29
37 Comments

I bootstrapped and sold my first SaaS company. Now I raised money for startup number 2. AMA.

In 2017, my business partner and I left our jobs to start Median (hellomedian.com). We bootstrapped the business for just over 3 years before selling it on MicroAcquire in late 2020. Now we started a new company, Workshop (useWorkshop.com), and raised $3.5m to take a bigger swing. AMA.

  1. 3

    What was your tech stack?

    1. 2

      Node.js and Ruby on Rails

  2. 2

    How much ARR/MRR did Median do and how long were you working on it? What were the some ways you found your first 1,000 users?

    Also, I love that it's a co-browse product. With everyone going remote I'm sure you've found it to be increasingly popular, no?

    1. 2

      There were 2 of us working on it full time and it was probably 6 months or more before we were able to get our first paying customer. Looking back, we might have spent a little more time on nights/weekends building it before going to market. We owned Median for 3 1/2 years, but spent maybe 2 1/2 fully dedicated to it.

      The first few customers were just other local companies we knew, but after that, we did 2 things 1) were an early listing in the Intercom app store which helped with self-service 2) I cold emailed lots of customer support leaders about the product. We were really bad with content marketing and other inbound efforts though. We eventually switched it up and decided to try to sell white-labeled cobrowsing directly to live chat and contact center software companies since we knew it was a tough technology problem to crack.

      As for revenue, we eventually got over $10k MRR through some white-label deals where we would power cobrowsing under the hood for some larger brands. What was unique about our company is that we actually sold perpetual licenses to our technology two different times for mid to upper 6 figures, while still retaining complete ownership of the company. It's something you likely wouldn't do in a VC-backed company, but since there were only two of us, taking the combined one-time revenue of over $1M was a no-brainer.

      As for remote having an effect on the business, we honestly didn't see much impact one way or the other. We had kind of put the company on autopilot while we started poking around with the new company at the beginning of the pandemic until we ultimately decided to sell it completely via MicroAcquire.

      1. 1

        Where did you buy the newsletter? What was that like? How much was it and how did you go about making it profitable. Pretty cool, man.

        1. 2

          I believe we found it on this site: https://duuce.com/

          We were going to start our own newsletter anyway, but we had an idea that if we help accelerate the process for not too much money, then we'd entertain that route. It had 5k-ish subscribers with slightly below-average open rates on it when we bought it and I think we paid somewhere between $5-10k (I don't remember the exact amount).

          Also, we didn't care about making it profitable. We were just using it as our own newsletter to help create more brand awareness for Workshop and use it as a vehicle to slip in some of our own content.

  3. 1

    Thank you for doing this! Couple of questions! @dhomann

    1. What is the most important skillset do you have that helped with building both companies?
    2. Are you looking for additional funding?
    1. 1
      1. Hard to say. I’m not a great marketer or sales person, but I developed some great relationships over the years with other folks in the industry and that actually led to more success for us than anything with Median. We’re still in the early days with our new company, so time will tell on what helps the most there.

      2. Nope. We raised some money out of the gate for Workshop, so we are set in terms of capital for the foreseeable future.

  4. 1

    How did you know it was the right time to sell your business? And what did you sell it for? :D

    1. 2

      We just wanted to start working on something else. Once both partners were more interested in working on some other project, you know it's probably a good time to just let a new owner take it and run with it. We ended up selling for 4x our top-line revenue which was our asking price. The acquisition price was actually less than both perpetual licensing deals we did. We like to joke that we actually sold the company 3 times in under a year.

      1. 1

        😄. Amazing. Thanks for the reply.

    2. 1

      Also read all the other comments. Thanks for doing this, very inspiring 💪.

  5. 1

    Hey Derek,

    Off topic question -- what newsletters do you read, if any, and which do you pay for, if any?

    Do you find the newsletter space too saturated for an emerging writer with no base, or still the best route to make writing for a living a reality?

    Cheers and nice job selling Hellomedian. It's great these days you its so easy to sell a revenue generating business without a middle man (not sure if you consider MicroAcquire to be one)

    1. 1

      I only subscribe to a few newsletters. Mostly business-y ones like The Hustle or Morning Brew. I don't actually pay for any currently though. I've thought about buying Trends from the Hustle a few times, but that "business porn" type of content is abundant elsewhere that helps get me my fix.

      With that said, I do think you can create a newsletter that gets a decent following and then monetize from advertising revenue as opposed to getting individuals to pay for the newsletter itself. I actually talked about this in a podcast I was on a while back because we bought a newsletter that had 5k subscribers to it for my new company and then rebranded it to HappyMondayClub.com

      All we do is share our 5 favorite links of the week and people love it. It has like 16-17k subscribers now and it's growing quite a bit every week.

      Also, here's the link to the podcast episode I mentioned: https://listen.madewithgrit.fm/episodes/41-from-bootstrapped-to-venture-funded-w-derek-homann

  6. 1

    What advice do you have for a marketer who wanna go into saas with a dev agency for building the techinal part?

    Thanks,

    1. 2

      Having a dev agency build the product could be very tricky. It has clearly worked for some people, but having a technical partner whose sole job it is to iterate on the product made it much easier to make fixes, adjust to user feedback, and get a deep understanding for what problems we were trying to solve for.

      So with that said, I would say having an agency build the MVP isn't ideal, but if it's your only option, I would try to pre-sell as much of your product as possible (it's super hard imo).

  7. 1

    Congratulations and all the best for the new product.
    I wanted to understand what were the metrics that the buyer focused on before acquiring hellomedian?
    What are some things that you will do differently with useworkshop?

    1. 1

      Basically just our current revenue, number of customers, and contracts we had in place. Other than that, the only other thing they focused on was that it could be complementary to another company they owned in the telecom space.

      1. 1

        Can you tell how long the entire process took (from listing HM on MA to the deal being finalized)? Cheers!

        1. 1

          Not long at all. Probably 2 weeks of talking to buyers to get a term sheet. Another 30 days or so for due diligence and finalizing all the smaller points of the deal and then the money hit the bank.

          1. 1

            Woah! Crazy. MI explains the process on the website and it seems like it can take multiple months (even a year!). Glad to know sometimes it gets done really quickly like in your case 👌

            1. 2

              Yeah, it can definitely take longer. My advice would be to set deadlines for stuff to get done. I was very clear up front that we were working on another business already and my goal was to get a yes or no as quickly as possible.

  8. 1

    How did you go about validating your idea? Did you have any other competing ideas and if so how did you settle on Median without getting distracted by the other ideas? At what point during product development were you convinced that the Median problem space was large enough to support your salaries?

    1. 2

      I'd be lying if I said we spent much time validating the idea. I knew it was a need because it was something my customer support teams could have used previously. I also saw there were several cobrowsing companies who came before us and had all been acquired, so I felt that was a fairly decent signal and made it a little easier to compete as a bootstrapped company since it was a niche product with not a ton of active players.

      It also wasn't some tech that a big company like Zendesk or whoever could replicate in a month by throwing 20 devs on it. So our theory was that they would either 1) want to offer us as integration in their app store 2) white label us directly so they could offer it as a native feature in their product 3) just try to buy us

      All 3 of those things become true eventually. We had app store integrations with Intercom, Live Chat, and a few others. We also white-labeled cobrowsing for Olark, and a few other chat providers, and then eventually we had a company wanting to buy us to complement their existing product, so it all worked out.

      Lastly, neither my cofounder nor I ever made enough money with Median to replace our current salaries, but we did start taking small salaries about 18 months in. After we did our two large perpetual licensing deals + the acquisition, the money we made from that more than made up for the salaries we left and then some. It also helped to work with a tax advisor to ensure we maximized our take-home money.

      1. 1

        It also wasn't some tech that a big company like Zendesk or whoever could replicate in a month by throwing 20 devs on it.

        How so? Can you elaborate a bit?

        1. 1

          It was just a hard technical challenge to build. They certainly could have done it, but it was just going to take a decent amount of developer hours to do. Cobrowsing is interesting because you can get it to work on 80% of sites in 6-8 weeks, but getting it up to 85% of websites takes just as long as the first 80%. Also, there are always new web technologies coming out, so it’s not like you can just build it and move on to the next thing. There will need to be new code written to address websites with new web technologies.

          Also, the reality is that many big companies will just take wayyyy longer to build the stuff that a small, motivated team will. Often times they’d rather pay someone to solve an annoying problem rather than deal with it themselves.

          1. 1

            Also, the reality is that many big companies will just take wayyyy longer to build the stuff that a small, motivated team will.

            Interesting. Is it because of bureaucracy and because they have lost their ability to be agile and nimble?

            1. 2

              Both. I've worked at several large tech companies (5-10k employees) and the number of stakeholders that are involved in making any product decisions is wild. So people just get used to that slower pace and think that is how long things should take to get built.

  9. 1

    Lol NICE! This is basically what Cohere is (but they've got the YC hype) - great job mate!

    1. 1

      Yep! I've been following them. They are doing a great job with product velocity and branding. I do laugh every time I see some random VC act like they invented this amazing new technology though. I don't exactly when the first iteration of DOM-based cobrowsing came around, but it was at least in 2012 when Firefly did it. Possibly earlier.

      1. 1

        Yeah HA i know what you mean! I remember seeing you guys AGEs ago and actually pulling a cheeky one and tagging your product when they spoke about innovation etc.

        And yes i remember Firefly too!

        Congrats on the sale and the raise! Big things!

  10. 1

    A few q's:
    How much time did you spend marketing vs. developing?
    How did you decide to address this problem?
    Why did you decide to sell instead of running it passively, and what ARR multiple did you sell for?
    Thanks, the product looks great!

    1. 2

      I think we were actually pretty bad at marketing. Our team was just 2. I did sales/marketing and my partner wrote all the code. We did bring in a contract developer for a few months at one point as well, but for the most part, it was 50% development, 50% trying to acquire users through cold outreach, participating in customer support communities, etc.

      In regards to the problem itself, I came from a customer support background and ran teams at Flywheel and LinkedIn before we started the company, so I was acutely aware of how often we had to ask for screenshots and how clunky it was to ask a customer to schedule a full-on Zoom call.

      We mostly decided to sell because we were just kind of over it. Since we started working on a new project, it was hard to focus 100% on it when a customer would report an occasional bug. We'd also feel bad for not improving the product for our existing customer base, so we decided it was best to at least see if we could sell it.

      When we sold, we listed for a 4x multiple because we thought it was fair and would help accelerate a deal closing. We also wanted to be completely out of the business within 60 days to focus on the new company, so we felt like we may be able to get more than that, but it would be at the cost of time to close and how long we'd be required to stay on for.

      Also, thanks for the kind words on the product. The new owner updated the marketing site, has added some new features, and has a pretty cool vision for it, so some of that is definitely not us :)

  11. 1

    As much as you can speak to, what led to the sale of Median on MicroAcquire? Had you gotten inbound interest from acquiring parties and then decided to "shop around" on your own? Or timing just felt right? Or?

    Secondly, what are the top 3 things about B2B that continue to attract you the space? (B2B is my preferred space to be in, too.)

    1. 2

      We had wrapped up one of the two large perpetual licensing deals we did which was basically an exit without actually exiting the company. After that, I came across MicroAcquire very early on and saw how easy it was to list a company for sale. Both my cofounder and I had gone back and forth between letting Median cash flow in the background for us vs. just sell it entirely. Since MicroAcquire made it so easy to list, I put it on there to test the waters and sure enough, we got a ton of interest almost immediately. I exchanged messages with a bunch of interested parties, had Zoom calls with probably 10, got verbal offers from 3 or 4, then eventually we took the deal from the buyer that gave us the best combo of price and payout structure.

      As for what attracts me to B2B, I think that is just what I know the best. Recurring revenue on higher-priced software is certainly appealing as well, but it's that simple for me.

      1. 1

        I just read that in your response to another question, above. Wow!

        What was unique about our company is that we actually sold perpetual licenses to our technology two different times for mid to upper 6 figures, while still retaining complete ownership of the company. It's something you likely wouldn't do in a VC-backed company, but since there were only two of us, taking the combined one-time revenue of over $1M was a no-brainer.

        Do you think you'll take this lifetime/perpetual pricing into your next products? Agree that obviously sounds like a "take the deal" type of scenario.

        Awesome, thanks for sharing your experiences! I've toyed around with listing some of my projects that, as you say, are just "cash flowing" in the background. Emotionally attached to most, though, so it's hard to see letting it/them go.

        Nice, couldn't agree more! Similar backgrounds professionally, it looks like, with mine emphasizing more on developer-centric auth and webapp side. In B2B it's the "picks and shovels" analogy that resonates with me and/or selling something like "plumbing of the internet" that is (at least for now) always in-demand.

        1. 2

          I don't think we'll carry over the perpetual licensing deals to our current company, but I would never say never. In both cases with Median, the folks that did the perpetual licenses weren't competitors, but were huge companies (both publicly traded) that wanted to build it into their own, non-competing products, so we had to figure out how to get creative to get a deal done since there were just some things we weren't going to be able to do (SOC2 compliance, etc.).

Trending on Indie Hackers
How long did it take to build your MVP? 33 comments Dealing with lack of motivation due to failed soft launch 27 comments Bootstrapped my productivity app to 700 paying customers! AMA. 18 comments Free e-mail countdown timer that doesn't suck 💩 6 comments Return of the external link 5 comments How To 10X Your Design Rates in 2022 (Free Script) 2 comments