Episode Transcript
[00:00:09] Speaker A: Maybe we can get started. You just telling us about how you started at Outseta?
[00:00:12] Speaker B: Yeah. So my name's Jeff Roberts. I'm one of the co founders of Outseta and what we build is particularly relevant to this show being called Subscription Heroes. Outseta is a business that was split, spun out of scratching our own itch. So my co founder and I worked at a previous SaaS company and we looked at all of the tools that we had to string together to just run a SaaS business. And at an early stage we were like, wow, there's a lot of software that's needed. There's a lot of time spent integrating all these different tools.
Why hasn't somebody made it easy to launch a SaaS business or a subscription business like Shopify made it easy to launch an E commerce store, for example? So we set out, we kind of looked at SaaS businesses specifically, but subscription businesses more broadly and said, what tools do they all need? And we came up with list of sort of five core features. They all need payments to charge their customers. They all need authentication to log users in and out of their products. They need a CRM to track customers, they need email tools to communicate with those customers, and they need a help desk to provide customer service.
And pretty much every SaaS business that we found in the vast majority of subscription businesses need all of those things. So that's what outset it is. It's a platform that gives you all those things in a single platform and makes it easier to get started and launch a subscription business.
[00:01:39] Speaker A: And I saw on a post you made that you guys basically worked on Outseta for like three years, basically made no money, is that right?
[00:01:46] Speaker B: We did. I think after three years, we were at something like $1,500 in MRR or something really, really low. So essentially no money. Certainly not enough to even cover our costs at that point. So, yeah, I get that question a lot. People are like, why did you keep doing this? I think there are a couple of things that contributed to that. One is I had experienced the problem firsthand. I had launched a SaaS business, grown a SaaS business, and sort of seen the chaos and time and energy involved in integrating all these different tools. And I had a really high degree of conviction that an integrated platform would be better, or at least for some portion of people, it would be a much better solution. So I genuinely, like, believed that in my heart of hearts. The second thing is, we knew going into this that we were building a, a big thing and we were bootstrapping it. So instead of building a single software product. We were really building a payments tool, an authentication tool, a CRM and email system, et cetera. And those are really, really competitive categories of software. So we sort of knew going in we just needed to give ourselves time to build to the point where the product was good enough to compete against all these point solutions or more specialized tools that we compete against.
And the hard reality is, even after three years, it just wasn't that compelling. There were a lot of great alternatives that frankly were better. And I think the number one thing that we've seen in our growth over time is as the product has continued to mature and get better, we've grown faster and faster. So we knew that there was a time component to this too. And the third bit is just some good old fashioned stubbornness.
I think for me, three years in, I was definitely dismayed that we weren't further ahead than we were.
But I also looked at it through the lens of I've devoted three years of my life to this already and I'm just going to scrap three years of effort and walk away? No way.
So I stuck with it stubbornly, for better or worse. And really it was the fourth year where things started to kick into gear and the business started to grow much, much faster. And in retrospect, those three years were hard, but I'm happy I stuck with it.
[00:04:04] Speaker A: So if you could go back to before those three years and talk to yourself before you started outseta, would you be like, dude, just build something easy or would you do that all again?
[00:04:12] Speaker B: Yeah, I say just very frankly, outset, it is sort of a bad startup idea.
It is this big sort of labor intensive product to build. We sell to early stage companies that churn at a high rate. Just a lot of these companies don't, don't pan out. So we have a lot of tailwinds going against us. And we knew that going in, frankly like we, we knew that we were going to have to build the business with these constraints and these challenges in mind.
But at the time in particular, I knew that this was a problem. I thought there was a better solution. But more than anything, I knew that I had the right co founders and that was kind of my reason for building this, even knowing that it probably wasn't the best startup idea. The second blog post, if you go to outsider.com blog and you go all the way down to the end of the list, the second blog post I wrote after we launched was titled something like My Reservations with this Startup Idea and why It's Not Good, like I was very aware of this early on and having been through the last eight or nine years, we've come out in a pretty good place at this point. But it was super taxing. And to answer your question directly, yeah, next time I'm not looking for something this robust to dig my teeth into. I'm looking for something you can get traction on a lot faster.
[00:05:34] Speaker A: Yeah. And I think that brings us to compensation at altc, which you mentioned by email and I read a post. It's pretty insane.
[00:05:42] Speaker B: Yeah.
[00:05:43] Speaker A: So I'd like to hear kind of what your comp model is at ALTC and in particular why you decided on this. Because I would say none of your employees went through this kind of three year debt phase. They're paying out expenses and so on. So. Yep, maybe I'm getting ahead of myself with questions, but could you go ahead and kind of give us a run on what your comp model is?
[00:06:00] Speaker B: Yeah. So before we even started outseta, we spent a lot of time thinking about how we wanted to operate the business.
Having worked in a much more sort of traditional VC backed SaaS environment prior where we had a good experience and a good outcome and everything like that. But this was sort of our opportunity to start with a clean slate and do things a bit differently. And one of the ideas that we kept coming back to was just we had more fun as a company of 20 than we did as a company of 200 and we wanted to keep outs at a small by design.
And everything kind of fell out of that idea. We said, okay, we're building this big thing. We want to have a small team. How do you make that possible? And then sort of the second realization was we needed to hire really high caliber people, pretty, pretty senior people and kind of prove that a team of experienced A players can compete with a more traditional company. And then we said, okay, what do we do to attract a team of experienced A plus players, etc. We said we have to A compensate them pretty well and B, we need them all to act like owners. How do you get people to act like owners? You give them actual ownership. So the compensation model itself we call sort of a choose your own adventure compensation model. And there's three components to it. The first is everyone at the company is paid the same. It's a full time salary of $210,000 a year right now, but that's for everyone on the team, regardless of what you do. There's no magic to that number. We just think it's a pretty healthy pay rate that's consistent with hiring pretty good people. So we started there. The second is we know that a lot of sort of the most talented entrepreneurial people out there are likely to have other entrepreneurial projects, and we actually think that's a good thing. So the second piece is anyone on the team can work with one to five days per week. You can choose how much time you want to work on outseta. So if you have other entrepreneurial interests, you can pursue those as well.
And the way that works with the salary is if you work five days a week, you're making the $210,000 a year. But if you're working one day a week, you make $42,000 a year. You make work two days a week, you make $84,000 a year, all the way up to that $210,000 a year salary if you choose to work full time.
The third component is really sort of the most unique, I think, and that's we allow everybody to also elect to work some percentage of their time for equity, and that equity is earned on the exact same terms as the founders and everybody else on the team. So the model is everyone's paid the same, everyone has the same compensation arrangement, but you can sort of choose the mixture of cash and equity that you want.
So, for example, an employee could come in and say, I want to work three days a week and get paid cash compensation for those three days a week. So they'd make $126,000 a year. And then two days a week, I'm earning equity in the business.
And the way the equity works is we just look at the total number of days across all employees that have been worked for equity. So let's say all employees total have worked 100 days for equity, and I've worked 10 of those.
I own 10% of the business. It's. It's that simple. So the idea is we get pretty senior people. They all have significant skin in the game. They all have much, much more ownership than you would see in a traditional SaaS business.
And we're trying to have a small but mighty team as a result.
[00:09:50] Speaker A: So how did you guys balance that with what I mentioned earlier, where you guys, as the founders, put in three years, probably put in your own money, so you have much more that you sacrifice for the same comp. Same equity.
[00:10:02] Speaker B: We do. Really, the only way that this benefits us at this point is we started working on the business a lot earlier, so our ownership percentage is larger. It's not larger because we were just granted more ownership in the business as founders, it's because we've made greater sacrifice in terms of working for longer without pay.
But that is essentially the only real benefit. I mean, of course there's other things like being a founder in the business, you get to shape the culture of the business and we came up with these policies because we like them and those sorts of things. But ultimately the rewards, so to speak, will simply be based on we made larger sacrifices in terms of time working for equity than most other employees would.
[00:10:51] Speaker A: Wow, very interesting. And then when it comes to finding people who are really good for the business, would you recommend that other founders have non traditional comp models or is this just like a very unique thing to your personality, to the other founder's personality? And Alex?
[00:11:08] Speaker B: I think it's a little bit of both. I get questions about this nonstop and I never tell anyone, you should run out and just take this compensation model because this is the magic compensation model with all of these benefits. I certainly don't view it that way. I do think it fits the personality style of our founding team. That is certainly a component of it and some of the things we wanted to achieve. In short, I think it comes down to when you see SaaS companies, even the ones that win big, it's always the founders and the investors that make out well. And the team kind of doesn't typically get to celebrate in the success that much. And we hope if we drive an outcome this is like a life changing thing for a larger number of people that that's really the biggest motivation.
But I think the important thing to me is that if you are going to do something like this or just something unique in general, publicize it because some people will reject it and that that's fine. They're sort of self selecting out and other people will love it and they sort of self select in. And this has been an incredible advantage for us when it comes to recruiting. I can't tell you the number of people that proactively reach out to us every week being like we came across your compensation model, this is so cool. We want to be a part of it. When you are hiring, let us know. And I think it's really been one of our biggest competitive advantages. Frankly, a lot of people this seems to appeal to really cool.
[00:12:33] Speaker A: And another competitive advantage that I think you've talked about it before is growth by elimination.
So can you talk about kind of what that is, what that means for Outseta?
[00:12:41] Speaker B: Yeah. So to operate this way, in short, we have a lot of constraints on this business that we need to work within in order to make the business function.
So we sell a low price point product, we sell to a market that's going to churn at a high rate. We're paying people pretty hefty salaries. We're not like offshoring work to people in cheap geographies and that kind of stuff.
So we have to work within all these things and somehow still run a viable business.
And the idea and the blog post that you're referencing, it's called growth by elimination.
We basically said, what can we eliminate from the business altogether to make this business work? And we almost made it a goal. Like let's cut everything that you typically see a business do that is not completely essential out of the company. So you're just left with a few core activities. And the overarching idea is we shouldn't be doing anything unless it's building product, marketing, providing customer service or hiring. Basically everything else we tried to eliminate from the company. So I'll give you a few examples of that. First one is like salary negotiations.
We don't do that because we have a standardized salary. So when we send a job offer to someone, it's basically like, here's how we operate. Take it or leave it. We don't waste any time on that. We said early on, for better or worse, we're not going to raise money from investors. We spend absolutely zero time putting together board decks or fundraising or anything like that. We said we're not going to have a sales team. We have no sales team. It's 100% product led growth. People come sign up for a trial and convert or they don't.
We said we're not going to have a customer service team. Everybody on the team is going to contribute to customer service and share that responsibility.
So there's just countless examples of this throughout our business. We don't do budgets, we don't do forecasting.
We just kind of said these are things that people think about as like, oh, that's how you run a business, but do you really need to. And we've kind of designed systems within the company so we just don't have to think about those things and can focus the team as much as possible on those four activities that I mentioned.
[00:15:02] Speaker A: I'm curious about a lot of this. I think the first one that comes to mind is the customer service aspect of this. So how do you guys get by without a customer service?
[00:15:10] Speaker B: Yeah, so it's a shared responsibility. Everybody on the team, Most of our team is engineers at this point, with 20 plus years of experience who could be CTOs anywhere and they are answering customer support tickets. So when I tell people that, there's immediately this kind of jarring reaction of like, how do you get engineers to do support A and B? Isn't that a terrible waste of money having a, you know, really expensive employee do support?
I completely understand where that comes from and it goes back to my previous point. People select in or select out. It is non negotiable. If you want to work at outside of that, you're going to devote some of your time to customer service.
And in terms of it maybe not being the best use of expensive employees. Kind of what we're going for is having built a traditional customer service organization in the past, those tend to be less expensive employees, they tend to churn at higher rates and they tend to ultimately just escalate issues to the people who can actually fix the problems with the software. And we just saw that and said there's a lot of inefficiency there. Yes, there are some benefits, but you're basically just building this escalation layer where you invest a lot of time in people, most of whom ultimately leave.
Why don't we just get you right to the person who can jump into the code base and fix the issue when you submit a support ticket? So it is very unique. If you submit a support ticket at Alta, it's probably going to be an engineer with 20 years of experience responding to that ticket. And if there's something actually wrong with the software, they will probably just fix it ahead of time.
So you can argue that where we're actually solving issues faster. Although there is sort of a cost in terms of our engineers time devoted to some of that.
[00:17:02] Speaker A: Yeah, I mean, I can't imagine how cool that customer experience must be as well.
Like you reach out to support, you get in touch with someone who's basically qualified to be a cto. It's like that gets fixed, you know, like that is. That is a really cool customer experience.
[00:17:16] Speaker B: I think so.
[00:17:17] Speaker A: As far as other things that you've eliminated, remember you mentioned you guys don't do sales stuff.
[00:17:22] Speaker B: Yep.
[00:17:23] Speaker A: So how have you structured your customer acquisition if you're not doing sales? Because this is, I guess your lower price point. But it is B2B.
[00:17:31] Speaker B: It is B2B. In the very early days of Outseta, I did spend a lot of my time doing demos and more of what I would call like a traditional sales role at times. Fast forward to today.
We basically do nothing sales related.
I will still very occasionally do a demo it typically needs to be a large customer that is migrating to Outseta and they're looking for just positive reinforcement that we can migrate them and whatnot. I will do demos in that scenario. But aside from that, people ask for demos and we say no.
So it is just a purely product led growth motion. I'm a marketer by background, that's kind of my skill. I'm the marketing founder, so I spend my time on content marketing, SEO, optimizing for AI tools these days, making sure the website converts really well, all those sorts of things and it's simply just driving traffic to the site and some percentage of that traffic signs up for the trial, has a good trial experience and converts without question.
Like if a VC was to look at our company, there's some inefficiency there. I, I know for a fact there are, there's drop off that if we had a sales team we could probably save and you know, we could have onboarding specialists that could probably get more people through the in app onboarding process that we, we have today. But it's just one of those constraints in order to make this business work, in order to operate this way, those things have to be okay. You have to say, okay, we are going to have some efficiency and the inefficiency in these areas to gain efficiency in other places, well, it seems like.
[00:19:17] Speaker A: It must be working pretty well. And from what I remember you mentioned Life Profitability.
What does that mean?
[00:19:24] Speaker B: Yeah, so it's not my term. We have a podcast now, it's called the Life Profitability Podcast if you want to check it out. But it was termed by one of the co founders of WooCommerce. His name is AD Painar.
He wrote a book entitled Life Profitability. You should, you should check that out. That's where I got the language from. But ad's book basically gave terminology to an idea I had been thinking about forever.
And I'm not the first person to think about this. This is just generally sort of lifestyle design and why you're an entrepreneur and the the first place. And the sort of core idea behind Life Profitability is as entrepreneurs we're very good at measuring the profitability of our companies from a profitability perspective. We know from a financial perspective exactly how much money we're making, exactly what our revenue is, exactly what our MRR is.
But if we look at it through the lens of how much our entrepreneurial experience in our company is actually enriching our lives and not just our finances, we don't have any way of measuring that and AD's point, and I completely agree, is for most of us, yes, we want our entrepreneurial projects to build financial wealth, but we're doing it to enrich our lives in some point. Everyone who's a founder is kind of obsessed with personal freedom for the most part, and we just don't have a way to measure that.
And for me, that's completely true. I'm not wealthy even to this day, and I, and I want to build financial wealth, don't get me wrong, that's certainly one of my objectives without seta. But I always knew going into this that I was looking to enrich my life. I wanted to have freedom to do the things that I want to do when I want to do them.
And that is ultimately sort of the more important scoreboard to me than just the financial scoreboard. So the whole idea behind life profitability is you actually look at that and think about that and try to assess that from time to time.
Because you know as well as I do, if you look at, particularly founders of startups, a lot of them are super anxious, super stressed, super overworked, whether they're, whether they're making money or not. And I just think you need to balance the focus on financial profits with some degree of focus on how this, this thing that you've built is actually affecting your life outside of work.
[00:21:52] Speaker A: And how do you make that balance in your life.
[00:21:54] Speaker B: Yeah, so I, first of all, I work really hard. Everybody that I talk to about this is like, oh, you're building a lifestyle business, that's, that's cute, you probably work 20 hours a week, blah, blah, blah.
Not true. I work, I work super hard, but I also make a lot of time outside of work to pursue the things that I want to do in my life. For me, it's, it doesn't look terribly unique. I would say on the average week, I'm working 40 hours a week. And I, I work very hard and very diligently during those 40 hours, but I, I leave it there. And for, for me personally, I'm kind of a travel nut. I just spent the last six months traveling around Europe with, or Europe and the world in general with my family. I lived in six different countries over the course of six months. So for me, like, that's something that I want to do with my life no matter what. And frankly, if I have to choose that or work, I would choose that. That is the more important thing to me. And I look at the work at outset as a way to enable that sort of lifestyle and that Sort of freedom for myself, but also for the rest of our team.
Something that I think is maybe unique is people ask me all the time, like, why do you operate the company this way? What are your goals? Blah, blah, blah, blah, blah. I look at Outseta as a company that exists to provide this sort of freedom to our employees. And a lot of people take exception to that. They're like, shouldn't Outsetta exist to serve your customers? And to me, the end goal is not serving the customer. It is providing a small group of people with the opportunity to do the things that they want to do with their lives. But serving the customer is a prerequisite. If we don't serve the customer really, really well, then we can't offer these opportunities to our. To our team. So it's kind of this symbiotic relationship where you have to do one in order to enable the other. But, yeah, that's my goal and way of thinking about things.
[00:24:03] Speaker A: And if you don't mind me asking, where have you traveled in the last six months?
[00:24:07] Speaker B: I live in San Diego normally. We lived the first month in Barbados.
God, I'm going to get the order wrong here. Then we went to the Scottish Highlands for a month.
Then we went to two different places in Italy, way south in Puglia and way up north in the Dolomites in Italy.
Then we went to northern Spain and then an island in Greece, and I'm back in the U.S. i just got back last week now for a month, and then I'm actually moving to Spain somewhat. Somewhat permanently.
[00:24:41] Speaker A: Nice.
So was it one month per location?
[00:24:45] Speaker B: Pretty much, yeah.
[00:24:46] Speaker A: Yeah. Was that not exhausting?
[00:24:48] Speaker B: So I. First of all, I do this with my wife and kids. I have twin boys that are five, so I'm not doing the solo nomad thing, which is very different.
And yes, traveling, particularly with young kids, the actual travel sucks. Anyone that tells you otherwise is lying to you.
But the reason we stay for a month at a time is like, we can get the travel over within a day or two and at least kind of set up shop, set up home for 30 days without bouncing more frequently than that.
That kind of frequency gives you time to get to know the place a little bit and reduces the travel stress. You know, some people that I know say it takes them a long time to fall into routine when they get to a new place and they struggle with work and that kind of stuff. That's never been a problem for me. Like, I'm a solo laptop, one screen guy as long as I have a room. And you Stick me in that room. I can just kind of sit down and focus in on work. So I've, I've become pretty accustomed to it. And these six month trips have become something my family's done.
Out of every 24 months, we spend six months living abroad. We've done that for about a decade now. So I've just gotten into the routine of it.
[00:26:04] Speaker A: Gotcha. Yeah, I think, I don't know if I'm more similar to your friends. For me, I won't go anywhere if it's for less than two months unless it's a pure vacation with family. Like I might do that over a week or two, but for me, like a month is just long enough for me to touch the surface of somewhere and then get really frustrated that I can't spend more time there.
And then the whole travel day, like it's at least a day, but it takes like two, three days to recover sometimes. Can't imagine kids. So for me, a month per location for six locations, I would be, I'd be toast.
[00:26:33] Speaker B: I'd be too much. Yeah, yeah.
[00:26:35] Speaker A: I'm single, 27 year old. I, I'm saying only one laptop, but I would be toast with your travel schedule.
[00:26:41] Speaker B: Yeah, we're, we're, this is probably the last time we're gonna do one of these six month trips, but we're gonna go live in Spain at least probably for a couple years at this point. And then I imagine I'll end up back in the U.S. at some point, but we'll see.
[00:26:56] Speaker A: Oh, amazing. Yeah. I did a similar thing with Costa Rica. So I have a house in Costa Rica.
[00:27:00] Speaker B: Nice.
[00:27:00] Speaker A: And I lived there pretty much full time for about two years. And I'm just now at the point where I'm comfortable like leaving it alone.
That was the first place I ever bought and I didn't realize that it takes like some aspect of your mental energy to own as opposed to rent. I just rented forever and it was awesome.
I was like, okay, I'm gonna buy a place. So I bought a place and it maybe took like you know, 1 2% of my mental energy, but I didn't realize, like if you only have a hundred, then 1 to 2% is actually like kind of a lot.
[00:27:26] Speaker B: Yeah.
[00:27:27] Speaker A: So yeah, I just didn't, I just didn't realize that at the time. And now I'm, I'm comfortable leaving it. I've got people who watch it and so on.
[00:27:34] Speaker B: Awesome.
[00:27:34] Speaker A: Yeah. Yeah. It's kind of, kind of a similar story where I was like, I think I'm gonna leave for a few years and I did.
And as of today I'm back in the States, but probably not for too long.
[00:27:42] Speaker B: So I, I own a two bedroom condo in San Diego and we actually rent it out when we leave on these trips. So we have tenants in there now. But I have sort of fallen into a pattern of we rent it to other people that are sort of nomadic type people and they just kind of get it. They're like, we, we understand you're going to be overseas and you don't want to deal with us. And you know, we, they're kind of low maintenance tenants anyways. And you're absolutely right. It takes some mental overhead. I try to do like all the preventative maintenance that you possibly can before we leave. Yet something always goes wrong.
But we've had overwhelmingly positive experiences so far, luckily.
[00:28:22] Speaker A: Nice. Well, very good. I think. One other thing that I would like to ask about. Why are you an entrepreneur other than the lifestyle freedom? And do you have any advice for people who are getting into entrepreneurship?
[00:28:33] Speaker B: Yeah, it is definitely first and foremost the lifestyle freedom. I'd say beyond that, of course, it's the financial opportunity. I like the idea that there is financial upside and I directly have the ability to drive that. Yes, that's a responsibility and that means the ball's in my court. But I'd rather have the ball in my court and have a chance at, you know, having a greater financial outcome than you'd probably have as an employee most places. In terms of my advice for people, something that I sort of preach a lot is you see so many people, particularly on, on Twitter, and it comes from Peter Levels and Mark Lu and all these indie hacker types.
Talk about like, you need to just constantly be spitting out new businesses and bringing them to market and seeing which ideas stick and follow the traction and all of that. And there's nothing wrong with that approach. It has clearly worked for plenty of people.
But it is the antithesis of what I have seen work for most people.
I am really hot on the idea of look for. Don't try to build something new and novel.
Look for an idea or a market that already exists and just say, I'm going to build in that market and I'm not going to give up until it works. I have seen that work repeatedly. I've seen it work out. Set as an extreme example where we did this with a big idea and it took three years to get traction and whatnot. But competition is good. Competition means there's a market there. That means you just have to take the time to build something good enough. But you sort of de risk your chances of entrepreneurial success if you build something in an established market.
So then it just becomes completely a game of how do you give yourself enough time to build something good enough? And there's a million different ways you can solve that. You can work on things part time, you can do other consulting work. You just do whatever you've got to do long enough to stay alive. But I think if you do that, you de risk entrepreneurship so much. And I wish more people considered that. Even though it's sort of a less sexy approach.
[00:30:49] Speaker A: It's much less sexy, for sure.
But it's obviously worked for you. And you're right. I mean, I think every business, pretty much every business that's ever been successful has competition, so.
[00:30:59] Speaker B: Yep.
[00:31:00] Speaker A: Well, Jeff, thanks so much for being on the show. If people want to learn more about you, where you're at, where should they go?
[00:31:05] Speaker B: Yeah, you can find me. My name is Jeff. It's spelled kind of funny. I'm a Geoff G E O F F Roberts. You can find me on LinkedIn, Twitter, or blue Sky.
[00:31:15] Speaker A: Awesome. Thanks so much for being on here, Jeff.
[00:31:17] Speaker B: Thanks for having me, Brady.
