📰 The Solo Founder Newsletter #95

Yossi loved the idea of an anonymous account because what he wanted to share with people were insights that other dealers and manufacturers would be angry at him for sharing.

The car market was like a black box for consumers before he showed up.

So he wanted to share transparent insights to help people understand the car dealership process better.

As for his account growth, I think there are a number of factors to take into account like:

The insanely valuable content he was sharing

Being able to share insights others wouldn’t dare to because his account was anonymous

But I think there was something else at play here: He was building relationships along the way.

While many other accounts post content and barely engage with people, Yossi took the exact opposite approach.

I haven’t been a founder very long but I think most founders would agree with me that one of the biggest double-edged swords of being a founder is that you need to be persistent and optimistic to succeed but that persistence and optimism can also cause you to be myopic and rigid. The hard part is reconciling those two things and identifying when you need to double down on persistence or when you need to step back and see the bigger picture.

I think what makes startups so hard is that for every case study that teaches you to do one thing, there is another case study that disproves it. Airbnb worked on the same idea for 2 years with pretty much no revenue before hitting PMF while Segment spent 18 months pivoting before hitting PMF. Why didn’t Airbnb pivot? And why did Segment? There are countless stories on both sides.

It’s easy to pivot when your thing isn’t working at all and it’s easy to stay the course when it is, but it’s those times in between when something is kind of working that it’s hard to decide what to do. If you’re a year into a startup (like we were) and seeing some growth but not seeing the growth that you think you should be seeing, being intellectually honest probably means telling yourself that things aren’t working and that something (big or small) needs to change.

But optimism and persistence tells you that you’re seeing some growth and maybe you’re being impatient and just need to put your down head and forge on. But are you then ignoring that gut feeling that is telling that something is off? Are you being intellectually honest with yourself? How do you reconcile those feelings? How do you know when something needs to fundamentally change? These are all of the questions that were running through my head that I was trying to answer. Unfortunately, I don’t think there is an easy way answer to these questions. The best I can do is an unsatisfying, “it depends”. But what I do know is that if you’re asking yourself these questions, like I was, then you owe to yourself, your team and your investors to investigate why you feel this way and not just ignore it. These feelings kicked off a period of deep and honest reflection and eventually led to us pivoting.

Raise prices, even if nobody’s buying

One of the best pieces of advice I received this year was from Cory Zue. He suggested that at $0.003 per request, my prices for Zestful were too low. At the time, Zestful had almost zero paid users. How could my prices be too low if nobody was buying?

Though Zestful had few real customers, it had many prospective customers. Every few weeks, a new company contacted me saying that they were interested in Zestful, but it was missing one tiny feature they absolutely needed. Desperate to win my first big client, I’d work feverishly to implement the functionality they wanted. A week later, I’d proudly deliver it to them.

“Oh, yeah,” they’d reply sheepishly. “That was for a project we decided not to pursue.”

It cost these companies nothing to ask for features, but it was extremely time-consuming for me to meet with them and implement their wishlist. I recognized what was happening but couldn’t figure out a way to stop it. Ignoring the request was an option, but what if they genuinely were prepared to spend thousands per month?

When I took Cory’s advice and raised prices, it changed the conversation in an unexpected way. At $0.003 per request, nobody tried to negotiate with me on price. When my rates jumped by 6.5x to $0.02 per request, everyone started asking about volume discounts. Then, when they claimed they’d buy after Zestful had their pet feature, I gave them this line:

Great! You can pre-pay for three months of service, and your billing cycle won’t start until that feature is available.

I’ve never been burned on a feature request since.

My prices are high enough that most customers have to spend a few hundred dollars each month to use Zestful, which discourages people from telling me about the all-important features I’d have to implement to earn their $5/month. Interestingly, the customers who ended up purchasing enterprise plans had no feature requests, and those deals closed in a matter of days.

Pursuing the right idea means rejecting the wrong ones

My first year as a founder, I was a puppy chasing any ball that happened to roll by. If one of my projects failed to achieve traction, I’d work on whatever idea was next in my mental queue. Building a “quick” prototype felt cheap and easy at a project’s outset, but it always took weeks of coding and subsequent months of work courting customers.

My friend David Toth taught me the value of idea screening. He pointed out that whatever idea I pursue determines large parts of my life for several months at the minimum, so it’s worth choosing carefully. Instead of bounding off after the first good idea he has, David generates ideas until he has a list of at least 10. He then evaluates that list carefully to choose which has the highest chance of success.

Reading Start Small, Stay Small (notes) and The Mom Test (notes) also influenced how I approach new businesses. Both books encourage founders to start with market research and build the product later. As a result, I was conservative about building anything and gave myself permission to bail if my investigation indicated an idea was no longer my best chance of success.

…

High-risk, high-reward Attacking one of these scalable channels is high risk but also high reward. Every startup has to make sure they are able to slot themselves into one of channels in order to scale their business, but in the meantime, how do you show enough traction to not run out of money?

This essay by Paul Graham gives us a clue, as he writes about Startups = Growth:

A good growth rate during YC is 5-7% a week. If you can hit 10% a week you’re doing exceptionally well. If you can only manage 1%, it’s a sign you haven’t yet figured out what you’re doing.

Another way to say this is, growth is measured through a percentage and so early on, small things can drive a high % growth when the base is small. When you’re starting, there’s a whole list of other tools you can use which don’t scale at all but are nevertheless low risk.

Here are some low-risk, unscalable ways to get users:

Getting your friends+family to use the product

Emailing/posting among your local community, whether that’s college or an alumni mailing list or whatever

Guest writing on niche blogs – you often see this with mommy blogs, etc.

Cold e-mailing potential users and influencers

Engaging with potential users over Twitter, Reddit, forums, and other communities

Contests and giveaways, partnering with a blogger/YouTuber or something Getting covered in niche press outlets, like the tech press … etc., etc.

All of the above require hustle, but are low-risk and fairly high-percentage. And when a contest can generate a few thousand signups, on a small base that’s not bad at all. The other added benefit is that these methods put you in direct/close contact with your users. So in the early phase, when you are still working on product/market fit, this can be an important way to learn if you have the right product.

However, none of these methods scale well, which is OK, if you know when you need to move on. Even getting covered in the mainstream press, like NYT level, maybe only garners a few hundred thousand signups max. Getting featured by Google or Apple is about the same thing. That’s better than nothing, of course, but it’s still far below what you need to get on a rocketship trajectory. For the rocketship, you’d need to perfect one of the 4 main channels I listed earlier.

So ultimately, how do you balance these? Let’s talk about the barbell strategy.