To Justin Jackson, co-founder of Transistor.fm, coming up with a great SaaS product is a lot like surfing. “When you’re surfing,” Jackson says, “you’re waiting for the right wave. The same is true in business: you want to be in the water, waiting for the right opportunity to reveal itself.” Surfers, and entrepreneurs both need to learn patience and observation. Good waves have a certain size and shape to them, which surfers can learn to recognize. The same is true for business, except in business the “wave” is market demand. “It’s worth waiting for the right wave,” Jackson continues, “ultimately, your product’s potential is determined by the size, momentum, and characteristics of your market.”. Surfers spend a decent amount of time in the water practicing the fundamentals. Each time they set out to surf, they may not come across the perfect wave, but they have exercised both patience and observation. At the very least, they are in the water, already halfway there to finding the perfect wave, rather than watching it roll in from the shore.
As Jackson puts it, “opportunities often come in the midst of you doing something else,” and hopeful SaaS founders shouldn’t be afraid to get in the water. “As a SaaS entrepreneur, getting in the water might mean taking on a side project or developing a fledgling idea,” Jackson explains. “In the midst of those projects, opportunities, ideas, or solutions reveal themselves,” and those developments, according to Jackson, can take shape as the perfect wave.
The perfect wave, or SaaS product, doesn’t strike you by coincidence or pure luck, it comes with the aforementioned patience and observation. “And it could be adjacent to what you thought you were going to do,” Jackson elaborates. “For example, I thought that I was going to make online courses forever, and the truth was that there was an opportunity adjacent to that in podcasting. I had been in “podcasting waters” since 2012, and for a while, there were no true opportunities, but in 2017, I began to notice a shift in the water.” This shift, for Jackson, was the idea for Transistor.fm, a podcast publishing platform.
SaaS Mag chatted with Jackson about his experience founding a successful SaaS business, what he has learned along the way, and how other SaaS entrepreneurs can find their ‘perfect wave.’ Here’s what he had to say:
You co-founded Transistor.fm. Let’s talk about the genesis of the project, and what inspired you to take on this venture?
In 2012, I started a Podcast [Product People]. It really did change my life. It introduced me to hundreds of new people. It helped me connect with folks that I would’ve never connected with if I hadn’t. It opened my eyes to a world of opportunity that I didn’t know existed.
One of the people I connected with was Chase Reeves. I interviewed him for the show, and then he invited me to come and speak at a conference with him. It was called New Media Expo. At the time, this was for bloggers, podcasters, and YouTube people. Really, anyone trying to make a living online. It was a great experience; I got to meet a lot of people. Chase and I liked hanging out so much I said, “Hey next time you do a conference let me know. I’d love to go with you.” So he invited me along to XOXO in Portland, and Chase introduced me to tons of folks.
Back in 2014, one of the people he introduced me to was Jon Buda, who would eventually become co-founder of Transistor. Jon had built the first version of Simplecast. We got talking about podcasting, and he asked me if I would test out Simplecast. I did, and I gave him some feedback on it. We stayed in touch over the years, and we kept hanging out. Eventually, we started building things together, but they never really materialized.
In 2017, we were both coming off some real hard years personally. Near the end of 2017, Jon said, “I think I’m going to build another podcast hosting platform.” What kicked this off for him was that his employer, Cards Against Humanity, was going to release a new podcast. He said, “If I build this [platform] will you use it,” and they said, “yes.” Jon is telling me this, but meanwhile, I’ve been in the water observing this podcasting trend. For a long time, it felt like there was nothing there–it was mostly hobbyists, DIY people. A lot of them didn’t want to pay any money, much less a recurring thing every month. But then, there was a sea-change: Serial came out, and podcasts started becoming mainstream.
What was that like being in the podcasting world and seeing something like that come out and just explode people’s interests in podcasts?
For me, it was just fascinating. When I was in a coffee shop and listening to other people’s conversations, it used to be, “what are you watching on Netflix?” or “what music are you listening to?”. Then all of a sudden it turned to podcasting. Gradually, I started hearing more people talk about podcasts. This was 2015, 16, 17. I’m noticing this rising tide of interest. What really sealed the deal was when we had a family reunion, and my youngest sister said, “have you heard of podcasts? I’m getting into podcasts?” I said, “Emma, I’ve been doing a podcast since 2012.”
The fact that it had broken through into the public consciousness was interesting to me. There are other things I noticed too. Like in the New York Times, they were doing an OpEd on podcasting every week. You had companies paying for it. Basecamp created a podcast studio and hired two full-time people to staff it. CodePen had a podcast. Companies started to have it on their checklist of things they needed to do for PR. I began noticing all of these touchpoints, and when Jon came to me and said he was thinking about doing it for Cards [Against Humanity], I said, “Jon we have to do this together.”
In the PR version of Transistor’s story Jon begs me to join him, but in reality, I begged him. [laughs] I could feel it in my bones that this was going to get a lot bigger. I could sense that I had something to offer there and that working with Jon would be a perfect partnership. Jon is very thoughtful, he doesn’t make decisions rashly. At first, he thought about it for 2-3 weeks. Eventually, he came back to me and said, “Yeah, let’s do it.” He’d been burned by a partnership before and so we right away did everything very official. We signed a partnership agreement, we hired a lawyer, we negotiated everything, then we went from there.
Jon already had a working prototype. He’d already built Simplecast so he knew how to build the basics. We had something working by the time we decided to partner up and make it a business. I think we started officially signing things in January 2018.
What do things look like now for Transistor.fm?
When we decided to partner up, we’d both come through some hard personal stuff, as I said. Me personally, I had come out of a long depression, and I had spent all of my savings. I had spent all my creative energy. I hit rock bottom, and I was just starting to come out of it. At the beginning of a project, you don’t know what’s going to happen. I had a lot of uncertainty and anxiety. I was like, ‘is this going to work? How long is it going to take to make this happen?’
When you come out of a period of suffering, it can impact your self-worth.I wondered, do I have what it takes? Am I just a joke? But with Transistor I felt, for the first time in a while, like I could run this race. I felt like I had it in me.
We started inviting beta users in February, and right away, we had people paying for it. That was the first step. People were willing to pay for this. It was one of the advantages of doing podcasts because each of us knew dozens of people who had podcasts. We called those people and asked, “hey do you wanna switch to Transistor, and we’ll give you a good early bird price?”
What did you find in that Beta period? You found people were willing to pay for it, but was there a lot of valuable feedback in terms of market demand? When did the pieces start to come together?
In the early stage, February until August, I realized that our network was the most important thing. I’d spent all these years building up an audience and that helped a lot. I think about 75% of our customers in the early access period came from my audience and Jon’s connections to the Chicago podcast scene. At that point, our personal reputation was the key part. People were willing to switch just because they liked us. But they stayed because they liked the product. People would get in and say, “wow, this is great. This bare-boned, beta version feels clean, simple, and well-built. You know what you’re doing.”
We got tons of feedback from folks who had just switched from somewhere else too. Jason Freedman has this quote, “You can’t ask people for feedback until they’ve just switched to you or they’ve just canceled.” It’s either people who have just started a podcast so they’re brand new. Or, in the beginning, almost everybody was switching from an existing platform, for example, Libsyn, Simplecast, or Buzzsprout. We were an alternative to those things. Right away they would give us feedback and having a relationship with those folks where they knew how to give us their feedback was critical. When they said something needed to change, we would take that seriously.
What else did you learn during this early phase of the product?
In that early stage, there are two sides to it. On one side, it’s accelerating and on the other side, you’re going but you’re not there yet. There’s this overriding feel of growing tension. Is this going to give us what we want? In the beginning, what we wanted was a business that would pay us both $100,000 a year. We were wondering how long that would take.
We launched officially on August 2nd, and we had a big launch jump. I remember thinking, in early-stage, we were at $750 an MRR, maybe we’ll double that at launch. We launched and got up to $2,000 or something. Then it was like, now what? $2,000 is great but how long is that going to take?
I wrote this piece called ‘Bootstrappers Paradox’ where I say, “When you’re self-funding a startup, you have this bassline of stress because you’re caught between two realities. You’re investing real time and money into the product but the product isn’t yet giving you anything back.”
When I mapped this out I was like, how long is it going to take us to get to $21,000 in MRR. I found if it grows at 10% exponential growth with 5% churn, it’s going to take 60 months. Also, there was this feeling of being old. I started Transistor when I was 38, Jon was 37. I joked with Jon: “This feels like I’m Rocky and this is my last fight because I don’t know if I can do this again.” His joke was: “You realize after Rocky 1, he made 4 or 5 movies after that.”
At some points, I did feel like maybe this would be the end of the road. Not knowing at that point whether it was going to happen and that risk hanging over my head: I’m either going to go broke or I’m going to be broken. Those are really the risks of bootstrapping. Now looking back on it, it seems quaint but at the time…
Those are very real, visceral emotions and fears. With that anxiety and stress, why did you choose to bootstrap the venture?
I started to flail around this time in July, right before we launched. We had been working on it for six or seven months and I was starting to feel that pressure. We looked into crowd-funding, taking money from one of those new bootstrap funds. I think the idea of anyone having a piece of the business didn’t appeal to us. We felt like we were being stretched, but we also felt like we could still hold on a bit longer before anything snapped.
I think the other thing that was reassuring was that we built up all these relationships where I could feel comfortable seeking out advice. I emailed David Heinemeier Hansson, and we went back and forth. I called Jason Cohen at WP Engine, I called Josh Pigford, Rob Walling, Nathan Barry. I had all these people that could look at where we were and give us an honest opinion.
To tell you if it was viable or possible?
In the beginning, they didn’t know if we had anything yet. Jason Cohen gave some of the best advice: “If after 2 years you haven’t reached $10k of MRR per founder, I would start looking at something else.” Maybe the idea is viable and it’s your execution but you just can’t hold on that long.
Another thing that Des Traynor said to me that illuminates the risk you’re taking: “There’s a huge opportunity cost to being an entrepreneur. You’re giving up some of the most important years of your career to this thing.” You’re losing out on the salary and the opportunity to be climbing the ranks at a company. That was always in our mind, but the fundamentals looked good enough.
At first, our numbers were public on Baremetrics because we could show people our trajectory, and they would say, “This looks great, here’s what you should look at.” Then I’d say, there was an inflection point by January. I don’t know. At some point, we found some channels that really helped us gain traction. My audience ran out, and the fuel from the launch ran out. Then all of a sudden we found these channels that worked, and we were getting tons of trials–and they were converting. We didn’t know these people, and they didn’t know who we were, yet they were excited to use the product and were switching from other podcasting platforms.
That’s when it started to feel like it was growing. We hit 10k and then it just accelerated. It was 10k, then 4 or 5 months later we hit 20k. Once we hit 20k that was the magical 10k MRR per founder. We knew we had something. We started paying me in April 2019 and then in August, Jon quit his job. One year after we launched officially, we were both working on Transistor full-time.
What are you guys doing in MRR now or what was the percentage of growth from startup to now?
I can say that we are a seven-figure business now. We’re still basically a two-person company. We have three part-time contractors, but we hit the seven-figure milestone a while back. Recurring revenue is amazing; this is the first business I’ve ever had where it didn’t feel like I was starting over every month.
Initially, we were worried about what was going to happen going into the pandemic, but in April and May, we had our best months. You can see the growth line trending, and then in April and May it bumped. Even then, it was still a higher growth than before, but those two months are the skyscrapers. The pandemic helped accelerate us a little bit.
Given what you’ve just told me, what are three things that you wish you would’ve known or three things that you’ve learned along the way that could be used as advice for people that are in the position you were in a few years ago?
I actually can think of five things.
Number 1 – The market you’re in determines everything. If there is no momentum in the market, if there’s not a wave to surf, you don’t have a business. You can have all the skills, you can be in perfect physical shape, but if you’re surfing on a pond…that’s not surfing. You need a wave. But don’t settle for a mediocre wave. As much as you can look for a market with strong demand, look for evidence of that demand.
That’s been key. Honestly, when I met my friends Adam Wathan and Taylor Otwell, they both have products in the developer space, and when they showed me their bank accounts, that opened up my mind to the power of the market. The market you choose determines everything. It determines growth, it determines your margins, it determines your competition. You really do need to choose the market carefully. That being said, those opportunities will reveal themselves in the midst of doing other things.
Number 2 – Getting out of your bubble is the other thing. If you’re in a small town, move to a bigger city. Meet people outside of your circle. Develop relationships with people that are very personal and get to know what’s really going on behind the polite society facade. Get to know how people make money. What are they doing? What are the salaries in this sector versus that sector? Get to know that stuff. Go to conferences, hang out with people you wouldn’t normally hang out with. One thing I did was I signed up for a local meet-up in Las Vegas. It was a Ruby developers group. I didn’t know Ruby, but I wanted to meet interesting people–and go to Vegas. My wife and I went and we hung out with people in this local meet-up group. It expanded our world view. To get perspective, you have to get out of your bubble.
3 – You need to be in motion: always work on something and keep putting projects out in public. For example, writing, podcasting, tweeting, writing code–creating projects and releasing them. Being known for something is kind of like paddling in the water, but the key is, you’re in the water. It also helps you with the other two things. It helps you observe markets and getting out of your bubble. If you’re staying home and doing nothing, it’s going to be difficult for opportunities to arise.
4 – Margin is important. You can maybe live for a while just squeaking by, just having enough money, or working really long hours, or waking up at four in the morning to work on your side project, but it’s not sustainable. If I could do it again, I would be more sustainable about all that. Take care of yourself. Give yourself the room to succeed. That’s what I mean by margin.
5 – Help people make continuous progress. It’s not enough to get a customer, you have to keep the customer. The best ways I’ve found to keep customers happy is to give great customer support and to educate them. For example, we wrote a podcast starter guide that helps new podcasters jump over all the barriers to entry. It helps them make progress, which is what people want!
Moving back to your first point about the importance of finding the right market. How can you establish market demand or fit? What things do you need to look for?
The first question I ask people when they come to me with a business idea is “how do you know people want this? What evidence is there?” It’s such a simple question but most new entrepreneurs haven’t asked that question. It could be: I know people want this because 3 million people a day are searching for it on Google. I know people want this because I have friends in the industry and 90% of them have bought a product like this in the last 3 days.
And then, how big is that pool? How many people want this? How badly do they want this? How do you know they want to pay for this? Just like a surfer learns to discern the size and shape of a good wave, this is the work that new entrepreneurs need to do – figuring out what is the size and shape of a good wave. Part of this you can’t really know until you feel it, but there’s part of it that is objectively out there. I can give you tons of examples.
Derrick Reimer is starting SavvyCal, a Calendly alternative. How do you know people want this? Well, I know hundreds of people who use Calendly. And there are likely lots of people who haven’t discovered Calendly yet or people who would switch to a better solution.
Ruben Gamers is building Docsketch a competitor to DocuSign. How do we know people want this? He told me, “DocuSign did a billion dollars of revenue in 2020, they have millions of customers.” If he carves off even just a percentage of their market and takes a little bit of that demand and follows it to Docsketch…I’m not saying, it’s an automatic success at the point or it’s guaranteed. Nothing is guaranteed. This is hard: it’s like if you and I are gunning for the same wave but you get up and I fall off my board. But he’s answered the question: do you know if people want this?
It’s also the energy in the market that’s going to determine how far you go. If it doesn’t feel like it’s there, then you probably want to change streams. You’re likely not going to get where you want to go unless there’s actual energy there. There are early signs, like if you can get a bunch of people on a waiting list, or a bunch of people to prepay or say they’ll switch. If you have evidence that your boss or your friends or your associates or your industry is already buying this every day, that right there helps.
The other thing I’ll say, is if you’ve been working on a SaaS product and you still only have a few trials a month, I think that’s an indicator that you don’t have enough momentum. For a product like Transistor, which is in the prosumer B2B space, we’re getting hundreds of new trials every month. We convert a very high percentage of those. We’re converting over 75% of those for sure.
If you’re working on a SaaS business, my friend Ian Landsman says, “Software really is all about volume.” I see some folks running a SaaS business as if it’s a consultancy. Like, if I just get a few trials a month I’m going to be ok. No, you need hundreds or thousands of trials depending on what kind of scale you want to get to and you ought to be converting all of those without a huge amount of effort. If it takes you a lot of effort to convert or keep people, it’s a bad sign. You want something where there’s enough momentum where people are showing up at your door every day wanting to buy and it’s not too difficult to have them convert.
Another thing I’ll say having worked for a lot of SaaS companies, it’s so helpful if your target customer is the one with the credit card and they’re the one who makes the decision. Products where you need to get the whole team on board or…if you need to talk to more than one person, it’s so much more difficult. I’ve worked for project management SaaS before, it’s like, “This looks great but I’ve got to talk to my dev manager and they have to talk to the team.” No, most of our customers come to our site, they read the site and they sign up. It takes very little convincing. We do have some customers that it takes a phone call or two, but if we relied on those sales we wouldn’t have a business.
A great SaaS business sells itself.
So those are the things that could help people. There needs to be some proof if you’re a year in that you’re getting enough traction. Definitely finding good marketing channels out of the block, that’s important, but I don’t want people to be searching forever for the secret marketing channel…
So, we’ve talked about the market, but what do you think distinguishes a good SaaS product?
What distinguishes a good product? There are two halves to it. It has to be both something that people want and something that they will keep returning to. Quibi was a good example of something that people neither wanted nor kept returning to.
But really, finding a good product all comes back to practice and observation. It’s all practice for watching that wave when it comes so you’re ready and you know what it looks like. Hopefully, you’ve gained enough fundamental skills that you can go out and ride it.