Vinay’s note – Rob Walling is a serial entrepreneur who most recently co-founded Drip, one of the fastest-growing email marketing and automation tools. In his first interview, he shared how to create a software product (even if you can’t code). In this interview, he shares how he bootstrapped Drip from the ground up, and turned it into the 7 figure business that it is today.
Drip is lightweight marketing automation for individuals and companies that sell software, ebooks, courses and consulting services. It’s grass-fed, organic software lovingly hand-crafted in California’s Central Valley. With a lightweight approach to marketing automation and a low entry-level price point, Drip has made marketing automation accessible to individuals and organizations that don’t have the time or budget for more expensive, enterprise-level automation systems.
You hired a developer, Derrick Reimer, to build Drip, and now he’s your co-founder. Can you tell us more about how you met, why you decided to work together, and how Derrick went from an employee to a co-founder?
Derrick started out as a contractor, he worked with me on HitTail and then Drip, and at one point, I realized that he was an exceptional developer and made him an offer to come on-board as a full-time employee.
We really enjoyed working together. We had a relationship that was highly collaborative. We’d go back and forth about features all the time, and we were having co-founder level conversations on a regular basis.
And at a certain point, I realized that it would make a lot of sense to have Derrick as a co-founder. He’s a smart guy who likes to build things, so he was getting ready to move on to a new project, and I asked him if he’d be interested in staying longer. We talked about it, worked out the equity split, and now we’re co-founders.
Can you tell us how you came up with the idea for Drip and how it was different from the current product?
It all started when I was running HitTail. It took our developer several days just to get a little email opt-in widget on the lower right of the page, connect it to MailChimp and set up an autoresponder sequence. It was a lot more painful and time consuming than it needed to be, which is how I came up with the idea for Drip.
Initially, Drip was supposed to be this small app that would provide a simple way to capture emails on your website and to set up an autoresponder sequence, but once we launched we quickly realized that that wasn’t enough.
So we started adding all these marketing automation features, got a positive response from our customers, and now Drip is an email marketing automation app that allows you to do most of the things that you could do with tools like Infusionsoft (now Keap) but at a fraction of the cost.
How long did it take and how much did it cost to develop the initial version of Drip?
It took about 6 months before we had our very first paying customers (we were still in early access), and from there, it was another 4 months until we launched Drip to our entire email list.
As for the cost, it’s hard to say, but my estimate is that the very first version probably cost around $100k-$150k including our labor.
When you started development you told Derrick, “I want people to think about it like it’s Mint.com, an app that is gorgeous and easy to use, even if we have to spend 20% more time on building it.” Why were the aesthetics and the user experience of Drip so important to you?
I wanted that to set us apart – I wanted people to rave about Drip, about how it was beautiful and easy to use.
Email marketing and automation is such a competitive space that I wanted to do everything we could to get it right, even if that meant that spending more time building it.
You advise to start marketing the day you start coding. Can you tell us how did you go about the Drip launch?
I actually started marketing before Derrick started coding – I got a verbal commitment from 11 people that they were willing to pay for Drip based on what I described before he wrote a line of code.
After that, we immediately put a landing page up at getdrip.com, I split tested several value propositions, then kept the one that converted the best and asked people who were interested in the product for their email address.
Then I drove traffic to that landing page. I blogged a little bit about it, talked about it on podcasts, ran Facebook ads, etc. We had over 3,400 email addresses by launch day.
Your launch was successful, and 1 month after it, you had over $7000 in monthly recurring revenue. However, it soon became clear that the churn was so high that the company wasn’t growing, and the revenue plateaued. What was the issue?
The issue was that we had not built something that people wanted badly enough to leave their existing solutions.
Over the next few months, our revenue floated around in the $8k to $9k/month range, but the trial-to-paid conversion rate was too low, the churn was too high, and the growth was too slow.
I realized something was wrong, and tried to figure out what the problem was by talking to everyone who had cancelled, and people were saying, “You know, I can do this with the existing tools that I have. Yours is beautiful, it’s easy to use, it’s fun, but it’s not quite worth the price.”
So we had a decision to make – we had to either lower the price or add enough value to make it worth the price (something I call “aspirational pricing”). We chose the latter.
How did you evaluate the situation, and why did you eventually decide to turn Drip into what it is today?
We evaluated the situation by doing 3 things:
- We talked to our existing customers, as well as customers who had canceled. We handpicked smart and knowledgeable customers and said, “Look, this is where we are, this is what we are thinking about building, what are your thoughts on that?” Then we listened.
- We researched the marketing automation space. I didn’t know it very well, so I spent several days combing through CrunchBase and press releases, and otherwise trying to get every piece of information I could about the market and the players. I noticed there was a sizeable gap between services like Aweber and MailChimp that cost around $20/month and services like InfusionSoft that cost $200/month (or more).
- We built 1 piece of automation at a time. Basically, we built the automation framework, and then we built 1 rule and released it, and then the second one, and then the third, etc. We trickled it over the course of 4-5 months.
The marketing automation space is dominated by big, venture-backed companies. Weren’t you concerned about competing against them?
Definitely. But there were 3 things that made me feel better about competing in the space:
- Experience. At that point, I had been building and selling software for 12 years, and I had a lot of insight into email marketing because I have been using it heavily for over a decade. Meanwhile, a lot of venture-backed people were first time entrepreneurs, which meant that while they had a lot more cash than me, I had a lot more experience than they did.
- Derrick’s product knowledge. He’s an exceptional developer with top-notch user experience and user interface sensibilities. It’s hard to find someone better than him. Did those venture-backed companies have people like Derrick? It’s a possibility, but unlikely.
- Cash flow. I have several other businesses that generate income, so while we weren’t venture-funded, we weren’t cash-strapped either.
I’ll admit it, I was a little intimidated at first, but when I considered our experience, our skillsets and our assets, I determined that we could make a dent in the space.
And what happened when you started adding marketing automation features to Drip?
As soon as we added a few automation features, the numbers moved in exactly the right direction. Our churn went down, our trial-to-paid conversion rate went up, and the growth of our monthly recurring revenue accelerated. It was obvious that we found product-market fit, so we switched our positioning from email autoresponders to lightweight marketing automation.
Did you encounter any challenges specific to rapid growth?
One was scaling in terms of technology. We had to add more servers, we had to circle back on some of our code and refactor it to improve performance, etc. We bootstrapped Drip so when we started scaling up, we realized that we needed to go back and optimize a lot of things, so probably once a quarter we’d spend 1-2 weeks just doing that.
And then there was scaling in terms of customer support. On-boarding people, answering their questions, helping them to get good use of the app, all that is a lot of work, and it quickly became too much for 1 person to handle. So in mid-2015, we hired Anna, our customer success person, and she helped us add a second concierge element to Drip and land some bigger clients.
Now that Drip is growing fast, do you ever feel like budget constraints are becoming an issue, especially given that your competitors have much more money to throw at problems? Have you ever considered raising capital for Drip?
I won’t say that it’s never crossed my mind, but raising makes things very complicated, and I don’t feel like our budget constraints have limited our growth to such an extent that it would be worth it. I like to keep things simple.
Can you tell us more about the Drip team? What is your take on hiring people and building a company culture? What role did your team play in Drip’s success?
We have an office, but most of us only come in 2 or 3 days a week. We do our meetings in the office and then work from home.
We are also open to remote work. We want the best people we can find, and sometimes those best people are based somewhere else. That’s okay. We have 3 remote team members at the moment.
We are slow to hire and extremely picky about it. When you are venture-backed, your investors expect you to hire fast and grow fast, but being a bootstrapper means you can move at your own pace. We try to stay as small as possible in terms of team size and grow as large as possible in terms of revenue.
We have a few people who could have worked for any company they wanted (and likely could have made more money), yet chose us because they wanted to work in a small team with open communication that is a little more relaxed than your average tech startup (no one expects you to work 70+ hours/week!).
We absolutely wouldn’t be where we are now if it weren’t for our team. I wanted to build something bigger, and I could not have built Drip alone, and Derrick and I could not have turned it into what it is today all by ourselves, not even with a team of contractors.
Having full-time employees makes running a business much more complex. You have to pay the salaries, you have healthcare to cover, etc. But if you want to build a 7-figure SaaS business, you need people who are committed to your company and focused on making your product succeed…and the best way to get that is to hire a full-time team.
Why do you think a bootstrapped company like Drip was able to successfully compete in a marketing automation space against venture-backed companies?
I think that the main reason was the fact that there was an unmet need in that market that venture-backed companies weren’t addressing.
There was a real pain there. People were saying, “I really hate this solution that I’m using for email marketing, and here’s why…”, and that “why” was similar for a lot of folks.
Anyone, venture-backed or bootstrapped, could have gone after that. It just so happened that we were the ones who were listening, and we were the ones who had the experience to pull it off. So we went ahead and solved that problem.
What are the most important lessons you’ve learned from building and running Drip?
I learned not to hold too tightly to my initial vision of a product. Drip’s initial vision had missed the mark. Sure, maybe it could have been this neat little $10k/month product, which isn’t a bad thing… But that wasn’t where we wanted to go with it. So we had to drop that idea, listen to the market and build what people were asking for, which is how we got to where we are today.
Also, I realized that while self-serve SaaS model works great, having customer success people who do a lot of manual work that doesn’t necessarily scale well (helping on-board people, doing sales demos, etc.) is invaluable, and adding that personal touch to Drip has been a game changer and contributed heavily to our growth.
What would be your top 3 tips for someone who wants to launch their own SaaS app?
- Thoroughly vet the idea before you commit to it. Try to convince yourself not to build that app. Why? Building a SaaS app takes a lot of time, energy, and money. It’s best to make sure that it’s something that people actually want and are willing to pay for before you pour all those resources into it.
- Start marketing the day you start coding. Really put an effort into building that email list so that you can have an amazing launch. You don’t want to launch to crickets.
- Talk to your potential customers as you are building the app. Show them screenshots, ask for their opinions and listen to what they say. That way, you will have a much better chance at building a useful product, your potential customers will have a sense of ownership because of their involvement in the process, and they won’t forget you or your product during the months leading up to the launch day.
Also, any resources besides your own work that you could recommend?
Thank you, Rob!