FounderQuest
FounderQuest
Should You Target Pieces Of Pie Or Whole Enchiladas?
Show Notes:
Justin Jackson
Transistor.fm
Mitch HedbergRightMessageProduct Journey podcast Kevin Kelly - 1,000 True FansJohn Gruber and Merlin Mann talk at SXSWJawaAdam WathanPeldi Guilizzoni Tyler TringasSuperhumanMicroConfJason Fried
Full Transcript:
Justin: You just wait for someone to say something funny?
Josh: Yep. We just got to wait. We don't start until someone says something funny.
Justin: That's so much pressure. That reminds me of the old Mitch Hedberg bit. Do you remember that bit?
Josh: No, I don't.
Justin: He's like, "My job is to sit around and wait and think up things that are funny, but sometimes I'm too far away from a pen. So then I just convince myself that what I thought up wasn't funny."
Justin: Mitch Hedberg's my spirit animal. If you haven't... I think he's better on audio, but yeah, just look up some of his old stuff. It's just some comedians are... they'll get into a bit and the bit has stages, and they'll sometimes hit the same thing over and over again, and it'll be 30 minutes. Like Chris Rock, "Barack Obama." He'll just keep saying the same thing over and over again. But Mitch Hedberg is like fastball after fastball. It's just all one-liners. Yeah, he's so funny.
Josh: Nice. We'll have to find some links for the show notes.
Justin: Yeah. Definitely worth checking out.
Josh: And speaking of, for our listeners, I was going to say if you think that Starr sounds a lot like Justin Jackson today, it's because Starr, unfortunately, couldn't make it. Her daughter's sick, and so she's home playing caretaker. But luckily Justin was available, and so we're going to... I guess this is the first guest episode of-
Justin: Is this the first time ever?
Ben: You're our first guest host.
Josh: You're the first ever guest.
Justin: I should've worn my Honeybadgers shirt today.
Ben: Totally.
Josh: Yeah.
Justin: I love that shirt. I don't even know what I was thinking.
Josh: To be fair, you should always wear your Honeybadgers shirt. But especially on FounderQuest.
Ben: We should send you six more so you can wear them every day.
Justin: Yeah, just so I wear them every single day. I've got the Godzilla one. It's so good. Is there multiple shirts, or is that the only one you guys have right now?
Josh: There's two. Godzilla's the latest, and then the other one was like a badger ripping out of the chest of the shirt. We actually have a couple other designs that we should probably get going, get to the printers.
Justin: I think folks could learn a lot from you just in terms of swag. You definitely have the best swag. I think you set the high bar, and everyone else is just trying to catch up to you.
Josh: Well, thanks. We love our swag.
Ben: It's been a lot of fun.
Josh: It's fun. Yeah. And we like to have fun.
Justin: My least favorite thing about going to conferences... I'm going to get into trouble for this. My least favorite thing about going to conferences is somebody comes up to me with a shirt that they made for their startup, and they're like, "Hey, take a shirt. What size are you?" I'm looking at the shirt, I'm going, "I'm never going to wear that." I'm not going to wear your shirt that's for... See, I can't even talk about it because some people will know.
Josh: Hypothetical company incorporated.
Ben: They make the great painting shirts.
Justin: It's almost like people forget. They do all of this, well hopefully, they do all of this thinking about building something people want with their software product, and then they make a shirt that just like, their dumb logo or something with the .com in it or the .biz. And then-
Josh: It's an afterthought.
Justin: Although, actually, I will wear a .biz shirt. If you have a .biz domain, I will wear that shirt.
Ben: How about a .ca shirt? Would you wear a .ca shirt?
Josh: A .ca?
Justin: I will definitely wear a .ca shirt. That's fair.
Josh: You got to rep the CA.
Justin: I've had a few Americans go, "What the hell is this .ca?" I'm like, "It's Canadian. It's .ca."
Josh: .ca. That's good.
Justin: Because the C in French is ca-
Josh: Yeah. Yes. I caught that.
Josh: We're a little bit cultured here.
Ben: We are in the Pacific Northwest. We're close enough, right?
Josh: Totally. Yeah. Well, if you... I know you're a Laravel guy for the most part, but if you ever want to explore the Rails world, RailsConf will be here in Portland this year.
Justin: Oh, sweet.
Josh: So you could always come hang with some Rails people.
Justin: Well, our Transistor's built in Rails, so when I-
Josh: Yeah, well there you go.
Justin: -when I do hop in, much to John's chagrin, it's always in Rails.
Josh: Nice.
Justin: But the nice thing for someone like me is that once you understand... because almost always all I'm doing is editing views. So as long as you know where to find the views, you're fine. Whether it's Laravel or Rails or anything that uses that MVC way of organizing things.
Josh: Yeah. They all have similar architectures.
Justin: Yeah. Yeah, I dig it. Yeah, we should totally go to Portland. That's actually John and I kind of... that's our meeting point. So we've seen each other in Portland, I think, almost every year since 2014.
Josh: Nice. Where's John located again? You might've said-
Justin: He's in Chicago.
Josh: He's in Chicago. Oh, that's right. I think I knew that. Cool.
Justin: Which does work a little bit... I'm still trying to figure out, because I live in a really small city, how big of a city do you need to live in? For us it almost feels like we needed at least one founder to be in a big center, and I don't know exactly why I feel that way. There's just some serendipity of being in a big city. People are always flying in. No one ever flies into Vernon, British Columbia, unless they're going skiing.
Josh: But yeah, you had been in Seattle the longest, and you kind of had all the startup connections, I recall.
Ben: Yeah, that definitely helps.
Josh: You were the city guy.
Ben: Yeah, even though I live on the east side of the area. For Seattle people, I'm considered to be out in the boonies. I'm a grand total of 13 miles away from downtown.
Josh: Kirkland.
Ben: It's kind of funny how regional it gets. Yeah, I think it does help to have someone in one of those bigger centers, because yeah, you're at the networking stuff, if that's your bag, and you're meeting those entrepreneurs. You're having, let's go to coffee and talk about X, Y, or Z. I think it's much easier when you're in a place like Seattle or Chicago.
Justin: Yeah. I might move someday. But today is not the day.
Ben: If you move south, you come down here, you can still get the all dressed chips in the grocery store.
Justin: Oh, see. See. Okay. This is the sales process you need to...
Josh: You've got Transistor, sounds like, going pretty well now though, so maybe you won't have to move for a while, because you know...
Justin: Yeah, I mean-
Josh: You're doing the sustainable long-term growth thing.
Justin: That's right. And I think if-
Josh: Kind of pro.
Justin: -if anything, I think John would move to Canada.
Josh: Yeah. Right.
Justin: So we'd have to figure that out.
Josh: I mean, you don't need Chicago anymore now that you've got it going.
Justin: Everything's going now. Yeah, we got to go somewhere else.
Josh: Yeah. Well, I'm super stoked that you're like the first guest on FounderQuest, considering that we're big fans of Transistor, and of course we use Transistor.fm to host FounderQuest and have since the beginning.
Ben: It's been fantastic.
Justin: Yeah, you guys do it right. Everything about your show, like that voiceover guy that you got and the music and the artwork. It's actually interesting that's in your culture. I almost have a tendency sometimes to be like, okay, well, let's just get this going and do bare minimum. And it seems you folks have the opposite inclination, which is, no, let's get some really nice artwork made. Because it's all custom drawn, right?
Josh: Yeah. We use the artist that does our shirts, we used for the FounderQuest art.
Justin: Yeah, and you did a bunch of customizations on your podcast website, and you got that voiceover guy. It really does make a difference for a first impression. And people always wonder how can they make their... Well, they're always wondering how they can stand out with their podcast, or their product, or their blog or whatever, and some of it is just like the noise is always kind of just thrown together. So there's a blog post that's just kind of thrown together, or a podcast that's just kind of thrown together. But very few people just do the extra steps of we're going to make the artwork look really great, and we're going to have this funny voiceover guy do our intros and outros. It really does help.
Josh: Yeah. A good friend of ours, Alan Branch, back in the day gave us, I think it was actually Ben and I, some advice on marketing, specifically for us, because I was asking him... I wanted to learn marketing, but we're really small and we're trying to stay small. I was like, "How should we do this?" And he's like, "Really, the only thing you have going for you is who you are, your personality and your brand." Basically, that's your competitive advantage for the most part. That's how you can really stand out is to be a unique individual company. That's why we've tried to double down on that, the whole badger thing. We put that badger illustration everywhere. We try to do interesting artwork, interesting swag.
Josh: And we didn't always do that. To be fair, our first shirt was just a logo shirt on a Gildan. It's like the shittiest shirt. It's like belly shirt on me, because my shoulders are big, and it doesn't fit at all.
Ben: But it was orange. It was orange. It had at least that.
Josh: Yes. It was bright orange and it worked in the beginning, because even that stood out. No one is walking around in a bright orange like construction shirt.
Ben: Exactly.
Justin: That's the kind of risk taking I want to see is somebody handing me a midriff shirt.
Josh: Oh, yeah. It stood out because of that too.
Justin: Just say, "Yeah, you got to wear this." I'd be like, okay. I like it.
Ben: Yeah, it's definitely been intentional. We've definitely tried to really enjoy... If you pick a name like Honeybadger, you just got to run with it. That was the point that Alan made, and he helped us really liberate that in ourselves. And the thing that's been really cool that's been our experience is that it really resonates with the customers that we have, and the customers that we want to have. If someone doesn't really latch on to the whole Honeybadger idea, if they're repulsed by that or they find it unprofessional or whatever, it's like, okay, well you're probably not the best customer for us.
Justin: Yeah. But wait a second. How many customer service messages are you getting that say, "I'm repulsed by this"?
Ben: Last count I think it was zero.
Josh: We should have a survey or something in app, like "Are you repulsed by this?" We got the Right Message thing on the website. We could make that a question.
Justin: I think most people would say that's the wrong customer.
Ben: But we do have a lot of people saying, "It really resonated with me. I really like what you guys are doing. I want to support you." That's been a lot of fun.
Justin: Especially for, I'm imagining that a lot of folks are... the purchase cycle starts with the developer who's saying I want to use this. They're advocating for you. So I think having some fun in your messaging makes sense, because that's what's going to stand out for a developer who's working on stuff. There's a lot of boring companies out there, so if you're interesting at all, maybe they advocate for you.
Josh: Exactly. Yeah.
Ben: Right.
Josh: Yeah, we've specifically chosen to... That really is... A developer is our, is the person we're always talking to versus... And that's something that does set us apart from our competitors, because they're very into the enterprise, they have a lot of VC funding, and they've got enterprise salespeople. That's where all their money is. That's what they're going after, so they don't have the ability to speak to developers quite like we do.
Justin: Yeah, I've got questions about that. Do you have specifically things you want to talk about?
Josh: Well, yeah. So, no, this is great. This is really great, because I think this actually ties into why I actually asked you to come talk to us today, because I caught... I forget... I think the name of the episode on Build Your SaaS was "should you build an audience first", but it was like you had an interview with... What was the other name of the podcast that you were interviewed on? I'm blanking out right now.
Justin: Can you build an audience first? Oh, this was... Oh, yeah, it was on the Product Journey podcast.
Josh: Product Journey. Yeah. So I caught that episode. It was really interesting to me. I know you've talked a lot about the whole the myth of the niche market a lot. I think I missed some of that conversation, so forgive me if we're rehashing old Twitter debates or something. But I thought that was really interesting, especially considering with Honeybadger we kind of chose a niche early on, which was obviously within web developers. We launched only for Rails. I think that there's some nuance there. I know that your position is kind of like you think it could be bad advice potentially to choose a niche when you're just starting out. I think there's probably some nuance in there, but I just thought we could maybe get into that a little bit, and kind of hash it out.
Justin: Yeah. My favorite topic. People getting sick of it. I think, first of all, the challenge in saying anything in public, or even just trying to figure things out in public is that people might take my line of thinking from three months ago, and then hold onto that forever. And I've tried to say this over and over again, on Twitter especially. I treat Twitter like a comedian treats testing out material at a local club. I'm just going there and I'm testing things out, and definitely some of what I want is people to respond back with challenges to those thoughts. And it's like now there's almost this expectation that every thought you ever express publicly has to be fully formed and rock solid. You have to be willing to defend it till the day you die, and it's maddening to me.
Justin: So the flip side is something that annoys me even more, which is I'll have thought about this and hashed it out in public forever, and then I'll do this well researched article that took me weeks to think about and years to process, and I'll finally put it all down on paper and it's sourced. And then somebody will just say, "Well, that's dumb." Or, "That's wrong." Okay, well. At least give me something. Write a fully formed piece in rebuttal instead of just saying, "Well, that's dumb, or you're just after attention." Or something like... It's silly.
Josh: Yeah, that's super frustrating.
Justin: I think there is nuance to this. Part of it is semantics. What do you consider to be a niche? I'll tell you what I've seen happen that I think people should be wary of, which is, for them a niche means a small, tiny, little group of people where there isn't a lot of other competitors. So they'll say, "Well, no one is competing in this little market here, so that must mean it's a good thing to go after, because I have no competition." Or even Kevin Kelly's idea of 1000 true fans. To me, when you really think about it, because his line of reasoning in that blog post... If you haven't read it, it's a famous internet essay... is that there are billions of people on the planet and therefore any kind of category or interest group you can think of, you can find 1000 true fans, which he defines as 1000 people who can support the work you do financially.
Josh: Right.
Justin: To me, that's just a silly line of thinking. One, because what kind of math are we using here? Are we using every man, woman, and child on the planet? Because that cuts down your billions. Are these interest groups irrespective of country and culture and economic situation? There's all sorts of ways you can slice this. In practice, and sorry I'll just go to the side here. There's also a famous John Gruber and Merlin Mann talk at South by Southwest where they say, "Don't create a site about Star Wars. Create a site about that one Jawa in that one scene." To which, I've always gone like, "Are you crazy?" Nobody cares about that one Jawa. Sure, create a site about that, but it's not like there's all this pent up demand for that one scene with that one Jawa. That's just ridiculous.
Josh: A few people care about it maybe, and you might have a lot in common with them, but are they going to keep you afloat for-
Justin: That's right. Are they going to support a business? And this is the challenge, is that obviously there's multiple vectors to this, and this is just kind of ground zero, which is are you focused on a group of people where there's enough of them, enough purchase frequency, enough purchase price, and enough actual activity going on in this market that you think you could have a business? One realization I've had lately that kind of messes up this conversation about niche is people will say, "Well we focused on Ruby on Rails developers and that's a niche, so therefore..." One thing I've realized as I've thought about this a lot is that web developers or even just programmers in general is the most uncharacteristic market there is in the world. There's no other market like developers, and I mean this in a good way, in that... The joke used to be that programmers don't pay for things. That is such bullshit. Programmers are some of the most highly-
Josh: They pay for everything.
Justin: Highly paid people on the planet. They are always buying new tools. They are always paying for their education. They are highly incentivized to be better at what they do. All of their political capital in an organization is about what they suggest. Programmers as an example of how niche markets can work, I think, is uncharacteristic. You're not going to get that same benefit with shepherds. There's no market like programmers. It's just very uncharacteristic right now, and by the way, if artificial intelligence really does take over, let's say in 25 years, takes over most programming, that will become a bad market, because there'll be way less people who...
Justin: It's just like we've seen these waves before. Anyway, I'll stop talking.
Josh: I think programmers, they won't pay for dumb things usually. But when it comes to something, at least me personally, if it comes to something that will demonstrably increase my productivity or my ability to do what I do better, I will buy it in a heartbeat. It's a no-brainer to me. I don't know. Maybe that's part of developers are always optimizing, looking for opportunities to optimize in the first place, but I don't know.
Justin: Yeah, and there's some things that programmers, like any group, won't pay for. Certainly, you could do far worse than choosing a technical audience for your product or service or educational product or whatever. It's a good market. So I think some of the challenge is, especially for new entrepreneurs, is we set up these examples of, well, Adam Wathan released this course and did amazing with it, and so you can take this to any group in the world and have similar results, because Adam chose a niche of Laravel developers that care about test driven development. You have to take every characteristic of that market. You can't just say, well, it's the fact that it is somewhat... That you're positioning it for this... Like the contours-
Josh: To be fair, most Laravel developers care about test driven development to some extent. There's not ever... I assume there's not a huge group of Laravel developers that just despise test driven development and would never buy a course about test driven development.
Justin: Yes, but I think the counterpoint is that in other adjacent groups there may be something similar where people care about it but don't have the same incentives to pay for it. Going back to my shepherd example, this is going to get bad, but maybe there's a proper way to shear your sheep or I don't know, but they might not have the same incentives or the same ability to pay or the same economics that rule their lives. So there's tons of nuance to this. In the original post that I posted, it was kind of attacking this idea that because the internet is huge and there are billions of people, any niche will do. That's not good advice, and just saying... And even there's these truisms that get thrown around that I just do not find helpful at all, like the riches is in the niches.
Josh: I hadn't heard that one, but that's amazing.
Ben: I think some of the nuance there is maybe some confusion about making your product versus marketing your product. If you make your product that only shepherds can use it, let's just roll with those shepherds, obviously that's a very limited market. But if you made a product, let's say like scissors or shears, and oh, by the way, shepherds could use these shears. Maybe camel herders as well. Maybe your initial marketing is just the shepherds with the idea that I'm going to make some noise in this smaller group, like Seth will tell us. Market to people like us who do things like this. You get that small audience where you can actually make some noise, and then you can take it to the next adjacent audience and the next one. Even though our marketing for Honeybadger started out with the Rails people and we tailor the product very much for Rails people in the early days, it wasn't like it was only applicable to Rails developers.
Ben: Any web developer, any software developer, which is a very big market, could use it. So there's a difference between building your product for a very small group of people, and depending on 1000 life fans versus just marketing to that group initially.
Justin: Yeah.
Josh: So this is kind of, this is like my secret agenda all along. Part of the nuance I think in this discussion might be positioning versus actual market. I don't know. I feel like that can get kind of confusing a little bit, because if we're talking about... Like Ben said, shepherds is a defined... there's only X numbers of shepherds. But there's tons of people who use scissors.
Justin: Yes. Again, I could be wrong. I'm just some idiot on the internet. What do I know? But in my experience so much of a business's success actually gets decided in the first 1% of the company, which is when you decide who is this for and what is this for? So in my early 20s, I started a skateboard and snowboard shop, and immediately I am now in the skateboard and snowboard market. And there are characteristics about that market that define and cap how well you're going to do. It defines your margins, it defines your customers, it defines who your competitors are. It defines everything. It defines how you're going to ride the waves of the economy, and I think... And I got my degree in business. These are things that never got taught to me, and I still think these are things that people just brush over, which is, "I'm going to choose this group because I like them, or I'm going to choose this group because of whatever metric we use."
Justin: To me, I say you should choose that group because there's evidence that there's a lot of economic activity going on in there, and you feel reasonably confident that you could capture some of that economic activity. That's the process that you have to think about. That 1% or 10% is going to define everything else that comes after that. It's kind of like, you mentioned positioning. I think it's kind of like skiing. So if you are on a flat slope, you can position your skis however you want. You can point them right, you can point them left, you can do a pizza. You can do whatever you want. You can go backwards. You're not going to move, because you're flat. If you have a steep slope, you're going to move a lot faster, and then positioning matters quite a bit, because that's how you're attacking the slope.
Justin: I think business is like that. Now I'm kind of glad that I don't have a slope as steep as Peldi did when he started Balsamiq. That sounded crazy. Too much slope, too steep, going too fast. But I can say Transistor's slope is a lot better than things I've tried in the past, and wow, do things get easier when you're... If you've ever taught somebody how to ski, if they're going too slow, it's actually harder. You need some sort of slope there to even be like, "Well, okay, now you're going to lean this way."
Josh: So you can gradually get into it as you learn. Yeah.
Justin: I just feel like not enough people are talking about that. What slope are you choosing? Is there any evidence that there is a slope there that you could actually ride? Because all of the stuff we add later, which is positioning, which is like tools, that's like your ski gear and all that stuff, all of that matters, but it only matters once you're moving. In the beginning, it seems like the most important decision you make is what market am I going to target?
Ben: I think that's excellent. I 100% agree. I have a friend of mine who, as an entrepreneur, whenever he's looking for ideas, he's always looking for is there a marketplace where people are spending money on this thing already? If there isn't then I'm not interested, because I don't have the resources to make a market.
Justin: Yes.
Ben: But I do have the resources to carve out a segment of an existing market.
Justin: Yeah. Exactly. I'm just digging into this. There's probably smarter people than me that know about this, but I'm really interested in how markets get created, because so far I've just focused on is the slope there or is it not? But then there's this also interesting thing of what creates those slopes in the first place? I've used the surfing analogy as well. We can't just be winter specific here. What creates those waves that you can then paddle out to and then try to ride? I think, from what I can tell, as I investigate the big waves like the internet, automobiles, kind of things people often bring up to me when they're like, "Yeah, but what about the light bulb?" A lot of those things are actually the result of government and academic investment.
Justin: So the internet is nothing without the U.S. military and is nothing without millions and maybe billions of dollars in research grants. The internet is a huge wave, but it wasn't an entrepreneur that created that wave. Henry Ford did not create the automobile wave. What created the automobile wave is a bunch of things, but maybe the U.S. Interstate Highway Act where the government funded 90% of the cost of construction had something to do with Henry Ford having this big wave to ride. I think there's this capitalist idea that it's like, "No, it's us entrepreneurs that are creating all.." I don't think entrepreneurs in most case create the demand. I think we find demand.
Josh: You're saying we're kind of riding larger economic trends, basically.
Justin: That's right. I think the waves get created by things bigger than us, and maybe once you get to scale, maybe at Apple scale or Amazon scale, but that's my other point. We're not even close to that.
Josh: Yeah, it's pretty crazy how different things are for small business. We're small businesses, basically.
Justin: And the difference between a business at our size... So Amazon's revenue was $70 billion in 2019. So I'm just going to put... I think Transistor's annual revenue right now is around $500,000. What's 500,000 divided by a billion?
Ben: It's like our annual revenue is Amazon's toilet paper budget for the year.
Justin: Yes. I had that thought. I visited the Spotify headquarters in New York, and I was like waiting... First of all, that's crazy, like they have a security desk downstairs. I'm just this Canadian from the sticks, and I'm like, "What the hell?" Go up this elevator, and then there's another waiting room where you sign in and wait for the people you're going to talk to. It has a coffee bar and it overlooks the New York harbor. My eyes are just like, "What the heck?" And then I went to the bathroom, and it's like they have all these bathrooms. And they have all of these startup amenities like mouthwash and everything. And I was looking around and thinking, "How much does it cost to stock these bathrooms every month? It's probably just as much as Transistor was making."
Josh: Yeah.
Justin: I think that's... It's interesting to think about. Yeah, so the point being... Oh, my God. I just did 500,000... Oh, wait, I did 70 billion divided by 500,000, right? Is that what, yeah.
Josh: Yeah, I think so.
Justin: Divided by 500,000. Amazon's annual revenue is 140,000 times our annual revenue. The scale of these companies is crazy, and so the idea that us little bootstrappers would take any advice from Jeff Bezos, is like why are you even... Don't read his book. Don't ever quote him. Why are we quoting... I quote Steve Jobs all the time, but Steve Jobs, he's in a different universe. He's not even on the same planet.
Josh: Yeah, and there are people who start businesses that aspire to that, that are trying to build the next Amazon, but then there's people... I don't think that's... We are not trying to build the next Amazon, and a lot of us in the bootstrapping world are not.
Justin: And again, I'm still not convinced, as far as I can tell, those companies are still riding waves at their scale as well.
Josh: Right.
Justin: Maybe they can create some demand, but even the iPhone, which people always hold up as this super, this big innovation, I mean, there was lots of things in the long line leading up to the iPhone. There are many things. And there's also this idea that we're always building on top of something else that you can't just build demand off of nothing.
Josh: Right. Well, a lot of the demand for the problems that the iPhone eventually solved weren't possible until the iPhone existed too. It ended up doing a lot of things that they didn't even foresee when they created it.
Justin: Yeah. Yeah, exactly. Some of that just happens as things get into motion. But I mean, I had apps on my PalmPilot. I had a word processor that I could download off a app store on my PalmPilot when I was going to college in the early 2000s. So these ideas were already in motion. They build on that momentum and it just keeps going. I think for folks that are building... And I guess now the challenge for Honeybadger and for Transistor is... I also have this theory that there are natural limits to every market, meaning there are walls or contours. So you kind of grow to whatever the limits of the market are, and then you stop and then you grow slowly. Have you guys experienced that as well?
Ben: Yep.
Josh: We have, yeah. I was going to ask, and this probably is a lead into that, like when you talk about the slope and you might be going in a direction skiing down this slope, but you have the ability to change directions. For us, we started out, we only supported Rails and Rails developers were our market, but we eventually did reach limits to that where we weren't growing as fast as we wanted to grow. We had to go and look for how do we broaden the market that we can serve basically. And because our broader market was still web developers and we do something that is still general to all of them, of course we could go add support for Laravel, or go into numerous markets that existed within this large market that were all open to us.
Josh: I think where I still... I want to say I still... Like the niche advise holds up is that early on, I think it was a good idea for us to launch for Rails developers. It was who we are. We know them intrinsically. There's nuance in every development community, so you can't sell the same thing in the same way to everyone. And like you said, we probably didn't even have the ability to launch something that was going to appeal to every single type of developer out there, and I don't even know if that's even possible. Even now, there's always going to be... there's going to be a development group that just doesn't get it.
Justin: Yes, and I mean, this is another... So I agree with you, by the way. I like Tyler Tringas's definition of niche after we've argued about this a lot, he says when he uses the word niche, he uses it in the ecological sense, meaning roughly sufficiently specialized to the point of acquiring a comparative advantage, rather than simply meaning small.
Josh: Nice. Okay. Yeah.
Justin: I think there's something about that that can be helpful. Again, we got to be careful, because it really depends on what you're trying to do, in that in some cases maybe you do get started better if you focus on this specialized group and it gives you comparative advantage. For Transistor, the opposite happened, is we started saying, "Okay, we got to specialize. We got to say this is who this is for." And I was getting tons of DMs from paying customers that say, "By the way, that messaging on your home page where you say you're just for businesses kind of threw me off. I almost didn't sign up." Now that we have about 2000 customers, I can see, okay, wow. We were really off.
Justin: Yes, we have businesses, but really, Transistor is much more aligned around the job to be done, which is, I just want somewhere to host my podcast. Podcast hosting, that's what I'm searching. I'm not searching podcast hosting for... And this is another, I think, nuance about the software development market, is that, yeah, often you are looking for error monitoring for Rails apps. But there are some markets where you're just looking for engagement rings. That's all I care about. I don't want engagement rings for Canadians. I don't want engagement rings for people who are 5'8. I'm just looking for engagement rings. I'm sure there's exceptions to that, but I'm just saying in the mass... if you really want to target the market, sometimes adding on this qualifier can be a disadvantage.
Justin: But I do think that for some products, or maybe even all products, I don't know, this is where you have to know the group targeting. Sometimes there's an advantage to really narrowing your focus and saying this is the specialized group of people like us that we're going to focus on. There are other advantages too. It's not like that's the only one that exists. Again, there's so many different vectors to business, and-
Josh: That's the thing. We only did this one way, so we only have experience of how it worked out for us. I'm not married to this idea at all. I don't know what it would've been like if we had targeted the entire market and still been appealing to Rails developers, but just because I don't have that experience.
Ben: I think, too, you have to consider the maturity of the market, right? Because if you launched a HR tool today, a tool for recruiters, there are gazillions of recruiting tools out there right now. It's going to be hard to grab a significant portion of that market without doing something pretty remarkable. But if you're launching a podcast hosting platform in 2019 when podcasting is on the rise in a big way, and the market is relatively new, it's easier to capture a broader segment of that market with a broad message. You don't have to say it's just for shepherds. You can say it's for everyone podcasting, because it's growing so quickly. I think that's definitely a consideration as well.
Justin: Yeah, and also, remember, some of those big mature markets, all markets go in cycles. So some of those big, mature, competitive markets, all of the players are super old and crusty, and all it takes is a newcomer to come in. I mean, look at Superhuman. To me, that is ridiculous that someone comes in with a new email client in 2018 or whenever they came out. You can stand out in some of those markets. The common advice is like, "Oh, no. Don't go into those markets. Microsoft's got it all wrapped up." Maybe you shouldn't, like for example, I think project management, that market is very difficult right now. Lots of big players who are quite entrenched. The market itself is difficult you have to convince a whole team to buy, as opposed to just one person.
Josh: And literally everyone's building one, too. I've built a project management system. Most of my friends have.
Justin: Yeah. They're very opinionated, people-
Josh: They're all different.
Justin: Yeah. So you've got to do some research. I've had some podcasts where people are like, "Well, give me an example of another good market you should pursue." It's not that easy. If it was easy, I would just be betting on the stock market all the time. It's difficult, and so much of it has to do with your entire journey, what brought you here today, and what position you are, and what you can see from your vantage point. I've been podcasting since 2012, and I could see a lot of things that a lot of other people maybe couldn't see, and that helped. There's other things that happened there too. I built up a bunch of connections. There's a bunch of people who knew me. There's a bunch of people who I knew. There's all of these kind of characteristics that you bring to the slope, and maybe I was geared up better than some other folks.
Justin: Because that's the other kind of pushback I get is, well, it can't just be the market. Obviously, something else, there's other things that matter. I'm like, of course. Let's build a foundation here. Okay, first you choose a slope. Okay, and then you show up in jeans and T-shirt. Okay, that's not going to work here. You're going to need a ski outfit. Okay, go back and get a ski outfit, and then you come back and you've got little snow blades. I'm like, no. That's not going to work either. We're skiing powder today. Go back again. And if you've been skiing since you were three and you show up that day, and it's a super steep slope, and someone else shows up and they've only been skiing for two days, yeah, you're going to kick their ass. That is how it works, right? And that's how business works.
Justin: So yes, the slope matters, but after that... There's also this... We're not all going to make it.
Josh: Yeah, I was going to say I've always had this sneaking suspicion that we were just super lucky with Honeybadger. Like maybe that's the reason that we're here, is that we just happened to do this at the right time, and there's demand.
Ben: There's definitely a right place, right time aspect. There's no question that that plays a part, but I think the preparation's also there. We had been Rails developers for nearly 10 years at that point. We saw a lot of the things like Justin's talking about. I think that's definitely a factor that should go into your selection for what you want to work on. What am I prepared to do? And oh, by the way, I'm not going to hobble myself by picking a market that's too small to actually make an impact in my life as I'm trying to make a business that supports me.
Justin: Yeah, actually, and what am I prepared to do, and what have I been preparing for, I think are the two things you want to think about.
Josh: Yeah, well, and the other thing like... When we started Honeybadger, everyone was mad at Airbrake for not working right and stuff. Most of our customers were developers who were frustrated with Airbrake, which is what we were. But they didn't go out and start an error tracking service, even though a lot of them were in the same position as we were, had all the same foundation, maybe even had better network. I'm sure we had an initial customer that had a better network and Twitter following and everything than we did at the time. But we were the ones who went out and did it, so now we're the ones who have a business today-
Justin: Exactly.
Josh: -because the demand existed.
Justin: Well, just picture in your mind all those surfers out there in the ocean just waiting for waves, and it's a big group. There's hundreds of them, and every once in a while, a wave will come along and the surfer has to make a decision. Am I going to go after that wave? And sometimes you choose the right wave, and sometimes you choose the wrong wave. Sometimes you choose the right wave, but there's so many other people going for that wave it doesn't work out. They kick you off your board or whatever. Or sometimes you just do everything right and you still just slip. There's all sorts of potential there. I mean, even sometimes you can ride... See, it's hard to ride a bad wave. That's the thing.
Justin: But yeah, you could have a bunch of people sitting around looking for waves to ride and they miss a good one. That happens all the time.
Ben: If you pick too small of a wave then you're not going to have much fun.
Justin: That's right. That's right. That's where the metaphor works.
Josh: Nice. Well, I don't know if we're... have we run this metaphor into the ground yet, or I guess into the shore?
Ben: We got to get some shepherds on their boards.
Josh: Get some shepherds on the boards. Maybe we could talk about a swimming pool next time.
Justin: I'm glad you brought it up though, because every time I have this discussion, my thinking gets moved forward a bit, and I get nudged forward. The whole reason I talk about it is because if we're going to even have podcasts like FounderQuest or Build Your SaaS, or we're going to have conferences like MicroConf, if we're going to be discussing this, the whole idea is we're trying to help people not make mistakes. That's Rob and Mike's intro, "So you don't make the same mistakes we did." This advice is mostly for folks who are starting something new, but still applies to us.
Justin: Again, if we go back to the skiing metaphor, there's this run at our mountain here where you're going down this slope, and then it splits. You can either go down this black diamond or double black diamond, and depending on the conditions that day, you have a choice. Am I going to go that way or that way? You can also... I've gotten myself into places where it's super flat and I have to dig myself out and it takes forever. So even once you're going, there's these decisions, and I feel like that's where I need help these days is figuring out, okay, things are starting to slow down. What do we do now? Yeah, there's still things that can happen while you're in motion that are market related, that are just like...
Justin: I mean, that's what I think about all the time. Maybe podcasting is just here for a couple years, and then it's going to be gone and what do we do then?
Josh: Yeah, we think about that too.
Justin: That's the part... Well, that's good to know.
Josh: Not podcasting, not podcasting. But we have the fear. Is it just a passing thing or... We're still kind of pinching ourselves a little bit. I think you've maybe used that...
Ben: We share your feeling. We still wake up like, "Is it all going to be gone tomorrow?"
Josh: It's been eight years.
Justin: Eight years of that anxiety. That's the other thing is like-
Josh: It gets a little better. I mean, to be fair.
Ben: It gets a little better.
Josh: It gets a little better, to give you some hope.
Justin: Yeah, I guess once you have... That's the other challenge-
Josh: You get used to it.
Justin: -is that once you have more years of data, then you can at least... Most things don't drop off suddenly. Most things have a gradual slope up, or a gradual slope down, or an up or down or whatever. And yeah, we just don't have enough data right now to know. We've got two years of data, and I think I'll feel better when I get to year three or four or five, or whatever. But I can see that the, what do you call that? Temptation to sell, because we actually had an offer just a couple weeks ago. We're still, like I said, we're over 500K in ARR, but if you think of the multiples of that, they're not great.
Josh: But that's in two years, right?
Justin: Yeah. But if you get a three times multiple, you can do the math, and that would be split between two people. So 1.5 million split between two people is not a great payout, but you can see why people sell, because there's always this nagging thought of... It's very much like poker.
Ben: Exactly.
Justin: Do I-
Ben: Do I let it ride?
Justin: Do I let it ride? And when do I cash out my chips? We've all been in those games where you cashed out too late. I mean, I think we're still too early to sell, but I can understand. I used to kind of judge people that sold with a 37signals piousness. Like, "Oh. Way to go." But I totally get it.
Ben: We've had the conversation a few times. The first time, the first opportunity, we felt the same way. It was just too early. We felt like we haven't shown yet whether or not we can actually do this, and we want to find out if we can do this. So, later opportunities came along and it was like, okay, the payout isn't exactly what we would like, the revenue, doesn't give us a multiple that we can just sail off into the sunset forever, but the same time, this could all disappear tomorrow.
Justin: Yeah.
Josh: And by now, we have a pretty good idea of what it will take to get it to the next level too, whereas before we didn't know half as much as we know now.
Justin: I mean, from my perspective, from an outside perspective, podcasting definitely feels like a more fragile market, because the medium is always changing. A lot of our customers are aspirational, like they aspirationally want to have a podcast, and as you folks know, it's hard recording something that's good every week. Error tracking and error monitoring, to me, that just seems like that's only got to increase.
Josh: As the number of programs in the world.
Justin: Yes, and actually this is the way I like to think about it is how many people are going to be lined up tomorrow waiting for the Honeybadger store to open up so that they can buy error tracking? And in my mind, I'm like, of course, tomorrow there's going to be some boss that says, "Hey, we got to get some error tracking, and we want something that works with Slack." So they just like da-da-da-da, and they're lined up at your door waiting for you to open up for the day, so that they can get error tracking. I like that image as well, because it gives me this picture of, we've all been in a coffee shop line up, and you're like, "Man, this line up happened today, and happened yesterday, and the day before, and the day before." Every single day there's people that wake up all over the world and go order a cup of coffee. That's probably not going to change.
Justin: I think you folks are in a good place. Maybe I should invest.
Josh: Speaking of, ever since Jason Fried at last MicroConf was talking about, we've been dropping subtle hints to Jeff Bezos, or other Jeffs out there. Maybe you're our Jeff. If anyone wants to take some money off the table for us with no strings attached, we can kind of just pad our bank accounts so we eliminate some of that risk, we're all ears.
Ben: Yeah. We're open.
Justin: That doesn't seem to happen very often, does it?
Josh: No.
Ben: Well, Justin, it's been a lot of fun.
Justin: Yeah, sorry. I hope we didn't go too long.
Ben: No, it's good.
Josh: No, I think it's good.
Justin: We're at one hour and two minutes, 23 seconds. Yeah, no, this is-
Josh: No, it's lots of good stuff.
Justin: -this is great. Thanks for being here. I mean, I'm glad to be here.
Ben: Thanks to-
Josh: We're glad you're here too. Cool. So I think we need to ask our FounderQuest listeners to, if you like this episode or you like FounderQuest, or if you like Justin, then go and rate. If you like Justin, go on iTunes or wherever your podcasting, wherever you listen and rate us nicely, or leave a nice review.
Ben: And of course check out Transistor.fm where we host FounderQuest, because it is awesome just like Justin is awesome.
Josh: Please start your own podcast if you're starting a bootstrap company. Start your own podcast and use Transistor to do it.
Justin: Yeah, there's so many other founder things you could add, like founder adventure, founder journey, founder...
Ben: Just take that and run with it.
Josh: If you want to just do a generator in the app, you can just generate your name and founder whatever.
Ben: Shepherd founder.
Josh: Roll the dice.
Justin: Lots of options.
Josh: Founder surfer. Cool. All right. Well, thanks a lot, Justin, and we'll link you up and everything else in the show notes. Yeah, it's been great chatting.
Ben: Thanks.
Josh: Cool.
Ben: Catch you later.
Justin: All right.
