The Bootstrapped Founder Newsletter Episode 10 – January 17th 2020

Dear founder,

There are very few things that are more important to the success of a business than the founders involved. Yet many companies fail because they get the initial lineup wrong. I’ve been part of several companies that went nowhere because either I didn’t fit in or my co-founders were not compatible.

So let’s talk about co-founders. It always feels like a gamble: here are these people you may or may not know well. And they want to start a business with you. You know you could probably do it on your own. You also understand that they might make a difference if they work hard, and the business would be all the better for it.

What to do? Some founders swear by their choice to be a solopreneur. Others, like me, think that a good co-founder can be a catalyst to incredible success.

To answer this question, I have written an article called Do You Need a Co-Founder?.

I argue that you should at least give it a try. But only after you’ve carefully vetted your prospective co-founders.

It boils down to several alignment checks that you should feel confident about:

  • Personality Alignment: Do you communicate along the same lines? Can you understand each other without being annoyed or frustrated? It’s all about trusting and respecting each other.
  • Empowerment Alignment: Do you care equally about lifting other people up? Are you both focussing on enabling and empowering your customers, your team, and each other? The will to empower is the source of great strength. It should be present in every founder.
  • Skill Alignment: While complementary skills are excellent, they’re not required. As long as you make sure that responsibilities are clearly distributed, and a pre-determined someone has the last word when conflict arises, you can deal with any kind of skill overlap.

To find out more about these alignments and the asymmetries to look out for when vetting a co-founder, read the full article called Do You Need a Co-Founder?.

This week, I released two new articles in the “Emotional Journey of a Bootstrapped Founder” series: Obsession with Perfection and Negative Self-Talk. Both contain stories from the days when I was deeply entrenched in the day-to-day operations of FeedbackPanda and how I dealt with the emotional challenges I was facing every day.

What Happened in the Bootstrapped World

A few days ago, the world met the Deli Hustler. In a Reddit post that is now deleted but was backed up in a Twitter thread, a budding entrepreneur asked the community why his sandwich-based business idea was met with a surprising amount of resistance. He wanted to license his newly invented sandwich to delis in his area as some sort of intellectual property, take 20% of the profits, and now wondered why no one wanted to take him up on the offer.

The community responded with mockery and ridicule. They laughed at their perceived naiveté of the entrepreneur, how he didn’t understand the inner working of the deli industry, how he had over-inflated expectations of how his genius idea would make him rich.

Initially, I must admit that I had a very similar reaction. Only after a conversation with a fellow founder in the comments did I reflect on the implications of all the snap judgments made by the people who commented on the threads that soon picked up the hashtag #sandwichgate.

I started to wonder what was really happening here. Someone had an idea, had thought of a way to monetize it, and started reaching out to a target audience. He failed to validate that they had a problem that his product would solve.

For a founder, that is an impressive result. Failed validation is a wonderful opportunity to go back to the drawing board and see what can be changed to make success more likely.

Why then was the first reaction of these commenters such a negative one? Paul Graham had recently written about haters, so was it all about that? Are people envious of other’s success, trying to pull them down?

I feel that most wantrepreneurs have a massive confirmation bias towards things not working. If you haven’t experienced the journey of an entrepreneur, you will find fault in every single idea. If you don’t understand the powers of a founder to bootstrap whole businesses from nothing, you will sneer at rejection and say that you knew it wouldn’t work all along.

But as founders, we can do better.

So let’s look into what the Deli Hustler did and see how we can give it a positive twist.

From a scalability perspective, he’s got it right. He is mostly trying to franchise out an idea. Significant profits and very little investment. When he was called out about why they didn’t open a deli to sell this sandwich, he responded that this was the clever part of his idea: the expenses of a shop would only “eat into it”. Phrases like this made me think that this might be a smart troll, but let’s assume it’s a genuine entrepreneur for now.

So what exactly is he licensing out? A sandwich recipe. Phew. That will be hard to protect as intellectual property. But this idea is hinting at a more profound question: is there a good customer for creative new sandwich recipes? Who would benefit from this one recipe or many more?

In short: is there an audience that is big enough for new sandwich recipes? Are there enough places that would want to sell new and exciting sandwiches to their customers? Are there enough customers that would prefer an experimental sandwich over a Reuben or a Philly Cheese Steak?

And this is where the whole discussion turns out to be quite interesting. Apparently, the eleven deli managers our Deli Hustler talked to didn’t appreciate his business idea. But what if he had been talking to the wrong audience all along? After all, his problem validation failed spectacularly with the people he had spoken to.

What if he found an audience whose critical problem is the absence of innovative and creative sandwich recipes? What if instead of trying to sell his single recipe to established delis, he came up with a solution for people opening delis and similar establishments, looking for something to stand out among the competition? What if he turned this into a recipe-as-a-service business for deli chefs? What if he researched the industry enough to develop a starter kit for a whole deli franchise?

All of a sudden, this is not a joke anymore. It’s a legitimate discussion about finding an audience, their critical problem, a solution, and finally turning that into a product.

If you get over the initial dismissal of someone’s idea, there is so much to learn.

And it would never have happened if the Deli Hustler would not have gone to the delis with his grand vision of a sandwich empire of his own. Try being a Deli Hustler for a day.

“To avoid criticism say nothing, do nothing, be nothing.” — Elbert Hubbard

Links I Found Interesting

If you’re into podcasts, and I would be surprised if you weren’t, you will find a lot of fantastic content at Podnami. Supposedly filled with technical podcasts, a lot of the most popular ones are about running a business, and a majority of those tackle the challenges of bootstrapping a SaaS business and all the crucial parts of that: product, idea, audience, and building a sustainable enterprise. The hacker news discussion around the product is very interesting, as it contains a big thread on the merits of podcasts as well as lots of links to other curated sources and recent individual episodes of merit.

As bootstrappers, we’re scrappy when it comes to putting money on someone else’s table. That’s where this Google Spreadsheet full of deals for startups. The items in the spreadsheet range from 50%-off for years to thousands of dollars worth of credits for PaaS solutions. Consult this list before you’re making your tech choices. If you’re already invested in some of the services mentioned on the list, you might find a discount you can ask their customer service about. It’ll help either way.

After last week’s Earnest Capital Investor Memo Draft, there have been a few more interesting articles that were published about the new asset class of slow-growing, sustainable, bootstrapped businesses. Tim Kubik’s Get Rich Slow and Steady looks at Buffer and the economics of a company that does not need or want explosive growth yet still shows returns that make it attractive as an investment vehicle. We will see more and more investor pieces on the desirability of businesses that commit to the bootstrapping mindset. And that is a good thing for us. New opportunities for funding and support will appear that are different from the highly intrusive VC model. Bright days ahead!

Bootstrapping Success Stories I Noticed (and a few Glorious Failures)

In a rare moment of recursion, I would like to announce that this newsletter now has over 500 subscribers. Thank you to every one of you reading my work every week. I am beyond grateful for every single second you spend listening to my thoughts and opinions.

Speaking of subscribers: Harry Dry of Marketing Examples had an avalanche of 4700 new followers overnight on Twitter this week, jumping from 8k to almost 13k. Serendipitously, the person responsible for this was also the person that Harry had modeled his Marketing Examples tweets on. What goes around, comes around.

Tjcx, the founder of GlacierMD, wrote a very candid article about the failure of their business, called I wasted $40k on a fantastic startup idea. In a detailed telling of the 9-month journey from founding to failing, they shine a light on how misalignment between customer benefit and business value created an unsustainable business that came from a great idea. But a great idea is not all — a cautionary tale.

Another cautionary tale is Josh Pigford’s article about how he almost sold Baremetrics for $5M. It starts out as a hopeful piece, only to end in tears and shambles. If you want to learn about what can go wrong when an acquirer reaches out, goes all the way, and then doesn’t finish the deal, read this article.

Thank you for reading this week’s edition of The Bootstrapped Founder. If you like what I wrote about, please forward the newsletter to anyone you think would enjoy it too.

If you want to help me share my thoughts and ideas with the world, please share this episode of the newsletter on Twitter or wherever you like, engage on Hacker News, or reach out on Twitter at @arvidkahl.

See you next week!

Warm Regards from Canada,