Back in 2012, I quit my comfortable job at Facebook to start a business. I had some cash in the bank and began what would become the most testing time of my life.
Before and during my time at Facebook I had started a number of businesses and “side projects” that went nowhere. But now was the time to burn the boats and have no exit, except success.
Foolishly, I decided to start a business in an area I had no experience, expertise or contacts.
[Side Note: Don’t Do This!]
I also didn’t know how to code. I was truly naive. Thankfully, I got some guidance from an entrepreneurship course I found online. It was one of those online courses you’d be embarrassed to tell your friends about. In fact, I waited until my girlfriend was out of the apartment before I put down my credit card and paid $6,000.
The advice was simple, find a niche, stick to B2B SaaS, talk to people. If you have a problem, ask for help in the forum. The hardest part of all of this was speaking to people.
Finding a Niche
The first step was finding a niche. I decided on contacting roofers. My thinking was that, there would be less competition to sell them software and there were thousands of roofers. I googled “roofers”. Found 20 companies and cold emailed them telling them I was building a software product to solve their problems. Can we please have a phone call.
The email worked-ish. 3 roofers replied saying “yes”, they’d love to speak to me, but whenever I called them, they were “onsite” and couldn’t talk. From then on, I learned an important first lesson; don’t build products for people it is hard to contact.
Then I tried my second niche. Real estate agents who manage multi-family apartment blocks. Again, I found 20 companies on Google, emailed them and 5 replied. Unfortunately, they told me they had zero problems except for rent collection. They asked if I could create some software that made people “pay their rent on time”. I had no idea where to get started and quickly gave up on this niche.
[Side Note: Today, I am sure there is plenty of rent collection software, but I had no idea on how to spot an opportunity, so this one passed me by. Another important lesson: There is a skill called “recognizing opportunity”.]
I had now been looking for a niche for about four weeks, with no luck. My friends in the entrepreneurship course were also mostly struggling. Many started to give up. I continued because I had given myself 18 months financial runway, would think less of myself if I gave up so easily and I had no other job options.
The next niche I contacted would be the start of my incredible journey. That niche was financial advisors.
This time I emailed 30 financial advisors and 10 agreed to talk to me. I had optimized my cold email script so it was easy to get people on the phone. At the same time, I worked on improving my call performance. I started devouring books on sales, writing call scripts and doing mock phone calls. I was tired of struggling. This had to work!
One financial advisor in particular (Thank you Pete Matthew!) was instrumental in getting me started. He told me about a problem assessing the amount of risk investors were willing to take with their investments. After the 2008 financial crisis, it was now a regulatory requirement to document a client’s risk tolerance in a certain fashion. Perhaps some sort of online questionnaire could help. Amazingly 6 out of 10 financial advisors had the same problem. BINGO! I had my idea.
Validating The Idea and Building The Product
Next step was validating the idea and building the product. I could not afford to build something people didn’t want, so I asked my 6 financial advisors what features they wanted in a solution. I then mocked up the product in Powerpoint. Yes, Powerpoint! I showed them the product and with extreme fear and nervousness, I asked them for a down payment of £300 in return for a future discount. 5 said yes and I was off to the races!
Now I had some customers lined up my confidence soared.
[Side Note: I’ve noticed in my businesses that true confidence only comes from solving customers’ problems and making sales. Other achievements don’t stick.]
All I had to do was build the product and then I would be rich! Not quite.
I began my search for a software developer since I had no idea how to code. I checked out Elance but I was worried about communication issues with an outsourced team in India. I then contacted some developers on Ruby on Rails forums, but they were not very interested in working with another wannabe entrepreneur.
Eventually, I found a fantastic developer (who I co-founded my next company with) on Hacker News. When searching for a developer, I always looked for quality and was happy to pay “full-price”. However, I focused my effort on freelance developers rather than agencies. I wanted someone focused and dependent on the project’s success to earn their living at least for some months. The final step was testing the developer. I cold emailed Ruben Gamez, asked him to assess my developer’s sample code and he happily agreed. Ruben approved and we started building immediately. Thanks Ruben!
Building the website took three months and $18,000. In the meantime, I lined up customers and continued to “pre-sell”. The product launched with about 10 customers and $1,000 in monthly recurring revenue.
Struggling To Grow
Early on in my journey, I wrote a weekly email to friends and family to keep them updated on my progress. The point was to keep me accountable and avoid lying to myself. Here are extracts from those emails as my growth started to sputter…
15th March 2013 - “I love marketing and I love sales despite the fact it can bring me to the point of depression at times. My sales effort last week produced mixed results. I got a high percentage of opens on my emails (47%) and a lot of clicks through to my site (15%) but nobody requested more information after sending 82 emails. I got replies but most were just not in the market.”
3rd May 2013 – “Obviously, something isn't quite working somewhere. Since I launched 4 weeks ago there have been 11 free trials and I would say only 3 remain seriously interested in the product. I am working backwards through my funnel to "fix" the issue.”
This pretty much continued through the spring and summer. I flailed around with SEO marketing, online ads and attempted joint ventures but nothing was working. After 8 months working on my project (and 4 months since launch), I only had 12 customers. Then came the tears…
One night my girlfriend (now wife) came home to find me slumped on the floor in the corner of our apartment crying. After 8 months working on this damn business, I was failing. I personally spent about $40,000 on software development and my living expenses with very little to show for it.
My girlfriend reminded me it was not the end of the world, I had only been working on it for less than a year. I had specifically given myself 18 months runway, so I should continue. This helped me get back up, but the biggest help ended up being the few remaining entrepreneurs on my online course.
One member, in particular, had also been struggling, with about 10 customers, but pushed me to continue. If it wasn’t for his words of encouragement it’s likely I would have quit. Looking back the $6,000 expense for the online course was peanuts compared to the value I got from his words of encouragement. It’s amazing what a supportive network can do.
[Side Note: If you’re an entrepreneur, get around other entrepreneurs. Only they can fully understand your struggle.]
My Miracle: Getting Unstuck
My miracle started by going on holiday and getting away from the business. After two weeks away, I did a thorough analysis of all my past customer conversations. I realized the problem. I had only been selling my product in the U.K. Most financial advisors in the U.K. were restricted on what software they could buy for compliance reasons. But those reasons were unclear for outsiders. Thus, my market size ended up being considerably smaller than I originally estimated. Basic research informed me there were about 8,000 financial advisors in the U.K. but this compliance quirk meant only 1,000 could easily buy my product. As a result, my business was unviable.
[Side Note: The lesson here is not about market size. It’s about understanding your customer. My business was failing because I didn’t understand my customers.]
At this point I did what all British businessmen do when they can’t sell enough at home; go to America!
I feverishly started emailing and calling American financial advisors. To my excitement, they had the same problem as British financial advisors but with less compliance friction. To make sure I didn’t misunderstand the opportunity I pre-sold 8 customers before changing a line of code in my app. Once the problem-solution fit was confirmed, I rebuilt my product for the U.S. market and launched immediately.
I marketed the product just like I did in the U.K. Cold email, webinars and referrals but now suddenly it clicked. I had found a customer base that had the problem I was solving AND could easily buy. Eureka!
One year after launching the product, I had 41 customers and $4,162 in monthly recurring revenue.
Eventually, I would go on to acquire hundreds of customers and sell the business, but that is a story for another day.
[The Gut-Wrenching 1st Year of My B2B SaaS App]
Key Lessons From The 1st Year Bootstrapping A B2B SaaS App
- It will be harder and longer than you think, have 18-24 months runway to give it a proper shot.
- All the “good stuff” comes from talking to customers and reflecting.
- It helps to have no other options but the success of your app.
- Tell people about your journey and join some entrepreneurial communities for support and encouragement.
Want more information or have a question?
- Follow me on Twitter - @johnndege