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Jayson Manship

Product vs Payment: a $200,000 Lesson in Self-Funding

cash flow bootstrappingLike most IndyMade startup founders my business partner, Matt Turow, and I are focused on creating a product and scaling it. Our problem is that we keep getting in our own way. And we have the scars to prove it.

When we launched inSourceCode in 2010 our plan was to build the next Basecamp or ExactTarget. We fancied ourselves a product company, but we wanted to take a very different approach than others in the startup world. We wanted to self-fund the whole thing. We didn’t want investors. We wanted to control our own destiny and we wanted to grow organically. Our contention was that by taking on investors too early many founders become servants and lose creative control. And as entrepreneurs that’s not what we signed up for.

Work-For-Hire, The First Step Toward Self-Funding

Because neither of us had any money, we came to the conclusion that our only path forward was to do work-for-hire projects on the side to supplement our income so we could spend part of our time building SaaS Apps. For the first few months we were building a portfolio of work-for-hire clients and building cash. Six months in we decided to follow the lead of Google and implemented the 20% rule where we (our team had grown to 4) would spend 20% of our time on non-billable projects. And we naively hoped that one of these project would be our home run.

We would literally sit in a room and discuss big ideas and then would just jump right in and start coding. We built Bev’s Scoop, an Indy area Groupon clone with a unique business model. We built PackTheSeats.com to help sports organizations leverage personal fundraising to sell tickets to groups. We even lowered our grandiose vision and built BadWordsList.com to try to sell a filtered list of cuss words to other developers.

Turns out our Field of Dreams methodology didn’t prove true. We built it and no one came.

We had no idea how to market our ideas. We were a group of coders. And because we were focused on building the code first, we spent tons of time and energy creating a product that no one wanted. To this day I would argue that Bev’s Scoop and Pack the Seats are marketable, but without the cash and team to market the ideas they never stood a chance.

lessons in bootstrapping your business

Nail It, then Scale It: Lean Products to the Rescue

The next phase of our company’s evolution happened when we stumbled across the Indianapolis Lean Startup Circle. Josh Colter, Alex Lopes and Kyle Shipley helped us realize that we needed to ‘Nail It, then Scale It.’ We continued to build our work-for-hire business, hired more employees and grew our bottom line as we hunted for our next product idea. That came from a former colleague at a previous job who was looking to build a SaaS app that allowed volunteers to make survey-based phone calls through their browser. He worked for political groups and wanted to have a web-based tool that allowed volunteers to make phone calls from home. He offered to pay us $20,000 for the rights to license the technology. Great! We had a paying customer that had validated a product that we could build. And it didn’t exist in a HUGE market. Pain – check. Payment – check. Huge market – check. So we set forth to create the coolest web-based phone banking app on the planet. Matt spent the next few months building this app while I worked to pay our bills by wrangling work-for-hire projects with other coders and designers that had since joined the team.

We called the product Volunteer Your Voice. And we had great intentions to make this a big priority. But we found in reality that the development timeline kept getting pushed back. To borrow a parable from the Bible we found ourselves praying to two masters. We needed the cash from work-for-hire to get paychecks but we needed the app to be a homerun to create an exit strategy. We didn’t have adequate time to test the app or interview customers. Our licensing partner lost interest. We failed again. And I distinctly remember telling my wife that I felt like Fat Bastard from the movie Austin Powers. “I eat because I’m unhappy, and I’m unhappy because I eat.” Our work-for-hire business that was providing paychecks was the same business that squashing our dreams. Volunteer Your Voice became a point of contention in our business. There were hard feelings about why it didn’t work. Failure sucks. But life must go on.

So we shifted our focus back to work-for-hire. It was our bread and butter and since we’d just been through a glorious crash-and-burn we needed to find our center again. We had developed a reputation as one of the premier WordPress companies in the U.S. so we doubled down on our wins. We built the first ever WordPress site inside of the United States House of Representatives, we were hired time and time again to convert mega sites to WordPress, and in August of 2012 we were approached by the folks at Automattic to become one of nine VIP partners on the planet. At one point in time we were directly responsible for six of the fifty most trafficked WordPress sites on the Internet. But if you know anything about scaling a service business you know that it’s painful, hella frustrating and cyclical. High highs. Low lows.

We worked with the folks at Automattic to remove ourselves from the WordPress VIP partnership. I’m to happy to discuss why and how it all played out, but this post is already pushing 1,500 words. We kept rocking out enterprise level WordPress sites, but realized we weren’t equipped to be an exclusively work-for-hire shop.

Who Do We Want to Be When We Grow Up?

"When I grow up, I want to be a giant."

“When I grow up, I want to be a giant.”

In April of 2013 we had a series of all-hands “who do we want to be when we grow up” meetings, where we set the vision forward for inSourceCode. And that vision became very clear. We still wanted to be a product company. But instead of trying to build a market around a product, what if we built products around our market? We had a pretty decent business built on WordPress. Why not cater to what we knew intimately?

In August of 2013 we launched a WordPress-as-a-Platform service where we can boot up rock-solid sites very quickly, and in turn charge very little on the front-end. This approach allows us to charge a budget-friendly monthly fee for hosting and support and creates the residual income we’ve been looking for since day one. We meet with a client, ask them a bunch of questions and then give them a website that they love. We’ve since launched 30 small business sites including: Badabing Limo, Nameless Pizza, and Advance Electric.

When validating the idea we learned not to let one customer drive the business. We needed mass buy-in. Small business owners know they need to be online, but they don’t know who to trust. Many have tales of hiring “some dude on Craigslist” to find out later that their “web expert” had just downloaded a theme, installed a few random plugins and made the front end look good enough for the $1,500 they were charged. Site launched. Freelancer paid. And six months later they still don’t rank in Google and they are getting hundreds of daily spam comments. And more often than not the freelancer either disappears or has no idea how to fix their problems.

Talking to dozens of small business owners with similar stories drove us to build our latest product. We’ve built WordPress sites that get 10 million monthly visitors so we know how to make sites load super fast. We know the best plugins and how to configure them. We know how important basic SEO is to small businesses. And our secret sauce allows us to do all of this for less than they’d pay some “dude on Craigslist.”

In total, we’ve squandered just over $200,000 building things that no one wanted because we opted to fund this dream ourselves. We’ve failed time and time again. But we’ve adapted and grown and I can proudly say that in 2014 we are on pace to hit a million dollars in work-for-hire sales. It took us three years to find a product that fits our strengths. But we are getting ready to announce a deal with the State of Indiana to offer this service to all small businesses in the state. And we are in a closed-beta right now for an agency model to enable other firms to white label our platform to service their clients.

It’s shaping up to be a great 2014. But it sure wasn’t an easy ride getting here.

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  • http://convergestreet.com/ Sean Sullivan

    Jayson,

    I really enjoyed the article! Your team and you did not try to use outside funding. You stuck with a plan and put a lot of hours in. Nothing is easy if it is worthwhile. Glad things are going great at inSource Code!

    Best,

    Sean

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