I've bootstrapped Phusion to $1M ARR. AMA!

Hi, I founded Phusion and I'm the author of the Passenger application server, which helps deploying and supercharging apps. Based on Amsterdam, The Netherlands, and founded in 2008, we're Bootstrapped, Profitable and Proud: a number of years ago we hit 1 million USD annual recurring revenue. Passenger is an open core product (open source code, paid add-ons) with 650 000+ sites world-wide using it.

I love making developer tooling and bridging Dev and Ops. I'm a long-time open source enthusiast, having contributed to various projects since the early 2000s, such as Nginx, Ruby, Rails, GNOME, and more. Recently I identified why Ruby bloats memory and was able to reduce memory usage by as much as 70%.

Since having founded Phusion, I've gained a lot of experience not only as a developer, but also as a CTO and as a consultant.

I love helping others, as I regularly mentor people. Ask me anything!

If you want to follow me, join @ honglilai on Twitter or check my blog: Joyful Bikeshedding.

  1. 2

    Amazing !
    Taking the old apache -> mod_jk -> tomcat idea and implement it in other techs ....
    love it
    One question ..
    How did you convince developer to pay ? its so hard ....

    1. 2

      Don't target individual developers. There's no money in there. Instead, target businesses. A business's goal is to make money through their core competency. Tech infrastructure isn't their core competency, so you can potentially help them there.

      Whether they value your product depends on multiple factors, such as how much technical competency they have. The more technical competency, and the more free time those people have, the more likely it is that they want to build things themselves instead of paying you. So target the businesses where their technical people always have other things to worry about, and where your product will give them value (e.g. save time, less worrying about downtime, etc).

      I've found that medium to large businesses are the best customers, as opposed to startups, small businesses and freelancers. The latter group has very little money and are more willing to build things themselves than to pay for something. The founders themselves are often on top of all expenses so they evaluate all expenses critically. The former group worries less about paying, because money comes from a department budget. The people who pay, aren't paying with their own money. They do need a business case, so if you can give that to them and make their job easier, then they'd potentially be willing to pay. Targeting medium and large businesses does mean that you'll have to deal with more "enterprise"-like procurement processes and account management processes.

      Finally, we use open source as a marketing strategy. The open source version is what initially attracts people. It's valuable on its own, and it's free. Only when people are already convinced of the value of the product, do they seek us out, so that lowers the barrier for paying. The paid version adds features that are mostly useful to medium and large businesses, that have enterprise requirements and where team collaboration matters.

  2. 1

    Amazing, congratulations on the $1m ARR;
    A few questions:
    #1 If and how have your customer acquisition methods over time, with growth of the service and changing times of technology?
    #2 You mentioned consultancy, what was your main area and what did you provide to your clients?
    All the best :)

  3. 1

    If you were to start today a company with a 1 year runaway what ideas would you consider? What would be your top 3 priorities?

  4. 1

    Your documentation is pretty solid...how important is it to ship documentation with software? I get the sense most companies aren't very invested in it.

    1. 2

      That depends on the kind of software. In general, I'd say documentation is very important, not only for commercial software, but for all software. I mean, how else are people going to use it, or what are they going to do when they run into trouble?

      In case of consumer apps, I'd say documentation is less important. A good UI/UX is then more important, because that's how users interact with you; few consumers read the docs.

      1. 1

        I'd agree with you, Stripe won their market pretty much off their excellent documentation alone. You don't realize just how bad most documentation is until you've seen it done extremely well.

      2. 1

        Do you think a service helping StartUps turn their documentation into videos makes sense? I've been considering creating one, but I haven't pitched anyone yet. In your experience, do you think it would be a desired service? (I guess the selling point (in my mind) would be that people would find it easier to watch a video rather than having to read all of it)

        1. 1

          I think you are too focused on the documentation itself as opposed to the goal of the docs. The goal is to ensure user success. How users achieve success depends on how they interface with your product.

          Most of the products that I see on IndieHackers are some kind of consumer SaaS with a UI. For this class of products, the most important interface is the UI, so your primary focus must be on designing the *** out of that, as a method to ensure user success. Documentation is then secondary: users only come to your documentation after they can't figure something out using the UI (assuming they haven't abandoned you already; most people don't bother looking for the docs).

          For some product categories, embedding tutorial videos in the product is indeed useful. And indeed, some users need a lot of handholding and might feel more comfortable with watching a tutorial video. But my preference goes to designing interfaces that don't need tutorials in the first place; I think that must be the first priority.

          Things are very different if you make, say, developer tools. A very important interface with developers is likely a CLI, an API or a config file, so docs matter a lot there.

          Regarding your idea of helping startups make videos: I recommend against targeting startups as your customer base. They usually don't have a lot of money and/or are frugal. Instead, it's better to target medium/large businesses that do have money. Those businesses will likely not think in terms of "turn docs into videos", because that's a very specific solution direction. Potential customers must already know that they're looking for that solution direction, in order to select you as a potential vendor. Instead, your messaging should target the problem, which could be "customer success is suboptimal; onboarding success is suboptimal; new customers abandon you because they can't figure out how to use you effectively". You can then pitch "videos" as a solution to those problems. That those videos could be constructed from docs, is just an implementation detail; maybe your customers don't even have good docs right now!

          1. 1

            I agree! Thanks for sharing your thoughts. Yea, I should've written tech companies or saas companies instead of startups.

        2. 1

          N = 1 for me, but unless I’m trying to do a very specific task that requires lots of smaller steps videos are no go for me. I like to CTRL-F my way through documentation to find answers to my sticking points.

          That said, definitely don’t take my use-case as gospel. I tend to be a bit different when it comes to tech products.

        3. 1

          Sounds pretty cool to me @ItsKev - I think videos + docs lead to overall a great customer experience. A video by itself with no doc I think wouldn't be optimal but with docs...now I think you've got something interesting. I'd be down to talk more about this too. If you want, shoot me an email [email protected]

          1. 1

            Definitely! (I'm replying here so I don't forget) You can also shoot me a message on my twitter anytime, I'd love to hear what you have in mind.

  5. 1

    Love the site and the icons you have that go along with each section advertising Passenger's benefits: "Security" "documentation" ect.

    How much thought and attention to detail went into the marketing angel/branding of Phusion and did you do it yourself?

    1. 1

      We put a lot of attention into marketing, branding, etc. There are two reasons for this.

      The first is that our sales strategy is mostly inbound, which means that we rely a lot on marketing.

      The second is that, although we're based in Amsterdam, we have a lot of affinity with the Silicon Valley way of doing things. We read Hacker News, we mingle in SV-heavy developer communities, etc. SV-based companies are often quite good at marketing and branding, and we're targeting a similar standard.

      The marketing and branding were all done by ourselves. It's a team effort: everyone in the company contributed to this. We leveraged an in-house designer, we wrote the copy ourselves.

      1. 1

        Can you recommend some of those communities?

  6. 1

    damm, $1M ARR is no joke. what was the hardest part about bootstrapping Passenger to hitting that milestone? have your sales all been passive from word of mouth or do you have an active sales team?

    1. 1

      The hardest part for us was learning how to run a company. We founded Phusion during our early years at university. I myself had no working experience. Knowing how to develop software and even how to market is one thing. Managing a company effectively and professionally is a whole other thing. I had to learn from scratch, from first principles, because everyone else in the company was young too.

      Up until this day, we rely mostly on inbound sales. Sales is basically responding to customers that already know they want our product. We don't have a sales team that does cold outreach. Customers know us because of our marketing efforts (blog, social media, conferences) and word of mouth.

      The main reason behind this was that, as developers, we hate being sold to, and we hate spam, so we thought our customers and users would be like that too. We took this principle pretty far: we never initiated any contact, not even to ask an existing inquiry whether there are any obstacles we can help them with; we never ask them for a video call; etc.

      As we further progressed, we discovered that this was not a smart strategy. A business actually should more proactively do sales. Many times, potential customers actually want you to be more proactive in communications. Especially with regards to enterprise customers, the sort of relationship they expected from us was totally different from what we did: enterprise customers expected an account manager who really knows their case and who proactively reaches out to them to solve trouble, etc.

      Today, we still do not have an active cold sales team. Active sales is a very different strategy that requires a large up-front investment in terms of hiring, but also in terms of changing the company culture and our processes. While a more active sales strategy could yield more revenue eventually, we've chosen not to go that path for now.

      As for what I said about managing a company effectively and professionally: when the company was less than ~4 people, everything worked similar to the way you were used to when you were just 2 people. After that, things started to break down quickly because there are too many communication channels. One needed to start being professional, e.g. having a well-defined and well-documented business strategy, well-defined roles and responsibility, active management, etc.

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