David Hsu (@dvdhsu) was able to grow Retool to almost a million dollars a year in revenue before making a single hire outside of the founding team. Rather than stopping there and resting on their accomplishments, Retool set an even more ambitious goal: to literally change the way developers write code. In this episode, David and I discuss the benefits and the perils of deciding to "go big," the keys to finding product-market fit and word-of-mouth growth, and opportunities that founders can take advantage of in the low-code space.
https://retool.com – David's low-code SaaS for building internal tools very quickly
@dvdhsu – follow David on Twitter
What's up everybody? This is Courtland from IndieHackers.com and you're listening to the Indie Hackers Podcast. More people than ever are finding ways to build cool stuff on the internet and making a ton of money in the process. And on this show, I talk to these Indie Hackers to learn about the latest ideas, trends, and strategies they're taking advantage of so the rest of us can do the same.
If you've been enjoying the show, do me a favor and leave a quick rating for us on Apple podcast, it really helps other people discover the show as well. Today, I'm talking to David Hsu. David is the founder of Retool, which helps companies build internal tools way faster than having to code them from scratch.
What's really cool about David's story in particular is just how ambitious he is. With the founding team, without hiring anybody, you were able to grow to about a million dollars a year in revenue pretty quickly, and they didn't stop there. They decided that their ambition was to change the way that people write code.
They've raised a boatload of money to accomplish that mission. And I think they might have a shot at actually doing it. Today, Retool is just a few years old and they're already doing tens of millions of dollars a year in revenue. A big part of David and I's discussion revolves around how they're able to grow so quickly. But also how do you decide to go big as an Indie Hacker? What does that process look like? And what are the tradeoffs involved? Enjoy the episode!
David Hsu, welcome to the Indie Hackers Podcast.
Thanks for having me, I'm really excited about this.
I was looking at our history over email to try to find out like when was the very first time that we spoke. And it was actually an email you sent me that I didn't respond to you because at the time I thought it was automated, but now reading it, it seems like you almost typed it by hand. It was right after you launched Retool on Hacker News. I saw it and I was like, "Oh, this is super cool." Like, you can build these internal tools way faster.
And I had been building tons of internal tools for myself to just give me more leverage and like be more efficient running Indie Hackers. And so I was like, I should use this. So, I signed up and then I think two days later you sent me an email. You're like, "Hey, it's Sunday night, but I'm working on Retool and got any questions? I'm the CEO, this is what I'm here for." And I just archived it, and didn't respond.
Yeah.That was like you said right after we had launched at Hacker News, I think. Yeah. That point, Retool was tiny. I think it's just a few of us. We had worked on it for a little bit. I think this must've been in 2018.
Yeah. August, 2018, almost exactly two years ago.
Yeah. So that was, I think a year after we'd already gone through YC. And then we worked on Retool, doing outbound sales and coding, basically for a year until we finally launched it. And I was so excited when I saw that you signed up, because I mean, I have already been a fan of Indie Hackers for awhile, this sort of whole Indie Hackers e-tools.
I mean, we were living that at the time, right? We were just, you know, a few of us coding away, selling away, and stuff like that. So, I was really excited to see you sign up. I was kind of sad you didn't respond, but excited to see you signed up.
I was excited to sign up and we eventually started talking quite a lot because once I got into the tool, I think you had like an Intercom widget or something for feedback in the bottom right and it was early days. So, they were just features that were missing at the time.
And I was like, "Hey, you know, Retool team, can you build this?" And you're super responsive. You would reply like, "Yeah." And often, you would, within like the same day, add a new feature or push like a bug fix or something.
And this just like happened for probably like the first couple of months I was on Retool where I would just like make all these suggestions and see all this stuff going on. And like, I know you were probably doing the same song and dance with a bunch of other early adopter customers too.
Yeah. It's interesting. Not as sort of dive into too deeply, but I think sort of from a product development strategy perspective, a lot of people really think that sort of being very reactive or sort of just building what customers want is, you know, all the time seen as a bad idea. But I think in the early days, it's by far the best way to find product market fit. Because had we not built those things you probably would not be using Retool today.
And, had we not built those things all the other five businesses would not be using Retool today either. And so, I think in the early days, reactive product development, building exactly what customers want, allows you to hone in on product market fit very quickly. I think it's quite underrated.
I interviewed John Collison, probably around the same time, a year and a half, two years ago at an Indie Hackers meetup in Dublin. And, we got onto this topic of how do you as, you know, a prospective employee or maybe an investor evaluate a startup? If you want to see, you know, it's just going to turn into something or is it going to crash and burn.
And I think the conclusion that we worked around to was the best thing you can do is look at where they are now, ask them about their goals and what they're working on, and then check back, you know, in a month or two and see how much they progress with their product, how many more customers they found, just kind of want to look at their progress.
And I've seen this pattern over and over again as a user of software. So 10 years ago I was using the Heroku, and I was pretty early to Heroku. So, I was in their chat too, just asking them questions, making feature suggestions, and they were working super hard and like making all these changes based on things I was suggesting. And I was doing the same thing with you and Retool.
I did the same thing with the app we're using to record this podcast, Riverside, and the founders are super responsive. They're messaging me on Telegram, asking questions, making fixes all the time. And the consistent trend that I've noticed is actually, if instead of just using these products and making feature suggestions for every one of them, I had just invested, I probably would've made a ton of money by now because all of these companies have really good turnouts.
They're all way bigger than they were when I was like in their chat making feature suggestions. So, it was cool to see that you fit the same mold with Retool.
Thanks. Yeah. It's just that you and John were talking about this, because I think it's a pretty common idea that sort of, you know, it's not the, what is it, the y-intercept that matters, it's really the slope that matters. And everyone says that obviously, but I was like, "Okay. Yeah, sure. Whatever, you know, that's what people say."
But I experienced it firsthand during YC, which I know you also went through. But during YC, because everyone comes in, there is a very different winder's reference. People come in with no idea. So, if you will come with an idea but no-code ribbons, if you will come in with a million dollars in ARR or whatever else. And it's interesting, of these sort of no matter where, if you look at the batch that we were in, sort of no matter where people came in, the biggest successes today, if you look at it, we're the people who've made the most progress rather than sort of you came in with 500K of revenue, and you know.
Because I remember during YC, I was so intimidated by them. I was like, "Wow! If I were to count revenue with no revenue, no customers, how are we ever going to catch up?" It's ridiculous. And yet, I think progress is much more important.
The other thing I think about is one half of the equation is, "Okay, you're making all this progress and you're being responsive to customers." But on the other hand, like, I was still using Retool despite it missing things. I was still using Heroku despite it missing things. Like I was still using Riverside despite there being like bugs and errors and wonder where your opinion is on this.
Like how much more important is it that you're building something in a market where customers love what you're doing or need what you're doing so much that they're willing to put up with a bunch of crap versus how responsive you are to all the crap that they're complaining about?
Yeah. I think that's really interesting. When I use products now, oftentimes I sort of am most excited about the products that are semi unpolished and I can sort of see the rough edges or I can see the bugs because then I almost feel as if the product was sort of more powerful or it's like built for me or, you know, something like that.
Whereas when I see a really polished product, I almost feel like, "Oh, you know, there's probably knowledge improvement to be had at this point, and so this product, it's already pretty mature or whatever else. So I was more excited by the product that has rough edges. But to your point, I think, you know, exactly, I think the product market fit is much more important than how polished a product, especially in early days.
Even today, I think Retool has a lot of rough edges and a lot of things we could be improving on, but it's, you know, fortunate in that when you have product market fit. And I found customers that use it despite the bugs, it's a good litmus test, I think.
So, let's talk about your market, because I think the space that Retool is operating in is something that would be super insightful for most founders to just know more about, even if it just gives them like, sort of general business principles, but like specifically, because a lot of trends going on, a lot of opportunities to go to build in the space. And I think what you're doing is obviously incredible. So, what is Retool and how would you describe the market that you're serving?
Yeah. So, Retool, our goal is to be a fundamentally new way of building software. The idea is you sort of look at, you know, buildings off of the past 10, 20, 30 years. The building itself actually hasn't changed very much, right? I mean, you and I are both engineers, right? So we sit in front of a computer and we basically just write code.
The code itself has changed, maybe 20 years ago we were writing Java, 10 days ago we're writing a JavaScript, today we're already JavaScript ES6 now, I guess. But fundamentally it's the same stuff, right? To get a computer to do things, you sort of write these tokens, you define functions and you call functions and you know, things happen, right?
The idea behind Retool is that, hey, you know, for a large class of software, we're starting with internal software specifically, so internal tools basically. The idea is that for this very large class of software, maybe there could be a much higher level way of building the stuff, instead of let's say working in writing JSX, you know, sort of working on the DOM individually.
What if you could sort of have a drag and drop interface where you say, "Hey, I want a table, I want a button," so you drag on a table, drag on a button and you say, "Hey, this button should make a post request and it should make it to this end point or something."
And so, you can sort of use the drag and drop interface to get to something like 50, 60% of the way, so it's, you know, very fast. But then, customize the sort of remaining 30-ish percent, let's say by actually writing code. So, that's what Retool is sort of in a nutshell. It's kind of interesting because, when we first started and when you think about Retool as like an abstract idea, you're basically giving developers a drag and drop way of building software.
And that sounds sort of identical to what every developer wants, right? No developer wants to use a drag and drop some tool to build things. And yet people do actually use Retool. And I think part of it is, you know, to your point, I think if you're able to find sort of a product market fit or in our case, I think developers really don't like building internal tools, I'd love to hear your story about how you started using Retool.
But I think developers fundamentally really don't like building internal tools and so they're like, "Oh, you know, there's a fast way of doing it." It is drag and drop, but, hey, you know, it's actually much faster. It's actually pretty flexible because it can write code so let's give it a try and see what happens.
Yeah. Probably the trend most people are familiar with today is no-code, which are all these tools that are trying to empower non-developers to build things that previously only developers could build.
But Retool is very much targeted at developers, which I think is an interesting take and like, you're right, like, theoretically, just sitting down if you'd asked me, "Do you want to drag and drop interfaces to build stuff?" I would say no, but like, maybe that's because in my experience almost all drag and drop stuff has tried to abstract away the idea that there's code here. And it's not as powerful because it doesn't cater to developers, it caters to non-developers.
And I also think there's another part of it where developers are just like skeptical, and a little bit defensive. Like nobody wants to hear that like, "Oh, your job's going to be taken away like some automated tool." Was reading a threat on Hacker News the other day about no-code, and I think the take in the actual post itself was pretty reasonable, but of course, 99% of the comments were "No-code has no future.
You can never replace developers, et cetera, et cetera." So I think we've got like, you know, maybe a little bit of a bias, a little bit of an incentive to not want no-code stuff to work.
Yeah, it's interesting. Two things, first of all, when we started Retool and there was no sort of low-code or no-code space. And so it's been kind of interesting watching a space sort of happen around you. I don't think we caused anyway, but I think we certainly benefited in a bunch of ways. For example, there's a more enterprise interest, for example, low-code no-code stuff today, as well as investor interest, which has been helpful for us.
But secondly, I think I agree that I think most people talk about no-code, but if you really think about it, I think low-code is actually more interesting. And the reason is if you think about no-code, it's basically, you know, you sort of can customize software without writing code at all. And that's pretty good for some use cases or maybe even a sort of a good chunk of use cases.
But fundamentally, a lot of the software that people want, they really want to be able to customize it, right? And it turns out that writing code is a pretty good way of getting a computer to do something. Probably a pretty good example actually is if you think about like a switch statement. So a switch statement is pretty simple for you to write in code.
You know, you just say, switch this case 1, case 2, case 3, case 4, whatever. It's pretty simple, right? But if you're going to do it in a gooey, it's actually pretty hard, you know, you might want to start drawing sort of no's, you might want to start drawing edges, it gets pretty complicated, right?
And so, I think code is a pretty good way of getting computers to do something. And so I think the real opportunity really is sort of combining both approaches of no-code, but also code. So maybe, you know, you use no-code to get to something like 50, 60, 70% of what you want, but the last 30 or 40%, I do think you have to customize with code.
I don't think code is going away anytime soon. Probably bet that, you know, 20 years we're still writing code. I would bet. And so I think the combination is what was really powerful. And I think that is a sort of a fertile ground for exploration today.
I love that you're building in the low-code space, but you're long on code. You think code is here to stay.
And it almost seems like that will be the opposite. Like why are you doing low-code tools if you think codes are going to be around for a while, but like, it makes sense you want, if people are going to keep coding, to make it easier and make them more productive. So you're in the low-code space, not the no-code space.
I think most people think the opposite way. They focus more on trends and the fads. There's a famous Jeff Bezos quote, where people were asking him, you know, what's going to be different in 10 years. And he's like, I don't care about what's gonna be different. I care about what's going to be the same in 10 years.
And if we're just focusing on these fads and you're always trying to sell shovels to people in the next gold rush, then when the gold rush ends or when the fad goes away, like you've nobody to sell shovels to. So I like your approach, I think it's much smarter. And if you can build on sort of an enduring trend, then it's much less risky, it's probably going to be around for a while.
It's something you can bet your company on. And the trend has just more time to grow and get bigger as more and more people learn how to code.
Yeah. It's interesting. If you look at the major SaaS companies over the last, maybe five, ten years, I guess I'm thinking post-fad developer facing ones. If they want to Stripe, Twilio, to some MongoDB, all of these things are infra E, right? The goal is to, you know, enable other businesses to do more things, right? It's like process payments, start companies, send text messages, telephony, all that kind of fun stuff. So, yeah. Agreed. I think we're lucky to be selling shovels.
Even in the consumer facing world, I mean, you've got all these different creator economy platforms that are enabling people to build these businesses they never would have. And so, you got people on Shopify and Etsy, got all these YouTubers, Twitch streamers, Substack authors, and now they're all running with these online businesses and you can come in and provide lots of tools, shovels, basically, that just give them more leverage.
They can do what they're doing better. You can help them clip up their YouTube videos and promote them on social media. You can help them make their TikTok videos, have all these cool special effects, you can spruce up a Shopify store or whatever it is. And there's just a ton of ideas here that I think people should explore and we'll get into this and how you're doing this in the low-code space.
But before we do, I want to talk about the early days of Retool, because you're able to get to something like seven figures a year in revenue with just the founding team, and then you decided to go big. So I want to talk about how you did that, how you grew so quickly and also how you came up with the idea for Retool in the first place?
Yeah. First of all, thanks. We're Indie Hackers, you know. We wanted to start small and see how far we can go. So, when we started Retool, we started it because we ourselves built a lot of internal tools. We'd actually previously started at a different company. It was in the FinTech space, two of us. It was really, it didn't go anywhere, so it was really a failure.
But, during that period, we ourselves built a lot of internal flows. And you can imagine sort of, you know, the internal tools that Stripe might have, right. It's a lot of stuff around no KYC laws, around AML laws, or a lot of regulatory things, a lot of fraud things, et cetera.
When you build enough internal tools, I'm sure you went through this yourself, when you build enough internal tools you realize that all of these tools, despite doing very different things, all kind of look the same and basically have the same building blocks. And so, you know, whether, for example, for you guys at Indie Hackers, let's say managing the community, for example, that tool is very different conceptually from a tool that Stripe might have to let's say find risky merchants or whatever else.
But fundamentally, the building blocks are basically the same. It's basically tables, buttons, forms, text inputs, dropdown, and stuff like that, right? And so the idea really came from the fact that you don't, I think we're all engineers and we were a little bit lazy and thinking to ourselves, "Hey, you know, maybe there could be a faster way of building all these internal front ends as opposed to just writing code from scratch every single time."
So that's where the idea of Retool came from. And when we went through YC for probably around a year after YC, we didn't hire at all. I think part of it was having gone through YC yourself, you've probably seen this too. I think from the outside wise, the company seems so successful and when you get into YC you feel so great and feel so amazing.
But in reality, when you get into YC and when you graduate YC within six months, something like 20, 30% of the companies are dead, for a variety of reasons. And so for us, we were always extremely scared of death. We were always very worried we'd be sort of one of the companies that graduated, raised the seed round, it seemed really hot, whatever else, but then three months later shut down.
And so, our genius strategy to not die was to not burn money, so we just didn't spend any money. So we just didn't hire anybody. And so, that's really sort of where the fear of death is where the motivation for not hiring came from.
But, I think that not hiring in the early days actually has a lot of advantages later on. Even if you do decide to raise money. I think, hey, it really builds your muscle for a lot of things that you do at the company. For example, I know of many technical founders, for example, who say, "Okay, I build a product, I'm going to go hire someone to sell this thing for me."
I think that very rarely works. In our case, we had no one to sell it, so we had to sell it ourselves. We had to do support ourselves, we had to do marketing ourselves. Everything's sort of, you know, we did ourselves and we actually learned quite a bit by doing that. I think, when you signed up, we were probably at maybe 500K in revenue, something around there, and the team was still…
Oh, wow! So you got a ton of revenue before you launched?
Yeah. I think people always see you can launch multiple times. I'm not sure I entirely agree with that. I think especially on Hacker News, there is fatigue if you launch five times and nothing happens. The sixth time, you know…
You can certainly exhaust the channel, for sure.
Exactly. And in our case, I think for a developer tool, Hacker News is the place where you want to be. Possibly Product Hunt as well, but really I think Hacker News. And so for us, we want to launch once, I think at that point we had maybe 20, 30 customers together, you know, around 400K in revenue or something.
It's almost about 20, 30 customers, we ourselves are fairly confident that we were onto something interesting, at least, cause probably not 20, 30 people were crazy.
Yeah. I mean that's a lot of money per customer. $500,000 a year, 25 customers. It's not that many customers, that's like $20,000 a year per customer.
That's way more than most Indie Hackers charge for their very first sort of beta products. And what's cool is like you weren't doing this with an enterprise sales team that you went out and hired. Like you were just the founders doing the sales yourself, the same way that every other Indie Hacker does sales, but just charging way more per person.
So I'm going to dive into this, but not quite pricing yet. I want to talk about the idea, because you mentioned something that I love, which is that you were working on something else, and you had to build all these internal tools. And then you realize, like, that was a much better idea. And I always suggest that people, you know, come up with ideas by starting something, anything.
And in the course of running that business, like you'll probably have better ideas. So I'm sure you had lots of ideas while you were working on your other business. Why did Retool stand out among all of them as the most promising?
First of all, I just want to agree with you on that. I think when you try to come with startup ideas in a vacuum, it's actually really, really hard.
And most founders come up with maybe plausible sounding, but probably don't actually have a market because you're trying to build for yourself, but don't actually have an experience, right? And so it's funny because before starting to Retool, we don't have that many ideas really. But I was starting which we actually have many more ideas, but of course still working on Retool, Retool's going for real and focused on it.
But it is funny that by starting things, you actually get much more idea, many more ideas. So, when we decided to start working on Retool, I think most of, we had a few other ideas, too. I knew a few friends who sort of write down 10 ideas on a whiteboard and they just try to buy ad words for all of them and then they try to sort of optimize the CPC and everything and they try to calculate, and then they build a landing page for everything.
They built landing pages for all their 10 ideas. I think that strategy very rarely works because the signal that you get in the early days is so noisy, you know, you might get one signup and you might feel sort of, you know, so excited and it's sort of on top of the world early that once I don't, you know, it might not mean anything, right?
And so in our case, we picked Retool primarily because we ourselves had the problem before. And so we thought we can't be that weird. Probably other people have a similar worldview set of problems, stuff like that as us. But I think also we just maybe because we had the problem before we were also highly convicted about Retool, because, you know, we are supposed to like, this is a deal we will certainly do.
So, I think instead of doing, let's say a lot of markets, sizing research, you know, Googling, let's say internal tools, market size or something like that, or, you know, trying to build landing pages and buying ads for them. I think conviction really is by far the best way to decide a startup idea. I think it could go raw to be clear, but what I think if it, you know, for the startups that went well, I think it really almost always was conviction.
So if you look at companies like the big ones today, that'd be quite similar to stay like Airbnb, Stripe, everybody sounds like a pretty stupid idea, right? I think there is that joke where, I think when they were initially looking more of the size and then calculated that based on how many air beds there are, or how many air beds are being manufactured every year. If all air beds eventually come out at Airbnb, be how big is the market, right?
And so I think a lot of the analysis is kind of stupid. It doesn't really get you anywhere or it doesn't build up conviction. It should not be the reason you start the company.
I'm big on conviction too. I think most companies die because the founders quit, but there's also this very classic problem of being an overly optimistic founder, where nobody and nothing can tell you that your ideas on a good one, you're just super convicted and no matter what you run into, just never pivot, you never change.
And you just have this really terrible idea that like, you're just like beholden to for year after year. How do you avoid that? You know, how do you make sure that your conviction alone is something that you can trust if you're not going to do all this like market sizing and idea validation, and really just delving into things to make sure it's actually a good idea?
You should look at the market sizing in general, in our case, I think we're quite fortunate where our goal is to change the way software is built as it was a pretty big market. There's something like 20 million developers in the world. And 20 million times, let's say, you know, average a 100K salary per developer, pretty big numbers.
So I guess we didn't worry too much about that. But I do agree with you. I think you should look at the market, just get an overall take. But that's it. I do think there's almost always a path out of every small sounding market. It's like the air bed thing, right? Like, you know, if you do the back end of the calculation, they've worked for air beds.
It's probably not that big, especially air bed rentals on a daily basis, you know, sounds pretty small. Right? And yet sort of the path out and now that Airbnb has a tremendously large market opportunity and it's captured a lot of it already. So I think there almost always are ways out, as long as they're able to find early adopters.
I think the early adopters are mostly found via conviction or via your conviction that you can find them. Then you find people who are similar, hopefully if you're working on a problem that you yourself had or would want solved. So I think market sizing is somewhat important, but I wouldn't focus on it because I think there's sort of a way out of it, anyways.
I do think it is important.Despite having conviction to gather feedback from the market because you will probably learn things. I think while most will give you feedback, it doesn't come from a place of, they're not trying to sort of intentionally shit on you. They're not evil, right? They're not giving you feedback, probably, not like you probably, like their intentions for sure, basically have a feedback.
And so, this actually happened to us where we started Retool, the first thing we did was yes,to write code. And then, after we built an MVP, we attempted to find people who might use, who would try to find customers, basically. The first thing we did was conceptually Retool's quite similar to something called FileMaker.
That's the company that I think Apple bought maybe 20, 25 years ago, something around there, it's also conceptually somewhat similar to Microsoft Access. And so, our idea was okay, you know, given that Retool's similar to these two things, but, you know, a substantially newer, you know, maybe more high-performance, you know, better because a lot of other reasons, would you try to find people who use Access and FileMaker and see what they think of Retool.
And so, I remember I went onto LinkedIn, found a FileMaker user group, pretended to be a FileMaker developer, I think I changed my title on LinkedIn actually. And then applied for membership in the group, got in, saw the 300 or so members that started cold emailing every single one of them saying, "Hey, I know you use FileMaker.
I saw you were in this group. I was also fine with these users back in the day, I would love to show you Retool, which is a slightly different spin of FileMaker and as you know, better, these ways worse than these ways, we'd love to get your feedback. And how do the 300 or so emails that we sent? I think we got maybe three replies.
So the reply was kind of dismal given that, you know, I was targeting FileMaker developers, right? And of the three replies, I think all three of them told us retool was a terrible idea and that they would never use it. And that, we should probably go work on something else because it's such a bad idea. We should not waste the use of our life on this.
And so, I think it's important to have conviction, but also when you gather data, I don't think they were telling this to us sort of veers off course, or yet to be evil or whatever else right? I think they really believed in it. You know, they really believe that they did not have any use for Retool.
And so, in that case, I think you should sort of take into account this new information. And in our case, what we found is actually the market is not FileMaker developers or Microsoft Access users. Rather, it is sort of software engineers who are building internal front ends with react, view, angular or wherever else.
And we've pivoted quote and quote, our market to that. And now it's gone, you know, uh, quite a bit better. You know, now when we send emails, the sponsor is a little bit higher and, we don't have a hundred percent objection rate anymore.
And so I think are maybe two lessons, one is that you should have conviction, but you should also be willing to change and be flexible, to change your conviction depending on sort of the information that you find it, because most of the reasons you get, I think is, comes from a good place and they're not trying to mislead you.
But secondly, I think it is an interesting thing of product market fit, where I think when most people, at least we thought about it this way, we think about product market fit.
You mostly think about how could I change my product to serve the market? And so, you know, most people pivot the product, they don't pivot their market. Right? But in reality, I think product market fit is two dials. They've got more dimensions than just twisting it up now a little bit, you know, you can sort of twist your product dial, but also twist the market dial.
And, in our case, the product dial was working. You know, if you think about the product that we sold today, compared to the product that we had four years ago, we had one more feature, a lot more bells and whistles, but fundamentally it's the same thing. It's just, the market has changed.
And now this market is much more receptive to Retool than the FileMaker or Microsoft Access market that we thought we should go after.
I love that. So if you don't have the conviction, when you get the negative feedback, you're not going to stick with it, you're going to fail. And it turns out if your idea is pretty good, like maybe the timing is slightly earlier, maybe like you talked to the wrong customers and you need that conviction to push through that sort of early adversity, which in my experience is pretty common, even with ideas that tend to work.
Like the very first podcast guests I had, episode number one was this guy, Jason. And he has this really cool product where if you're making music, you probably want to do is market your music.
And so there's all these different music blogs out there. And musicians and producers will like submit their music to these blogs and be like, "Hey, would you push my song to your audience?" And he ran one of these big music blogs. And he mentioned he created a SaaS app that allows you to like submit to all the different blogs for like a dollar, a song or something.
And he had an email, like a thousand people. And the first, like four months and everyone was like, no, we're not going to use it. Like, this is so stupid, like, and eventually worked and like, almost all those naysayers are using it, but like he just had the conviction to push through. And I've had like, even with Indie Hackers, emailed 140 people to get my first 10 interviews.
And like the vast majority of the people I emailed are like, "This is the dumbest thing I've ever heard. I would never share like my revenue. You crazy?" And now a lot of those people have been on Indie Hackers, like my good friend, Vincent Woo. He rejected me like stone-cold and was like, "I would never do this."
And he's been on the podcast twice and shares like all of his revenue numbers and all sorts of stuff. So, it's pretty fascinating to see how important it is to kind of pushed through that early sort of negative feedback if you get it.
Yeah. I think this is one of the big values of YC, is hearing how fucked startups were in the early days, or how difficult was the early days. Because then you're like, "Oh, actually I could do that too, you know.
It's not like sort of everything immediately went well from day zero and it's been amazing since then. We get to learn about sort of the early stories that you hear at YC, but even at YC startup school, when you listen to the talks online, it is crazy how much adversity, almost every startup experiences in the early days.
And if you push through, you know, you may really, you become Stripe or whatever else, right? And it's really incredible.
Also curious about the shape of your growth in the early days. Because you don't necessarily know you're on a really good trajectory, right? Were you growing linearly? Were you growing exponentially? Like how obvious was it that you were really onto something?
It was mostly linear and for a while, that was actually very worrying because I think if you look at it at an exponential curve at the Reed beginning, it also kind of looks linear. So, you know, when you go from a 1000 to 1,500 in revenue, it's like, yeah, it's fifty percent growth, but it doesn't sound like that much, right? It's $500 or something, right?
And so for, maybe the first six to nine months, I would say we were quite worried actually, that the growth was too linear and that, you know, this was sort of never takes off. And that was quite concerning to us. Part of why it was linear. I think it was because we never got, in the early days we didn't get the flywheel really going.
And so, if you think about how most B2B companies start, anyways, in our case, we started by doing outbound because no one heard about Retool, right? And so in order to get customers, we actually just had to go email people that we didn't know.
Also, that one didn't work one bit because we always had to go email people that we didn't know.
And, there was a lot of iteration on sort of the exact outbound messaging. You know, we tried the FileMaker thing that didn't go very well. And then we pivoted over into building internal tools faster, et cetera. So we're trying a few different things. But in the early days it really was, we sent outbound emails, we got some demos.
Of the demos we do the demo, see if interested, et cetera. A lot of people say, no, some people say yes. And the people that say yes, are probably just not ready for them. And so we have to go and build all the features required to actually get them to use Retool. And then you repeat that basically.
It's also interesting because I think people's memories of the early days are oftentimes quite rosy. And I think if you talked to, you know, most of the solo founders you guys have had on this podcast, it's easy to forget how much adversity there was in the early days. But I looked back at my calendar actually, cause in my head I'm thinking, "Oh yeah, you know, sales is so easy back in the day, we just do demos, they've closed, maybe 80% win rate, something like that and whatever, right?"
When I look back at my calendar, I see sort of all the demos that I did three years ago. And I remember getting so excited about, you know, everybody's opportunities. And then when you look at how many of them actually closed, only maybe 5% or 10% of them actually closed.
So, it's funny that when I think back to it, without looking at the calendar, it's like, oh, you know, the sales was so good back then, you know, it was so easy, But in reality, it was, we would do 20 demos, maybe three out of the 20 would be somewhat positive, of those three would lose two of the anyways, eventually closed one.
And so, there was a lot of cold outbounding in the early days. And because of that is quite linear because we never got word of mouth really going at the beginning. Once we picked 20 customers at launch, I think word of mouth really started getting going, and now it's pretty exponential, but in the early days it was definitely linear. And I think all startups are kind of that way, so.
How important was it for you to get better at sales as a founder? Was it like a thing where you're just improving your skills, you're sending better cold emails, you're doing a better job demoing or was it more so that you were just learning about your market and picking the right people to talk to and the right pitch to get?
I think both, which is I think why founder-led sales is so important. On this second point, I think you learn a lot doing sales. You learn a lot more about your product doing sales than even building the product, I think. Because you talk to customers, you see what their needs are, you see what they like, see what they don't like, you mentioned particular features their eyes light up, you mention other features they don't care about them.
And so there is, you sort of really hone down on the messaging, how you talk about the product, what features you should be building, what your product roadmap should look like by talking to customers, not by building products, which is kind of counterintuitive.
Was there like a turning point for you where you were like, "Oh, this is really resonating. We're building the right features, I'm saying the right things, and it just got easier?
Eventually, yes. For a very long time, we thought we did not have product market fit. We thought that we just found 30 people, 50 people, a hundred people, a thousand people that liked Retool, but maybe they were all kind of defective in their own way or something.
I'm remember this Cortland guy, you know, he likes Retool, but he's kind of a weird guy. So in a sense it's going to be hard to find out how many more Courtland's, right? Surely. So, for a very long time, I didn't think we had part of the market fit.
That said I too think that it did appear the demos are resonating, but then again, I mean, given sort of, you know, the fact that we did 20 demos, 17 of them didn't go, well, yeah, maybe three resonated, but really I think we were focused on something that didn't go well, rather than three, that went well.
So emotionally, it felt that we were not making that much progress or progress were quite slow. Even though, of those three, if we close one, that's actually a huge win for a small company of a few people, right?
I think what's good about this is that you had a business model that allows you to do this.
For example, like I talked to a lot of people selling their apps for like 10, 15 bucks a month. And if they spent all their time doing sales and they're closing like, you know, three at a 20 demos, they would end up with like 45 bucks a month and they would have to let go, get a job because it just doesn't work.
You, on the other hand, 20, 30 customers got you to 500 grand a year. That's insane. Like you're obviously charging quite a lot of money. How did you decide what to charge sort of land like that high of a revenue point?
Yeah, I think a lot of it is pushing boundaries. I think most people overestimate the irreversibility of pricing or quoting pricing specifically.
And so I remember our, maybe sales number one, two, three, something that sort of first, you know, a few sales on, we were visiting the office of a potential customer. And I think they had used Retool. They liked it, and they were thinking about purchasing Retool, and so the founder of this company pulled me aside and said, "Okay, cool.
So, Retool thing sounds pretty interesting. How much is it going to cost us?" And, I remember thinking on the spot, like, you know, "What is a ridiculous number that I can name that we'd be really, really happy about it?" And so I think I said something along the lines of maybe 2K a month, maybe 2.5K a month or something, you know, it was some high number. To me that was an incredibly high number at that point in time.
And I remember the reaction, I think it was like silence for maybe a few seconds, maybe five or ten seconds, and then it was like, there's no way that could potentially work because, you know, look at the office that we have, it's a nice office because the office only costs us to, you know, 2.5-3K a month.
You know, we're not going to pay 2.5K a month for a software. That's ridiculous, right? And so, I think you should call high prices because there's almost no downside to doing it. I mean, yeah, people were quite shocked at the price. But you could always just cave and go down, in the early days you can always. I think when you get bigger, you definitely need pricing regularity and you know, you can't give big discounts cause eventually word always gets out and everything's just so now regional pricing was very regular and structured.
One of the early days, if you quote 2.5K and they laugh at you, just walk away, you can come back to them and say, "So what price would you do it at?" They say, "Let's say 50 bucks a month, 15 bucks a month, you can just say, how about a hundred?
They'd probably say yes. And then you saw it right? And they also feel great about it because they felt like they got a great deal and you feel great because you got a customer and, you know, you tested the price and you found the 2.5K is probably too high for this particular customer.
So, I think most price quotes are, in the early days, if you have a good relationship with the customer, very reversible. As you get bigger, I think this totally changes, but the earliest where we got to put new customers I would just quote progressively higher prices and see what they say, until they will start saying "No", and when they say no, we just go back down again, and then I start from there and start quoting higher prices again and see what happens.
It's a good feedback loop too, because the fact that you were able to do this is only possible because you're having like these like in-person or at least on the phone sales conversations, one-on-one with an actual human being or like they can say something and you can respond.
Yes. Never quote pricing over email. Never do that cause they might go away and you have no idea what the reaction was.
Exactly, yeah. There's no reaction and even worse, it's just like not talking to anybody, building something new, putting up like a landing page and a pricing page and then just launching a product time and like, okay, well of course, you're going to be afraid to put like a high number because this is your launch or something and you don't want to waste it.
So, I think everyone should have like the sort of early phase where they're doing this talking to customers. And you can't really afford to have this phase where you're trying to grow one, two customers at a time unless you're charging a lot. So it's a kind of two phenomenon that play off of each other.
Yeah, I think sales gets a bad rep for many technical founders. Maybe they view it as like below them or something else, but really sales, I think, is the real work to be done in starting the early stage. I mean, you never write the code and, you know, build a product, but really sales is sort of where the rubber meets the road.
You can test a product with customers, see what they think, see what the messaging is, test out pricing, understand the value prop, you know, all these things that make your startup successful. I think really you find out by doing sales in the early days. And so, I really don't think this is something you can outsource.
So, the other thing that I see happen often with early stage founders is they get distracted and lose focus. And when you haven't found a product market fit, you're not a hundred percent sure like what's going to work? You know, what's not going to work? It's hard to follow a particular thread in a certain direction.
So, I wanna put you on the spot here, like number one, like how did you get around that? But also, you mentioned earlier that like you did have ideas and things that cross your mind, you know, building Retool, what are some ideas that you think people should be building that you wish existed? That you don't have time to build cause you're building Retool?
On the second briefly, the funny thing now is I'm not looking for startup ideas anymore, so I don't write them down, kind of just past, it was like that would be an interesting idea, huh? You know, it just passes through. So I actually don't have any good advice now, I'll think about that a bit more. And you know, I send you an email.
How about this? What do you pay for? What do you pay for Retool? What tools do you use? What helped you get to the size that you're at right now? Well, I can tell you, I pay for Retool. I just looked at my invoice, 250 bucks.
I pay Upwork a decent amount of money. We spend a lot of time like finding contractors and stuff, and I wish there was better, more like vertically integrated Upwork platforms that would allow you to hire like very specific jobs, because like it's kind of general and it's hard to find someone good. Like I want a place where I could just go hire great writers.
That I agree with. So, we use Upwork as well, sometimes for enriching emails if we're doing outbound and it takes a lot of trial and error to find the right people.
So much trial and error.
And if there were a vetted platform, we would use that.
Yeah.
Maybe a small thing that we would use is, right now we use Slack to manage all of our relationships with customers. We use shared Slack channels, basically. I think it provides quite a good experience if done properly for the customer, because they can just Slack you and get a reply very quickly.
At this point, we have a lot of Slack channels, I think hundreds, maybe thousands of sort of shared Slack channels. And so, it's quite hard managing all of them and trying to sort of do a sort of support ticketing system. That I think is an interesting idea. That said, I have had two friends start this and then pivot away from it.
So maybe there are problems with the idea, but I think, in priority it sounds like an interesting idea. And that's something that we would use.
Let's fast forward here a little bit because you eventually kind of figured it out and you eventually made a pretty big decision to raise a ton of money.
So, you know, recently you announced raising $50 million, which is an unfathomable number of dollars that is more dollars than there are seconds in a year. I can not count to 50 million. If I tried to count to 15 million, the pandemic will be over, there'll be a vaccine, or will be very different because it would be like 2022 before I finished.
And that's a huge decision to make as a founder, especially when you had such a sweet gig going where you were just making many hundreds of thousands of dollars a month as a tiny team, and you've got to probably just keep doing that indefinitely, and just live the good life. And you would raise money beforehand. I think you said you raised a million dollars. How much of that had you spent?
Oh, I think we spent very fairly, maybe a 100K, maybe 200K, some amount. Yeah, it was very little.
Okay, so you're burning almost no cash. You're making money, hand over fist. Why go big? Why raise a bunch of money from investors?
So, the goal for Retool, I think the Mark of Retool for us is quite, potentially quite large. Our goal is to be the way software is built and if we can be the way software is built, the market for that is phenomenally large, it is unimaginable. It's much, much larger than 50 million, you know, It will take many years to count to sort of how many dollars that market is.
So I think the fact the market was very large, the fact that it's pretty wide open right now, that fact that, the way that software engineers built software is literally by writing code, which seems so primitive in retrospect was the reason we thought, "Hey, developer, couldn't think so big. We should really capitalize on the opportunity as quickly as possible."
And that means raising money to have more resources. That's it? I think a lot of the downsides, I love to maybe hear about some of the downsides as you've heard there. One of the downsides can be mitigated, if you are fairly disciplined regarding your financial health. So our case, we raised a seed round in October, 2017, it was around a million dollars.
In March of 20, maybe April, May, something like that of 2019, raise a series A round about $24 million, and then a series B this month around $15 million. And practically, all of the money is still in the bank. And I think what's interesting is if you are Indie Hacker and are able to get to a point where you're profitable, it's actually surprisingly hard to ever become unprofitable, but B, it gives you incredible leverage on investors to raise very good on very good terms and very good reps.
So on point A, if you think about, let's say you're profitable, you're a few people making a few, also someone who can revenue or something, I think that's roundabout when we launched, I think. If you're doing that way, the revenue is growing let's say five X year on year, you'll see it grow from, you know, seven sometimes you get 3.5, next year 15 or whatever else.
It's actually quite hard growing company, five X for how many years. I mean, the first year growing from, let's say, you know, a few people, three, four, let's say something like, you know, 16-20, 15-20, that is manageable. But then growing the company gain five X from 20 people to around a hundred people, it's actually quite difficult.
It's very hard to keep up headcount growth with revenue growth. And so if you're lucky enough to have very fast growth, big growth is actually just very hard to pick up unprofitable. It's actually hard to find places to spend money really, besides head count for a SaaS company.
And so, you are sort of in this very good place where you're all sort of always either close to profitability or profitable and it's very hard to get your way out of. It's very hard to become that non-profitable, actually. So you just set yourself up for success in the next, you know, five, maybe even ten years to come, which I think is really interesting.
On the second point, I think when you are in that position, raising money becomes so easy because you don't need money. You know, in our case, we raised our series A, we could have just not raised. I mean, we have burn so little money and we were making so much money and the team was so small, that for us organically grow, I think when we raise a series B on the series A, I think maybe burned maybe a 100K, maybe 500K, something around there, you know, really not much money out of the 25 million, and at 1.4 million at that point.
We're 1/48th of that or something like that, right? And that I think is a tremendous leverage. And so, if you're able to get the correct terms or very good terms, then it's almost like free cash.
I mean, it's true you're giving us some equity, but I actually do think if you find the right investors that actually do it themselves, add a lot of value, as even though you sell 5% of the company, it was sold maybe 5%, 6% of the series B. The value that you get from the investor easily makes up for the five or six percent you sold. The company is probably more likely to succeed or by at least 5 or 6 percent because of the investor coming in to actually, it was pretty helpful.
Right. Okay, I've got a bunch of questions.I want to ask you about this because typically don't have a lot of companies on the show that have raised a lot of money.
And I think Indie Hackers are just, would be interesting for people to hear about like your mindset going through this. So first off, how do you feel about the fact that you have a lot of pressure on your shoulders now? You've got to be working on something close to a billion dollars just to make your investors whole.
Yeah, for me, the pressure comes much more from customers or from the team than from the investors. I think if you do it right, if you find customers as an HR hiring team to serve these customers, I think you eventually find that most of the pressure comes from that rather than from the investors.
Even if investors share do well and you know, maybe put some pressure on you to do well, but you know, if Retool ceased to exist, It would actually be much, much, much worse for the 40 or so people that work in Retool, and much, much, much worse for customers that depend on Rettol. Like you depend on Retool, right?
You know, you would have to rebuild all your internal tools, I don't think you want to do. And I would feel much worse letting you down or letting our team down, letting, you know, and invest like Sequoia has. I guess maybe you can listen to this, they're full of money. It's fine. They'll do fine with or without the 15 million they gave us. Whereas, you actually, that'd be quite sad, if you actually had to go build it from scratch.
But isn't it like a different kind of pressure where like, "I'm not, as a customer, putting pressure on you to be a multi-billion dollar decacorn, right?" Like, it doesn't matter to me that much of Retool gets humongous.
And so you can kind of like, like the way you are right now, I'm very happy with Retool. Like you can almost rest on your laurels and like I'm happy, I'm sure a lot of your employees are like, "Yes, it's a great gig." Whereas, investors might be like, "No, no. Like you need to be a hundred times bigger." So, I'm curious, like why do you feel more pressure from customers? As a customer, I don't feel like I'm really putting that much pressure on you.
Yeah. I think the, maybe this is a retail specific thing where for us, there really isn't any ceiling to how big Retool can get. So to give you a sense, you know, we have one customer, that every year spends $400 million building internal tools, which sounds utterly insane, but, they haven't, you know, around 125,000 employees.
If you divide $400 million by, you know, an average software engineer salary, let's say 200K, that's actually only 2000 software engineers. So having, you know, something like 1.5%, 1.7% of your company, the software engineers is actually perfectly reasonable.
So anyways, we have customers that spend, you know, and insane globs of money on Retool. And so for us, the risk has never been, "Oh, you know, maybe Retool won't get big enough, maybe Retool isn't a billion dollar company. Maybe it's not a tender, you know, a hundred billion company that was always, you know, we'll figure that out later.
Like if the market is so big that I'm not too worried about it. For me, I think the worry or the pressure has much more been, you know, what if we execute improperly? What if we let competitors catch up and kill us even? And so for me, I think maybe going with the theme of my life, I guess the fear of death is much more acute than the fear of not living up to expectations.
And so for you, I think you're right. You know, whether Retool gets big or not, I think there's some argument to be made that Retool gets big, we'll probably put better support to you, we'll build better products, we'll probably be better, et cetera. But, I think that the fear of death for me is much more acute where, you know, we can't give you Retool anymore because it just doesn't exist.
And that makes me, that was much more pressure. On the teams, I think the team also would feel, I think a lot of people join Retool and personally, I think this is, you know, philosophically, you need to decide whether do you want to go big or not. If you do decide you want to go big, even if you have no investors, our employees have, I have a lot of equity, right?
And so, they themselves are joining for the promise of the equity becoming more valuable in the future. And so I would probably feel worse letting them down, than letting Sequoia down, or you know, any VC down, really. Because, I mean, first of all, I interact with them more, but also they're contributing more to the cause and this sort of, you know, providing more of their, you know, time, of their effort, of their life to Retool.
And so for me, that gives me substantially more pressure than one partner at Sequoia who maybe can't buy a check because Retool wasn't a hundred billion dollars.
What about in terms of a work-life balance? Do you feel like your life as a CEO of this 40-person company, like right now, today, is sustainable? Or do you think like you're going to eventually make some changes, work a little bit less, cause right now you're burning the midnight oil?
I think the nature of the work itself changes quite a bit. And it depends sort of whether you find it energizing or not. So, in the early days when you start a company, really you're, you know, you're pushing the rock forward or you're pushing the rock up the hill, probably. And if you don't push the rock's going to fall down, it's going to crush you and crush you, you know?
And so, that work, I think oftentimes, I think it's the lack of redundancy that makes it tiring, because if you know, for three years, let me think, for maybe two years, the team was less than five people, I think. And so the lack of redundancy, I think can get quite tiring and quite stressful because you can't go away, right?
If you ever go away, you know, the rock falls and the company is dead, or something really bad happens. Nowadays, I think, for me, but even for other people on Retool, there's a little more redundancy, right? You know, I think everyone at Retool is incredibly important, but the good news is that, you know, Retool has built, to some extent a machine that, you know, will continue executing.
Even if you take a day off or, you know, you're really feeling bad one day or you don't want to take a day off and stuff like that, so, I think it's quite important for us still to work very hard. And I think we all still do, and I'm very proud of the team that does this. I think it was quite important to do so.
But, I do think that there, because it was more redundancy, you know, you should go take a vacation now, for example, and I think everyone on the team should, if they feel tired or burnt out or whatever else. And we are in the fortunate position that we can do that. And actually part of that is with hiring other people or raising money, because if you don't raise money I think, as an Indie Hacker, if you're just doing it solo, it is very hard actually to, if the business is fully dependent on you, it's very hard for you to go do anything else.
Whereas, if you do raise money and hire people and hire great people, which we've been fortunate to do, they can actually pick up some of the slack if you know, you just, you know, one day you're feeling awful or when you're feeling off or something like that.
So if anything, let me make an argument for raising money, because I think of the people that I know who haven't raised money, I think they are actually more stressed, I think, than those who have raised money, if it goes well.
I don't know. I've seen a pretty good split. I think the most stressed Indie Hackers seem to be the ones who like haven't found that product market fit with whatever they're building, and they're in this like, often people are in this like sort of straddling the door between like full-time job, working nights and weekends, trying to get this thing to work. Or like even more stressed people, quit their full-time jobs and are watching their bank accounts deplete, and yet there are companies in generating revenue.
But most of the Indie Hackers I've talked to, I could name dozens of people who've got like, kind of a revenue generating machine and they designed a job for themselves that works and they can afford to hire, seem to be in a pretty chill place.
And I often see a hydro startup founders who just seem stressed out. Like not to pick on anyone, but like, Vlad Magdalin was tweeting the other day about, you know, "Oh, the hardest part about my job is I have to explain to my wife why it's all worth it." And, I have seen an entire spectrum of people who've raised a ton of money and just feel super stressed and maybe it has to do with like, whether or not they're living up to various expectations or like, you know, how they manage their own time.
So, I'm curious about what that looks like for you. For example, I often like do research on Twitter before I bring someone on the show. And I went to your account, I saw you were following me and I was like, "Oh, I'm like such a jerk. I'm not even following David." And I scroll down, like you don't have a single tweet.
So, I immediately unfollowed you again, like, "Oh, I get it." Like, you're not spending your time on Twitter. How do you spend your days? And how do you avoid some of this stress that I've seen the other high-growth vendors are going through?
Well, first of all, you're a jerk for unfollowing me as supposed to follow me.
You got to tweet something.
The past doesn't predict the future, who knows what may happen? But, that said, yeah, I think in the early days of a startup, I think you have to be fairly heads down and sort of fairly focused on the stock.
But I think this is probably true even until maybe a year, for me unless I think maybe until year five, year 10, year 15, for a while, I think actually. And, I think part of it is sort of the philosophical choice you make when you start to startup or, you know, when you find trash and whatever else or you already going big, or is this kind of to stay, do you want to live a chill life and, you know, make a million dollars a year from this and move to Hawaii or whatever else?
In our case, we chose because I think the opportunity was quite large to really try and go big and see if we can be the way software is built. That to me personally is more exciting, but I think it's a personal choice, you know. I know of other friends who would much rather just go move to Hawaii and, you know, make a million dollars a year, and life is very good in that way.
But I think if you do make the choice of trying to really go big, I don't fully like to go big things, it feels almost too positive. It feels like, you know, I want to go small and no one wants to say, "I want to go small," right? I don't want to pass any value, judgment really on sort of going bigger, going small.
Well, let's say, you know, you raise VC, you really want to make a really large company that has a really big impact. Then I think it is very important for you to be very heads down and sort of very focused. I feel this could be wrong. I feel like my friends who start startups that don't succeed in the early, let's say two or three years, I feel like a lot of it comes down to focus. I could be wrong about that.
The focus may be caused, lack of focus may be caused by the fact that things are not going well. Having enough fun on the product or whatever else, but I do think focus is a tremendously large predictor of startup success. Again, there may not be causation on or maybe correlated
because the startups going well, then you're more focused on it, it's hard to say. But, I think how it's correlated with how well things aren't going.
What's the downside here? Like let's say, you know, worst case scenario for Retool, a competitor does catch up to you and it can eat your lunch and no one's using Retool anymore, but you've raised all this money, you know. What does that look like to you?
And also, have you mitigated that risk? Like, did you take money off the table when you raise money or do you think about exit plans or like what could happen if the growth doesn't go the way that you want it to go?
Yes, so this is tremendously stressful. Cause this may be one of the most stressful, if it's actually maybe the most stressful thing actually about Retool.
I also like a good amount and in biking the thing that stresses me out the most is when I am ahead and I can hear someone trying to pass. That is so stressful. Catching up with someone, that's fine. If I can't catch up that's okay, whatever, you know. They started before, whatever, right? But, when someone started after me and I started before them and they are catching up, nothing gives me as much stress as that.
And so for us, in our case today, we have every reason to win. If we don't win, it's going to be a tire like cause we fucked up. If you sort of look at the revenue, if you look at the number of customers, the logos that we have, the great investors we've raised from, et cetera, everything's going our way, the people who work at Retool today, you know, everything's going our way. And so for us, if we don't make it big, we must have really fucked up somewhere.
So that I think, I guess to sort of your previous question around sort of do VCs give them? Sure, like, I guess not really. I mean, really that comes from the team for maybe me internally, I guess to me, I really feel it, you know, and I think that there's a real possibility we could fuck up that, right?
And then tons of startups, as you know, that raise a billion dollar valuation and it just disappeared basically. So that is really quite scary for us. In terms of mitigation, I mean, it's kind of like cycling, right? You know, someone's catching up to you, really. The only thing you can do when someone's trying to catch up to you is bike faster. And that really is the only strategy, is faster.
I think I read something actually about, I might be making this up, I might've just like dreamt of this, but I'm pretty sure I read this or like there was a scandal in the cycling community where bikers would like split the winnings kind of, and they would say, "Oh, you know, like, I'm going to come in number one this time I can come in number one the next time, cause I just really don't want to have to peddle that hard into this race."
And like, I don't know what the analog would be for founders, like, I'm pretty sure there aren't startups who were doing this, but like you can't take money off the table. I have a friend who raised $20 million and took like I think $3 or $4 million off the table.
So, he's like, okay, well, if this doesn't work out, at least like I'm doing fine and I feel much more comfortable going big. So, like there are things you can do where like, you know, maybe if you don't pedal fast enough and you lose, you have kind of a softer landing. How do you think about that as someone who's raised money?
I think to some extent, the pressure is good. When I check my Strava and when I sort of look at, you know, in what cases went to just very high when I'm cycling, it's actually when people are behind me. That's what it was like the most motivating thing for me, actually. I don't know if this is actually a legitimate...
You don't want a parachute.
Yeah. I don't know if this is a good financial decision, right? But, I do think the sort of competitors trumping at you, at your ankles when you're biking, I think does actually make you execute faster or pedal faster. So I think to some extent it's a good fit. I'm trying to think…
Well, there are other companies I've seen too, like for example Zapier, pretty sure they just stopped raising money. And it's not like, "Okay, we're failing, we should stop raising money." But it's kind of like, "Oh, like, we're fine here. We don't need," I guess like on the sort of risk reward balance, like found like a place on that curve where they were fine.
And you know, maybe there's like for a significantly profitable company like Retool where you're like, you're not like an Uber or like a Facebook where you're like, you know, selling rides at a loss, so, you know, spending a ton of money like you theoretically could be just fine before the investors were like, "Give us our money back, tomorrow."
Yeah. I think that also makes it a lot easier because I agree if you start a consumer company, you may be unprofitable for a very long time and you have no idea where it's going to go. It could be huge or it could be not, right? Whereas with a SaaS company, I think most companies Indie Hackers start, it's quite stable, right?
If you sort of look at revenue growth over time, if you look at churn, it's very low for us. It's in fact, a negative. So, on average people spend more than the actual churn so that makes it quite predictable. That's it on the Zapier thing. So, I think I slightly disagree there because if you look at Zapier's competitors, I think it was like 10 or something now, right?
There's like one called Tray.io, there was another one, I don't remember the name of these, but…
Integromat.
Exactly, Integromat and as a few others too. Some of them were actually getting pretty big actually. And so for me, again, I don't know the Zapier founders and so I don't know their motivations or whatever else, but for me, maybe I'm quite competitive, I guess, you know, it's kinda like cycling, you know, I always want to be number one and if I'm not number one, I'm very unhappy about that.
So for me, I would almost try to get every advantage possible in order to be number one, without doping, obviously it's likely. But, you know, he's sort of a perfectly fair advantage, right? You know, you sell some percentage of your company in exchange for great people helping you, but also a lot of resources, which you can scale.
So for example, in the series B, we were lucky enough to get a guy named Carl Eschenbach, from Sequoia joined as a board observer. And he's on the boards of Snowflake, Zoom, UiPath, Palo Alto Networks Workday, et cetera. And having him on our board has tremendously helped from a go-to-market perspective because Zoom and Snowflake are incredible SaaS companies.
And this is the advice that, frankly, I don't think we could have gotten, had we not raise money from Sequoia. So, I think you can sort of view fundraising almost as a way of getting an advantage. I do feel like Zapier, to some extent, is losing their advantage, where to some extent. Again, maybe the goals are different, I don't want to pass any value judgment on that, but if I were in their position, I would probably have raised money in order to stamp on all these competitors and declare Zapier the winner.
Yeah. So, let's talk about how big Retool can get and why it can get so big. You mentioned earlier that you hadn't really unlocked the key to word of mouth growth yet when you had 20, 30 customers, you thought, maybe these are just weirdos and like, you know, we're just pushing this rock up hill and we're doing a good job pushing the rock, but like, it's not going to go on its own.
Whereas nowadays, I assume like the implication of what you're saying is like, you do have word of mouth growth for Retool. Is that true?
It is. Yeah, for a long time it was worrying to us. I think it's just that word of mouth takes a surprising amount of time to get going.
I remember asking multiple other people about this in the early days, and it's interesting how people's memories are all quite rosy. So I remember talking to John Collison from Stripe about this. He did really remember how my startup started the earliest. Oh, yeah, seemed like it was going pretty well.
And then if you look at the number it's actually not that big actually in the very early days. Then I talked to Peter from Segment and also similarly, he doesn't really remember, but then when you look at it, ours aren't that big, and of course it's an incredible business now and ours is over a few billion dollars than Twilio.
I also talked to Figma, Dylan Field and if you look at those kinds of numbers, you know, at the very early days, they still were also pretty small, of course now it's like a tremendously large company, right? But, I think founders often times forget how difficult the early days were.
And for me, that was a little bit demotivating cause, you know, I would ask them and they'd be like, "Oh, seems like things are always going well for us. I don't know what's up with you." But then, you know, when you actually look at it now we're know a little bit past the hump and we look back and you could see, you know, sort of, every time we do something, you know, maybe it's, we've launched at Hacker News, maybe I'd go on a podcast or whatever else, there actually is a fairly noticeable spike actually.
And then, for the next two months thereafter, the actual baseline has actually increased. And so, it's a lot of these things that eventually sort of build up over time, but there is no sort of, you know, overnight success or, you know, any 'aha' moment where we find this one marketing trick that unlocks all leads or something like that.
It really is pretty slow for a while, until it starts slow, and then you forget the slow part.
There's just talk that I always loved that was given by Kathy Sierra, the Business of Software conference. And, she had this framework for making your users bad-ass. Her whole idea was that if you want word of mouth growth, that comes from people talking to their friends and people when they talk to their friends about themselves and the stuff they're using, they want to like cast themselves in a positive light, so they have to brag about what they're up to.
And so do you want them to talk about your product, your product has to make them into bad-asses so they can brag about themselves. Like somebody would be like, "Oh, Cortland, you know, you're able to make Indie Hackers by yourself, you know, that's so cool." And I'd be like, "Yeah." And then I'll mention Retool. I'll be like, "I could do it because, you know, I've got all these cool internal tools that just make it way easier to manage and give me like way more leverage."
So I'm curious how you think about word of mouth growth. Do you follow the same framework that she does? And, you know, what do you think are the sort of the main levers for growing by word of mouth?
Yeah, I think high level 'Yes!' I think one interesting nuance she points to is between sales and product or go-to-market with the same EPD. And I think most technical founders typically overweight EPD over go-to-market and most startups fail because they never do sales and never find customers or they charge too little money and whatever they've done,
right?
I do think though, if you look at a lot of other companies in this sort of SaaS world, if you look at like Salesforce, for example, or Workday, or, you know, sort of these big SaaS companies, a lot of them are actually overweight go-to-market. And a lot of them just hire a lot of sales people and they hire artists as tool and just, you know, sell you a product and they flood the world with Datadog or Salesforce or whatever else, right?
And I think the ideal point, at least for a Retool, somewhere in the middle where I think sales is critically important to Retool. There is no way we're going to be a hundred billion dollar company without sales, sales is still incredibly important to us.
And yet, we're not a sales driven company and will never be a sales driven company. And the reason is, precisely to what you said, it worked to get to our goal of being the way developers build software. If you sort of think about all the other developer tools that have gotten quite big, let's say like Stripe, Twilio, and whatever else.
Stripe has not struck because they have a giant sales team. They also have a big sales team that you know, is performing incredibly well and as does Twilio, but Twilio is not fully sales because they have a big sales team giving demos to every developer in the world, right? At the end, you have to build a really great product that really generates a lot of word of mouth of friends to tell each other about.
And that is the only scalable, sustainable way of becoming a sort of an iconic developer tools company. And so in our case, so I would agree with you. I think word of mouth is critically important to us. That's it. Sales is also important because no one is ever going to put $10 million on a credit card, right? So, I think both are important, but EPD or word of mouth is what is really important.
There's this cool, almost arms race going on where, you know, these developer tools that are increasing productivity and as a result, developers kind of reacting to that by demanding even more. So it's almost like, you know, the, the snake bites, the honey badger, the honey badger doesn't care because it's resistant, but the snakes even more poisonous and so on and so forth.
You know, companies build all these tools so we can build software better and faster and cheaper than ever. And what happens is like we don't only just build software better, faster, and cheaper, but now, like you have all sorts of new people who decide, "Hey, you know, there's time enough to build software on the weekends cause all these tools are so good.
I'm going to start doing it." And they have even more picky, demanding requests because they want it to be even faster. And so the cycle repeats and it's never quite done. And if you're trying to, you know, build Retool under this thing that changes the way the software is built.
I can't even imagine your vision for the future. Is it going to be some sort of weird AI driven something I can't even imagine that you're thinking about that's going to make us way more productive at building code?
Yeah, it's interesting you mentioned this because when we first started selling Retool, we always thought the value prop was, "We'll save your engineering time."
You know, that is true. We do save you engineering time. But as we started selling more and more Retool to more customers, we realized the real impact actually was on all the people in your company, because now they actually have tools for the job, right? Instead of hacking Excel spreadsheets or using tools that are often outdated, insecure when you log in.
I generally think like, "Oh, this is probably not going to work, you know, it's probably outdated or whatever else." Sure you probably have experienced it too. Now, they are high quality, now all companies, all of our customers at least, have high quality internal software that they can trust. It is robust, it is secure, and is performant.
And that actually dramatically unlocks the productivity of the whole company. It's not just saving developers time, it really is that a lot of the companies operate at a higher clock speed than before. And so, for us that, you know, is the second order effect, I think that's, what's really interesting is, you know, by sort of making building software easier, lowering the bar for building software, now a lot more software is built.
And if you'd be thinking about the world today, the way most companies drive more efficiency in their businesses typically is by software. You know, if you're sort of look at Coca-Cola, Coca-Cola, you know, the manufacturing of the beverage is not really getting any substantially cheaper over time.
It's kind of fixed cost, kind of constant cost at this point in time, right? But, what Coca-Cola is doing in order to sort of drive profit margins up is by really focusing on software. And so, you know, to your point, I think software is going to be more and more, more and more, even more so than today, the larger part of the economy.
And, I'm really sort of glad to be powering a little bit of that. And eventually one day, hopefully, you know, when all software is built on Retool, you know, if it's very far out, but that is the goal. Far away.
You've shared to me in our previous conversations something like, to me, mind blowing facts. I forget what the percentage of it, but like, what is the percentage of all software that's built internally versus externally?
It's probably something like 50 or 60%. And this is very counterintuitive, but it's because if you think about your job or my job, right? You know, we're in Silicon Valley, our job starts off for other people. Most of them Valley companies, Stripe, I mean, Airbnb, Uber, or whatever else, they are writing code for others, they're selling their code.
But if you look at most, more traditional companies, like some of our customers, NBC, for example, Warner Bros, Mercedes-Benz, Jaguar, Land Rover, all these companies, they're not selling software, you know. Mercedes is definitely not selling software, they sell cars, right?
It just turns out that software is tremendously helpful in doing their job. If you look up most foragers in the world, most of them actually aren't in Silicon Valley. Most of them work for this sort of more traditional companies where the jobs are direct software to power internal operations. So I think the opportunity for us is quite big.
I assume you didn't know that when you first came up there, the idea for Retool? I'm just curious, like, what are some things that might not be obvious to people who are thinking about no-code and low-code, that weren't obvious to you?
I think that one thing that is underappreciated is that the general workforce is getting much more technical. And so, if you look at, let's say people who are in non-engineering roles at Silicon Valley companies. Let's say PM's, people that work in operations, that work in support, marketing sales, whatever else, a lot of them, especially the new grad staff actually taken some sort of computer science class in college and have taken comp sci class, you know.
They might not be, let's say, you know, the 10X developer who can, is really productive writing react or whatever else, you know, dealing with Redox already, whatever else. But, you know, understand how Redox works, you know, under the hood, but they are able to go write SQL. And I think that has really fueled the rise of low-code or no-code in the past T months or so, because now the sort of average knowledge of the knowledgeable worker has gotten higher.
And I think most tools that we use assume less knowledge or assume that the knowledge sort of baseline has not changed or as Retool assumes that, "Hey, you probably know what SQL is. You know, what a database is, you can write a little bit of code. And we've seen tremendous adoption because of that.
I love that it's not only technology that changes, but it's actually people's familiarity with technology that changes. And that provides opportunities for you to build new apps and tools and websites that couldn't have existed in the past because like the user base just wasn't ready for it.
We're kind of at the end of our time, but most people listening in have not started anything, they haven't come up with an idea, they've run a line of code, they don't know what they want to do, what you think they can take away from your journey, David, to help them get started on their own?
I think there was one thing I myself worked from YC and watched startup school talks too, is you should just get started. This sort of risk is so low, especially if you start as a side project, right? If you start as a side project, code in the weekends, code at nights, you'll see what happens. And then if something takes off, or you eventually find traction, even then quitting your job or, you know, quitting school or whatever else to start something, it's actually just so low risk, that you must try it and see what packets.
The worst case is to do things as a side project and never take off, and you still won't get your job. There's really no downside. So you might as well get started and see what happens.
Get started. See what happens. Can you tell people where they can go to find out more about what you're up to at Retool and they can find you online?
Yes, please. Retool.com is the place to be.
David Hsu, thanks for your time.
Thank you.
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