Episode #003

Bootstrapping a SaaS Business to $30,000,000/year with David Hauser of Grasshopper

David Hauser explains how prioritizing selling early on, talking to customers, and rigorously testing marketing channels helped him bootstrap to $30M/year. Brought to you by DixonAndMoe.com.

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Transcript

Courtland Allen 0h 0m 7s

In 2003, David Hauser and his co-founder Siamak started Grasshopper, and thus began their journey in bootstrapping a business that would go on to generate $30 million a year in revenue. I'm Courtland Allen, and I've interviewed a lot of founders for IndieHackers.com, but none who've achieved that level of success, especially without raising any money whatsoever from venture capitalists. In this converation with David, I really wanted to pick his brain about the kinds of things that early stage founders and aspiring entrepreneurs could do to raise their chances of building a hugely successful business like he did. We talked about everything from coming up with a solid initial business idea and how to find your customers in places nobody else is looking to managing your work-life balance, or as he calls it, your work-life integration. David has a ton of insightful knowledge to share, and I know you guys are going to enjoy this interview and learn a lot, so I present to you David Hauser, the founder of Grasshopper. Before we get started, let me tell you about a group of guys that I got to know a couple of months ago. They reached out to me as fellow MIT alums, and I ended up interviewing them about one of their profitable side projects on IndieHackers.com. Dixon & Moe is a boutique digital agency. They're technical designers with a focus on business and marketing and they specialize in helping bootstrapped founders grow their products. They're based in San Francisco, and they work with founders from all over the world. And they're big advocates of the indie hacker movement, both as participants, having made several revenue-generating projects in-house, and as design and development consultants who work with an array of founders and products. For example, they helped the founder of WisePops grow his revenue from 10 to $50,000 a month and quit his job at Amazon to go full-time on his side project. They helped Alex from GrooveHQ, who by the way has David Hauser as his lone investor, to reposition his help desk software from a scrappy app for startups to a professional tool used by companies big and small. He's now making $500,000 a month. Dixon & Moe are looking to take on two new projects this year and would love to see where they can help. You can chat with them over email or phone about any design, development or marketing problem that you're struggling with. Reach out to Moe, that's M-O-E, at moe@dixonandmoe.com. That's dixonandmoe.com. And make sure to tell them that Courtland from Indie Hackers sent you. Hi, everybody, this is Courtland from Indie Hackers and I'm sitting down today with Dave Hauser, the founder of Grasshopper and Chargify. How you doing, Dave?

David Hauser 0h 2m 36s

Good. Hey, Courtland, thanks for having me.

Courtland Allen 0h 2m 38s

Yeah, thanks for being on the show. So you've done a lot of things in your career, including Grasshopper and Chargify, and I am personally the most familiar with Grasshopper. So we'll probably spend a little bit more time talking about that today, but can you tell us a little bit about what Grasshopper is and how it works?

David Hauser 0h 2m 55s

Sure, yeah, so myself and my business partner, Siamak, started Grasshopper more than 12 years ago now. And the simplest way to describe it is we provide a virtual phone system for entrepreneurs. So what does that mean? It means, you know, the phone system you'd expect in a big office, press one for sales, two for support, on-hold music, transferring, you know, all those features just totally virtual, so no hardware, no software to install, all web based, but you can also still keep using the cell phone that you have or if you do have a VoIP line or anything else, so it's pretty flexible. And we designed for that, because we knew that entrepreneurs really have lots of varying degrees of offices and setups and even moreso now, remote employees and things like that. So I mean, that's kind of what we did, and we served over 250,000 customers over that period of time, and, you know, learned a lot along the way.

Courtland Allen 0h 3m 50s

I bet, that's a huge number of customers. And you ended up selling Grasshopper in 2015 to Citrix. Just how big had Grasshopper grown?

David Hauser 0h 3m 59s

Yeah, so we had bootstrapped Grasshopper to 30 million in revenue and just under 40 full-time employees, mostly in our office in Massachusetts, just outside of Boston. So, pretty sizable company, a solid management team that was really running a lot of the business, you know, a lot of those things, it made a good acquisition for Citrix.

Courtland Allen 0h 4m 24s

Yeah, at $30 million a year is by far the most money that anybody I've ever interviewed has made. So that's humongous, and I also had no idea that you guys are outside of Boston. What part?

David Hauser 0h 4m 35s

So we were in Needham. We moved around a little bit, but we started in Needham and finished in Needham. And that's where we kind of stayed, and that's where the company still is today.

Courtland Allen 0h 4m 47s

Cool, you guys should've come out to the MIT Career Fair or something, because I was there between 2005 and 2009. So I probably would've seen you.

David Hauser 0h 4m 56s

Yeah, we had done a few things, a bunch of stuff, interns with Northeastern and other things, but that was towards the later years, when we had more kind of junior hiring needs. When we were first kind of starting, it was hard to hire more junior people. We just kind of needed more senior people, so it was kind of away from that group.

Courtland Allen 0h 5m 15s

Makes sense. So let's go back to 2003 and talk about the founding of Grasshopper. I think a lot of listeners are at that beginning stage, where they're thinking about starting a business, but they're maybe not quite sure how to come up with a good idea or what it is they should be working on. So I'm curious how did you at Grasshopper decide to build a virtual phone system. Where did the idea come from? And what motivated you to get started?

David Hauser 0h 5m 43s

So myself and my business partner had both worked on previous businesses, and we had experienced the same problem so many times, which is how do you sound professional when you don't have an office necessarily, right? We didn't want people calling, you know, our cell phone, and we'd just pick up at random times. We needed a professional image. And we went out there and looked for this, and there weren't really many options, right. The options that were available were either very expensive or not flexible and the technology itself was actually quite easy, right. This wasn't a magical technology that we created. It'd been around for a long time. But we knew the problem was. It wasn't packaged correctly for what we, at the time, called small business users. And we kind of, over time, learned that the better term, that people identified with was entrepreneurs. But it just wasn't packaged and priced for them. So we spent the time to create the solution and package and price it for the right market.

Courtland Allen 0h 6m 45s

Yeah, there's a lot of uncertainty in the beginning for most people, and it sounds like what you're saying is that nobody was doing what you were doing in the way that you wanted to do it, which was to sell to small business users and entrepreneurs. But there was really no guarantee at that point that it was gonna work out, right, because maybe you could've tried doing it, and there would be enough people who wanted a professional virtual phone system or some other problem. So what did it take to validate your idea early on? Was there some aha moment, where you realized hell yeah, this is gonna work out. Or were you confident from the very beginning?

David Hauser 0h 7m 18s

So I think we were kind of young and stupid in that we were confident from the very beginning, but I think it came from the fact we were solving a problem we had, right. It wasn't something that we heard from other people necessarily or kind of magically created. This was a problem we had, right, directly. And I think some of the best products are really created this way, because you could can somewhat skip a little bit of the step of talking to users right away, because you at least know the base of what you're talking about, right. And that's not to negate, like, it is super important to get real-user feedback, but we knew we were solving a problem. And I think we ignored a lot of the other things. And then we got to selling right away. Like, rather than talk about it and see and kind of pontificate about why it should work or wouldn't, we're like okay, let's just sell this to people. And we started selling way earlier than we should've, but I think it's the best thing we ever did.

Courtland Allen 0h 8m 13s

Yeah, I remember in your tech space interview, you talk about, and speaking of selling too early, you talk about doing customer support in the early days. And customers would call you, and while you were on the phone, you would be writing SQL queries to look up the customers in your database, because you hadn't written any software to actually look them up.

David Hauser 0h 8m 29s

Yeah, I mean, look, the priority was very simply like getting people sold and paying us money. And it was still important to support them, but we didn't think about an interface to do it or a CMS or a support ticketing, like, people would call. We'd answer the phone, and we would be literally writing SQL statements to find the customer in the database, right.

Courtland Allen 0h 8m 52s

Yeah.

David Hauser 0h 8m 54s

But the important part was they had paid us, and they were a customer, and they were using the system.

Courtland Allen 0h 8m 59s

Interesting. So I talked to a lot of people who are starting businesses, especially developers, and what you guys did is almost the exact opposite of what most developer founders do. The temptation for programmers oftentimes is to just build, build, build, before talking to anybody, and often they spend weeks or even months just building out their software without talking to a single person about it. Well, you guys are the opposite. Your whole viewpoint was that the system was crucial, but you could build it out later and just wing it for now. And for now, selling is the number one priority. So why were you guys so focused on selling when it's not the intuitive way to go for a lot of people?

David Hauser 0h 9m 37s

Well, I mean, I think there's two factors. One, we didn't have very much capital, so we had to bootstrap the business. We just had a little bit of money from past ventures and such, and it wasn't a tremendous amount. And this was way before, you know, kind of the true cloud computing. There was no Twilio for telecom. We were having to buy physical equipment and run T1 lines and do these things. So the cost of doing so was just very fixed, right. And we knew that we weren't going to get very far if we spent a lot of time doing that and not selling. And then both of us, although I'm technical, right, I can write code, and I have written code. I'm not great at it. You know, now, today, I can probably review it better than I can write it. Both of us kind of came from more business backgrounds. So all we really knew was, like, let's market and sell this. Like, that's what we knew. We both went to Babson College, and that's the background we had.

Courtland Allen 0h 10m 35s

Yeah, it's a background that a lot of programmers don't have, including myself, because I basically had to spend the last 10 years in the school of hard knocks, just trying to figure out how to do some of this stuff. But it's really interesting to look back at the time period where you were creating Grasshopper and to look at the differences, because there was no cloud computing. There was no Twilio or AWS. And so in a way a lot of the things that you could do were very limited. You just didn't have that many tools to build on top of, which seems like a disadvantage, at first glance, but it's also advantageous, in a way, because it forced you guys to get in a mindset of selling immediately.

David Hauser 0h 11m 8s

Yeah.

Courtland Allen 0h 11m 10s

And of course, the disadvantage is that things are super expensive and hard to do. So how did you afford your infrastructure? 'Cause even just getting service or hosting, back in those times, was a pretty tough ordeal.

David Hauser 0h 11m 22s

Oh yeah, I mean, we were buying servers from Dell and racking them and stacking them in a data center, and you know, like, what people wouldn't even imagine you would do today, right. And I think, two things we did, right. We used the capital that we had as efficiently as possible. So we negotiated terms with every vendor we worked with, some vendors extending us terms that they probably shouldn't have, right, because they believed in what we were doing, right. We sold them on the vision of, like, we're building something for entrepreneurs, and that's who we are. We believe this is gonna work, and here's why. And they probably gave us terms that they hadn't given others, and they shouldn't have given us, right. So we took probably about 200, $250,000 and ended up, you know, putting together an infrastructure that should've cost us probably about $1 million. From servers, Oracle database(s), like, those are things that are quite expensive and then also bringing in physical T1 and then as we got bigger, DS3 lines and stuff to these data centers. Like those are hard costs that today, people don't even think about.

Courtland Allen 0h 12m 37s

So not only were you selling to customers from day one, but you're also selling to vendors, selling them on your idea and selling them on your vision. And I can't imagine that was easy to do, because it was 2003, I mean, not that long beforehand, pretty much every tech company had just been wiped out of existence, so how did you negotiate with these people?

David Hauser 0h 12m 57s

Yeah, it was a hard time. You know, we sold them on our vision. We sold them on who we were. And I think it really came down to people believing that what we were telling them actually was a need. So that was some validation even before we were able to sell, that other people saw this as a need, especially as we talked to people in telecom, right, because had to negotiate contracts to buy phone numbers and minutes and things like that, right. And we got feedback like, you know, we're gonna start referring people to you right away, because we get customers that are too small, that always want this, right. So I think that was good. And we stuck with those same vendors for a long time and probably longer than we should've from a cost perspective. We were loyal to them, because they helped us start. And over time, obviously, we did start to migrate to larger tier one vendors compared to tier two vendors and things like that, but look, I think they made a good investment, and it paid off for them.

Courtland Allen 0h 13m 57s

Yeah, it sounds like it was a win for everybody involved. It also sounds like you were dealing with a little bit smaller companies in the beginning. Did that make it easier for you to negotiate these deals?

David Hauser 0h 14m 9s

Oh yeah, we were talking to their founders or presidents, right. These were, you know, in telecom, very small companies, but way bigger than we were at the time, which was nothing.

Courtland Allen 0h 14m 21s

Until you eventually grew to the huge numbers, like you were saying, 250,000 customers served and making $30 million a year. One constant that I've seen in talking to different founders and entrepreneurs is that there's always a difference between what founders believe and what the actual reality of the world is. For example, you, as a founder, might have ideas about who your customers are or what they want or the best place to reach them or what messages they'll respond to, and you might not be accurate in all those assumptions. I assume that you guys weren't perfect in the beginning, but you grew so much in the end that you had to have eventually successfully aligned your beliefs and hypothesis with the reality of the world. So what are some of the things that you learned, and also what methods did you find the best for learning what product to build and how to reach customers?

David Hauser 0h 15m 12s

Yeah, I think that's a great question. And quite honestly, I think we got all of it wrong at the beginning, and maybe towards the end, we got a little bit right. But I think it's an ongoing battle in both directions, right, in that, you know, when you're starting, you have this vision that no matter what, you're gonna persevere through everything, right. And it's like all green in front of you, right. In kind of the middle, you worry a little bit more, and you're like okay, now there's some reality setting in. Like, it's a little bit harder to sell than I thought. It costs more to market, right. And I think that kind of continues. And if you lose that, that's when you start losing, and competition comes in and kills you, right. And I think one of the things we learned towards the middle as well which was we thought we had kind of capped out on the market. We're like, you know, others around us are like, "Look, the market's only so big." We're worried that we're starting to kind of plateau in growth. We had many plateaus in growth, and then we had growth spurts, right. And we kind of started to believe this ourselves. So we spent time focusing on other products, and we built other things. And that's when we built Chargify, and a bunch of other stuff that failed. Chargify actually did well. And we lost focus on the business, and looking back on it, what we really realized is we were wrong. We got bored, and we should've stayed focused. And we, you know, there was plenty of growth in front of us. We just weren't looking in the right places.

Courtland Allen 0h 16m 48s

Yeah, it's a really tough line to straddle, this balance between when to quit, or at least, when to change it up, and when to persevere, kind of seemingly against all odds. And you hear stories on both sides, of people pivoting into a really great idea that was way better than what they were working on at first. Or people, like for example, the Airbnb founders, who keep working on the same thing over and over, even though it's failing for years, and it ends up working out.

David Hauser 0h 17m 15s

Yeah, I mean, I think that's what it is to be a founder, right. We, as founders, kind of persevere through that, and probably in most cases are too positive and wait too long, right. But that's what creates success, where I think, those that fail didn't have that same drive, or, you know, if you just hire a manager to run a business, right, they're much more pragmatic about it, right. Founders have that vision, like, "I don't really care what else is happening, but I believe this."

Courtland Allen 0h 17m 47s

Right, and on the flip side, there are times where the thing that you're working on, as a founder, truly is not worth working on, or maybe you're just going in a different direction than you should be. So are there any examples, and I'm especially interested in the early days, but are there any examples where there's something that you learned from talking to customers and trying to sell that shifted your direction?

David Hauser 0h 18m 8s

Yeah, I mean, unfortunately, in the beginning days, we didn't really talk to customers very much, was probably the biggest problem. This was well before it was kind of a popular thing to even, you know, in the tech community, say you talk to customers, right. So we didn't understand that at all. So we built and packaged the product in a very complex way that we understood, right. And this came out in user churn, right, which was we were onboarding customers that were not as technology savvy as we were, right, and either would call up, and it would cost us a lot of money in support time and cost, because we always provided 24/7, US based support, not outsourced to another country, right, and true 24/7, not like open a ticket and wait. Like, call us and we answer the phone, right. So we saw it in churn and cost. And that's when we realized uh oh, like, we have a problem here that yes, we've built something that people want, because we've shown that we can get people to sign up, effectively, at good CPAs, but now, we're having people churn out, and we're having onboarding problems, right. And that's when we started to say okay,

Courtland Allen 0h 19m 36s

Cool, and what kind of tools did you use to start talking to your target market? Was it email surveys or--

David Hauser 0h 19m 43s

You know, initially, it was really talking to people, because we were doing the customer support ourselves, so that meant like I was on the phone actively talking to someone who was struggling with a problem. And, you know, quite honestly that was the best thing we could possible do, compared to some, like, random user group or whatever. This was someone who paid us money, signed up, and said, "Yes, I want this." And they're telling me they have a problem.

Courtland Allen 0h 20m 9s

There's just no better source of feedback than someone who's actually a paying customer.

David Hauser 0h 20m 13s

Right, and we tried to encourage this in later years too, where, you know, I think, as you grow, and you have 10 people and then 20 and then 30 and 50 or whatever, right, you lose touch with the customer. and especially, you know, developers, 'cause they kind of get insulated from support, right, because it's, quote-unquote, a distraction. So we had a program where everyone had to make seven phone calls to new customers, everyone, no matter what position you were, right. And it was just a welcome, but like, very quickly, a welcome turned into hey, I love this, I hate this. Why is there a problem with this? Right, like, it was instant feedback and just seven phone calls. It only took a little bit of time, but it kind of brought back that touch.

Courtland Allen 0h 21m 1s

Smart.

David Hauser 0h 21m 2s

And we did that for a long period of time.

Courtland Allen 0h 21m 3s

That's really smart, and honestly, I think it's funny that you mention that you weren't talking to customers in the beginning, and that it wasn't as well known of a mantra back then in the startup community that you needed to actually talk to customers, because in my experience, even today, people don't understand this. People drastically underestimate how wrong their guesses and hypothesis can be about what people need. And they underestimate how effective it is to actually talk to a customer.

David Hauser 0h 21m 32s

It's one of the reasons I hate the kind of movement to all-online, ticket based support. I think there's just this inherent value in talking to someone on the phone. You get much more instant and direct feedback. You can ask questions right away. And you can make a real connection with a customer. And what we found was it costs us a lot of money, like, no question, right. However, for sure, this contributed to our extremely high word-of-mouth referrals, which we maintained at between kind of 22 and 30% until we sold the company, right. Which as you're scaling marketing is very hard to do.

Courtland Allen 0h 22m 13s

Yeah, that's huge.

David Hauser 0h 22m 14s

But like when someone calls up with a problem, we consistently turned them into raving fans, because we solved it on the phone, in real-time, when they needed it, right. So to some extent, we wanted people to have problems, so we could have that touchpoint, because we saw what happened, and we listened to the calls. And I think it's just so critical, and so many people bypass that today.

Courtland Allen 0h 22m 40s

Right, and what about in the early days, before you guys had really started talking to customers, and you just had this sense of okay, we know that we have this problem. We need a virtual phone system for ourselves. Other people have to have this problem, too. How did you find these other people?

David Hauser 0h 22m 57s

Yeah, so we were very lucky when we started, that this was before AdWords, but it was at the beginning of Omniture, who's selling, you know, kind of click traffic. And we were buying traffic really cheap, like cents per click, right. Or even in some case, a cent a click.

Courtland Allen 0h 23m 17s

Were these banner ads?

David Hauser 0h 23m 19s

Yeah, we used banner ads, but most of the paid traffic came from search paid traffic with Omniture, which was the precursor to AdWords. So we did that. We did some print stuff, which sounds crazy, but there's a clear target for SMBs. At the time there was Entrepreneur Magazine, Fortune, you know, a few that were very targeted. So we played with print. And those were the initial channels. The other one, we spent a lot of time on was organic SEO. It was very clear that there was a need for people searching for these terms. And those people were converting at much higher rates, because it was intent purchases, right. So all of our initial targeting, like from day one to the first 12 months, was like someone is looking for small business phone system, virtual PBX, professional phone, those types of terms, and we just converted them as best we could.

Courtland Allen 0h 24m 24s

Yeah, so it sounds like you were paying for a lot of your traffic, and SEO worked out great, too, which is interesting, because those are just two advantages that, I mean, like super cheap, paid traffic paying for ads for cents and also getting to the top of Google was probably just way easier in 2003 than it is now.

David Hauser 0h 24m 44s

Oh, it was way easier. But I mean, I think, the advantages are different today, and it's just a different platform, right. So if I'm starting today, I'm looking at, like, how am I buying traffic on Instagram and Pinterest and places like that, where there is still intent. It's not as direct as search, right, but there's still intent, and I can buy traffic very cheap, because there are newer platforms that are still trying to prove themselves, right.

Courtland Allen 0h 25m 11s

Right.

David Hauser 0h 25m 12s

And the companies that I talk to now, and I work with, those are the areas that they're seeing an advantage in, right, where big companies are ignoring that.

Courtland Allen 0h 25m 21s

So it sounds like you guys did very well with paid advertising, and you also got a lot of word-of-mouth referrals, which to be honest, are kind of the Holy Grail of growth in marketing. Were there any other marketing strategies that worked well for you guys later on? Because I'm sure in the 12 years that you ran Grasshopper, you probably tried all sorts of strategies and channels. Was there ever a magic bullets of sorts that worked better than anything else?

David Hauser 0h 25m 45s

Yeah, I think unfortunately we were always searching for the magic bullet, and in our kind of naive, young selves, we're like look, we're gonna find this channel where we're gonna go from, you know, 25,000 customers to a million customers, guys. Like, don't worry, we're gonna find this channel. Right? And I think just it doesn't exist, right. And people always hear about these stories where the companies we know, quote-unquote, or that are success stories, yes, they have millions of customers, but there was no magic channel that got them there, but that's what the story usually is, right. So we tested everything, right, and we failed at most of it, but along the way, we found things that worked for us, right. So along the way, we found that satellite radio worked for us. We were the first advertiser with XM, well, at the time, Sirius, right, when Howard Stern moved over, right. So we signed up very early, and we scaled that channel to well over 50 or $100,000 a month. Then we had lots of failures. We tried tray table ads on planes. We tried--

Courtland Allen 0h 26m 57s

Wow.

David Hauser 0h 26m 58s

Anything you could imagine where our target market might be.

Courtland Allen 0h 27m 2s

Yeah.

David Hauser 0h 27m 3s

And then as we continued to grow, I think what happened was, you know, these little tests became bigger and bigger, right. So when we were small, a test might've been $100 or $1,000, right. When we were growing, a test might've been $1,000 or $10,000. As we kind of matured a little bit, and we got bigger, and we were starting to get closer to 30 million in revenue, tests became, you know, a few hundred thousand dollars. Or in our, you know, the year before we sold, we had a million-dollar test in radio, right. So we decided that terrestrial radio was the right approach. We had all the right metrics, but the cheapest you can really test terrestrial radio in three demographics and do it the right way is about $1 million. So that was a test, right. We were pretty confident in it, to put that type of money up, but it was still a test. It worked and we scaled that channel to $12 million, you know, very quickly.

Courtland Allen 0h 28m 4s

Yeah, that's a lot of money, and those are economies of scale that worked, because obviously a smaller business can't afford that, even though it might be helpful, so they just can't even compete on that front. But it's cool that you guys are able to consistently test and figure out what appealed to your customers over time, 'cause it sounds like right up until the end, you guys were still experimenting and finding out new ways to grow.

David Hauser 0h 28m 26s

I think one of the things that happened, you know, quite a number of years ago, now, is we really learned that testing was critical, and this was early on in A/B testing tools, and we had a few people come in and really help us and build a culture of testing. And this culture of testing started to really go throughout the organization, not just in marketing, not just in conversion, but A/B testing onboarding tools. Literally, the question was have you tested this, right, internally? And yeah, I think it helped us tremendously, and we tested pricing plans, pricing increases. We did different tests on how we increased plans on our user base or not on it. Everything was tested.

Courtland Allen 0h 29m 12s

Yeah, testing is a smart way to do it, because obviously, then you know what's working, instead of just blindly assuming that all the things that you're doing are working. And speaking of blindly assuming, I want to talk about how people will look at an established business, like Grasshopper, in maybe its 10th or 11th year, and they see what it looks like, and they see that things that it's doing, and then they assume that it's always been this way. And so they try to copy it. And they don't realize that the assumption that they're making is that the things that are important to a huge $30 million business aren't necessarily important for getting a fledgling business off the ground. So what are some of the ways that Grasshopper today, or when you sold it in 2015, differed from when it started?

David Hauser 0h 29m 56s

Yeah, so I think a lot of things changed, right, but when you're small, I think the things that don't matter as much are kind of structure and process. When you get bigger, those are critically important, because you can't be looking and touching everything at the time, right. We made a lot of mistakes, but I think one thing that is ignored early on, and I think is critical, is culture and core values and core purpose and really having a true culture that really exists. I wish we had done that earlier.

Courtland Allen 0h 30m 33s

And just for some context, when did you guys make your first hire?

David Hauser 0h 30m 38s

Probably in month three, from when we kind of started.

Courtland Allen 0h 30m 42s

Okay, so you guys started growing almost immediately.

David Hauser 0h 30m 44s

And that hire was someone to help with customer support.

Courtland Allen 0h 30m 47s

Right, and so from the beginning, you were saying that you guys didn't focus on culture as much as you probably should have.

David Hauser 0h 30m 54s

No, we didn't. We just hired. We had no idea what we were doing, right. And we got to a point where we had about 50 people. The culture clearly wasn't right. It just didn't feel right. And we spent a solid year figuring out what our core values were, talking about them, okay, making sure the right people were on the bus. That took us more than a year. And that was in the middle of trying to scale a business, We made lots of mistakes doing it, but we could've saved that by really doing that much earlier. And we did that at Chargify much earlier, right.

Courtland Allen 0h 31m 36s

I think just the concept of having a company culture with values that you want people to operate on is fascinating, because when you're only one or two people, then culture just sort of evolves naturally out of whatever your personality is, because you represent such a high percentage of the people there, but if you grow, and you don't set a culture deliberately, then one kind of forms on its own, and it might be unhealthy or something that you don't want.

David Hauser 0h 32m 0s

Absolutely.

Courtland Allen 0h 32m 1s

So what goes into setting a culture, like intentionally, deliberately creating a culture at a company with more people, 'cause I know it's easy to have a list of values or to write some words down on a page, but how do you actually instill those values in people and make them a reality, rather than just a cheesy collection of words.

David Hauser 0h 32m 21s

Yeah, it takes a lot of time and a lot of effort. And I think actually getting real core values is actually very hard, right. Lots of people can write honesty and respect and things like that, but having real core values that are meaningful and actually represent not just what you want but what you are, and you're right, it comes from the founders. So our core values were go above and beyond, always entrepreneurial, radically passionate and your team. It spelled out GARY. We had fun with it, right. But we pounded people over the head with this. In the hiring process, this was the very first questions, right. Like, how do you apply yourself to these core values, right, and give stories around them. In the rewards and recognition process, we had quarterly, and then we moved to yearly reviews. Long story why we did that, it's not really relevant until you're kind of 30-plus people. But, you know, every period where we reviewed each other, we talked about core values. Our monthly meetings, we presented gifts and rewards around the core values, who showed this the most, right. We had an I-caught program, where people could catch other people showing these core values, right.

Courtland Allen 0h 33m 41s

So it was just everywhere, all the time?

David Hauser 0h 33m 44s

Yeah, we publicly talked about 'em. Customers knew 'em. So when we gave a credit, right, or we did something, we matched it to a core value. No matter what it was, it always went back to that.

Courtland Allen 0h 33m 59s

And there's a related topic that I want to talk about, that's kind of similar but perhaps more individualistic, but it's the psychology behind being a founder, which is questions like how do you manage your mental state and make sure that you're the best that you can be? And I think a lot of people underestimate how much of a role this plays, maybe just 'cause it's hard to measure and that's why I love talking about it, 'cause it's so rarely discussed, but there are all sorts of things for developing this kind of personal culture. Like, what's your philosophy on work-life balance, for example, and how do you deal with scheduling your work? How do you maintain motivation and get yourself up in the morning? Or on the flip side, how do you deal with burnout or depression? So what are your thoughts. Did you have any guiding personal philosophies for how to manage your own psychology as a founder?

David Hauser 0h 34m 44s

Sure, yeah, so I mean, I think there's a lot in that question, and so yeah, first, I don't believe that there is such thing as work-life balance, I think there's work-life integration, right, which means, you know, I work at times that doesn't make sense, right. Like, maybe I'll interrupt dinner, or I'll work at home, or whatever it is, right, or on vacation, because I think as you integrate things, you have more flexibility and freedom, compared with regimenting things and saying I can't work after 7 p.m. Or, you know, I'm going on vacation, and I'm not gonna look at emails, right. I think those extreme things really don't help. And there's this culture of, you know, I only look at my inbox once a day or bullshit like that. No, like, real people that have to get real things done. Do look at it more and should look at it more. Sorry, right. So I think that it's about integration. I think personal health is very important. If you can't treat your personal health and eating right, which initially I was all wrong with. I was eating all the wrong foods. I wasn't exercising. I was gaining weight, right, because I'm in the office. I'm working. I'm stressed. So I made major changes there. That had a clear impact. I think waking up early is the biggest advantage any entrepreneur could ever have, right. If I wake up at 5 a.m. and everyone else wakes up at 8 a.m., I gained three hours on everyone, right. And that's a magic three hours, where A, there's much less distraction, right. There's less emails. There's less phone calls. There's less people asking for things. But most other people are not getting up at 5 a.m. and working, right. And that's how you win, plain and simple, right. Like, that's how you win. There's no magic. There's nothing else. So I think that's very important. I think the last piece to your question, and I'm kind of trying to remember each piece. So if I forget something, definitely ask me.

Courtland Allen 0h 36m 54s

Yeah, it was a heavy question.

David Hauser 0h 36m 56s

Yeah, I think the other piece is as entrepreneurs, we have two selves, right. One which is our public self, which we have to present to our employees, our partners, our vendors, which is overly optimistic, right, no matter what, We're gonna persevere through anything, right, even when the real reality might not match that, but we have to, we need to face the real reality, but we need to present an image of we're gonna get past this and here's why and here's my plan, right, with here may be times where you go through this roller coaster, and you're at the bottom of that kind of slide, and things are very negative, or you really don't believe that the next step is possible, and I think the only way to deal with that is to have peers around you that you can discuss those things with, and they're other entrepreneurs, right, because it's hard to discuss it with your family, because there may be real financial impact to sharing something like, "Oh my God, I can't believe we might not be able to meet payroll next week," right. So it's hard to share it with family. It's very hard to share with employees sometimes, right, until there's more maturity in the business. But in the early days, like, I couldn't imagine sharing those problems, right. But finding a peer group of other entrepreneurs facing the same problems and being able to comfortably share them, I think that's how you get through the non-public image of entrepreneurship.

Courtland Allen 0h 38m 29s

Everything you said is awesome. And I just love talking about this stuff. The first thing that you said, it sounds like you're really focused. All right, it was when you were talking about work-life integration, rather than work-life balance, which got me thinking about the fact, and not everybody is like this, maybe it's just me, but for me, one of the things that I prioritize the most in my life is flexibility. Because what your business needs, for example, is not always going to fit on this perfect nine-to-five schedule, and it's similar with your mental state. What you feel motivated to do at any given time is not going to always fit into this perfectly organized box.

David Hauser 0h 39m 3s

Right.

Courtland Allen 0h 39m 3s

So for me, it comes down to doing what feels right at the right time.

David Hauser 0h 39m 6s

Absolutely.

Courtland Allen 0h 39m 7s

With Indie Hackers, for example, there are gonna be times where I really feel like editing the text interviews, and there's gonna be times where I really don't want to do it, and the thought of it makes me sick. And I'm gonna be a lot happier as a person, and a lot more productive as a founder, if I don't try to force myself to do everything on a rigid schedule every day, no matter what.

David Hauser 0h 39m 25s

A small little bit of flexibility gives you true flexibility to do what you want when you want.

Courtland Allen 0h 39m 30s

Exactly, and, you know, there is actually such a thing as being a workaholic, or being addicted, and I understand why people want to have these strict separations, but I think sometimes, it's kind of an overreaction, right. You're trying to live your entire life on a rigid schedule with strict delineations and time blocks, with your work between 10 and six, and you leisure time on Saturdays at 2 p.m. It just, for me at least, just doesn't work that well. It just doesn't naturally fit into how I feel and in what my business needs. But another thing that you talked about, that I thought was interesting, was waking up early. In most of my previous projects, pretty much for the last 10 years of my life actually, I've had this night owl programmer schedule, where I'll stay up late coding and wake up late. But with Indie Hackers, I wake up super early, and it's a different business, to be honest, because I spend so much of my time talking to people, answering emails, tweeting, sales calls with sponsors, et cetera, and I think part of me waking up early is that I moved in with my girlfriend who likes going to bed early and waking up early, et cetera, but also part of it is that I'm on the West Coast, and if I wake up at 10 a.m., then half the day's already gone on the East Coast effectively. So it's kind of a natural thing. If I'm actually doing my job right and talking to people, then I'm gonna feel pressure to wake up early anyway.

David Hauser 0h 40m 52s

Yeah, I think it's a great point about time zones, right. I experienced this when I moved from the East Coast to the West Coast, but all of my staff and the company was on the East Coast, right. So a 10 a.m. meeting was a 7 a.m. meeting for me, right. And so even more so, waking up early was important, because now everything had shifted by three hours naturally, so now if I wanted time that was more quiet or focused, I had to wake up even earlier, right.

Courtland Allen 0h 41m 24s

Right.

David Hauser 0h 41m 25s

And I think there's not better advice, I think, for an entrepreneur, than doing that. There's no other solution. And even with all these crazy things people talk about, you know, look at your inbox once a day, doing this, doing that, nothing will gain three hours a day compared to just waking up earlier.

Courtland Allen 0h 41m 46s

Another thing that you talked about was having peers around you who were entrepreneurs themselves, because you can share with them a lot more easily what's going on, and they can understand you better than other people who haven't really been in the trenches. And I think a lot of people listening, including myself, are solo founders. We don't have co-founders. That's not really even an option. And a lot of us don't even have employees. So I think that having some sort of other source for a community is crucial. And what's helped me personally is this trend towards transparency. So for example, I can hop on Twitter, and you certainly could not have done this in 2003, 2004, but I can tweet out a decision like, "Hey, I'm recording a podcast. Which of these topics sound the most interesting to you guys?" Or last week, I tweeted, "Hey, I'm having trouble with my affiliate marketing program. What am I doing wrong?" And the amount of amazing support and feedback that I got from people was staggering. Everyone jumped in and had different opinions for what I could do. And I think from a practical standpoint, obviously, getting this kind of advice is good, but even from a psychological or an emotional standpoint, just having other people who've been through what you're going through makes it way easier when something goes wrong, because it doesn't feel like you're completely alone. And I think a lot of founders who haven't found a community, who aren't on the Indie Hackers forum or aren't on Twitter and don't have people to talk to, end up getting sad or quitting or getting depressed, because they just don't have anyone to share with. On a different note, I'm really curious about how you sold Grasshopper, because when it comes to selling, there's always two questions that I have. Now you ended up selling to Citrix in 2015, and one question is why Citrix? And the other question, I think, is a little bit more interesting, but it's why sell at all? Because at this point, you've been running Grasshopper for 12 years. Your business was incredibly successful, and I'm sure it felt a little bit like it was your baby. I've only been running Indie Hackers for five months, and I already feel like it's part of my identity, so I can't even imagine 12 years. What kind of framework did you have in your mind for determining when to sell?

David Hauser 0h 43m 45s

Yeah, great question. So first, from day one, we never had an exit plan. People kind of asked us this question, and they kind of thought we were crazy. We were like "What do you mean exit plan?" Like, we're building a business, because we want a great place to work. And we think we're solving a real problem. Like, why do we need an exit plan, right? Part of this was we were also bootstrap, so we were never pressured by VCs or others to have a, quote-unquote, exit plan. So we never expected to sell the business, quite honestly. Citrix approached us. The process took over a year from when they first approached us to when we sold it. There were a lot of reasons that it was a good fit. I think the timing made sense. As founders, we had been in the business for 11 years. All of our personal wealth we had generated was in the business, right. We had no reason we needed to sell. You know, we drove the cars we wanted, or car, I should say. We lived in the house we wanted to live in. We didn't have extreme lifestyles, but we had the stuff we wanted, right, and, you know, I think that's, as being an entrepreneur, that's kind of part of the goal, right, is to have the flexibility and to have what you want, not to have crazy things but just have what you want, right. So there was no reason to sell. But as we went through the process, we found more and more of a fit with Citrix. You know, culturally, they believed in keeping the name Grasshopper, that brand which we cared about. They cared about the employees and keeping them. And end of the day, the monetary and structure of the deal made enough sense that it was impossible to say no to, right. And I think that the best outcome is when you're not looking for that. And it worked out very well for us, and the companies still thrives today within Citrix.

Courtland Allen 0h 45m 45s

What's your role been like since then? Have you been helping out with the company at all, or is it kind of a clean break?

David Hauser 0h 45m 51s

It was actually 100% clean break, so we closed in the middle of May in 2015. And the next day, I'm like, "Holy shit, "I need a new email address, because-- They're like, "Your email's gonna forward for a few months, but you got to figure something out."

Courtland Allen 0h 46m 6s

Right.

David Hauser 0h 46m 7s

So like, you know, every user name I had for every account, like, you know, everything, right, but I think it worked out well. You know, we had a management team of five other people that were running the business, and that's part of the reason Citrix didn't need us to stay. And it worked out very well for us, and it worked out well for them, where they didn't need to find a place for two founders and give them a salary for no reason. So yeah, it was pretty instant. It was like okay, that's it, done.

Courtland Allen 0h 46m 38s

I think it's pretty impressive that you guys built a business that could completely run without the two of you.

David Hauser 0h 46m 44s

Yeah, I think partially, intentionally done it, and partially, you know, by mistake. We hired people to fill in the gaps for the things we didn't like doing. Over time, those people got better and better at doing those things, so there was no reason to have us around as much. I then moved out of the office, so being remote kind of forced more of that. And, honestly, the team we had was just an amazing team, and I love all of those people that have been involved in really set us up for success and did the things that, as founders, we could never have done, brought structure to the business, brought process, brought years of experience in other organizations and what we really needed to be able to scale to that point.

Courtland Allen 0h 47m 36s

So what are you up to now? 'Cause obviously you're in a financial situation that is, I'm assuming, pretty good, and in some ways, that limits what you can do. It limits what's even worth working on, but obviously, it also gives you the ability to work on things that you never could've earlier.

David Hauser 0h 47m 52s

Yeah, so I spent a year kind of thinking about that, doing a lot of different stuff. I spent some time with 500 Startups and helping out with their Mountain View accelerator program, so working with some companies there. I've made a ton of angel investments, both prior and-- And now really, I've come to the realization, about a year-and-a-half after the sale, what we're gonna do is we want to buy a SaaS business, preferably in the SMB space, but we'll look at any SaaS business that's doing between half-a-million to a million or more in annual revenue. And we're gonna buy it and scale it, like we have. So that's gonna be our next step, and we'll still do investments and other stuff, but honestly, I've slowed down my angel investing and really targeted very specifically to companies like Groove, that I made an investment in, who is both profitable and didn't need the investment but was looking for both advice and structure in certain areas, and, you know, different, very specific things, and in doing so, those are the types of investments that I'll be making more of.

Courtland Allen 0h 49m 9s

It sounds really fun, I think.

David Hauser 0h 49m 11s

Yeah, I mean, hopefully, it is. Ask me in a few years and then see. Maybe it's totally changed, and I decide to do something different, but, you know, after a kind of year of thought and testing different things out, this seems like what is most interesting to me.

Courtland Allen 0h 49m 26s

I want to wrap things up by hearing kind of your general advice for people who are indie hackers or aspiring entrepreneurs. What resources did you fine helpful, and what stories are inspiring to you, and what do you think somebody who's just starting out should know about?

David Hauser 0h 49m 42s

Yeah, so I get this question a lot, and I've thought about it so many times. And one part of me felt like my advice should change over time maybe, right, like, because things change, industry changes, but I keep coming back to the same thing, which is I think the best piece of advice is just go out and do something, anything, right. Rather than talk about it, rather than, you know, wait and see what users think, just do something, right, because I would prefer to see an entrepreneur fail at something than fail at doing nothing, right. And I think that today we spend so much time reading, and there's so many resources, right. I could say go here, go there. There are so many great resources, blogs and podcasts and everything else. We can consume so much information that we get into this paralysis of like okay, like, all right, I need to know my next seven steps. Like, no, just do one step and do something, right. If it's build a product, if it's talk to a customer, if it's sell something, collect a credit card, like just each little step, just keep doing them, right.

Courtland Allen 0h 50m 51s

Yeah, I meet a lot of people who are, they've been contemplating starting a business forever, and they're just consuming things, and they never really get around to actually starting. And so I think in terms of bang-for-your-buck advice, that's probably the most valuable just because of the sheer number of people who are on the fence.

David Hauser 0h 51m 10s

Yeah, I wish I had better things, like, yo, go do these three hacks or go do this, right. But in reality, I think if you're doing something, you're getting up early in the day, and you're working hard, you'll find something that you both love and is successful. It may take a few failures. It may take time. There's no magic to it, but if you combine those things, you're at least on the right path. If you're not doing anything, and you have a schedule, and you're not eating well, like, you know, like nothing's gonna work. It doesn't matter if you're an entrepreneur or not.

Courtland Allen 0h 51m 48s

Agreed. Well, cool, it was great having you on the podcast, David. I know we didn't get to talk about a lot of different stuff, Chargify, for example, and I've got about 20 other questions here that I did not get to ask, but maybe one day in the future, you can come back on.

David Hauser 0h 52m 1s

Yeah, absolutely, and if anyone has any specific questions, feel free to reach out. I'm on Twitter. My email address is readily available online. I'm happy to talk to entrepreneurs that take the time to, you know, proactively reach out and have a real question or something I can help with.

Courtland Allen 0h 52m 19s

All right, thanks, David.

David Hauser 0h 52m 20s

Appreciate it, Courtland.

Courtland Allen 0h 52m 28s

If you enjoyed this conversation, you should join David, me and other indie hackers and aspiring entrepreneurs in discussing this episode on the Indie Hackers forum. Just visit www.indiehackers.com/forum. Also, make sure to subscribe, so you know exactly when I release new episodes in the future.

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