Format had seven people on the payroll before Tyler even got paid. We talk about bootstrapping in Canada, the amazing story of how they acquired the Format.com domain name, and what it's like transitioning from a survival mentality to a growth mentality as a business grows.
Garrett Dimon: All right. Hello. We’re here to day with Tyler Rooney, the cofounder and chief product officer with Format. They’ve been running Format for a while now. I want you, Tyler, to go ahead and dive into the quick 30-second overview of how y’all got into it and how you got to where you are now. Just try to keep it concise and simple, because we’ll dive into the details here in a bit.
Tyler Rooney: I’m a developer by training. I studied Computer Science and did different kinds of consulting gigs, worked at Amazon, that kind of stuff, and always knew I wanted to start something. My cofounder is a designer by trade. He pitched the original idea for Format, which is to make a tool for a trade of professionals to let them easily build and update a beautiful portfolio website.
In school, he knew tons of people who didn’t have portfolio websites and weren’t showcasing their work. Me being your typical engineer, said, “Why can’t they just build a website, or why can’t they just use WordPress?” That kind of stuff.
He walked me through it and he explained what he would do for friends who were trying to get stuff done. Then I did some really, really basic back-of-the-envelope calculations. I was like, “Yeah, let’s give this a try.” At the time we were freelancing, so your standard — worked on the beta while freelancing and switched over to full-time eventually.
Garrett: Walk me through the number of years from juggling this as a side project and freelancing to switching full-time to now. How many years total in are y’all?
Tyler: Our code base turned eight years old in November. I moved back to Toronto in 2008 and I think sometime the summer 2008 Lucas and I had conversations about it. We were sitting on a patio at a bar is where he pitched me the idea, so it was definitely in the summer. Finally, in earnest, he did some basic designs and we started working on it, like I said, November of 2008.
We had seven people on payroll before I got paid. I think I got back-paid later on, but it definitely took a while for me to get paid.
Literally, we had a couple beta users. When I say beta, I mean alpha-alpha users. It took us about a year-and-a-half before we got to a place where we thought we could actually do a public beta and not worry about people signing up, or that they would be just completely lost.
It was around that time, so that would have been… Hold on. I’ve got to get my years straight. The summer of 2010 we would’ve… Literally, we were going to launch. I always like this story because it gives you scope on how much we’ve progressed.
We were like, “OK, now we just gotta add…” We had integrated with a payment processor, but we hadn’t gone through all the paperwork. They were pretty progressive at the time. They were like, “OK, we just need to turn this on.”
They’re like, “No problem. We’re going to send you all these documents. You’ve got to fax them back to us. We’re going to send them to the bank. They’re going to go through their process,” blah, blah, blah, blah, blah. It took four weeks, and that was streamlined.
We’re like, “Oh, what are we going to do?” Instead, we just launched it, and we’re like, “It’s free for the first month for everybody.” When we were able to turn on the payment form, two people signed up on the first day. I was like, “Something might be working here. We might’ve actually figured something out.”
Garrett: Basecamp, when they originally launched, they did it the same way. They didn’t even have a billing system. They built it after the fact. I think a lot of people would have been like, “Oh, we gotta wait to launch to make money.” It’s like, “No, just launch and take money when you can,” because everybody wants to wait until it’s perfect. It’s never going to be perfect.
Eight years later, is it perfect yet?
Garrett: You all probably should have waited to launch. Right?
Tyler: We should’ve.
Garrett: When you went full-time, did you all wait until you could completely cover your salaries, or did you all take a pay cut to be able to switch over so you could focus on it more? How’d that unfold?
Tyler: What was happening was that myself and Lucas, my co-founder, we were also partners in a freelance design and web development shop with two other guys. We had two other freelancers who worked with us. One of our major clients was wrapping up their project with us. They were finally hiring everyone they needed internally.
Our other big client was also looking to hire people full-time to replace us. They actually hired one of the people who worked with us in the end, so that worked out well for everybody. Lucas and I were like, “Oh, should we do this full-time? Should we not? What should we do?”
We were trying to figure out what to do with the consulting business in terms of — Should we just wrap it up? Should we fold it? One of our partners at the consulting company, he was like, “Well, if I was you guys, I know what I would do. I would be doing this full-time. I wouldn’t even be thinking about it.”
That made Lucas and I be like, “Oh, OK. We really should be doing this full-time.” Our two partners from the consulting company came onto Format part-time that January — Mike, who’s our CTO now and Dave’s our COO. They were our partners in our consulting company. They came on board part-time for about nine months and then they started full-time after that.
When they started full-time, we were paying some very bare bones salaries then. I think we were paying ourselves, I don’t know, 30, 40 grand a year or something. Maybe not even that. I was fortunate enough that I didn’t really need this salary at the time and we definitely needed the money. Kind of like, “Oh… can we hire one more person. Can we hire one person?” We had seven people on payroll before I got paid. I think I got back-paid later on, but it definitely took a while for me to get paid.
Garrett: You all didn’t raise any money at all.
Garrett: It was just self-funded, out of your own pockets, out of your own…
Tyler: Yeah. When we decided to go full-time, we probably had maybe a hundred customers, maybe a couple hundred customers. I remember our big push, the next year was… Because, back then, we got an email every time that someone signed up, and we had our daily payment jobs. We were so excited to get to 2,000 people.
It finally happened on a Saturday afternoon. We all emailed each other. We were super happy about it. We went out to dinner and stuff like that. I think at that point it was just for the four of us plus our customer support lead. He was our first hire, and he worked with us part-time.
We originally hired him to work three days a week for five hours a day or something like that. Just talk about a limited number of hours. He now manages a team of six. It’s awesome to see those kind of things progress and people grow into roles.
Yeah, back then, it was definitely kind of… I remember being at 2,000 we were, “Oh, it’s fantastic.” We’re, “Oh, we’ll have to do it at 4,000 or 10,000.” We never celebrated another milestone like that ever again.
At that point, the way we structured those first nine months with Dave and Mike was we came up with the like, “We’ll either give you this much equity, or we’ll pay you this much based on how things go.” At the end of it, it was clear that everyone should be working on it, blah, blah, blah.
Then we figured out terms to convert it, everything they worked on into the equity. We never raised money, but we were pretty much like… Our server costs in the early days were almost nothing. It was one server on EC2 kind of thing.
We were break-even on that pretty quickly and then literally, it was just about increasing that until we were, “Oh, we can…” I’m pretty sure we were definitely paying staff and our support lead. I think we hired one other person before we were paying ourselves. Even those people, we had to be like, “Do you have your own computer that you can use?” Things like that.
Garrett: You all don’t have to worry about healthcare, being up in Canada. Right?
Garrett: I guess, there’s probably taxes and things like that that help cover it, but not like we do down here in the US.
Tyler: No. We were also really fortunate. The office space we had from our consulting company, I think it was about 1,100 square feet. We had signed that lease during the global financial crisis. We were only paying… Oh, my. I think we were paying less than two grand a month for it and it was in downtown Toronto.
Tyler: Prime, great location, really worked out well for us. It was dirt cheap. Yeah, it couldn’t have been more than 2,500 bucks a month. We were able to float that through the last of our consulting company.
The other thing with hiring people is, like what you were saying about being in Canada, is we didn’t have to worry about… We offered zero benefits. There were absolutely zero benefits for working with us, but everyone has socialized… You’re not worrying about that. Maybe if you need a drug plan, I’m sure there’s people who wouldn’t have been able to work for us, but it was literally a non-issue.
We told people when we interviewed them. I don’t think we got benefits until we had eight or nine people on staff. Even then, our benefits were pretty minimal. By US standards, the cost of them was cheap. It was really, really cheap to add dental, basic extended health, things like that.
I think the story I’ve told you before, as the measuring stick for it, is even by 2012 I made no money that year. I remember filing my taxes, I didn’t have to pay taxes because I didn’t make enough money to do it, and I had my first child that year. Our midwife was fully paid for by Provincial Healthcare.
We went to every appointment, every drug thing, every screening test you could think of was that, delivered the baby in the hospital, they came to our house afterwards, blah, blah, blah. Never a bill. You never, ever saw a bill anywhere. We needed no extended health coverage for the whole process. All you did was present your health card.
I was like, “I can’t fathom having to try and bootstrap a company in the States.” I remember having a conversation with some other founders. I went to Business of Software four or five years ago, when we were still really small.
Guys in New York, who were trying to get office space…to hire their first employee, they were spending like a thousand dollars a month on healthcare. I couldn’t even put two and two together.
Garrett: So often, so many get carried away thinking, “Oh, I’ve got to be in San Francisco. I’ve got to be in the US.” There were certainly some advantages, historically, but there are so many disadvantages as well. It’s not just purely benefits by being in the US. I think a lot of people, it’s helpful to realize, “Oh, I don’t have to be in the US,” or, “I can start a company here.”
I think now, especially Shopify, it’s nice to see more companies in Canada starting to show up. Hopefully, people are more comfortable starting a business where they are instead of feeling like, “Oh, I could never do that because I’m not in the right place.”
Tyler: The advantage of us being here is, like I said, we were able to get some really great office space, rent early on. Rent’s definitely gone up in Toronto, but it’s not like trying to get office space in New York, San Francisco, anything like that. Then not having to worry about healthcare. We charge in US dollars, and about half of our customers are in the US.
Thank God the US dollar’s doing great, because it’s basically the US dollar is about $1.35 Canadian. That goes a long way in terms of your labor cost versus your revenue you’re making. Then there’s other government programs. Whether it’s grants, or there’s a really large R&D tax credit, this program called SR&ED, which every major tech company in Canada heavily uses.
Basically, it can let you claim upwards of 80 percent of your labor cost that are strict development costs. If you have a startup that is dev heavy, you can claim a lot of that, and get a lot, both tax breaks and literally refunds for it.
That goes a long way in terms of… It’s funny you mention Shopify. I remember reading their IPO S-1 filing. It mentioned how large their SR&ED claims were every year, and it was millions of dollars for them.
Garrett: Wow. The benefits are out there.
Tyler: The benefits are definitely out there. Also, most of our team’s in Toronto. We’re about 35 people, and I think about 25 or more are here. We got one guy out in Vancouver. We hired a few people in Poland, and then we have support people around the world. Even when you talk about hiring remote people, some of the people we’ve been able to find remotely are just fantastic.
I think we would have had a lot of trouble finding them both in Canada, and affording them, especially at the time that we hired them.
Garrett: All of those savings translate to enabling you to buy a six-letter dictionary domain name. I know there’s a story behind it, so go ahead and walk us through how that unfolded, and what made you decide to go ahead and bite the bullet, and pick it up.
Tyler: If anyone goes on my Twitter account, the pinned Tweet I have is, “It only took 1,677 days, but we’re now Format.” Our domain used to be format, but you replaced the F with a 4, so it’s numeral four, O-R-M-A-T.com. I had said that, that sentence, “numeral four O-R-M-A-T.com,” on the phone with maybe a million people — banks, businesses — and usually wanted to kill myself.
How that all came about was, Lucas pitched the name Format, and he was like, “But we’re not going to be able to get the domain name.” He’s like, “I think it would be interesting to use a number because it would really stand out, and it looks visually distinctive, and all this stuff.” I’m not that opinionated when it comes to that kind of stuff — brand, etc.
I was like, “OK, let’s give it a run.” But we did reach out to the owners of format.com who, back then, was a couple. They were both computer science professors in Florida. They were security researchers, of all things. They had had that domain since ’95 or something, and they used it for their personal website.
It was just a landing page. It had a background image and two links to their own domains that they used for their blogs. I reached out to them and like, “Hey, would you have any interest in selling this? We’re a small startup. We’re looking to help creative professionals. We’re good people,” that kind of stuff.
The husband got back to Lucas initially and said, “Thanks, but we’ve had this domain forever. Everyone who knows us knows that that’s our domain. If you guys are ever wildly successful, get back to us. Best of luck to you.”
Every year, we would send a follow-up email being like, “Hey, how’s it going? What’s new?” We’d be like, “This is what we launched this year. We’re still growing. We’re scrappy. We’re super energetic. Do you have any interest in selling that domain name?”
Every year it would be the same kind of thing. “Thanks, but no thanks.” I can’t remember. Every so often you’d have a frustrating conversation about saying numeral four O-R-M-A-T. I’d be like, “Oh.”
Garrett: Email them and say, “All right, we’re ready.” [laughs]
Tyler: Emailed them again. I was like, “OK, I’ve really got to make this guy a compelling pitch.” I went on his website, and was looking around, and noticed that he had a pilot’s license. I can’t remember where he was in Florida, but it was near Orlando. My wife is, oddly enough… she has a multi-engine IFR rating. She’s a real pilot. Sorry, not a commercial pilot, but she knows her stuff.
She actually did a full plane class outside of Orlando. When I emailed him, I was like, “Hey, I saw on your website that you’re a pilot. I was actually just in Orlando, and my wife was flying at Jack Brown’s. Have you ever heard of that place?” blah, blah, blah. He always would take months to reply to your emails. He emailed me back 20 minutes later.
He was like, “Everybody knows Jack Brown. That’s where you got to go to do your float rating because” blah, blah, blah, blah. He said, “You know what? You guys have kept at this, and you seem like really nice people. Let’s talk, and maybe we can figure something out.” I was like, “Fantastic.”
He was like, “But I’m really busy with the academic year, and I’ve got this conference I’ve got to go to. Let’s try and schedule a call.” It was like three months later. So we scheduled a call. We do that. It’s kind of like, “OK. Well, we’ll figure out a price,” because he was like, “OK, I will sell it to you.”
I was supposed to figure out a price. I was like, “OK.” Then we were going to have a follow-up call, and I couldn’t get through to him. I emailed him and I was like, “Hey, what’s going on?” blah, blah, blah. Doesn’t get back to me. I hear nothing from him. I was like, “What the world’s going on?”
A month or so later, he emails me. He was like, “Tyler, I’m so sorry I missed the call, and I haven’t emailed back to you.” He was like, “I’m emailing you from the hospital.” I’m like, “Oh.” He was like, “I’m in traction.” He was in a car accident. He was like, “The doctor said I’m going to have a full recovery, but I’m in terrible shape,” and blah, blah, blah.
He was like, “So that’s why you haven’t heard from me.” He was like, “In worse news…” I’m like, “What? How could this get worse?” He was like, “My wife and I have decided to separate. Until that’s done, clearly I can’t sell the domain name.” He was like, “But, I’m pretty sure that in the settlement I’ll get the domain name.”
I’m like, “Oh, my God.” This is all happening after we thought we were going to get it. I immediately — I’m not joking — I immediately Google, how long does it take to settle a divorce in Florida? It was like six to eight weeks. No joke, eight weeks later he emails me.
He was like, “Hey, Tyler. The divorce is settled. She got the domain name in the divorce.” He was like, “This is her email address. Best of luck.”
He was like, “Hey, Tyler. The divorce is settled. She got the domain name in the divorce.” He was like, “This is her email address. Best of luck.” I was like, “I cannot believe this is happening.” Then I reached out to her. She was like, “I have no interest in selling. I’ll be able to sell this domain name for a million dollars,” blah, blah, blah.
But then I kept at it with her. I was like, “I understand your predicament,” blah, blah, blah. This is who we are, and all that kind of stuff. Eventually she came around. I remember her saying, “Wow, you guys are really…” She was trying to deal with different domain auctioneers and stuff like that.
She was like, “Everyone in this business seems so sleazy. What…?” I said, “Yeah, whatever you do, even if you don’t sell to us, be careful. There’s some snake oil in this world.” Eventually she came back to us. She says, “You know what? I’m going to sell the domain, but I’ve decided on a number, and I’ll give you the right of first refusal.” She gave us a number, which I can’t disclose.
We said, “We’ll do it.” For us it was a lot of money at the time. Even today it would have been a lot of money for us. But, yeah, we did it. Actually, the story keeps going from there. I don’t want to dwell on this too long, but it is ridiculous.
Hilariously, because her and her husband were both security researchers, hackers would try to get their domain name. So their domain was registered with Network Solutions, and it was locked down in every way possible. When she tried to do the transfer, they were like, “Oh, no. We’re not…”
Like, “Oh, you just have to do this, and this, and that,” so we did this and this, and that and it wouldn’t transfer. It literally had to escalate to the VP of Security or something like that with the register. She had to mail in sworn statements, and she had to send in her driver’s license… It was the craziest escalation. I guess because they’ve done everything to lock down the domain.
Eventually it got done. Network Solutions finally transferred it over to us, but you want to talk about a stressful few days.
Garrett: Oh, I’m sure.
Tyler: It was like, “I can’t believe we were on the edge of getting this done.” I was joking to you before that, when I went to the bank to do the wire transfer, the women… It was like, “Oh, what’s this for? Are you buying a house or something?” I was like, “No. I’m buying a domain name.” Someone else came over and said, “Did I just hear that correctly? What do you mean?”
Like, “How could you spend that much money on a domain name?” Yeah, that’s how we got it. What’s shocking is that there’s even more, crazier details, which I can’t get into.
Tyler: But that’s crazy enough as it is.
Garrett: That’s wild.
Tyler: Yeah. A car accident and a divorce. You can’t make that up.
Garrett: There’s always a story. There’s always a story behind that. You all didn’t just buy it purely… Obviously you wanted it, but there was also a little bit of fear and defensiveness in getting it, just to be safe, that you all probably wouldn’t have paid as much if you weren’t worried about the brand being acquired somewhere else, or used in some other way.
Tyler: Yeah. I’m sure I was pretty terrified that some competitor or any other website builder could… If they bought it and were like, “Hey, we’ve got a new feature called Format,” and then someone tried to Google, Format Portfolios, and it wasn’t us. It could have been devastating. Having the domain, that’s our trademark. We have a trademark on Format in the US, Canada, EU.
It’s something that we believe in, and we think it’s a strong brand. We’ve built our online publication. We changed the name to “Format Magazine.” I definitely think it’s worth it. It conveys a, like I said, a six-letter dictionary dot com domain is something that conveys a lot in terms of the maturity of something, etc.
Garrett: Absolutely. Once you all cut over, what was the impact? Positive? Lots of new traffic? Anything? Or just…?
Tyler: No. Nothing in terms of new traffic. We definitely took an SEO hit right away, which was maybe on the order of magnitude of maybe 20 percent of all organic search traffic. When you’d contacted me about this interview, I actually double-checked what it was. You could see the drop, but then it came back within, I think, about six months.
There are still things we used to be really highly ranked on, that we’re still not. But there are other things we are highly ranked on, that we weren’t before. I think all SEO is just black magic.
Garrett: It really is.
Tyler: Other than that, that’s really what it chalked up to. That’s what it shook out to.
Garrett: Has you all’s growth been pretty linear over all these years? Were there inflection points where it really took off, or any specific events that really triggered something special, or is it just slow, and steady, and reliable?
Tyler: It’s slow and steady. Well, I wouldn’t say slow. It’s definitely steady. In that first year, I think we had some months where we grew 80 percent, or something like that. Which isn’t that hard when you only got 100 customers. Even when we had, I don’t know, like a thousand customers, we were growing really, really strong month over month, and which was all through word-of-mouth.
This is one of those things of, like you ask me, if there’s one thing you could do differently, that’s one thing that I definitely wasn’t aware of in myself and now I look back on differently. Before, when we were hitting that growth and we were adding five, six, seven, eight thousand dollars of MRR a month. You have an instinct, especially the first company I ever started, and definitely my first SaaS business.
SaaS metrics, the way people talk about them today versus five, six years ago is just way different. It was kind of like we hit this inflection point. Like, “No, this growth is going to keep up. It’ll die down, but next month is probably going to be healthy, too, because this is all word-of-mouth.” We definitely hit this inflection point where… especially, when I started getting paid.
When I started getting paid — and I think we had like eight people on salary at that point — we weren’t just surviving. Our goal wasn’t just to survive anymore. It was to grow. My mindset was always about — What corners do we cut? How do we keep cost down?
That’s all I was doing. It was like, “We’re surviving, we’re surviving, we’re surviving.” It probably took me too long to realize that surviving isn’t the goal anymore. We’re past that. Our goal is to think about what needs to grow and what needs to be invested in. It took me too long to realize that.
I think that’s something, once you actually hit that — maybe that’s like a bootstrap company — you really do need to survive. That is, there’s nothing in the bank that’s going to save you, so you’re probably more geared towards that.
You know what’s funny is being broke was not stressful for me. That was just like, “Well, if we fail, we fail.” I was OK with that. Whereas, once we were then scaling, I was like, “Oh, this is the real thing. We actually need to not just survive, we need to succeed.” I think that was more scary for me. I was like, “Now we got payroll and we got people depending on us.”
It’ll be our opportunity to blow, because we validated at that point. That was a lot scarier for me, but that was definitely the thing I, in retrospect, realized. My biases, I wasn’t even aware of them at the time.
Garrett: Yeah, you definitely have to shift your mindset from survival mode to, “Hey, we’re in a decent spot. We can invest money in the business and grow.” When you’re bootstrapping, it’s so much easier to think, “Oh, I’ll just keep my cost low, and the business can last indefinitely.”
Then once you cross that threshold where you’re a little more comfortable, it’s difficult to say, “Hey, we can spend a little money on growing the business.” It’s difficult. I definitely struggle with some of that myself. Maybe the domain name is going to be the answer to this. What was the most difficult, stressful thing you all dealt with?
Tyler: [laughs] That week with the domain name, literally trying to get Network Solutions to transfer it over. That was definitely stressful. But, to be honest, nothing’s been that crazy. I worked at Amazon for three years on the payment servers and then the data team. I went through… Black Friday today, right? Yeah.
Tyler: I went through three Black Fridays at Amazon. One of them on the payments team, of all things, and nothing like it is…
Garrett: Does not compare.
I know a couple of founders of wildly successful tech companies that everyone has heard of that came within a week of missing payroll, and literally made payroll on a loan from family or something like that. That is the kind of stuff that I am not built for. I’d be vomiting all day long if I was in that situation. I’d be terrified.
Tyler: This does not compare to what life was like at Amazon. I know a couple of founders of wildly successful tech companies that everyone has heard of that came within a week of missing payroll, and literally made payroll on a loan from family or something like that. That is the kind of stuff that I am not built for. I’d be vomiting all day long if I was in that situation. I’d be terrified.
Maybe, being bootstrapped, you have to play it a little safer, But I’m OK saying that because I know who I am, and I don’t need to be Elon Musk. I don’t need to be leveraged to the hilt. Super happy that people like that exist and they’re doing their thing, but that’s not me.
Aside from that, yeah, there’s outages, and AWS goes down for a day, it’s terrible. There’s a DNS outage for a day. That stuff sucks. Those are the things that you’re just like, “OK, how do we make sure we never go through this again?” I don’t think anything’s been that stressful.
Definitely, the first couple of people we’ve ever had to fire I got…I’m a pretty, not to say emotional person, but I take that very personally. I take my personal relationships very seriously, and have a lot of trouble detaching the personal from the business. That was definitely tough, the first few times we had to do that. But, even that you learn from and you grow from.
Garrett: Yeah. I think there’s a slight difference with infrastructure products versus… Like with Sifter, I was never stressed out. Well, I mean I was, but not legitimately. Kind of the same thing, I would imagine, with Format.
If it goes down, it goes down for a little bit. People are generally understanding. Nothing’s online, five 9s… Not nothing, but a few things. With infrastructure it’s a little bit different. But, that’s also a conscious decision.
I think a lot of people, especially developers, get this idea like, “Oh, I wish I had this infrastructure piece.” Then you build it, it’s like, “Holy crap. This sucks running something like this. Because, if it goes down for a split second, we’re costing people money.”
Whereas a business where, “Yeah, it’s an inconvenience if it goes offline, but bring it back up and everything’s fine.” The worst case scenario usually isn’t all that bad, I think, is a tough lesson to learn.
Tyler: Yeah. We had an outage once. I remember there was some guy who was like, “Oh. I was literally walking in for an interview. My site was down.” Like, “You guys suck,” blah, blah, blah. That stuff’s terrible, don’t get me wrong. Luckily, almost all that stuff is mitigated now. We have almost all of that mitigated.
But, oh my god, at Amazon. I made mistakes that… My first production deployment was we were making a billing change for… Amazon used to run like a Netflix-like DVD mail delivery service in Europe and in Germany. We had to make some billing descriptor changes, and I kind of messed it up.
What I messed up was I didn’t know that the SQL command I was running didn’t autocommit, I had to commit it before closing my console. I messed up like a quarter million billing transactions.
Tyler: Things like that. Oh god, I could think of other things. During that Harry Potter thing, I once…We had to reauthorize all these Harry Potter…Everyone who preordered a Harry Potter book, we had to re-preauth their credit cards. We re-preauthorized them and had to do it in bulk.
There’s a type of European credit card. I can’t remember what it’s called. Swift Solos. I just was like, “Oh, we can just flood our payment processor with this. They can easily take the load.” They couldn’t, and we took down Swift Solo credit card processing at the largest credit card processor in America, across their entire network for a day.
Tyler: It was like, if some random person in the UK was trapped in America and was trying to use their credit card somewhere, anywhere the largest payment processor was using, their card would have been denied because of me. For one thing — for preauths on a Harry Potter book. We have never hit that scale at Format.
Like I said, I think I got taught my threshold for terror, was set really high at Amazon, and so everything else I can deal with.
Garrett: In my experience, that’s probably one of the best skills you could pick up, is to just have that, go through that, and then realize no matter what I do here, it’s not going to be that bad. Just put your head down, fix it, and get back to it. Right on.
That’s pretty much it. Is there any kind of one last parting tip you would have for somebody else who wants to start an app, start some kind of software business?
Tyler: I think one of the main things that I always talk about is, when someone asks for feedback on their ideas, one, make sure you have the right people around you. There is just no replacing that. I’d say that Lucas and I really lucked out on that, because we didn’t know each other that well at the time. You just need to go pick up…There’s a book, The Entrepreneur’s Dilemma.
It’s just case studies of things gone wrong, and how you can mitigate them sometimes through structuring of the company and shares, stuff like that. By sheer coincidence, the division of what we were interested in and passionate about fell where it was pretty aligned. We could make compromises really well in terms of like, “Well, this is a technical decision. This is the design decision. Then how do you make the right compromise?”
Then also, things like… In the early days, because you’re doing everything, so I did all of our bookkeeping for the first, I think two years, and I had automated the crap out of that. Like you were saying that you had everything. I knew how to do all sorts of accounting. I didn’t file our taxes, but I knew the ins and outs of it.
Everything was automated as much as possible in terms of paying invoices, doing payroll, bookkeeping, blah, blah, blah, so that when we actually did outsource it to somebody, it was pretty easy to hand it off. I actually was interested in that stuff. There were other things that Lucas was interested in that I was like, “Oh god, you’d kill me to do that.”
There’s that part, and the same thing’s true for anybody you hire. You want people who genuinely have your back. I think that’s the main thing there. Then, in terms of an idea or what you’re pursuing, if you’re not interested in it, if you’re not passionate about the space, you’re done. There’s going to be someone else who is.
If you got a great idea for a tool that would be awesome for hedge fund managers but you hate hedge fund managers, guess what? Someone’s probably got a comparable idea who loves working in finance and they’re going to probably beat you, because care more about their customer, all that stuff.
I think the great story I heard there once was Des from Intercom, they used to have a company that was exception tracking for Rails apps. Someone asked him, it was like, “Do you eat, breath, do you dream about how Ruby can create exceptions?”
He was like, “No.” He was like, “Oh, there’s probably somebody who does, and they’re probably going to care about this more than you.” He was like, “Oh, you’re right.” I think the same is true here. If you’re not passionate about it, you have to… Like you said, eight years in, I know everything that’s still wrong with our product.
If you’re not interested in the people who have to use your software, and their problems in their lives, and improving their lot in life, and giving them value, then you’re not going to last through eight years of bookkeeping, and firing people, and dealing with outages, and all that stuff.
If you’re not interested in the people who have to use your software, and their problems in their lives, and improving their lot in life, and giving them value, then you’re not going to last through eight years of bookkeeping, and firing people, and dealing with outages, and all that stuff. That’s the other thing there.
Then I guess, lastly, there are only certain businesses you can bootstrap. Again, we stumbled into this. We were super lucky that not… I think it’s really tough to advertise to our customers. They’re price sensitive, so you can’t just spend a ton of money to enter into our space. It means it’s harder for a super well-funded company to eat up the niche.
Same thing’s true if you’re trying to bootstrap a company. There has to be unit economics to it, because you have to be able to bootstrap it. You’re not going to bootstrap a hardware company. You’re not going to bootstrap something that has massive infrastructure costs. You need to be aware of that, if you’re in the right business.
It’s really, really hard to bootstrap something that needs sales teams. I remember a business software once… I had a similar conversation with Dharmesh Shah, and he said to me, he’s like, “One of the these things that engineers do not get is that there are products that people buy, and there are products that people are sold.”
If you’re making a product that is sold, and you are not a sales driven organization, you’re dead. So you’d better know which one you’re in. Our product is not one that is sold. Like I said, it’s very self-serve, which leans itself to being bootstrapped. If you want to bootstrap, that’s the things you’ve got to get right up front, or at least get lucky on some of them.
Garrett: There’s so many facets, it feels like that a subtle decision about the type of product you run, the way it sells, infrastructure or not, all these little facets add up and really influence what that business is going to become, whether you like it or not. You kind of have to go down a certain path.
If you don’t realize the implications of going down that path ahead of time, you can end up two, three years in and be very unhappy with the path you’ve chosen accidentally.
Tyler: Right, which is all of your own making.
Garrett: Yeah. I think, too, with developers it’s easy to think, “Oh, this sucks. I don’t enjoy doing this. I could build a business out of this.” Just because you hate how difficult a certain task is doesn’t mean you’re not going to necessarily be passionate about it. You’re passionate about how much you hate how difficult it is.
You’re not passionate about, necessarily, the core of the problem itself. I think that’s something that a lot of people get confused with and think, “Yeah, I’m passionate about it. I hate the problem.” But hating the problem doesn’t mean loving the solution, I think, is a very subtle difference there. I wanted to mention that from what you were saying a second ago.
Tyler: The other general piece of advice I try to ever give somebody when they ask is, “Don’t take anyone’s advice as gospel,” in that you read a blog post and like, “This worked for us, or this didn’t work for us,” blah, blah, blah. You really, really have to think about it, not from replicating it, but from first principles. The context of your business, and where it is, is so important.
…when we went from four people to seven people, the way we were making software and managing tasks and stuff completely fell apart on us.
The example I use there is, when we went from four people to seven people, the way we were making software and managing tasks and stuff completely fell apart on us. It blew my mind. I was like, “How is this possible? We added three people, and now we were falling over each other.”
It was because there was an explosion of number of lines of communication, and not everyone can be part of every conversation anymore. So we changed the way we worked. I remember reading this fantastic blog post about how one team was using Trello to manage their tasks and I was like, “Oh, this is fantastic.”
We moved over to that and it worked fantastic for us until we got to fifteen people, and then we had multiple projects, and it just wouldn’t work for us. It all fell apart and then we switched to the next thing, and then we got to another size, and we’re like, “Oh, this doesn’t work anymore.” Then you divide it again.
That goes on and on and on. I have all the respect in the world for companies that grow really quickly and have the ability to adapt to that. I’m very fortunate to know the guys who started Shopify. I met them when they were six people, and now they’re like, I think they’re like 1,400 people now.
I’d go to each one of their offices and it was like, “Oh, they’re busy. There’s six of you guys in this little space.” It’s like, “Oh, wow. Look at you in this big office, and there’s 40 of you.” “Oh wow, a bigger office, there’s like 100.” “My god, there’s 500.” “Oh my god, there’s 1,000.” At each one of those steps, it’s like, “How did you…?”
Because I know how badly our processes broke when we went from 15 to 30. What happens at 60, 100, and 500, 1,000? To do that, to become double staffed every year? Holy moly. You better have the humility to find people who’ve gone through those experiences and learn from them. That’s what I’m saying in terms of take everybody’s advice with a grain of salt.
One of the best things I ever did, you want to talk about ROI stuff? I don’t go to a lot of meetups, but I go to a handful of conferences. There’s one in Boston every year called Business of Software. I didn’t make it this year, and I didn’t make it last year due to scheduling or other things. I just couldn’t make it. I went to that for four years in a row. It’s all software founders.
I’d find people who were one year ahead of us. They would have a few more people, or they’ve just hired a Head of Marketing, or they were ramping up their AdWords account. It was like, “Hey, what did you do? What worked? What didn’t work?” Getting context from those people, getting their feedback, was like, “Oh, this didn’t work. This did work.”
“Your AdWords account, you’re going to need to… If you’re not willing to spend $5,000 a month, you’re going to have problems,” blah, blah, blah, blah, blah. “Don’t think that you can manage it. You need a this…” so getting all that context. Then it’s you hit the ground running.
It’s one thing to learn from your mistakes, but it is immense if you can learn from someone else’s mistakes. The leverage on that is insane, it’s just absolutely insane. That would be high, high on my list of advice.
Garrett: That’s literally the first sentence in my book, is “Don’t take too much advice.”As I lay into all of my advice and thoughts. But yeah, it’s the best way to do it, is look at the companies, the teams that are one year ahead of you on the growth curve and learn from them. Don’t get too settled into thinking you’ve got a problem solved, because the next hire or two hires is going to push you over the edge. That process is going to fall apart, and you need to grow.
Tyler: Yeah. Yeah, absolutely.
Garrett: Right on. Well, this has been great, man. I really appreciate it. I’m sure there’s a lot of people that are going to get a lot of value out of this, so thanks for taking the time.
Tyler: My pleasure, man.