The article below is taken from SaaS Mag Issue 4. To order your free copy, click here.
When Rob Walling made his first foray into the SaaS universe, SaaS enthusiasts were on their own. In 2005, when Walling started blogging about SaaS and startup-building with a friend, he wasn’t sure exactly who he was writing for or whether anyone would care. But he was gratified to find that not only were people interested, they wanted more. Walling soon recognized the potential for a community of like-minded leaders in the SaaS space.
Walling, 45, is the founder of MicroConf, a conference focused on SaaS entrepreneurship, educating founders, and guiding them through the bootstrapping process. Walling produced a podcast, “Startups for the Rest of Us,” that earned him a reputation as a leader in the SaaS industry and celebrated its tenth anniversary in February. The podcast created a digital gathering place for people interested in learning about building a business and about the unconventional road of bootstrapping, rather than the traditional venture capital track. And that gathering place moved into real life in 2011 when the first MicroConf took place in Las Vegas.
The conference has grown to include seven events around the world for both early-stage and growth startups, attended by the thousands of people who together make up today’s SaaS community. Walling is nothing if not prolific.
He has written three books, including Start Small, Stay Small: A Developer’s Guide to Launching a Startup and, together with his wife, Sherry Walling, a psychologist, The Entrepreneur’s Guide to Keeping Your Sh*t Together, about mental health and entrepreneurship, as well as hundreds of essays and blog posts.
The next MicroConf was scheduled to take place in Minneapolis in March, but once the severity of the coronavirus outbreak became evident, Walling and his team made the difficult decision to postpone. “The hardest decisions are often the right ones,” he says. “It was the right call. There are so many stakeholders to consider in a decision like this: from attendees to sponsors to the catering staff and audio/visual production teams. Each of those stakeholders are directly impacted.”
Walling talked with SaaS Mag about the process of building a community, the challenges facing entrepreneurs today, and the state of the SaaS industry as it grapples with funding, inclusivity, and global uncertainties.
You’ve been a name in the SaaS industry for more than a decade. How did you get attracted to this area? And why do you think it’s important?
I’ve wanted to be an entrepreneur since I was very young. But I grew up working class. My dad was a construction worker, and my mom was a homemaker. And I had no idea how to start companies. I had no model for it and no mentors or anything.
When I graduated from college, I went to work for a construction firm. That was what I thought I was going to do, just rise in the ranks of that. But I had taught myself how to code when I was younger, and I realized there are a lot of opportunities if you have software experience. And so I would work: I would go to a construction site and swing a hammer during the day, and then I would come home at night and I was checking books at a library to learn Pearl and HTML. This is almost 20 years ago, so it was really when the web was starting to mature. Pretty soon, I was able to get myself a job as a developer.
Within a few years of writing code for other people, I realized that I wanted to build something that I own. I wanted to have some equity in something, so it wasn’t just dollars for hours. No matter how much I could bill as a contractor, I knew that I would have to work forever to be able to retire. I essentially wanted to be able to work for myself and/or not have to work, frankly — and build interesting things.
I started doing side projects and had several of them fail. The first successes were around 2006 or 2007, small software products. This was really pre-SaaS as we know it. There were barely any subscription software platforms at that point. Over the next couple of years, I cobbled enough of these small apps together to buy out my own time, and I achieved my lifelong dream of financial freedom.
I worked about 12 hours a week and made enough to live on for me and my wife with a mortgage and a baby. That was around 2008. Then I acquired a little FastApp in 2009, and then another one in 2011. And then I built [email marketing and CRM company] Drip with a cofounder in 2012. Those were the stepping-stones, and I really did stair-step my way up from small to larger to larger. Each one was about 10 times the size of previous one in terms of revenue and challenge, I would say.
What is it about SaaS, specifically, that you love?
One is recurring revenue, which is the golden ticket when it comes to business. Because if you sell a product one time for $100 or $300 or $3,000, then the next month, your revenue starts again at zero. I had a product like this — it was software that people would buy. They paid $300 for a one-time fee, and I was making between $3,000 and $5,000 a month from this product, which was great. Then the 2008 recession hit, and my revenue dropped 80% overnight. I realized then that with recurring revenue, while it wouldn’t have kept going up, it wouldn’t have plummeted that far that quickly.
And second, recurring revenue allows you to build. There are so few one-time sale businesses that naturally build and grow over time, but when you have subscriptions and you have that guaranteed revenue base that starts the first day of every month, you’re at X thousand dollars per month. You’re still at the same number you were last time, minus churn.
The third thing is that SaaS truly democratized the startup space. There really were not many people bootstrapping and self-funding startups in the 1990s and early 2000s — almost zero. SaaS was what broke that wide open and allowed more of us who are not venture-funded, who are outsiders from the tech sector, to keep living in Minnesota and Mississippi and Kentucky, who are developers or know a developer, to be able to truly start a business that can be life-changing.
Life-changing doesn’t need to be a $1 billion, it can be $150,000 a year in income. It can be a $3 million exit, which is abject failure in the eyes of a traditional venture capitalist, but to someone like you or me, or that person in Kentucky or Mississippi, $3 million is enough to potentially retire — or at least take many years off.
The founders who come to Microconf, whether they’re from the E.U. or Australia or the U.S., all have that one thing in common: we want that freedom. We want that exciting purpose of building something we own, and we want to value the relationship with the folks around us.
What was the SaaS community like when you first started exploring the space? How did you find other people who were also interested in SaaS?
There was no SaaS community in 2005 when I started blogging. My essays and blog posts are what gathered an audience around what I was doing. At that time, 37 Signals (which is now Basecamp) was already blogging, and I think Patrick McKenzie’s patio11 started in 2006-2007. Those were the only people I knew who were mentioning anything, and even patio11 wasn’t doing SaaS yet. So it was completely nascent and not at all a thing until around 2009. From 2010 to 2011 is when I started seeing it actually become more of a community. My podcast co-host was the co-founder of the conference, and the reason he did that was exactly going back to your point: How do you connect with like-minded founders? We really didn’t until MicroConf and the podcast.
When did you know that it was time for an event like MicroConf?
We had a hunch — we kept seeing similar names. It seemed like there were enough people thinking and talking about this, but there were no in-person events focusing on it. We had an online community that was an online education course and forum, and we did start to see a lot of interaction there, and the podcast started building momentum to where we had hundreds of listeners. Then, after the second year, we had thousands of listeners and it was obvious that it was growing fast. We gambled and said, “We think that we can get 200 bootstrapped startup founders in a space.” We didn’t mention SaaS in the tagline, and we still don’t today, but people know that MicroConf has a pretty heavy emphasis on SaaS.
For our first conference, we thought we could sell a couple hundred tickets. We wound up selling about 75. It was very touch-and-go, and we wound up giving away tickets or selling them really cheaply to try to fill the room. But then it grew so fast that we started selling out. The second year, we sold it out in two weeks. In the third year, we sold out in 24 hours. The fourth year, we sold out in six minutes.
So we had to either grow the event or split it. We didn’t want to grow the event large because we’ve been to 500-person events, and they just don’t feel that personal. We decided to split the event into a growth event and a starter event, based on the stage that attendees are at. Starter is earlier stage and Growth and Starter are held back-to-back. And we ran a Europe event last year.
How is MicroConf different from other SaaS oriented conferences?
First, we don’t view raising venture capital as the be-all, end-all of making a business. We focus on founders who want to build real products that they sell to real customers for real money. We’re not about the unicorn — we’re about being ambitious but not being willing to sacrifice our relationships or our health to grow our companies. We like to balance that.
What are the benefits of bootstrapping, of not using venture funding?
It used to be, if you’re going to raise funding, it was venture funding. And venture says, “You need to get really, really big, or you need to crash and burn. We don’t want an in-between.” If you raise venture funding and you sell for $20 million, which is obviously a life-changing outcome for us, that’s an abject failure in the venture space.
When bootstrapping became the big thing, that’s the movement we really embraced. Now there’s even a third option, which is raising indie funding, raising small amounts of funding but staying independent so you’re not beholden to a venture capitalist.
The advantages are that the founder maintains control of the company, the founder is not on an 18-month clock to raise the next round. Which, if you raise traditional venture funding on Sand Hill Road, they expect you to burn through that money in 18 months, which means you start fundraising in 12 months. If you don’t hit the milestones to raise that next round by 18 months, the company goes bust. That is the typical model of venture funding. There’s also a lot of pressure — there are terms in some venture deals that say, “Hey, we can block a sale of your company. Even though we’re a minority shareholder, we can block a sale,” which is a problem. The founder loses control.
Since founders who bootstrap don’t have access to a lot of capital, is it your view that they’re compelled to reinvest in their businesses?
In the early days, yes. And it’s definitely a different road. It’s harder in some respects to bootstrap. To build a business, instead of building a slide deck, with no money or with very little money is very hard. And I did have to reinvest all the money that I was making to build my companies. The difference, though, is when you get to that six-figure or seven-figure annual revenue, the business is extremely profitable.
If you bootstrap or indie-fund or self-fund and you get this thing to 2 million bucks and you can have net margins of 30 to 50%, being able to pull out $600,000 in cash each year or $1 million in cash is not out of question. If you raised venture funding, they won’t let you pull money out because that’s not what it’s set up to do. They want you to grow and grow.
You have a MicroConf in both the U.S. and in Europe. Have you noticed any differences between the SaaS spaces in each place?
I definitely think there are cultural differences and there are frequent regulatory differences in certain countries in the E.U., where if you fire someone, you have to pay them a year’s severance. That’s a very different mindset than in the U.S., where the laws are more entrepreneur-friendly. In the U.S., if you start a company and then you just decide to shut it down, there’s typically no repercussion to that. But the founders who come to MicroConf, whether they’re from the E.U. or Australia or the U.S., all have that one thing in common: We want that freedom. We want that exciting purpose of building something we own, and we want to value the relationship with folks around us.
Would you say that the SaaS universe is affected by geopolitics?
GDPR was a topic of conversation and upheaval in our space for months before it came out, so yes, I would absolutely say it does. And especially if you’re one or two people packed away in a garage doing five grand a month, you don’t know what to do. You’re not going to read through the GDPR docs and figure all this out. Or if you do, it’s a huge time suck away from making progress. But if you are a huge company, you have a legal team, and you can just say, “What do we have to do here?”
When bootstrapping became the big thing, that’s the movement we really embraced. The advantages are that the founder maintains control of the company, the founder is not on an 18-month clock to raise the next round.
MicroConf Europe in 2019 took place in Croatia. Is there a big SaaS community there?
No – in fact, we may have only had one founder from Croatia attend. We didn’t choose Croatia because we wanted locals to attend, we chose it because it’s a relatively easy place to get to from most of Europe. And it is a destination that people can tack a vacation onto!
Is affordability a priority for you when you’re planning events?
Absolutely, and it has been from day one, especially for the early stage folks, who are often funneling money from a day job or side hustles to try to make these events. We always look at what the hotel will cost the attendees, how easy or hard is it to get there, how many flights someone has to take, and what the ticket price is.
In 2012, you sold Drip, the email marketing and CRM company you founded, for an undisclosed amount. Is it because of the sale that you’re able to do these things?
Yeah, in a sense. Before I sold Drip, I was making money from my software products and then some money from MicroConf that my cofounder and I would split at the end of each year. The money from MicroConf was not enough to live on, but it was just a way to try to justify the hours we spent on it. The vast majority of my income came from my salary. After I sold Drip, I did effectively live off of savings.
I’ve never been anti-funding – I’ve just been against everyone thinking that’s the only way to do these things. I think the vast majority should at least bootstrap as far as they can before looking for funding.
MicroConf is launching its very own Slack channel called Microconf Connect. What do people discuss there?
We’re actually in the process of rolling that out. Someone yesterday was asking for opinions and thoughts on a startup idea they’re working on. I see a very common use for this channel is sharing resources, people asking, “Hey, I need a designer. Who knows a good copywriter?”
Your 2020 State of Independent SaaS Report said that diversity continues to be an issue in the industry. Just 11% of founding teams include a non-male and 21% include a nonwhite founder. How are you addressing this issue at MicroConf?
We’ve done a number of things. We have a scholarship program with 20 to 35 scholarships that we use to help underrepresented founders and to expand diversity at the event. We have contacted and partnered with multiple organizations like Women Who Code and women tech entrepreneurs and underrepresented tech entrepreneurs and let them know we’d like to provide discounts to their community.
One of the big things we’ve done is to ask our community to help. It’s everyone’s responsibility to make this more diverse, so we’ve asked people to invite a woman or a diverse or underrepresented founder to a MicroConf event. And we’ve started seeing traction with that in terms of someone bringing a friend.
We have more diversity in our speakers than the industry does. That’s something we’ve been very deliberate about doing. Back in 2012, I couldn’t find bootstrap startup speakers who were diverse, so for some people, the first talk they’ve ever given is at a MicroConf, and that helps us raise the boat for everybody. They can speak at other events, which helps the diversity overall.
Can you talk about some of the challenges you’ve encountered as an entrepreneur?
I’ve spent six months of nights and weekends building an app or a website that I would launch, thinking it was going to be my ticket to getting out of employment. And then I would launch it to crickets because I didn’t know how to market and I didn’t validate anything, and it was just a huge waste of time that I could have been spending with my wife or with my child — or, frankly, consulting and actually making money. I had a couple of failures like that, which were pretty demoralizing, to be honest.
You mentioned not getting validation, and the State of Independent SaaS report says that nearly a third of the companies surveyed didn’t get any validation before building their product. Can you discuss that?
If you’re a first-time founder especially, you shouldn’t just go build something, because that is probably the number one mistake. If you have experience, if you have inside knowledge of an industry, if you’re a second- or third-time founder, less validation is probably warranted in those cases. But as a general rule, I do think that having some kind of buy-in from some group of people in some form — which can range all the way from “I had conversations” to “They’ve all written me checks in order to fund this thing” — is very helpful and healthy.
Do you think bootstrapping is the way to go for every entrepreneur?
That depends on the idea you’re building. I don’t believe Facebook could have been bootstrapped. It would be almost impossible to have grown to the scale they are without raising some funding. At a certain point you just have to raise funding if you’re going to become a huge company. But I also believe there are times when a SaaS app that is profitable or breaking even could make the choice to raise a round at a really healthy valuation. I’ve never been anti-funding, I’ve just been against everyone thinking that’s the only way to do these things. I think the vast majority should at least bootstrap as far as they can before looking for funding.
How do you measure the success of Microconf and what impact would you say it’s had on the SaaS industry?
We measure by the feedback that the founders and attendees give, and by how many people were able to connect with one another. Certain events have this real magic that forms around them. You see it on Twitter and you see it in the Slack channel, and you see it in the hallway.
I almost care less about what impact we’ve had on the industry and more about the impact we’ve had on the people who attend. We’ve given these founders an alternative to going down the venture capital path. I don’t know of a good option other than the MicroConf community to really engage with non-venture track founders — hundreds, thousands of them — in person. And it opens the eyes of founders who realize, “Wow, there’s this other path that I can travel” — one that more of them should probably be traveling.