Rob Walling has bootstrapped multiple startups to exit, most recently Drip. These days he’s working on TinySeed, the first startup accelerator designed for bootstrappers. He also founded and runs MicroConf and Startups for the Rest of Us.
Davis Baer: What’s your background, and what are you working on?
I’m a software developer by training and feel like I officially became an entrepreneur in 2005 when I acquired a software product that was in its alpha release. Since then I’ve started or acquired a few dozen products, most notably SaaS applications HitTail and Drip, both of which were acquired.
In addition I’ve been spearheading a community for bootstrapped founders through my essays, podcast, conference, and now TinySeed, the first startup accelerator designed for folks who would traditionally bootstrap.
We will focus on SaaS companies that won’t become unicorns, but could reach $1M-$50M in annual revenue.
These are companies with real business models. Charging real money. To real customers.
How is TinySeed different than other accelerators?
Most accelerators run for three months and founders have to relocate to a specific location. But there are thousands (if not tens of thousands) of bootstrappers who aren’t able to relocate due to family or other personal obligations. TinySeed is unique in that it’s a remote accelerator, and companies will be mentored for a full year.
In addition, accelerators focus on demo day — the day at the end of the program where the companies pitch their progress in an attempt to raise a seed or Series A. Since bootstrappers tend to be capital efficient, a founding team can live off that same low six-figure investment ($100k-$150k) for an entire year if they can participate remotely, without the necessity (but the option) of raising more capital at the end of the 12 months.
TinySeed companies don’t need to exit for our accelerator to work. We’ve designed a structure where the goal is to align both founder and investor interest such that founders don’t need to sell in order for the investor to get a return.
Obviously, if the founder does decide to sell, everyone wins — but we’re working on a flexible profit/dividend share model where the founder can focus on growth if they want to, but also optimize for taking cash out of the company (when that makes sense). We believe that designing a funding structure that fairly aligns founders and investors in this way will mean a lot more capital will flow into this ecosystem and hence allow many more businesses like this to be built.
This also means they can grow at a healthier pace and don’t need to force growth to raise their next funding round. I like to think of this as building a sane startup. That is, a startup that values people over results, has reasonable working hours, provides ample days away from the office, and generally doesn’t burn out the people involved.
What motivated you to start TinySeed?
There is a gap in the market that makes it very difficult to find funding if you don’t aspire to build a $1B company and exit in 7–10 years.
The venture capitalists, angels and accelerators most of us are familiar with focus on Unicorns (companies that have the potential for a $1B valuation). If you apply to YCombinator with a SaaS product that can “only” grow to $10M or $20M per year in recurring revenue, your likelihood of being accepted is close to zero.
But my experience working with bootstrappers for the past decade+ has given me first-hand exposure to a large group of SaaS companies that may not grow to Unicorn status, but have a good shot at becoming highly profitable, multi-million dollar businesses.
As an angel investor, I’ve realized there is a serious lack of capital and support in this corner of the startup ecosystem (Indie.vc is really the only player I’m aware of in this space). I also believe these companies are worth a similar level of investment (both time and financial) as those seeking to become Unicorns.
A SaaS application that’s past its fast growth stage can have net margins of 30–50%. When you’re talking about $5M or $10M in revenue you’re not going to IPO, but it can be a life-changing outcome.
To that end, TinySeed aims to “fill this gap” by writing accelerator-sized checks and providing a year of mentorship to SaaS companies that have the potential to reach $1M-50M ARR. This allows a founding team to work full-time on their business for a year.
How have you generated interest in this idea?
When we announced the idea in October with a landing page, a blog post and a tweet, the response was shocking, both from the founder side and the mentor/investor side.
175 retweets, 617 likes, 342 upvotes on Hacker News, and close to 3,500 interested people who provided us with their name and email address. About half of those provided their product URL.
I think the key to the success of this announcement hinged on a few things:
- There is pent-up demand for something like TinySeed. It’s a new approach to a problem many people experience. Working a day job and launching on the side is very hard.
- Given my involvement with bootstrappers I have an audience in the space and had easy reach into many email inboxes and Twitter feeds of people who would care about this.
- We did a good job of summarizing the pain and our solution in a well-written, founder-focused landing page (here).
What are your goals for the future?
The next few months are typical of a new startup — everything happening at once and not enough time to get it all done.
In the next 90 days I expect we’ll:
- close our funding round
- handle legal and corporate stuff (incorporate, bank accounts, etc.)
- launch a marketing website
- open batch applications
- narrow down to our final 10 or 20 companies
- and about 100 other things we haven’t thought of
My goal is to execute on the above, handle the unforeseen, and get the first batch of founders chosen in early 2019.
What are the biggest challenges you’ve faced and obstacles you’ve overcome? If you had to start over, what would you do differently?
The biggest challenge we’ve faced so far is trying to educate founders and investors on the merits of this approach. The Unicorn mindset is so ingrained in startup culture that questioning it is outside the realm of reality for many people.
When I’ve spoken at meetups in the Bay Area, I inevitably have to convince companies that they do not have to become the next Facebook. I explain to founders that you can be a $10 million company and be really successful, insanely profitable company without institutional money.
Have you found anything particularly helpful or advantageous?
The ability to control your emotions is highly underrated. I used to be terrible at this but had to get better (or implode) while I was growing Drip.
At times the stress is immense, failure is almost a certainty on any given day, and if you can’t figure out a way to function with that level of stress, bad things will happen to your body, your relationships, or your life.
I’ve found mindfulness and careful attention to my state of mind has become one of my superpowers.
What’s your advice for entrepreneurs who are just starting out?
It’s going to take longer than you want to find success, but if it were easy everyone would do it. If you base your timeline on TechCrunch articles it would seem like you can launch a startup today and be a millionaire next month.
I would encourage you to focus on a more realistic timeline, and think in years, not months.
Also, read books. Some of helpful books I’ve come across during my entrepreneurial journey include:
- Traction by Gabriel Weinberg and Justin Mares
- SaaS Marketing Essentials by Ryan Battles
- The Hard Thing About Hard Things by Ben Horowitz
Where can we go to learn more?
Feel free to ask your questions in the comments.