How We Stay Patiently Bootstrapped While Competitors Raise $100m+

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Google Founder Path or Latka next event. We'd love to see you in person. In the meantime though, enjoy this recording. It's a good one. Good morning. So, I'm Will Michael Cooney. One of the co-founders of What Converts. So, how we got started is um I was running a digital marketing agency and I had a web developer that worked for me for about 7 years. He got an offer from corporate. He went away. And 8 months later came back and he's like,

"Hey, corporate isn't working for me. Um so, I'd like to come back, but I don't want to work for you." I was like, "Okay." He says, "Do you have any ideas where we can build a company?" And I was like, "As a matter of fact, I'd just come from a client meeting and we had doubled the leads for this client in the campaign. I walked into the room and I said, "Hey, we doubled your leads. Isn't that great?" And he's like, "Um I don't know. Were they good? Were the leads any good?" And I'm like, "Yeah, sure." But

he says, "Can you show them to me?" Uh well, I can, but to get those specific leads, you know, there was like 500 leads and I'd have to get 100. It was like going to take 3 hours of work. So, I was fed up and I said to Jeremy, "You know what? This lead tracking and reporting uh issue has been going on too long and we need a solution." So, I said, "If you can help us, if we can track all phone calls and forms being filled in and chat back to the marketing responsible, store all that and report it, I think we can build

a really strong company." And so he went away and the first thing he started was like, how can we track every form on any website across um the world without requiring them to change the form. So he went and worked on that for a week, came back and said, I got it. We got it organized and that's how we started the company. So we went and played a round of golf and at the end of the round of golf, Jeremy and I we had a discussion. We said, look, how we going to set this up? We said, let's do 50/50. He'll develop

the product and I will go ahead and do the sales and marketing. So we wanted to do bootstrap and throughout journey this is the the growth. You can see in the first year we started in March 2015 and we grew almost to a $100,000. And I've got little labels there. So the first million it took us four years to get to the first million because we're still working in the agency uh while we're building the product. And I called

it the scary phase. It's scary because there's a lot we don't know. And there's so much advice going on and a lot of advice you get on Twitter turns out to be wrong. So um also in addition to not knowing what we're doing and just trying to figure out the SaaS space, we came up against well-funded companies. So there are a lot of companies in this space um you know, call tracking was one of the areas where there's a lot of well-funded companies and it turns out to be the

feature that converts really well for us. Um so on all these companies there's a billion dollars in funding. So I call it the scary phase cuz we're like, well, should we get funding or should we stay bootstrapped? We chose to stay bootstrapped and the reason for that is number one, over the years I've heard stories of founders starting companies, getting investments and if they don't get traction, they're just in for a whole lot of hurt. And we weren't sure if we would get traction. We didn't know if the product

would be well received. So that was the first thing. We wanted to avoid the risk. We wanted to build it in our own time and make sure um we got traction. Michael, real quick. I'm in the back of the room to your left. There's a lot of people in this room. Actually, raise your hand, guys. How many of you started your SaaS company as an agency or professional services? Raise your hand. This is like by far the number one theme from successful SaaS owners is starting as an agency. You did that. Speak up Spend more time speaking about how much revenue did the agency do? Are you still running it today? And how did you use the agency contracts to learn about the

SaaS product you could build? Yeah, sure. So, I mean, running an agency, I actually started an agency in South Africa, which is still going. Now, my brother runs it. And I got have one in the USA as well. So, combined, we were less than 2 million. We're probably about 1.5 million. Um the agency in the USA, I just still manage about a handful of clients and I sort of dog food our What Converts product with them. And then South African agency is still running. They're

about a team of uh 20. So, um I think I covered everything. Anyway. So, that's the reason we decided to bootstrap cuz we're still getting some funding from the agency and we could build it at the same time. We um we also wanted the optionality. We didn't want investors getting involved and changing, you know, controlling how we develop things. So, we just wanted to stay focused on sorting the problem we had. And then the other thing is we wanted to grow value before we got uh funding. So,

the reason for this is people say to you, "Do you want a tiny piece of a huge pie? Or do you want the whole pie?" Well, we're like, "Well, we want a huge piece of the huge pie." Yeah. Okay. So, when when do you decide how you can skip funding? So, bootstrap versus funding. And I'll put it into three distinct buckets. You got your problem, your product, and the promotion. So, with the problem, when you create a product, you're

solving a problem. And And you can't um if there isn't a problem to solve, you're going to find it difficult to get your message across. You're going to find it difficult to get sales. So, you really have to have a real problem and you have to understand that problem. And it really helps if you've lived that problem. So, as the agency, I'd lived that problem for 20 years. And, um, more funding wasn't going to help me, you know, define the problem any better. The next step is the product. Would having funding help us build the product? Well, my arrangement with

Jeremy was he was going to build the product and we could have got more, uh, developers on the thing, but what we found is we sort of lucked out. Jeremy had worked for me for 7 years, so he understood the problem really well and he had the development skills. So, that's focused development that allowed us to create a product and innovate, um, where we came across certain, um, features. And we just felt that if we had other developers who didn't understand the full problem, we wouldn't have created

as good a product. So, it was a slow burn like getting the product developed, but at the end of the day, we feel that we have a much better product and you'll see as I I speak that that product allows us to compete with well-funded companies. The last one was promotion. This is one area where we do feel pressure from, uh, well-funded companies and I'll show you an example of that in a bit. So, let's dive into the problem. Um, so by living the problem,

what this enabled us to do is not only develop a great product, but it's also enabled us to develop the messaging. When we talking messaging, we're talking to our target market, we know what they're feeling. We can position the product, um, to solve the problem very, very nicely. So, that's allowed us to go 60% year on year since we started. Um, the other thing I've got here is avoid shiny objects. So, once you start a product and you get customers, what you're going to find is

everybody's got ideas. And you have agencies come to you and they say, sorry, I'm not very good at a mic. You'll have agencies come to you and say, hey, we need you to develop this feature and if you do, you'll grow 10x. Um and you get lots of these, lots of suggestions and you have to have a framework on like, how are you going to avoid these shiny objects? So, we have we call this our 100-year test. Can I go back? Oh, no. There we go. Okay. We we call it

our 100-year test. And it's just a a simple framework where it's like, your core value of your product, if you look 100 years ago, was it true or was it valuable? If you look 100 years in the future, do you still see it being valuable? So, we took for instance call tracking. This is one of the main features we have. And we look back 100 years ago, was call tracking valuable? Well, it wasn't really anything, so no. Well, let's look 100 years in the future, is call tracking going to be valuable? And I think call tracking is

already becoming a commodity. Is it still going to be valuable? I doubt it. So, call tracking isn't our core value. Then we look at, okay, well, marketing, was marketing valuable 100 years ago? Absolutely. Will marketing be valuable 100 years in the future? I believe so and and if it's not, Google's in a lot of trouble. So, we see marketing uh is our core value and how we determine our values is we collect a lot of lead data and attribution and we use

that to make better marketing decisions. So, it's sitting under better marketing. So, our core values is surrounded by or it's around our lead data and marketing attribution. So, that's our 100-year test. Um the next thing So, this is an interesting story. It's a Jeremy and I we're playing golf again. Um Jeremy's a golfer. I used to be a golfer, now I'm a runner. I plan to go back to golf, but we were walking from the ninth to 10th hole and I remember this meeting very clearly.

And Jeremy turns to me and he's a man of few words and he says, "Michael, we have to have the best customer support of any software company." And I'm like, "Yeah, sure. Yeah, it's important to have support." He says, "No, you don't understand." He says, "I absolutely hate it when I send in a support ticket, it takes 24 hours for them to respond and then the response is not helpful. So, we are going to have technically competent support people that respond like within 15 minutes." And I was like, "Settle down, Jeremy. Okay."

You know. So, kudos to Jeremy. Yeah, I mean, he's he's made sure that this happens. So, in the early days, people um sent in a support tickets, he would respond within 15 minutes. And our support team is not really a support or a customer service team. We call ourselves solution providers. So, if somebody comes in with a problem, we understand what are you ultimately trying to achieve and then we we provide a solution. So, when they walk away, they have a real solution. And this has enabled us to be um to become a real

growth lever and it's become a competitive advantage. And if you go to G2 and you look at the reviews about what converts, most of them talk about our support. It really stands out. But they also talk about our our product as well. So, here's one example. And um just talking about how great the support is and how how good it is. And we get this um feedback quite often. So, that support has really been a great lever. It's almost as good as having a super

uh product feature. So, the product. Having a better product, we believe um has really helped. And in one area that's really helped is of companies that start with us, 70% um that start with a free trial, they become customers. So, we didn't think anything of this, but when I shared this um metric or this conversion metric with some people, they were astounded like, "You mean of every

trial that you get, 70% become customers. And we're like, "Uh yeah." And they say, "Okay, that's incredible." But I think it comes back to that technical customer support and onboarding as well as having a great product. So, what I mean by a better product or great product, you'll see this is our our menu, it's our our features, our feature set. And you'll see we have three buckets. We got lead tracking, lead management, and lead reporting, which is analytics and

insights. And so, what we do is we use call tracking as our mouse trap. The reason we use call tracking as a mouse trap is it converts really well. It's the only lead type that requires a third-party software to to work. So, we get people in for call tracking at a a low fee, it's $30 a month. But once once they once they join us, we automatically track their forms as well, or we we get their permission. So, they join us for call tracking, and then all of a sudden they're getting all their leads tracked with all their

marketing attribution, and then they're getting this great reporting as well. So, just by having that great product, and it's obviously better than our competitors who are well-funded, has allowed us to grow and compete even though we didn't we thought this well-funded competitors. Another benefit of having a better product than your competitors is you can use a land and expand strategy. So, our land and expand strategy is around marketing agencies. We don't have a sales team, or we

haven't had one. We plan on we we're currently building one, but in the early days, it was pure software sales. We we didn't have a sales team. So, the idea was when an agency shows interest, our focus was, "Let's just get one client. Um just try us out on a free trial. We're not asking you for money. We're just asking you to try and test us with one of your clients." So, it's a very soft sell, and the hurdle's really low. It's it's a free trial. Come on, give it a go.

Um and we even, you know, it takes time. There's friction in time, you know, getting somebody to try your product. So, we said, "Look, it's going to take you 5 minutes and we'll do the rest of it." So, we show the benefits of the one client, they clearly see that the product is a lot better, gives you a lot more than they expected. They came for call tracking and they get a whole lead tracking platform. And then they bring over all their um clients. So, this has enabled us to be very focused on targets that give us multiplication. So,

we don't have to have a huge sales team. Um, just the ones that come in, we just get a lot out of them. And this is how we measure it. So, this is our um land and expand chart. It's basically monthly revenue. Interesting thing on this chart, you see the little dip there around 60 months? That's COVID. So, we're we're going nicely and what you'll see is there'll be stages like sort of linear growth and then there's these bumps that just increase. So, what

happens here is we offer usage-based pricing. And we have very low churn, so we continually add new customers and that's the linear growth. But the way you see sort of the exponential growth, that's existing customers using our product more and more. And we just found that the usage-based pricing really helps. So, what we found is people start at $30 a month, but on average they end up spending four to five times a month with with some of our customers spending in many thousands per

month. And this led to an acquisition offer. Okay. Sorry, I'm I'm I've got click troubles. Um we went on this podcast. I don't know if you're familiar with it. It's a guy called Nathan Latka. Oh, yeah. So, we were on his podcast, we shared revenue and then after that a competitor came along and made us an offer of 7x. So, we were doing 2.1 million ARR all that stage and

they offered us 15 to 20 million. And our response was we appreciate the offer. This is not a small amount of money. This is great. But um we like the game. We enjoyed the game as we found it rewarding and uh if we take the money we out of the game. So I know Henry just said it's not fun. I'm telling him man, being bootstrapped, growing, and being profitable is a heck of a lot of fun. I enjoyed a lot.

So we kept on growing. So from that chart you'll see here that we are now at we're actually at 3.6 million now. And uh we glad we didn't take the money. So if you take a a seven or even a 10x multiple, you can see the valuation is a lot higher than if we had taken it earlier. So the third bucket is promotion. Now you can ask what are you talking about Google Ads? That's everybody does Google Ads. It's crazy. But there's more to

Google Ads than you realize. And before I get to that I just The next point on there says our agency focus because of the land and expand we have a fairly small amount of customers, but we serving 40,000 paid companies. And that's purely from the multiplication effect of going through agencies and franchise companies. So our software is currently installed on um 40,000 company websites. Okay, let's get into Google Ads.

This is actually year one this chart. And there's a few key things here. You can see the green line at the bottom. We started with a couple hundred bucks. Now why Google Ads is important to us is obviously conversions and search marketing I call it the triple T effect. You can you've got targeting, timing, and it's trackable. So you targeting people right at the time when they need the product and you can track everything that goes on.

So what happens here is you dream up any keyword that you think will convert. You put it into Google, you set a budget, you create the ads. Anybody can do this themselves. And then you watch for the data. How many Which keywords get the most impressions? Which keywords get the most click-through rate? And then which keywords get the most conversions? That data is so key in determining your messaging, determining what you target, um and determining like what content you're going to develop for your organic

strategy, which comes next. So, in year one, what you'll notice is we have a 64% impression share. And what that means is every time somebody searched the keywords we were targeting, 64% of the time we would be somewhere on the page with our ad. And that was 2015. Um our impression share was great. And we actually came at the tail end of the call tracking space. Call tracking went through a big disruption in 2011. It was

a hot trending topic. We got in at 2015 fairly late. And for the first year, we got great impression share. But let's see what happens year two. The impression share drops to 28%. And this is where we felt the pressure of funding. The competitors decided they want to buy market share, and they just jacked up the cost per click for things like um call tracking. So, before it was $8 for the top spot for call tracking,

within a year, and with the funding, that top spot was now $120 per click. And when you're selling a $30-a-month product, and you may need 10 clicks to get one sale, that you're spending $1,200 to get a $30-a-month sale. It was like, yeah, that's a bit crazy. However, even with the lower share, we still got more conversions than the year before. We had to spend more, and we were still getting that valuable data. But we then

started looking at uh Google organic um strategies. So in year two, these are our top four marketing channels. The top one the one that brought the most was Google Ads even though we were under pressure there. The second one is direct traffic. So here's a little secret and an insight that many people don't know is when you advertise your direct traffic increases. So we actually attribute a portion of our direct traffic to our marketing

channels. Michael, to your left, what percent? Um that's just whatever. 30% today. Wait, you just made that up. Come on. Yeah. No, I I sort of I just what what I've seen is and obviously I see the accounts of many different companies. For example, I've got one company, it's a company called Air Skirts that use us. They started marketing with us and they had a very small direct portion. They started doing Google Ads and that direct portion just increases pretty

much the same amount as they're bringing to Google Ads. They started with a budget of 5 grand a month. They ended with a budget of $35,000 a month. Um and because with our software they can track it, it gave them the confidence. But what was interesting is as the Google Ads increases, so does the direct traffic increases. So it's almost to to give you an answer Nathan, it depends. I'm not publishing this podcast episode. I'm just kidding. That's great. No, what is that because the secrets are

too valuable? The other thing you'll notice is the blue is Google organic. And um what you find is insights from the keywords, you start building content around that and because you know the the problem, you can really provide authority in the the content pieces you create. It starts developing traffic. So real quick before we go on, no one knows and this is my fault cuz I edited your slides on the last slide. What is the Y axis here?

The Y axis is the number of sign-ups. Uh free or paid? Uh paid. Well, it's the free trial and then 70% of those become customers. There you go. Okay. So, last year this this little label says 2022. This is actually a chart from 2021. These are our marketing channels that drove our sign-ups. So, now you see Google organic is now in the first spot. And Google organic is really important. What you'll find is in the in the first

year Google Ads is great. You can pay to play. But as you grow and you keep on going, you add content, Google organic is just going to keep on delivering. So, we're getting sign-ups from content that we added 5 years ago. And the key thing why I think it's a hedge against well-funded companies is you can really focus on the top keywords that deliver uh a lot of value. And even if your competitor does a similar amount of thing, there's 10 spots in organic. So, if you get, you

know, second or third or fourth spot and they get the the one or two, you're still going to get, you know, more than enough to compete with them. So, I really recommend, you know, content marketing, Google organic, using your your authority in the space to great create great content. Another secret that um well-funded companies may be able to create a thousand pages of content. What ends up happening is a very small percentage of those pages actually generates the most of the value. So, if

you can find out what pages generate the most value, you can be very effective. So, next goals um when we started the company, our goal was to get to 2 million ARR. We thought it was two founders, it was going to be terrific. And um we got there in about uh I think 6 years. And the interesting thing is once we got to 2 million, we thought, you know, we would have made it by then. We got to 2 million and Jeremy and I went for a round of golf.

And um, we discussed this like, hey, we're at 2 million, this is what we thought, what do we do now? We made a very small team, we're nicely profitable, we could live a very nice life, or we could exit. Um, and we were both like, you know what? We're just getting started. We've barely scratched the surface of what we set out to do. So, the next goal is 10 million. This was set a year ago. And so, we're 1 year in, so we're now at 3.6 million ARR. And the interesting thing is, if we just

apply a 70% growth this year, we'll get to 5.9 million. I know the chart says 5.2, but it'll be 5.9 million. And then another 70% year of growth will get us to 10 million. Go forward one slide, Michael. What was that? Go forward one. Oh, forward one. There you go. That's the one. Okay. Thanks, Nathan. Okay, so there there's a 10 million goal, that's the next one. Um, some

interesting things. As your team grows, new challenges come about, and on the previous slide, we want to be more mission-driven. The reason for that is I sent a I did a homework assignment for our team. I said, give me the five top benefits agencies have using What Converts. Our team went away, they did it, I collected all the benefits together, and we came out with 16 different benefits. So, you think that's a good thing, you know, wow, we got 16 different benefits. No, it means we're totally misaligned,

and nobody knows what we really do. So, we we've realized our product messaging uh, has a few issues, we really got to nail that down. And then, um, yeah, just get more mission-focused on what we're trying to achieve with our our company. Okay, so, I just showed you if you've got a problem that people really want to solve, you can create a a product that solves that problem, that means you're going to be able to make sales sales very easily. And then, you just multiply that effect

with some promotion and um live a happy bootstrap life. Guys, give Michael a round of applause.