Is that like an original rss feed?

Rob Walling: 00:11:02

Yeah, although it’s, it would take in rss feeds from your blog and then it would send it to the out to like 200 different news and blogs services and such, um, that we’re accepting these pings. So it was just a little utility, but you know, utilities aren’t going to be, they’re going to pay your pay your mortgage. So I learned things from them. It was fun to launch and do things in public. But I also, it was like, A, I need to niche down and B, I need to charge real money to real customers who have a problem, probably don’t want to go B to C at all. I want, you know, all these things, right? I mean, everything I’m saying now is, oh, that’s just common knowledge. Well, it wasn’t in 2003, you know. So my first real click with that was in 2005 when I, I basically acquired this software invoice. And it was in kind of Alpha stage. It was still pretty, pretty rough shape. And there were a few, uh, Alpha users. And that’s when I realized, oh, it this niche idea, I can kind of own this whole thing. There’s no one else who’s, he’s given the source code away with their product in space. So every consultant who wants to build an invoicing APP is going to buy this. And it was, there was solid for 95 bucks and I later tripled the price to 300 and it didn’t make a difference, you know, because again, if you’re a consultant, 99 to 300 wasn’t a. wasn’t a big deal. So it was all those lessons I learned throughout there that I then carried forward and start. I started blogging about it in 2005, which was, you know, another trajectory change.

Jay Clouse: 00:12:19

What were the people around you, whether it’s friends or family, what were they thinking about what you’re doing? Because this is such, probably a rare thing to hear about and know people doing at the time.

Rob Walling: 00:12:31

Yeah. No one really knew. I didn’t really talk about it because I had had experiences when I was in college and shortly after, like when I was working construction, I would talk to guys I was working with and I’d say, Hey, I’m trying to do the single side. And everyone’s, everyone just has it, you know, clever, witty remark about how that’s a dumb idea and how, you know, I was reading entrepreneur magazine or fast company or whatever and people gave me a bunch of crap about that. Like, Oh, you think you’re going to be an entrepreneur? And it was kind of like, you know, what? Like, screw you, I’m going to. Yeah, I am, you know. And it took me a long time, but I, I just, I got enough negative feedback early on from people who just had no clue what I was thinking and what I was going to do with my life because, you know, you’re just stuck in this. It was construction. I didn’t enjoy very much. I just didn’t like the people I was around it. It’s closed mindset or a fixed mindset of the folks I worked with. The only people that really knew that I was telling at that point where my, my wife and she was skeptical of it, you know, because I spent a lot of time. I spent nights and weekends for six months to build these things that I’m talking about. And they never did anything and she’s like, what are you doing with your time? Why? Why are you doing it? I mean, she was always, she was supportive but questioning and kind of like show me the money and make it worth it, you know?

Jay Clouse: 00:13:40

Yeah. Talk about good training though to be an entrepreneur and to face that type of adversity even from people close to you.

Rob Walling: 00:13:48

Yeah, that’s right.

Jay Clouse: 00:13:49

That’s super interesting. Just to hear that background. So you started, you started building these things, get me up to how long from that invoice to drip, what type of time passed in that period of time?

Rob Walling: 00:14:04

Seven years. Seven years.

Jay Clouse: 00:14:05

And were you running the invoicing software through that time?

Rob Walling: 00:14:09

Yeah, I was running invoicing software along with several other small products that I had either built or acquired and I basically cobbled them together because .net invoice never gotten bigger than about three or four grand a month. And I went out. I mean I, during this time I applied for y combinator. I with, with two Yale Mbas and or MBA students. I was looking for funding for something because again, I thought that was the only way to do this because there wasn’t anybody talking about you now, so, um, so I was running .net invoice along with other things and then I acquired hit tail in 2011, which was a SaaS app and I grew that and realized there were some dead ends there due to reliance on Google and high churn. And so then I was like, all right, let’s, let’s do this next thing. And that, that was when I started drip 2012.

Jay Clouse: 00:14:53

So when you were applying to y combinator, that was probably just what, three years into their existence, maybe even less.

Rob Walling: 00:14:58

I think it was 2007. Might’ve been two years in.

Jay Clouse: 00:15:00

Yeah. So they were, they were pulling in like 20 companies a batch. They’re probably looking for teams that were super well rounded, had like a full idea and knew exactly what they were building at the time.

Rob Walling: 00:15:10

Yeah. We and we had that. I mean we, it was me, I was a developer, right. And we had these two Mbas and Mba students and we did have a fully full fledged idea and we applied and we got a phone interview so we got through the first round and it was from yc alums who are doing that and I believe they said had an even number that number. It was like 10 percent of companies who applied get to that or 15 percent at the time. And uh, so that was kinda cool. And then we just, you know, we didn’t make it past that. And frankly, as interesting as that would have been, I think it’s a, I think things worked out for the better to be honest, because I went this non traditional path that we’re probably going to dig into here and that has just been life changing for me.

Jay Clouse: 00:15:50

What do you think it is about either your personality or your background that all through this time where there weren’t, there wasn’t a blueprint or there weren’t role models for you to look up to that you just kept doing it anyway in this, in this untraditional way?

Rob Walling: 00:16:03

It’s a good question. And one I’ve asked, I’ve asked myself before, I think growing up and especially in high school and college, I’ve worked hard to achieve things that that were not easy to do. Like I’m not a naturally gifted athlete, but I went to the state meet as a hurdler in high school and frankly I’m just not that athletic. And so the fact that I did that, it was pure, it was just grinding it out. Like I showed up every day. We worked out five days a week at the high school and then I would often go two days a week to a local, you know, I was working out seven days a week as long as I didn’t get injured and nobody else was doing that in high school. It just wasn’t a thing. So there was this work ethic of like showing up and frankly I don’t have the work ethic that I had back then. Like I now have gotten older and I’m a little bit like, I don’t think I could do these 60 hour weeks anymore. But I think that was a big piece of it, of just like, I will make this work. There was just this, this thing, and there was also an I have to make this work because I was not going to work for other people my entire life. You know, I did the, did the times in the cubicle farms and it wasn’t terrible, but it did decay my soul, you know, I wasn’t creating like I needed to. And you know, we’re on video here, but this tattoo on my arm that says create. And that was the first tattoo I got and it, it, it’s a daily reminder of if I’m not doing that, I will shrivel up. I will become depressed. There’s actually studies, my wife’s a psychologist and there’s studies they’ve done with entrepreneurs versus not entrepreneurs and normal people in everyday life. We’re not. Entrepreneurs have a much higher rate of depression and founders have a much higher rate of anxiety. And that’s what I found too. I was depressed, I don’t know clinically or whatever when I was working for other people. And now I’m much more anxious.

Jay Clouse: 00:17:47

I totally, totally relate to. And every once in a while, and hopefully this becomes more of a conversation, but it seems about yearly or twice or once every two years now, I see a pretty major article that comes out of the talks about the loneliness of being a founder, of being entrepreneur and how mental health, mental health is the crisis that we’re not talking about in entrepreneurship. And it seems to be unfortunately brought on by the loss of somebody. This last article I saw was after the co founder of vine and HQ Trivia passed away from an overdose. So you know someone else that we’ve had on the show that’s a good friend of mine, Web Smith. He tweeted one time, he said, actually, he said in an interview, mental health is the story that we’re not telling her that, that entrepreneurs aren’t telling. And I thought that really stuck out to

Rob Walling: 00:18:31

I would agree. And if you want to, there are resources. So my wife and I cohost a podcast called zen founder Zen And if you, whether you go and listen to that, because we have 200 episodes of that and the whole point of that it’s called startup or the subtitle is startup family life. It’s all about balancing these three. As I said, I’m a multitech founder, she’s a psychologist and now an entrepreneur herself. So it’s like kind of a good and we’re married to each other. So there’s this interesting play there. A Lot, a lot of info. We’ve talked about all this stuff. Suicide, the whole deal

Jay Clouse: 00:19:00

that, that Randi Zuckerberg quote to have like family, friends, exercise, sleep business, pick three. I find that to be also unfortunately very true. Okay. So take me up now to drip and how you drip started because that’s, that’s a name that probably a lot of listeners on the show here will recognize and have maybe even use for their email marketing. I’m interested to hear about the inception of that company.

Rob Walling: 00:19:26

Yeah. So it was based on a need I had with my prior SaaS app called hit tail. So the tail was a little 10, 20, $30 a month SaaS APP that help people with their seo and I wanted, we, we got a lot of inbound organic traffic because that was part of my tool belt, you know, I knew how to do seo and paid ads and this and that. So we got a lot of inbound and we weren’t capturing very many via email. Right. You weren’t capturing a lot of email addresses and again this is 2011 and so people were not. I mean I did a talk in 2010 at a conference and about email marketing and how important it was and how you should build your list and people like gave me skating reviews and said I was a spammer and stuff and I was not talking about spam but email was unpopular, you know, until very recently.

Jay Clouse: 00:20:08

That’s why,

Rob Walling: 00:20:09

you know, it’s really, it’s bizarre to see the tides change. A split testing was another thing nobody used to do. Okay. So all that said, I wanted to capture more email addresses and so I didn’t want to go and embed an html form on every friggin page of the website. We had 200 pages and so I was like, why isn’t there just that little javascript pop up that can go on every page. Right. I think I’d seen one before, it wasn’t some idea I came up with, but it was like, isn’t there a service to just slap some javascript on this thing and make that happen? And there was nothing. So this is before sumo me, this is before I’m optin monster. It’s before you know, whatever else, you know, tool you would think of to do that. And so I hired a contractor to build that and he know, just use jquery and styled it up and wired it into mailchimp, autoresponders. And it took them a week of work to do it. And I was like, this is nuts. And we started, we got a bunch of emails. It was great. It worked fantastic. So I was like, why is this not a SaaS app? And as we’re going hit, as I was going to hit sale, you know, we were, I was relying on Google and the churn was higher than I want it to be. I could never get past that. So I grew up to about 25 to 30 k Mrr, which is great because it was really, it was just me, you know, with the contractor. So the money was great, but I was like, am I going to be running this in a decade? You know, is this a, is this a decade long business because I don’t know what I’m going to do it. So drip became kind of the next, the next thing. And that was December of 2012 when we broke ground on code. I got 11 prepurchase commitments before we broke down on code. So I talked to friends of mine and folks, you know, in the SaaS space and said, would you use this? Here’s what it’s done for us. This sounds interesting. And they said yes. So that’s the point. We broke ground on the code.

Jay Clouse: 00:21:38

It definitely sounds, I don’t know the founding date of convert kit, but I’m guessing that drip was before convert kit if you’re working on it in 2011 and mailchimp was probably around but still pretty nascent and those guys, man, they’re their stories kinda crazy too.

Rob Walling: 00:21:50

Yeah, I know mailchimp wasn’t, I mean they were more than nascent. They were the, they were the 900 pound gorilla already because they had the free plan. They figured out how to do free with email. Uh, a Weber was another option. Constant contact was not as much in our circles, but they had been around since 2009, I believe. Ninety nine. And then as we got into email I learned, oh, Infusionsoft, I’d never even heard of Infusionsoft, you know, which is crazy. Think about today. And then active campaign was up, I believe. Was it like downloadable white labeled software or something because they, I believe they became SaaS in like 2014, 2015.

Jay Clouse: 00:22:23

Wow, do you think, this is kind of an aside of just my personal curiosity, do you think that email is still on the rise as a marketing tool or do you think that we’re going to see a post email type world soon?

Rob Walling: 00:22:35

I think it’s, I believe it’s still on the rise. I know people talk about posts, email and sms and facebook messenger and whatsapp and all this stuff, but I mean, you know, we, we put up a landing page the other day for TinySeed. It was October I guess a couple months ago and you know, got three or 4,000 email addresses and to me that’s how I’m going to communicate with people, you know, I wouldn’t meet in 10 years when I get their facebook messenger handle or some other thing. I guess I don’t see an option today that will replace the email. Maybe one comes out in the future, but there’s no communication meeting that I know of that I think will will replace it.

Jay Clouse: 00:23:10

Yeah. It seems like bots and sms, they have higher open rates right now, which is what the buzz is about, but they’re so invasive. Like I, I don’t, I don’t think I’ve ever had a facebook messenger Bot or an SMS experience related to marketing that I was like, man, I’m glad I got that.

Rob Walling: 00:23:23

Yep. Yep. And, and the asynchronous nature of email is, one is one thing that just no one else seems to be able to replicate the fact that I get pinged on my phone for a text or whatever, and that’s just the standard. It’s, as you said, invasive is a good way, which has also, you know, there’s a little bit of backlash about slack and just how it’s destroying maker productivity, I think not destroying but how it’s negatively impacting it. Yeah, I mean if anything’s gonna replace email will be slack. Right. The problem is because it’s closed, you know, closed thing. So how would we have gotten the 4,000 people that we got the other day? You invite them to a slacker and then that’s just a catastrophe. If you’ve been in one with 4,000 people, it’s nuts.

Jay Clouse: 00:23:59

Yeah, so Rob, you, you exited drip a couple of years ago and I read an interview with you where you talked about some of the reasons why. Could you share some of those reasons why you thought it was time to look towards acquisition for drip?

Rob Walling: 00:24:14

Yeah. Hopefully the reasons I say are the ones that you saw because I don’t know, you know, because things change over time and especially your memories, you know, fades and such. Probably the biggest reason is that as drip was growing, so I bootstrapped drip really self-funded it to be honest that have hit tail revenue. So it was, I mean I put a couple hundred grand into it, 150, 200 grand before it, before it became profitable. We got to the point where we were growing very quickly and we needed money just to hire people and keep the servers up. You know? I mean, we were, I was running it at breakeven and every time we’d go up 10 k Mrr in a month and I would hire another engineer just to keep us going, you know, and then we go up, 5 k hired another, another customer success person or whatever, and I realized that the cash constraint was truly a constraint on the business. So I was entertaining the idea of kind of doing a single round, you know, not, not going institutional but raising probably I was looking, thinking about a half million bucks of angel funding and just would’ve gone to my network and such. And during that time, as I started thinking about it and by this time that contractor who originally built drip for hip tail had become an employee and then retroactively became my co founder. So he had just been there since day one and took it, you know, a minority position in the business just made sense to keep them around. And he was a true asset to the company. And so as I’m thinking about that, I’m talking about this with Derek, my co founder, we were getting acquisition offers inbound and we got five of them in about the span of 18 months and we need to get an email and it’s like, Hey, we love this and you know, we’re a strategic and you know who they were. I knew who the companies were and so we’d start a conversation and it was never my initial intention to grow a company and sell it. But it did start to become appealing at a certain point of like so we could raise a round out of a x valuation and we’re going to need to go for another three to five years at this pace to really make that worth everybody’s while. Because to me raising around as a commitment to the investors, I want to provide them with a return or we could basically get acquired. And the reasonably pages was, was such a good acquire. As they had raised $38,000,000 in venture funding. So I knew that they had the money to put behind us. You know, that they could add the fuel to the fire and when we got in it was like, hire who you want. I mean the day we got acquired we doubled that aws bill because we just were running. I mean I was turning stuff on the weekends. It was just stupid. It was to cash strapped so and we can take money off the table so we could raise funding but also have a good outcome for us as well. And that was, that was the idea. So really the four stakeholders in any acquisition and it’s who I wanted to guard where our customers, I didn’t want them to get screwed our employees. I didn’t want anybody to get laid off and then the founders of course and we had the cash outcome and then the acquirer itself, you know, to provide them with, with value. So at least you know for the, I was there for about 20 months after that and I feel like I’ve had conversations with multiple stakeholders and you know, things worked out that way. Things worked out well for everyone.

Eric Hornung: 00:27:03

What does the acquisition outreach look like? Is it just an email that you get from someone that says, Hey, I’m looking to buy your company? Like, is it really that basic?

Rob Walling: 00:27:13

Yeah, I mean there’s, there’s two things. There’s certain people you know, I knew clay collins from lead pages. He, I, he had been on my podcast. We kind of run in the same circles. We’d never met in person, but we know the same people just having been around for awhile and so he emailed directly and was like, hey, we really liked drip. Have you, would you ever consider selling it? So he was very direct. Um, he’s actually published that email and I’m in a blog post. The others were, you’ll get an email that’s like, hey, I’m the, it’s the corporate development, you know, it is the title so that you get from the corporate dev guy or Gal. And it’s like, hey, we’re looking at strategic partnerships, you know, it’s all this very vague language. But like strategic partnership from a corporate person means they want to start having conversations about acquiring you. So, but yeah, it’s just, it’s an email or linkedin outreach and you just kind of got to read between the lines and frankly, I mean there were of the five, there were a couple that were just in a No go almost from day one word one, it was just like, yeah, I don’t want to work with you and I don’t think you have the best interest of the four stakeholders, you know, the other three I guess. And so there were some definite deal breakers and no gos for me. Again, I didn’t want anybody to get laid off and I wanted to product to keep going and grow and that’s what I was able to do while I was at, while I was working with lead pages.

Jay Clouse: 00:28:24

Because you had bootstrapped this, that decision was pretty much wholly in your court.

Rob Walling: 00:28:29

Yeah, that’s true. Yup. It was Derek and I together really we’re, we’re mulling it over, but we had the luxury of, you know, there was no, there were no venture capitalist, there was no liquidation preference. There was, there was no complexity there. It truly was, do we want to do this? And at, and at what? Under what terms? You know, we could just basically make the choice, which is a luxury, uh, you know, someone who’s bootstrapped has,

Eric Hornung: 00:28:50

When you say the terms, I want to talk about that a little bit more. One term that we hear very frequently in like the tech space is you get purchased and then you have like I have a four year lockup where you’re not actually locked up, but you either have some sort of earn out that gets paid or you have some sort of options that vest. Is that the same kind of things when you’re bootstrapped or how does that all look?

Rob Walling: 00:29:11

I’m sure it can look many different ways. Yeah, it’s. So I’m under NDA so I can’t disclose terms, but I can say that having seen terms from different folks and having talked to a lot of people as we were getting acquired, who I talked to, other founders who had been acquired and what they told me is look, if you get acquired by google or facebook or a big company like that, they love. They basically give you a three year earn out and they will also give you stock options, but they’ll typically pay you cash upfront and they pay you cash at year one and year two and year three. If you get acquired by smaller companies that are less less name brands. Typically it’s a two year earn out and you can leave before then. You just leave money on the table. Right? They’ll negotiate and say, I’m gonna buy you for 10 million and you get five of that upfront and then you get two at year one and three at year two or whatever you know. And if that’s all negotiation and it’s all, then you try to flip that around and you try to get a payment at 18 months and then you try to do that. But I have known founders who’ve gotten one year and 18 months, you know, earn outs as well.

Jay Clouse: 00:30:10

That was the case with. I had a very modest exit a couple of years ago in our deal was we had a two year earn out, but we had an earn out at year one and we had an earn out a year two. We left year two on the table because it was just miserable working for that company.

Rob Walling: 00:30:22

That’s tough.

Jay Clouse: 00:30:23

You know, I think most people listening to the show will have some experience with making some type of deal, whether it’s a small cash deal for like doing freelance work or something when you’re early on in doing sales. Sometimes deals are scary because it’s like, I really want this, but I feel like if I don’t ask for higher, I’m leaving something on the table. But if I asked him higher, they might just walk away in a situation like an acquisition. That’s a much higher stakes, similar circumstance. How did you think through that?

Rob Walling: 00:30:52

Yeah, it can be millions of dollars. Literally won or lost based on how hard you dig in. It’s crazy and it goes right to your personal bank account. So it’s even different than selling for someone else where you’re getting a commission. Like it’s, it’s, it was, it was really stressful. I got to be honest. It was one of the most stressful things I’ve done in my life and I even had, you know, I had help. I had a broker that I hired to just kind of back me up who’s consulting and given me stuff saying this, this is a great, this is a good offer or this isn’t an easy. The terms for me it was, you know, it took a year from the first email to close and the reason was is because I did exactly that. I said, you know what, it’s not worth, you know, selling for less than x or would you know, these terms. And they walked away multiple times, several times for months at a time, you know, and that was. But you know, I didn’t want to have any regrets in all honesty and Derek was on board with that. I mean I was pretty committed to hitting, hitting some certain things and so I dug in hard and at the event it was, it was about six months of casual negotiation and then it was like five or six months of intense, 20, 30 hours a week, like effort. I was almost not running the company towards the end.

Jay Clouse: 00:31:59

How aware were, what were your employees have this conversation going on and how did you guard that?

Rob Walling: 00:32:05

They were not aware. I did not tell them until about a month before the close because I just, because to me I had to keep telling myself this deal is not going to happen. That was my mental frame because if I got too excited about it, I knew that I would, I wanted it, but I couldn’t tell myself that I wanted it, if that makes sense. And I talked to the employees. We only had eight or 10 at the time. So I talked to him. One met with each one individually once it happened and I said this, I’m going to tell you news. That’s good. It’s going to sound like bad news, but I need you to trust me. This is gonna work out better for all of us. Just hear me out. We’re gonna, you know, I think we’re going to be acquired by lead pages and about a month and here’s why it’s going to be better. You know?

Eric Hornung: 00:32:45

Would you recommend that same methodology if you were in the same position going forward?

Rob Walling: 00:32:50

It worked very well. Yeah. I had the luxury of having a small team. If I had 40 people, I would have had to do a group announcement and group announcements are tough, right? Because you just know no one’s gonna speak and then people are gonna to go off and talk amongst themselves and private slacks. Whereas I sat there for an hour between an hour, an hour and a half with each employee and basically gave him the news and then. And Derrick did it with me, with the developers because he was managing the developers and then we’d just talked through what are your questions? Boom, boom, boom, boom, boom, you know, go through them. It worked really well. Yeah. And, and I don’t think I wanted, I don’t think I would have told them earlier because there was so much influx. Man, you know, at any given time I could get everyone all up in chaos and in a tizzy and then the deal fell through. It’s like, oh well that didn’t happen. So is rob and Derek trying to sell a company now, you know, like it would’ve just been weird. So it turned out it turned out good.

Eric Hornung: 00:33:41

Outside of your broker, what resources did you use to navigate these waters? Because one piece of feedback I’ve heard and seen as it relates to acquisitions is like there’s not much out there. And I know Brent beshore just released a book called the messy marketplace, which is actually on my nightstand. In his next book, I’m going to be cracking open. I’ve heard it’s great and gives a lot of insight into the process. But at the time it seems like there probably was a lot less.

Rob Walling: 00:34:07

There was a lot less, but what I did is I listened to an audio book guy, so I’m going to listen to. But what I really mean is read. I listened to build to sell like three times and there’s part about built to sell is it’s short. I think it’s a couple hours and you just gained some and he talks about selling a consulting firm, but there were some lessons that I took away from that. There was finish big by Bo Burlingham. I listened to that a couple times. Some of it didn’t apply to me. Other parts of piece of it did. And then now there’s a book. There’s also a book called before the exit thought experiments for entrepreneurs is by Dan Andrews and Ian Schoen from Tropical Mba and I read that just that just came out in the last couple of years. So it was after I was acquired. But that’s a good one. I recommend. And the built to sell podcast built to sell radio is actually pretty good to just kind of get some sanity checks. The other thing I did, so that’s what I consumed because I was so stressed for months, it was brutal. I also use my network and I talked to probably half a dozen founders either via email or on calls. Said, look, I haven’t offered this. You sold what did it looked like? What? You know? Basically asking all the questions you’re asking me except it’s private conversation so they can actually tell you all the terms and stuff and to find out what about this term, should I do this? Is this a system mind, you know, landmine. And so that was, that was how I did it.

Jay Clouse: 00:35:22

So I want to move into post strip now. TinySeed fund. When did the idea for tiny seeds start percolating after drip?

Rob Walling: 00:35:29

Yeah. You know what’s funny is I had this idea in 2011 as I was growing head tail and I wrote it down in a notebook and I wrote it as Yc for bootstrappers and I thought why isn’t there a, an accelerator that caters to us like my people, my micro MicroConf startups for the rest of us that the founders who, who kind of want to really bootstrap and don’t want to do the institutional thing, they may want to run the business forever, you know, may never want to exit. Or if they do it, you just don’t. You don’t want all the baggage of, of all of that. And, and vc went back, if you’re going to do, let’s say 10 million, 20 million a year ARR, but that’s it. That’s a crazy profitable business if you build a SaaS app to that point. So why isn’t there funding out there and accelerated help with that. And I didn’t do it because I didn’t want to deal with all the headache of raising investing and it just sounded like a nightmare to me. And I also don’t know that I had, you know, the, the network and the reputation at that point. So that’s where it initially hit when I, I spoke at MicroConf this year in April in Vegas and I mentioned this concept of fund strapping, which is to raise like a round of a couple of hundred grand, two to 400 grand and really never intending to raise, raise another round after that. And I got a bunch of people coming up and I said, look, I’ve done 12 angel investment, six of them are basically in companies like this, you know, it’s real people who really bootstrappers at heart, but they just need a kick to get into and to escape velocity. And I’ve mentioned the companies Cart Hook, you know, and, and turn buster and uh, and lead views and a few others spark Toro now, that was after MicroConf. But a bunch of people came up to me after the talk and that wasn’t even the point of the talk. It was like a five minute last slide. And all these people were like, how do I kind of want to do that? Do you have more money to, you know, are you writing checks? And I’m like, I’m kinda heavy on startup, but they’re like, is there a fun who’s doing this? You know, and I was like, I don’t know, someone should do that, you know? And then of course the realization, it’s like, well of course that someone is probably me, like I’m at, you know, one of the folks who’s just been doing this a long time and it’s kind of at the epicenter of, of the bootstrapper movement. And so that my cofounder with tiny seed actually approached me after that and he has some private equity ties and you know, he just knows LP, you know, limited partners. And he said if, if you want to do this, I would handle the investor side. And that was the, that was sealed the deal for me.

Jay Clouse: 00:37:39

Yeah. And you mentioned earlier that when you were doing drip, you basically bootstrapped it with almost $200,000 before it was profitable, you said. And that’s, that’s a position that very, very few people can come into a SaaS business with. So I imagine with MicroConf we haven’t talked about that here on the show, but that’s exactly the audience for that, that conference that you put together. And so that was just this past year, right? That was in 2018 or was that end of 2017?

Rob Walling: 00:38:05

In Aoril 2018. I did the MicroConf talk and then within 60 days of that we, we [inaudible] had put together a deck [inaudible] is My Co founder, he and I were still just floating the idea and like do we want to do it, you know, is this a thing? And then as we started talking to investors and founders, it was like, oh this is a thing, you know? And then we announced in October of 2018 and it was literally one email I sent out to my list and a tweet and it just, it just blew up. And we were getting tweet replies from all kinds of. I mean from Rand Fishkin and Joel Gascoigne from buffer and Dharmesh Shah and you know, just all the folks who are kind of bootstrappers there either through a bootstrap bootstrap is at heart, you know, and they were just like, this needs to exist, what help do you need? And Nat generated several thousand emails overnight and that made, it really showed us that the deal flow and the investors, you know, were there,

Eric Hornung: 00:38:53

I guess my question kind of revolves around that initial 200 and 250,000 [inaudible] for drip and then you said in the companies just wanting to like get a little bit more to kick something into orbit to reach escape velocity. Like what is the money being used for in a bootstrapping context as compared to what is it being used for in the traditional vc context?

Rob Walling: 00:39:17

Yeah, with a drip, I didn’t raise the money but I pulled it out of a, another company that I had called his tail and I. It was about 150 to $200. What I used that money for was to move faster. I was able to hire out, I was able to hire three developers and when we can really only afford to hire one and it got us to market and then got us feature parody because once we decided to move from being a email service provider to marketing automation, we had a hell of a lot of work to do to get there because to go from mailchimp to Infusionsoft, if you know, if your audience knows that like there’s a lot of stuff in there and with one developer it would have taken us a year or more and with three we were able to get there faster. So that’s, I also used it to hire like a, a good does that like a really good designer who is expensive instead of what I had traditionally done, which has just go on, you know, upwork or whatever and build stuff myself, which is awful.

Jay Clouse: 00:40:05

And were you paying yourself or your co founder at all at that time?

Rob Walling: 00:40:09

Yes we are, but we are taking really. We were taking very low salaries way below market
Jay Clouse: 00:40:14

So you mentioned YC for bootstrap companies, is that how you would describe TinySeed or what? What would you, how would you describe TinySeed to someone hearing it for the first time?

Rob Walling: 00:40:22

I describe it as the first startup accelerator designed for people who had traditionally bootstrap and we’re focused on SaaS, on B2B SaaS. I’m sure we’ll wind up really it’s subscription companies, but that’s just a cumbersome way to say it. But that’s what we’re trying to do is we’re trying to provide folks I know a ton of bootstrappers who are working side jobs or you know, working on the side and it takes them a year to get anything done. And if they just had a year’s worth of living expenses, 120 grand is probably the number we’re going to arrive at. If you had 120 grand and it’s like here, use this as a salary, just build the thing, you know, and, and get it out and they can really accelerate the growth because they’ll have the focus and it’s not, it’s not the 10 or 15 hours a week where you’re the least productive anymore.

Eric Hornung: 00:41:07

Why B2B SaaS?

Rob Walling: 00:41:09

it’s just a market that I know very well and it’s a repeatable, I could build B2B SaaS all day and all night and make them work. It’s just something that has a very high likelihood of succeeding. And it is a repeatable process. Building social networks is not a repeatable process. You could start a 100 and 3 of them will work and no one can really tell you why. Why did slack grow so fast? I don’t know. I mean it is B2B SaaS, but it grew like a social network because there was a viral component that is almost impossible to replicate. Whereas building a 20, you know, 10 million, $20,000,000 SaaS company, like let’s just, you know, we can just talk about the fundamentals, what it takes to get there. It’s like you solve this problem for this group of people. You land and expand. You start with a small niche, go out. Your price point should be minimum $50 a month, probably closer to 100. And you’re going to raise that over time. You know, it’s, there’s just these things you asked for credit card upfront and then later on you can become demo only, you know, I, it’s just the playbook and it’s, I’ve been doing it for so damn long that and there’s still so much opportunity there so B2B may be too strong, but at least I don’t think we’re going to do many b to c, b to c. it’s tough, right? If you’re going to do a, an app for costumers or something, it’s like the churn is really high and that’s where B2b, they’re less price sensitive and churn will be lower and such.

Jay Clouse: 00:42:26

So you’re asking yourself why doesn’t this exist? And my gut reaction is, well there must not be any money in it, but I’m guessing now that you’ve run the numbers and figured out a way where that can work. Can you talk about those dynamics and what would make this work?

Rob Walling: 00:42:38

Yeah, that’s, that’s a good question. And that is something that [inaudible] and I early on talked about. I said it doesn’t exist because vent, traditional venture capital really wants to Unicorns, right? They want billion dollar companies and going down market is not something you do, it’s just doesn’t. It doesn’t make a lot of sense and, but I’m here sitting looking at all these companies that I see that really I wish I could fund them all. I remember saying that at one point and someone said, well why don’t you. And I say, because I don’t have the money. And they said, why don’t you raise the money? That was where I was like, I don’t know, maybe I just shed. So what I dug in with the inr because he’s kind of the financial modeler guy. He’s like a data nerd. He has a phd in computer science and a lot of data modeling and stuff. So he got in and said, look, what do we think our success rate could possibly be? What are the different ranges? Because it’s certainly going to be more successful in any venture capital. They don’t run cohorts, but you know, in their portfolio they’re expecting, what is it 70 or 80 percent to just completely tank and then some zombies and then like one to 100 acts. I would expect ours to almost be flipped, you know, I would expect a of my six angel investments that are these B2B SaaS that I think will be seven or eight figure businesses, they all still exist and they’re all growing at 50 percent, 100 percent year over year and it’s not because I’m. Well, it’s not because there’s no other reason than it’s just easier. Base hits are easier than homeruns building a billion dollar company. You have to throw your just going to burn up in the launch most of the time and only one out of 100 is going to make it. Or I guess it’s three out of 100 right. Becomes a Unicorn right now. That’s the number. Whereas I think 80 out of 100, if I picked 100 companies, you know, 70 or 80 of them is going to become a seven figure SaaS business. It’s just, you know, maybe that’s a little high number, maybe it’s 60 percent, but whatever the number is, it’s a lot more. I mean it’s, you know, three percent to some, some large number.

Eric Hornung: 00:44:27

What’s your return for TinySeed on those companies that that 60 to 80 percent that are going to hit singles and doubles, like what is the return? Because the way that the three, three, three, one like vc model that we hear about works is like you get three that go be successful to go two to five x three that go, you know, the exit and you make your money back or something close to it. Three to completely fail and then one that either hits a home run or it goes to zero. And like if you do that then you get your two point six x return over 10 years. So what is the similar math? They’re in this six to 80 percent. Is it like they’re giving you one point nine or three point. Oh, x three point. Oh x. like what is, how does that all work?

Rob Walling: 00:45:10

Yeah, we, we have, I don’t have the three, three, three, one model for us. Inr actually does. And this is one of the things I’m definitely more on the founder, founder discussion side and the and the deal flow side. But yes, our, our projected returns are exactly within venture capital IRR, so I don’t remember the number exactly, which I probably should, but it is that to, what is it, two point five x [inaudible]

Eric Hornung: 00:45:33

average is average is two point six x return of capital over 10 years.

Rob Walling: 00:45:38

Right. And we’re, we’re in that range. If we get multiple home runs were at seven x or something, you know, or home runs for us. Sorry. So yeah, no, it’s, it’s in the same branch and it Kinda has to be because we’re going to see a lot of traditional LPs who are, who expect that kind of return and if we can’t give it to them, why should they do it? Why shouldn’t they just go invest in, you know, and Andreessen Horowitz or whatever.

Jay Clouse: 00:46:00

Yeah. So how many companies are you going to invest in? Your applications are opening soon. So what, what does the makeup of that portfolio look like? What are you looking for?

Rob Walling: 00:46:09

Sure, yeah. We’re going to do a batch of between 10 and 15 for our first batch. Manageable and easy. Nice small community. I think we’re, you know, we’re closing our funding round our, our fundraising and we’ve raised enough for 11 or 12 companies right now and I think if we get, we may get to the point it’s looking like might have the possibility of, of having to run 20 companies, but I think we’ll probably do two different batches, one batch of 10 now and then a batch of 10 later in the year to stagger them

Jay Clouse: 00:46:39

and that’s what the estimated $120,000 per company.

Rob Walling: 00:46:43

Yeah, it’s going to be between I think a hundred and twenty is for a single founder and then give or take, you know, let’s say you add 20 grand per founders, so maybe it’s 1:40, one 60 for two and three somewhere in that range. We haven’t settled on exact, but yeah, that’s the idea.

Jay Clouse: 00:46:56

Besides being B2B SaaS, What else are you looking for in these companies? That’s the point of them applying.

Rob Walling: 00:47:00

Yeah, it will take people all over the ranch. I’m sure we’ll have a few with, with no revenue and then I’d imagine it’s like more traction the better. In essence, you know, what anyone would look for. It’s like MRR is a good signal. It’s not that we’re only going to take Mr, but that’s, that’s where you start, right? Because it, that means that someone has gotten to the point where people are willing to pay for it and that founder has brute forced it probably on nights and weekends to get there. So that founder is probably someone who is to be reckoned with and I think the biggest thing that I’m looking for, again, I’m not the one making the decision and there’s me and my wife interviewing people, the psychologist, right, who knows founders and we’re getting other people involved to help. So it’s not so myopic view of our opinions, but me personally, the founder is the number one, two and three, you know, reasons. And then after that it’s like, well yeah, what’s your MRR and what’s, how big is the market? I mean it has to be big enough to support a seven or eight figure business. But I’ve been having conversations with founders already, just who have basically they got on the list and then they emailed me directly and it’s pretty fascinating to talk to folks and they get a feeling for the personality quickly and it’s, it’s like, yeah, this, I think this person is gonna gonna execute, you know, please apply when we get there.

Jay Clouse : 00:48:11

And also on your website it says, one of the points you have is we only succeed when you do and you talk about a profit sharing model versus the typical carry model. Can you shed some more light on that?

Rob Walling: 00:48:23

Basically, since we’re backing bootstrappers, we don’t want to remove their optionality to be able to sell the company if they want to be able to raise another round of funding if they want to or to be able to not raise another round of funding and just own this thing 10, 20, 30 years, you know, however long they want to own it. So if they, if they decide to sell, then obviously we all know we all make out well there. If they decide to raise another round then that, that will work too. If they decide to keep going and on the company forever, we have to figure out some way to get a return and so that’s where the profit sharing comes in where you know, we’ll have an arrangement where a, as you take, you know, as you take money out of the company, we, we share in that in order to, to provide it.

Eric Hornung: 00:49:04

So what is the financial instrument look like there? Is it just some sort of like future agreement for equity or profit sharing or is it a unique contract? I’m, I’m curious like what that looks like.

Rob Walling: 00:49:16

So we are in the process of that right now talking to a lawyer to figure out the best way to [inaudible] there’s the, there’s what it appears like, which it appears like equity, like we’re gonna, we’re calling it equity, but there can be tax implications of that if we have equity in a company and they leave money in the company, but it’s a pass through, you know, it’s an LLC or an s Corp. So there’s pass through earnings to us. Now we have a tax liability. So we’re trying to figure out the exactly that thing out. Is it equity or an equity instrument? Right.

Eric Hornung: 00:49:50

Or as an an option I guess, right?

Rob Walling: 00:49:53


Jay Clouse: 00:49:54

So you have the applications that are open open now actually just open on the 18th. How long are applications open and when do you kick this thing off? This, this grand experiment.

Rob Walling: 00:50:04

They’re open for, I believe about six weeks and I would love to kick it off at MicroConf in march, which is March 26th to the 28th this year. And in vegas. That’s that. That’s the ideal. It’s just a tight timeframe to do so.

Jay Clouse: 00:50:20

how do you feel about the weird contradiction of accelerated for bootstrappers that raised funding to exist?

Rob Walling: 00:50:27

Yeah, totally. It’s funny how these things work out, you know, and, and the idea is, what I’ve been telling people is I have a lot of founders who I’ve known who’ve raised these small rounds but are still bootstrappers at heart and that’s how I view this. Like even Jason Cohen who started wp engine, you talked to that guy, he’s still really capital efficient even though he grew this huge thing. Dharmesh was the same way with hubspot, like they bootstrapped that thing into, I don’t know, probably seven figures before they raised. I mean it, so that, that’s how I view it. I will be a bootstrapper no matter what. I was still a bootstrapper when I was working at lead pages. Was that 38 million in revenue, you know, or in, in funding

Jay Clouse: 00:51:05

You’re the bootstrappers’ bootstrapper.

Rob Walling: 00:51:07

Aye. Something like that. Yeah.

Jay Clouse: 00:51:10

Awesome. Well, is there anything that we’re not asking about TinySeed that we should be asking?

Rob Walling: 00:51:15

Well, I mean I feel there’s some differences between it and a typical accelerator, like TinySeed is one year long, right? Most accelerators are three months and it’s a year long because SaaS takes a long time, right? Don’t let anyone tell you they can throw $5 million at something and find product market fit faster because that is bold. It takes so long and SaaS takes way longer than then, you know, something that’s growing virally or a social network or whatever. I mean B2C things you can force money at it and forced growth but SaaS just isn’t that way. So we wanted it to be longer, we’re also remote, we’re remote, accelerated one of the few and the idea there is there’s just a lot of founders with a spouse and/or a kid you know and owns a home and just I couldn’t move for y combinator. I was going to be a big struggle because I had an infant and we were up in new Haven, Connecticut and I was going to try to commute to Boston and do all this crazy stuff at the time and that would have been a big really hard for us. So

Eric Hornung: 00:52:06

one of the other things that accelerators are generally known for his community and I think that’s bolstered by the fact that you do go to somewhere and you do have like this three month really intensive sprint with 20, 30, 40, 50 other individuals who you get to know really, really well. How does TinySeed embrace or think about community

Rob Walling: 00:52:27

foster that? Yeah, that’s a really good question because that’s a big part. I mean, when I think of an accelerator, I think of mentorship a little bit of money and community. Those are the three elements and the community aspect. We want to get everyone together in person three or four times throughout the year, preferably one at the beginning, so everyone meets face to face and then we’ll planning on doing either weekly or biweekly mastermind calls with the group and you know, weighing and hotseat format and then we’re doing office hours similar to what you would hear for other accelerators and we’re bringing in all the experts that you would expect, you know, the heat and shaw’s and joanna weaves and we got jason fried as a mentor and dhh and laura roeder of edgar, you know, just all the laundry list of people who you’d want to be giving you advice, frankly, is, is who will be helping out during those, uh, during those calls.

Jay Clouse: 00:53:17

yeah. Sounds like an awesome, awesome group of people. Well Rob, thanks so much for taking the time. Really excited to follow a TinySeed and see where this goes. After the show, If listeners want to learn more about TinySeed or about you, where would they go?

Rob Walling: 00:53:31

Sure, yeah. Well, TinySeed is at And i am Thanks so much for having me on

Eric Hornung: 00:53:42

Alright Jay. We just spoke with Rob Walling from TinySeed. I’m interested in hearing about your big takes,

Jay Clouse: 00:53:49

Big takes. As someone who’s followed a lot of Rob’s work for awhile. And to be honest, I didn’t know that drip was rob’s company until a couple of months ago, but I definitely followed drip. I didn’t realize how early drip had gotten started and so to hear his talk from there about when and how trip got started, I really enjoyed that part of the interview. I enjoyed hearing about how for decades now he’s been going against the grain with the things he wants to do. I think he’s a kindred spirit to me in that or maybe I’m a kindred spirit to him in that we really like to make things and make our own way. But a lot of his story really underscored the difficulty of that. And when he talked about how he bootstrapped drip and had to put in $150,000, 200,000 of his own money to get to profitability. That’s just a position that almost nobody finds themselves in, you know, that’s super, super rare to have that type of capital to be able to bootstrap and then if you did have it, to have the technical ability to build a team and build a product that actually returns that capital. So super rare skill set and an awesome story from Rob and you know, the big takeaway to me from all of this is he’s exactly the right type of person to be doing this type of, what do you call an accelerator or venture model with TinySeed because it is going to be very difficult I think from a model perspective and have somebody who can come in and personally mentor these teams because he’s done the B2B SaaS himself for years and to have a partner who understands the numbers and the model a little bit more I think is a really, really good combination.

Eric Hornung: 00:55:28

It’s kind of funny because I was kind of feeling that vibe that you guys had, especially when it came to like email marketing and for the listeners Jay handles kind of all of that for us. He’s a wizard at it and I have no idea what’s going on half the time, but I could just kind of like feel the connection. I kind of felt like mayo at a hot dog stand, you know, and you guys were like ketchup and mustard. It was just like I was the odd ball out for a bit in that, in that earlier conversation. But that’s, I think that’s the. That’s right. Is that like it’s good when people find a partner who is was different and when I asked the question about the math, I can tell immediately like, okay, maybe it’s cofounder is like more of the me in this duality,

Jay Clouse: 00:56:07

Right? I’m not the math guy. And before you even jumped on, he and I were talking about. I said, hey, so what do you use for podcasting? Because he runs to podcast podcast himself and I wanted to get into the weeds a little bit on production is like, well we use zen caster and records locally and we have a shared vocabulary because we have a similar skill set or place that we focus. So I really resonated a lot with his, his message on that.

Eric Hornung: 00:56:30

And you’re also like really big into construction.

Jay Clouse : 00:56:35

When it comes to wordpress sites. Sure.

Eric Hornung: 00:56:37

Have you ever built anything in your life? Like with your hand?

Jay Clouse: 00:56:40

Yeah. Yeah. And my dad’s an amazing carpenter. This is actually one of my biggest regrets was that I didn’t spend more time learning carpentry from my dad for Christmas this year. I have this history of getting Christmas gifts for my family. That is mostly just time with me doing things that I want to do anyway.

Eric Hornung: 00:56:53

That’s the most narcissistic gift of all time.

Jay Clouse: 00:56:56

Well, you know, I think that you want to give experiences and memories to people as opposed to stuff that’s at least what I tell myself. So my, my gift from my dad this year was a promise to build something with him. This year, the two of us, I haven’t decided what that’s going to be yet. Is it going to go in my apartment or we’re going to build it for somebody else. He’s retired now, so usually he just builds pieces of furniture and builds them for members of our family. Then drives them in his truck to wherever they are in the country and use that as an excuse to visit too, but otherwise no. Construction is not my bag building stuff, not my bag.

Eric Hornung: 00:57:28

The nice thing is all you have to do is build something that’s like functional. You just have to hit a single, right. You don’t have to hit a home run and knock it out of the ballpark.

Jay Clouse: 00:57:36

Yeah. What other big takeaways did you have from this conversation with Rob?

Eric Hornung: 00:57:40

I think it’s just just that it’s this idea that actually I forget who it was and maybe it was [inaudible]. Maybe it was some other vc philosopher on twitter, but they said if you just go to the fortune 500, go into their doors, get on their systems and find all the systems they have. There is a billion dollar company for each one of those systems because they are all so bad and I think about that all the time. When at my full time job I see the systems that we’re using and they are just all horrific from timecards submission to hr systems. It’s just like if you just took a startup mentality to those and it wasn’t created. I mean that’s why concur, the travel and expenses company dominated so fast is because everything is broken in, created by oracle and they’re not allocating their best resources to it or the most time to it.

Jay Clouse: 00:58:35

For sure. I’m really interested to see where this model goes because I do still think that the math is a little fuzzy to me and hard to understand and I would love to really. I would say I would love to nerd out with [inaudible] to look at the model, but honestly I would love to watch you nerd out with [inaudible] and talk about the model.

Eric Hornung: 00:58:54

Part two, You hear that tiny vc. If you’re listening and you’re listening to the episode. We got a part two.

Jay Clouse: 00:58:59

Yeah, because I’m sure it’s going to be pretty in depth and I would just love to know what some of the assumptions are and what they think the hit rate’s going to be and where those founders need to be at their journey because he’s said that MRR isn’t the only thing they’re looking for, but I imagine if they’re taking 20 companies or less, they’re going to have plenty of applications of companies that have some pretty impressive MRR and so you know, being a rare model and really the only model at the level he’s talking about where they’re looking to fund these companies, they’re going to have the pick of the cream of the crop, which really helps the model I would assume because you know, they’re essentially for that specific niche and type of founder. They’re going to be the gorilla in the room.

Eric Hornung : 00:59:41

Yeah, and I love that. I love the idea that you could like this is like, I think we’ve talked about this before on podcasts, but like the niche-fication of the internet, like all the all the big stuff has happened or is happening and there are pathways set up to create something very large. There are not as many pathways to create something. Not very small but mid sized.

Jay Clouse: 01:00:06

Yeah. You asked about the financial instrument for what those deals look like. That’s also going to be something to watch moving forward. Whether it’s their own innovative form of things, you know, I don’t know what the latest innovation in financial instruments is. The safe note is what I hear referenced most as one of the more innovative forms. Anything else that you’re tracking on.

Eric Hornung: 01:00:27

You have the saft note which came out of the cryptocurrency movement, which is the safe note, but with tokens instead of equity, you also have what republic created, which is interest bearing debt in the form of tokens. I think that most of that is more geared towards cryptocurrency, but maybe there are some concepts that can be pulled out. The most interesting thing for me is this idea of optionality and what that would look like in this context because you could effectively take a position in a company that isn’t a position. It’s just a like a futures contract.

Jay Clouse: 01:00:59

How does that work?

Eric Hornung: 01:01:00

So at a really basic level and option is either the right or obligation to purchase or sell an asset at a time in the future. So if I am buying an option, instead of buying equity in this company, that option can be in three years or upon a liquidity event, which could be an acquisition or an IPO or bankruptcy. I reserve the right to cash in on essentIally on my equity stake that this option represents or I can cash in on my right to future cash flows of the business via a revenue or royalty royalty program.

Jay Clouse: 01:01:41

And I’m guessing that there’s not a tax implication for holding options until you actually purchase the options.

Eric Hornung: 01:01:47

So that I’m not a tax lawyer. I’m also a tax lawyer. I’m also not a lawyer. I’m also not a tax accountant. So all of this information is my understanding of it and it’s definitely not any sort of legal or financial or accounting advice just in case anyone was unclear on that. But I do believe there is some tax ramification for options. But I think what he was referring to was the tax implication of passing through earnings to your LPs. Because in a partnership model you get a specific tax document that says, okay, this portion of the earnings of the company are attributable to this individual and that can increase your tax burden without seeing any cash.

Jay Clouse: 01:02:28

Well, I’m excited to follow TinySeed as they move forward. Something that you asked that I’m embarrassed that you asked that I didn’t ask was about the community aspect of the accelerator because that’s a core component of the accelerator that I run. That’s also a remote accelerator community is super, super important.

Eric Hornung: 01:02:45

So I actually have a question on that. For unit deals with shadows having run a virtual accelerator, which means that people are generally remote. You have a concentration around columbus so you can do some live and in person events, but now might be a little bit different here, but you have a remote accelerator. Community is important to you. Mentorship and access to services is also something that unreal does. So it seems like the three pillars kind of lineup. What shadows do you have about tiny seeds ability to execute on those three pillars given your experience with unreal?

Jay Clouse: 01:03:23

I don’t know that I do because the way that TinySeed is set up is to create money from the investment in these companies. I mean from a ethos standpoint, they want to empower those entrepreneurs and that’s going to happen if they provide this $120,000 to his entrepreneurs and for some entrepreneurs that may be enough to help them build the company that is profitable, that returns what that investment is, and that’s going to be a win for TinySeed. You will inevitably have founders just about any accelerator who don’t show up or take advantage of the mentorship, the community, the office hours. They don’t do that and that’s a real problem for the other members of the accelerator. If that’s the main value that they’re looking for, one of the main values that they’re looking for in joining. But if it turns into, you know, the founders who join are mostly looking for the capital and the mentorship.

Jay Clouse: 01:04:15

You have some flexibility on the community aspect of things, but if that is what he talks to the founders and that’s what they’re looking for and they join. They’re saying, hey, listen, I’m a solo founder of this bootstrapped company. I work in isolation. I don’t have anyone to talk to. I don’t have anyone to learn from and community is what’s driving them to join. Then maybe I do have a little bit of shadow of the remote nature of it, but there’s a lot you can do even remote to to facilitate that. Every time I talked to someone who’s gone through unreal, not every time, but a lot of times they will tell me, you know, I was really surprised how quickly I felt a personal connection to people just through video chat.

Eric Hornung: 01:04:52

Do you think then the one year timeframe versus the 10 week, 12 week, three month timeframe, do you think that’s a benefit or a hindrance?

Jay Clouse: 01:05:05

I think it’s good because for these types of founders, their wins and their progress is going to be spaced out. It wouldn’t make as much sense to do a weekly cadence the way we do an unreal. I think that by spacing out, you put calendar holds on people’s calendar far advance in. they’ll probably prioritize it because it’s a more scarce event throughout the month, but I don’t know remains to be seen. I think it really depends on the founders who are joining and what their motivations are for joining and I think that’s something they’ll probably look at it. Certainly something I look at as far as culture fit and dedication to the calls into the community and I would imagine that Rob and his team are looking at something similar.

Eric Hornung: 01:05:41

So in a traditional vc raise, you generally raise about enough money to get you 18 months of runway. That’s like the guidance that I’ve read. I’ve seen, I’ve heard this funding gets you 12 months of runway and a traditional accelerator. Your goal would be after three months to raise that 18 months, so this gives you 12 months. Is the idea behind that or do you think the idea behind that is that at the end of those 12 months you should be having enough profit to kind of pay yourself and you don’t have to worry about that runway as much because you’re running this profitable business?

Jay Clouse: 01:06:16

I would say yes because I think what he’s doing is really taking his experience with drip and I’m sure he’s talked a lot of founders in a similar spot, but taking his experience and saying I had to bootstrap this and put this much money in to get to a point of sustainability and profitability and I think he is modeling after that type of trajectory to say we want to give these founders the amount of funding to get to the point of optionality where they can raise a fund. They don’t need to raise a fund.

Eric Hornung: 01:06:40

You just say raise a fund?

Jay Clouse: 01:06:42

Raise funding after that 12, 12 months.

Eric Hornung : 01:06:45

Great. Well this is a fun one and I hope to explore some more of the company’s funds that are operating in this ecosystem so we can learn more about the kind of bootstrapping movement. Jay, I know That you have been on the tropical mba podcast, which kind of focuses on location independent bootstrapping.

Jay Clouse: 01:07:01

Yep, that’s right. So guys, if you have any thoughts on this, obviously this is a innovative type of approach. You can tweet at us @upsidefm or email us, If you enjoy this episode, please leave a rating on itunes. It really helps us bring on high quality guest to the show.

Jay Clouse: 01:07:17

That’s all for this week. Thanks for listening. We’d love to hear your thoughts on today’s guest, so shoot us an email at, or find us on twitter @upsidefm. We’ll be back here next week at the same time talking to another founder and our quest to find upside outside of silicon valley. If you or someone you know would make a good guest for our show, please email us or find us on twitter and let us know and if you love our show, please leave us a review on itunes. That goes a long way in helping us spread the word and continue to help bring high quality guests to the show. Eric and I decided there were a couple of things we wanted to share with you at the end of the podcast, and so here we go, Eric Hornung and Jay Clouse, or the founding parties of the upside podcast. At the time of this recording, we do not own equity or other financial interest in the companies which appear on this show. All opinions expressed by podcast participants are solely their own opinions and do not reflect the opinions of duff and phelps llc and its affiliates unreal collective llc and its affiliates or any entity which employ us. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. We have not considered your specific financial situation nor provided any investment advice on this show. Thanks for listening and we’ll talk to you next week.

Rob Walling is a General Partner of TinySeed.

He has bootstrapped multiple startups to exit, most recently Drip. He runs MicroConf, co-hosts Startups for the Rest of Us, and has been advising, mentoring and investing in startups for more than a decade.


TinySeed is a year-long, remote accelerator designed for early-stage SaaS founders. It’s built by Rob and Einar, two serial entrepreneurs who saw a gap in the ability for non-unicorn startups to raise early-stage funding.

It was founded in 2018, and is taking applications for its first cohort until February 15, 2019.

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