Justin: 00:00

We're not moving as fast as we'd like. I thought, you know, the original plan is that I would be able to work on my business and this and that you'd be able to work on your job and this, but this isn't working.

Jon: 00:21

Hey, everyone. Welcome to Build Your SaaS. This is the behind the scenes story of building a web app in 2018. I'm John Buddha, a software engineer.

Justin: 00:29

And I'm Justin Jackson. I'm a product and marketing guy. Follow along as we launch transistor dot FM. So, John, here we are. We we put out a teaser for this episode which we haven't done before and it's something I'm trying.

Justin: 00:46

I've it's it's interesting because we got a lot of responses to that teaser.

Jon: 00:51

Yeah.

Justin: 00:53

Rob Walling reached out on Twitter. You know, there's people emailing us with their opinions. And I think what was the subject of that? It was something like I don't wanna get crushed by the VC monster.

Jon: 01:07

Yeah.

Justin: 01:08

Yeah.

Jon: 01:09

The VC monster.

Justin: 01:11

And and I in the sub headline, I put Justin and John have a hard conversation about funding about startup funding. So I've really set the tone for this chat we're gonna have today.

Jon: 01:23

So that's the that's the chat today. We're back on our normal schedule, which we haven't been on recently.

Justin: 01:28

Yeah. Yeah. Recording

Jon: 01:29

Life's been a little rough.

Justin: 01:31

Yeah. Recording on a Friday. Yeah. I and I think maybe that's where I wanna get started. And I don't know what you think about this.

Justin: 01:42

It'll be interesting to have your thoughts, but we are, let's see. Technically, we signed the docs in January or February. I can't even remember now.

Jon: 01:51

I think it was, yeah, February, March, maybe. I don't know.

Justin: 01:55

Okay. So February, March. So let's just say March, April March, April, May, June. We're into our 4th month, and I would say this is not working.

Jon: 02:07

I would say it's it's it's stalled out significantly. Let's working but not working great.

Justin: 02:16

Yes. Working but not working great. And so let me tell my side of the story, and then you can tell your side of the story because they're probably different. But this is how I kinda feel. I feel like the original my original plan was I'm gonna keep my other business going, megamaker.co, which is resources for indie entrepreneurs and startups.

Justin: 02:40

There's a of, like, online training and courses and stuff. And that on the side, I would bootstrap Transistor. And actually, I also wanna bring up we've mentioned this in the past, but we have another app that we are working on called spots dotfm. So in my mind, we've had these ideas from the very beginning. And I thought, okay.

Justin: 03:02

We're gonna I'm just gonna keep making money in my daytime business. And on the side, John and I are going to get to work on transistor and spots. And on the plus side, I would say I feel like we're working really well together, when we do work and, you know, get stuff done sorry. How would you feel?

Jon: 03:23

Yeah. Yeah. I agree. Yeah.

Justin: 03:28

I I just saw you wanting to we have video, so I can see that you're, like, gonna say something.

Jon: 03:33

Yeah. I agree with that.

Justin: 03:34

And I actually just made a video on I was trying out the new Instagram TV. Did you hear about this?

Jon: 03:40

I did.

Justin: 03:41

Okay. So

Jon: 03:41

I still don't really know what it is.

Justin: 03:44

John see, John this is another reason John and I are good partners because John is just like he does not he's not I haven't seen him on Instagram once. And, but I'm all over this stuff. Like, when when Instagram TV comes out, like, I was upset because I couldn't make a video that night when I heard about it. But the first video I made was kind of, I think it's something like, maybe you shouldn't be a solopreneur. That was the title.

Justin: 04:13

And my feeling was, you know, just describing how working with you has made me realize, like, man, there's a lot of advantages to working with a partner. And I think the way I put it was, I feel like when I'm working with John, I have superpowers. I'm actually able like, when we're going, it feels like we're able to move along at a pace that I've just never had. Mostly just because I'm not as good at building things as you are.

Jon: 04:43

Yeah. I mean, I on the flip side, I feel the same way because I'm not good at marketing. Yeah. And the amount of the amount of attention and sort of exposure you've gotten us within a limited time frame has has been pretty pretty spectacular, I'd say.

Justin: 04:58

Yeah. Well and and it's fun when you can work out it's it's it feels like people have used that expression like Voltron.

Jon: 05:06

Yeah.

Justin: 05:06

You know that? And, for kids that weren't didn't grow up in the eighties, Voltron if I remember it correctly, it was like a big robot that was a combination of smaller robots.

Gavin: 05:18

From days of long ago, from uncharted regions of the universe comes a legend. The legend of Voltron. Yep.

Justin: 05:29

And so when you say, you know, we're like, this is our Voltron, the combination of our our parts is better together than it is apart. And so I feel like that part's working really well. But my original plan of working on, you know, my regular business during the day and then on the side working on transistor has proven to be a lot more difficult than I thought. I don't know why I thought this, but I thought, well, I'll, basically I'll work I'll I'll split my day up. You know, half my time I'll and energy and focus I'll give to Mega Maker and half my time and focus I'll give to Transistor.

Justin: 06:10

But it should have stood to reason that if I'm dedicating half my time to Mega Maker, it would probably do about half as good as it did last year.

Jon: 06:21

Right.

Justin: 06:22

And if I look at my numbers, that's around where it's been. You know? It's been, about half the time and investment in and about half the output out. And, so I'm starting to feel the financial pressure of whoo. Like, man, it would be nice if Transistor if we had some sort of funding for Transistor or if Transistor was paying the bills or if I could just focus on Transistor.

Justin: 06:50

I think, you know, MegaMaker will eventually just kind of run itself at, you know, whatever level. But the in the meantime, when you're kind of stretched between both worlds, it's difficult. Now I think so I would say my challenge is less availability of time and more availability of money. Yours would probably be maybe the reverse. Is that right?

Jon: 07:16

Yeah. I think so. Yeah. So for me, I mean, my my initial idea was, obviously, I have a full time job, so, the money is not an issue. And that I could I wouldn't be obviously be able to split my day half and half, but I would, the original intention was to work on transistor, at least once a day.

Jon: 07:38

I'd do something like once a day, right? Doesn't matter if it's huge. It doesn't matter if it's small. And then, that would pretty much mean nights and weekends unless I took a day off of work here and there and and worked on transistor.

Justin: 07:54

For

Jon: 07:54

a while that worked okay. You know, I was able to sort of do, you know, at least one thing a day. On the weekends, I would take, you know, one of the days on the weekend and and work for, like, 6 hours or something and have a good chunk of time

Gavin: 08:08

Mhmm.

Jon: 08:08

To do that. I think as time went on, I found that to be harder and harder just because because I was doing that, I was sort of ignoring other things in my life. Yeah. And then also, you know, kind of getting a little bit behind on the day job and sort of, feeling a little guilty that I was maybe letting some people down there.

Jason: 08:32

Mhmm.

Jon: 08:32

And then I get a little guilty that I was, like, letting you down because I just wasn't moving fast enough. Mhmm. And, yeah, my initial plan was that it would all be good and everything would fit perfectly together. And I would have a few hours at night to work on this stuff and still get enough sleep and still be able to work out. Yeah.

Jon: 08:51

And that just sort of didn't really happen. So yeah, it's it's more of a time focus, type of situation for me.

Justin: 09:03

Yeah. By the way, what I think one of the benefits of us recording once a week is it basically means that we're gonna have a conversation, a phone call every week, and we don't always publish everything that we talk about. In fact, we were gonna record we record we were going to record on Monday or Tuesday, and we just ended up having a real big, like, just heart to heart. And obviously, we were not gonna publish any of that. But just as a side note for other cofounders out there, I think one of the benefits for me of having these calls is that it just gives John and I another opportunity to be honest.

Justin: 09:44

And, talking to folks that have been through this ringer before. One thing you have to be very careful of is hiding things from your co founder. And, like, so even just what John said, like, he was feeling guilty. Like, it's important for me to know that. It's also important for John to know that I'm starting to feel some financial pressure.

Jon: 10:08

Yeah.

Justin: 10:09

And I know founders that have kept that stuff to themselves for months months months. So maybe they were feeling some emotional angst that they didn't share or they didn't let out. Or maybe they were feeling some financial pressure. I know founders that have put tens of 1,000 of dollars on credit cards to fund their thing and weren't telling the cofounders. And then all of a sudden, it got to a breaking point, and they're like, hey, guys.

Justin: 10:37

I gotta tell you something. And they're like, what? Like, why did you hide that? Yeah. Would you agree this dialogue has been helpful?

Jon: 10:47

Oh, yeah. Absolutely. Yeah. Yeah. I mean, I haven't I haven't really had that before.

Jon: 10:52

It's either me, you know, by myself, which I guess my, was my initial plan for Transistor. But that would probably just result in me like over analyzing it and not ever getting anything done and not having anyone to talk to about it. Mhmm. So, yeah, it's been it's been good. The emotional support has been great.

Justin: 11:14

This is that's exactly what I talked about in my Instagram TV episode, John. You need to watch it.

Jon: 11:19

I do.

Justin: 11:22

So okay. So that's kind of what's work not working. And, in our heart to heart earlier this week, I kinda went back to you know, sometimes when there's lots going on and you're like, you're like trying to go all over the place to make things work. It's It's like you're running over here and doing some work on transistor and then running back to work and trying to catch up there and then running home and trying to get to the gym and go to sleep. And for me, I'm, like, running around, like, okay.

Justin: 11:52

I gotta get get my business kinda cranking again. Okay. Oh, but this thing needs to be done for Transistor and, oh, I got a customer development phone call and, oh, this person wants help with this.

Jon: 12:03

Yep.

Justin: 12:04

And you're kind of running around. Right? And I think it's helpful to slow down and just think what do I want? Like, if if I could have anything I wanted for this year, what would it be? And even long term, what would I want?

Justin: 12:26

And so one thing I said to you earlier is I just want to make stuff with John. And so if someone came, you know, if a magic fairy came and said, I can, you know Justin, what do you want? What's your dream? I'd be like, well, I just wanna make stuff with John. Whether that's transistor or spots or anything else.

Justin: 12:50

I've really enjoyed our partnership. And whatever enables me to make cool stuff with John and put it out into the world and have people, enjoy it and use it, that that's what I wanna do. I think I mean, you I don't wanna speak for you now. So because you said something back. Yeah.

Justin: 13:09

Do you remember what you said?

Jon: 13:11

Not exactly. No. Sorry. You almost spilled a coffee.

Justin: 13:16

Yeah. I was spilling coffee. Sometimes I ask you a question because that is a period of time where I can take another drink of coffee.

Jon: 13:23

Yeah.

Justin: 13:24

So if you mess with that rhythm, John like, for example, I asked you, you know, if you could work on transistor full time, is that with what you'd wanna do?

Jon: 13:35

Yeah. Yeah. I would. There's still an amount of freedom there that you get with working on your own product. That, you know, you don't have necessarily by working for a company, good and bad.

Jon: 13:49

There's freedom. There's also probably more work and more things to think about. But Mhmm. It's still ultimately for me about sort of what I want from what I do day to day. And is it is it the freedom to work on something that, you know, other people use and other people like and provides value to people?

Jon: 14:08

Mhmm. Can, you know, make money for other people.

Justin: 14:12

Mhmm.

Jon: 14:13

But yeah. I mean, it's you know, if I could, I would do that. Mhmm. And building it with you is obviously a huge benefit too.

Justin: 14:23

Yeah. Yeah. So it it's I mean, one of the advantages of bootstrapping is we could really get started right away. Right? We were kind of like Yeah.

Justin: 14:35

Do we wanna work together? I mean, you thought about that for quite a while. Like, do I wanna work with Justin? And then Mhmm. You, you know, you decided he did.

Justin: 14:45

And then we signed some partnership documents and made it all legal. But the we were able to kind of get going right away. And now we're 4 months in, and this is usually where the wheels start to fall off the bus. Right? The honeymoon, is, you know, starts to be over.

Justin: 15:03

And, there's some reality. I I I've had friends that were in a similar situation to us, you know, partners. They start working on the app. They're super excited. They got all this energy momentum.

Justin: 15:18

They got early access users. They're everything's going, but then it's just like the pressures of life kind of seep in and they're they have to give up.

Jon: 15:29

Yeah. I mean, you can't you can't let those things build up. I don't think.

Justin: 15:33

Mhmm. And so there's some big questions that we need to address right now. 1 is what do we want. 2 is, when do we want it? So, for example, you're working full time for cards, which is a great company.

Justin: 15:56

You're in charge of a team. And there's a question of how soon would you wanna leave. Right? Right. Do you wanna do you wanna talk anymore about that?

Justin: 16:07

Or Well, yeah.

Jon: 16:08

I mean, that's a big unknown. Obviously, if if things were rosy and and Transistor was making money Mhmm. I would obviously consider it pretty soon. And if I thought it was going in a direction that it would, you know, sustain itself and sustain both of us. It's obviously kind of difficult to just leave in my position.

Jon: 16:35

Like, I couldn't just, like, up and leave and be, like, hey, I'm I'm leaving in 2 weeks or next week or whatever just because there's, you know, a lot of things in in motion being planned, being worked on. I would have to, really prepare the team for that or whoever was hired on to sort of replace me or

Justin: 16:57

Mhmm.

Jon: 16:58

So professionally, I wouldn't really want to just, you know, leave.

Justin: 17:02

Yeah.

Jon: 17:06

Let me

Justin: 17:06

ask you a question. Let's say tomorrow. Two scenarios. Tomorrow, we get a 1,000 new customers, and we're making $20,000 a month. How soon do you think you would be able to leave, or would you want to leave?

Jon: 17:25

Maybe a maybe a month.

Justin: 17:28

Okay.

Jon: 17:29

May a month or 2. 4 to 8 weeks, probably.

Justin: 17:31

Okay. Probably. And I guess this is a similar scenario, but, let's say tomorrow we got an infusion of cash, 200 grand. How soon would you leave?

Jon: 17:47

Is that money for for us to live on?

Justin: 17:49

Yeah. Like, an investment. Someone someone says, here's 200 grand. You guys build and grow transistor and spots, which we haven't talked a lot about. But Yep.

Justin: 17:59

You know, here's here's some money. Go do this.

Jon: 18:02

That one's a little I feel like that's a little dicier because they're not it doesn't automatically translate into customers. Mhmm. So we would nest we would probably owe that money back Mhmm. But also might not actually make it back. Mhmm.

Justin: 18:18

You know

Jon: 18:18

what I mean? So

Justin: 18:19

Oh, that one scares you a little bit more.

Jon: 18:21

That one does. It does.

Justin: 18:23

Even if it's an investor that's saying, hey. I'm just rolling the dice on you. You guys have good traction. You guys are like peanut butter and jelly. I just want in on this magic you guys are creating.

Justin: 18:34

I've got 200 grand to bet on you, and I'm hoping that, you know, I make, you know, 10% on I don't know. It's 10% what they make? I don't know. I'm hoping I make 10% on dividends over the next 5, 10 years. I I have no idea what what kind of payback people want.

Jon: 18:55

Right.

Justin: 18:56

How would you feel about that? And and and does that change how quickly you would wanna you would want to kinda move into full time development work on?

Jon: 19:07

I I feel like I'd be a little more hesitant about that, but I think someone investing in us would probably want that to happen sooner or later. Right? They're not gonna invest in someone who can only put in, you know, a handful of hours a week. Mhmm. Yeah.

Jon: 19:26

And I would think, you know, VC would be this a similar situation where they're gonna review the team and be like, well Mhmm. You guys are working half time, it's not gonna work. We're not gonna give you money.

Justin: 19:36

Yeah. And no one's gonna fund just one jackass like me. We they're they're gonna want the Voltron.

Gavin: 19:42

The legend of Voltron.

Jon: 19:45

Yeah. Right. Yeah. I mean, there's there's this there's a scenario where it's like I could do some sort of sabbatical

Justin: 19:55

Mhmm.

Jon: 19:55

Situation and just yeah. I've I've thought about this stuff.

Justin: 20:01

Yeah. Oh, I see. Because part of it for you see, I have no stability in my life. I I'm just, I'm already running this business. And and but for you, you've got this stability that's actually quite valuable.

Justin: 20:14

You've got a good job.

Jon: 20:15

Yeah. Stability. It's a team of people I really like and a company I like a lot. So, you know, I've been here for almost 4 years, which is a long time for me. But Mhmm.

Jon: 20:27

I haven't ever talked to about this with anyone at at the office. But if there was a scenario where it was, hey, I'm gonna take a month or 2 off Mhmm. Is it possible to do that and still, you know, come back at some point? Mhmm.

Justin: 20:44

Yeah.

Jon: 20:45

And they may or may not be open to that.

Justin: 20:46

Yeah. Yeah. That's interesting. The I wonder if if we kinda think how I wonder how our thinking if this is a reflection of our thinking, because I've just always been very entrepreneurial and I've always had this thought of, like, especially in 2016 where I'm like, okay. I'm going, like, full time independent entrepreneur, and I really don't wanna go back.

Jon: 21:17

Yeah.

Justin: 21:18

And I had this feeling of I'm gonna make this work no matter what. Not not being so egotistical to say, you know, I might need I might need to go back and find paid employment again. But definitely, there's this feeling of, like, I like this. I wanna do this. Whatever form it takes.

Justin: 21:41

Mhmm. But I can also I also I mean, I was I had a I worked for the same software company for 7 years. And the reason I did that is because I had kids, I had a mortgage, and I wanted that stability. And when I was in that position, I really didn't want to lose that stability. The stability was nice.

Justin: 22:02

Right?

Jon: 22:02

Yeah. And you you have the you have the added incentive, which I think I've mentioned before, and I haven't done too much research on this. The added incentive of having Canadian health insurance.

Justin: 22:14

Oh, yeah. Yeah. That's huge, actually.

Jon: 22:17

Which which in the US is a total shit show. Yeah. And, you know, I obviously I obviously have good health insurance through work, but, like, it's unfortunate that that's one of the things you have to think of is if I leave my job, I now have to buy my own health insurance.

Gavin: 22:34

Mhmm.

Jon: 22:35

And currently, the government is just tearing apart the Affordable Health Care Act.

Justin: 22:40

Yeah.

Jon: 22:40

And it's expensive, and it barely covers anything. And, you know, the good thing about having coverage that you have is that it allows you the freedom to delete to move jobs without losing that safety net.

Justin: 22:53

Yeah.

Jon: 22:53

Where whereas in the US, I think a lot of people are stuck Mhmm. At their job because they're like, I have to have health insurance. I can't leave

Justin: 23:02

Yeah.

Jon: 23:02

Even if they wanna go do their own thing.

Justin: 23:04

Yeah. Yeah. Totally. I think that's a huge I've heard that from a lot of my my entrepreneur friends in the States. They've had to go back to paid employment.

Jon: 23:16

Especially if you have a family.

Justin: 23:17

Yeah. Just and they all had families. That was the thing. They they they just we can't they couldn't even get insurance as private business owners. It was like Yeah.

Justin: 23:26

We just can't they won't no one will give it to us. And so yeah. I think that is that is a thing. Obviously, the answer is for you to just become Canadian. Right.

Justin: 23:42

I did I I sent you this, I'll put this in the show notes too. But Canada has a startup visa program that I haven't actually looked at. But I think it's basically allows people to immigrate to Canada to build startups. And I'm not sure if it's how easy it is or whatever, but

Jon: 24:00

Yeah.

Justin: 24:01

Okay. So let's talk a little bit about our options. There's kind of 4 options the way I see it. Let me know if you think of other ones. Number 1, angel fundraising or fund strapping.

Justin: 24:13

This is something that Rob Walling mentioned, in the past. Traditional VC. So that would be people looking for a big exit. There is a lot of invest like VC money going into podcasting right now. It's up, like, 10 times.

Justin: 24:30

You know, it was very, very low. And now we're seeing, like, Castbox, which is just, iOS Podcatcher, just got 13,500,000, which is insane. But they would be looking for 10x, 20x, 60x exits. And so Yeah. We would not be able to be, a small little 2 person lifestyle, quote unquote, company making 1 to $2,000,000 a year.

Justin: 24:56

And the next one would be to stay the course. And then the final option, which I've been pitching to you, which is the crazy idea is Yeah. Is there another way we could fundraise this without giving up a portion of our company and without selling our souls and without doing everything else? Now I'm gonna I'm gonna keep that I'll I'll just keep that in my back pocket for a sec. Any thoughts on angel fundraising, fund strapping?

Jon: 25:28

Aside from trying to stay the course Mhmm. That's probably my my most attractive option

Justin: 25:34

Okay.

Jon: 25:35

I guess. And that's kinda because I think you could find someone that, you know, you know pretty well. Maybe it's a single individual or a couple individuals together. Mhmm.

Justin: 25:49

Yeah. I mean, I think we've got a pretty good network, and a lot of these folks like us and wanna see us succeed. Yeah. And they've got probably between let's just say on on average, we could probably find 4 to 6 people to put in 50 k each and, you know, do a 200 to $250,000 rent.

Jon: 26:16

They might, you know, they might be able to access some sort of advisory board, or they may have, some feedback for us and Mhmm. Insight into the market.

Justin: 26:25

Yeah. Okay. But would you say that stay the course is the most attractive option for you right now?

Jon: 26:36

It might it might be. That's just me having a hard time getting past, like, the stability of a job. Yeah. But, but again, like, I don't have kids like you. I don't, you know, I'm not, it's a different situation for me.

Jon: 26:53

Like, I should be in a position that I think take more risks. Yeah. But part of that is, you know, the stay the course part, it's still without taking funding. I think it still could potentially include this idea of, like a sabbatical from the full time job.

Justin: 27:11

Mhmm.

Jon: 27:12

Because I could still I could still support myself without working for a couple months Yeah. And and working solely on transistor. Mhmm.

Justin: 27:23

Yeah. There's there's a lot in there. Wow. Let me tell you give you some background on this crazy idea I had. And, unfortunately, John and I are have already processed a lot of this, but I wanna kinda take you through it because I think the thought exercise is interesting.

Justin: 27:39

Here's the background. I meet with Dan from Crowd Riff. I think I can say this. Yeah. Dan from Crowd Riff.

Justin: 27:46

He came to Vernon and wanted to have coffee with me. He's I mentioned him on the show a while back, and we were just talking about, you know, he's really interested in what we're doing with Transistor. I also, yeah. He's really interested in what we're doing with Transistor. And he says, you know, have you thought about raising venture capital?

Justin: 28:09

And, you know, CrowdRiff has raised money, and, you know, that's enabled them to grow really fast. I think they're, you know, at 60 people or something like that. I said, I don't know if that's a good fit for John and I because I listened to Dan and the other people, you know, I know who have raised venture capital. I've listened to them talk about how draining and emotionally exhausting and frustrating all of that is. And I just didn't think that you and I could do that.

Justin: 28:43

I I I don't think I've got it in me to do that. And, especially, you know, I wanna move faster. I don't wanna take 6 months off to do a roadshow and have to go around.

Jon: 28:53

Yeah. Pitch do pitch decks and all these presentations. And

Justin: 28:58

Yeah. Yeah. So having to come up with a pitch deck, having to do all that, like, I can't I I I shouldn't say can't, but I just it really sounds awful. And so part of my conversation with Dan was, what if there was another way to raise money? Right?

Jon: 29:18

Right.

Justin: 29:19

And I thought about Kickstarter and how that that idea of pitching potential customers and your network of friends and all those things, pitching them on the value you're about to bring, or even just pitching them on why don't you, you know, support this work that we're doing and how amazing that is for creators. Because when it works, it's just what a great way to empower the maker. Right? Like, you can you empower the people to create these things because now you've got all the funding for it. Now I've recognized that that model really works for certain types of things.

Justin: 30:08

Right? And not for others. We have our friends, Tom and Dan at Studio Neat have done this with, the glyph, which is a little tripod for the iPhone. Right? What else have they made?

Jon: 30:21

They made, like, the the neat ice kit, the, simple syrup kit.

Justin: 30:27

They

Jon: 30:28

they did a iPad stylist a while ago. I think they're working on a new pen.

Justin: 30:34

Yeah.

Jon: 30:35

Yeah. They got a lot of cool stuff. Yeah. Hardware. Physical physical they've done some software, but

Justin: 30:42

Yeah. Sorry. Hold on. I gotta my wife's calling me. I gotta call you back in a sec.

Jon: 30:48

Alright.

Justin: 30:49

Okay. Alright. So John and I weren't able to finish this conversation. So we decided we're gonna break it up into 2 parts. Come back next Tuesday for part 2 of our conversation.

Justin: 31:02

In the meantime, head over to Itunes. Give us a review. Your reviews keep us going. All you have to do is open up the app, search for build your SaaS, scroll down, click 5 stars, leave us a little written review and, that really helps us out. As always, you can interact with us in breaker.

Justin: 31:21

You can also interact with us in cast box and we will see you next Tuesday.