Matt Wensing: Evolving as an Entrepreneur

Matt, a committed bootstrapper, focused on building the product and growth strategy for Summit, his second startup but then came to realize that to build the business he wanted to create, bootstrapping was not the right path for the company OR for him as an entrepreneur. This time, pursuing meaningful funding was a better route to a successful outcome.

In this BoS talk, Matt shares his thinking process, the context and the pivotal moments that led to this big decision.

Slides

Transcript

So I wanted to give this talk in a way that mixes the personal and professional, I think that’s going to, that’ll be a three line here. Because, you know, so much of and I think BoS especially brings out the fact that we can’t separate the two. And so what I’d like to do is just kind of take you on the journey of, you know where I was and where I’m going now.

So a little bit about my first rodeo, which was a company called Risk pulse, I did bootstrap it to profitability took me eight years from the time I had the idea to being profitable enough to hire and pay reasonable wages to myself and my co founder, and a few others, it was eight years. I’ll summarise it in two words, instead of a whole novel, but I’ve written a lot of blog posts about it, I ended up having a co founder, we built it up to a team of 15 people, which has a business that you know, and end up raising a little bit of so what we ended up doing is we bootstrapped to profitability. And at that point, we raised money.

And so I kind of had this dual experience where I had that initial drive and, and desire to build something completely self sustaining, and it works. But then I wanted to make it bigger, and my ambitions were larger. And so my co founder, so we raised money. And we ended up selling the business in 2019. But again, 15 year journey, last seven, we’re basically split eight and seven in terms of, you know, bootstrapping, and then raising money. And then along the way, co-raising four children.

So while bootstrapping my first business, we had one, Emma, and then we had another, we had a son, and then we had twins, which was the coup de gras, of our of our parenting. And so we kind of ended up realising we couldn’t handle much more than that. So we stopped at four. But one thing I took away from that first journey was that every startup is a journey through this table, kind of like to bring up this table, it’s, it’s guaranteed to be wrong in the specifics, but I think it’s correct in its generalities that, you know, kind of how the ownership gets split, is something that’s kind of always in the back of your mind, and then sometimes front of mine, and you kind of work through these two axes and say, you know, where are you going to end up as a founder in terms of this business that you started? And how much of it do you own compared to where you start? So if it was your idea, you start at the top left with 100%, you might add founders?

And then my question was, What will my journey be this time. So last time, I had a co founder, which meant I was immediately in this box in this column. So I started out owning half of my business, and then basically proceeded to move down the rows here, and own less and less. And that was kind of a, it was a conscious choice once we made it, but it had its trade offs. And I think everyone from this community is keenly aware in the bootstrapping space, keenly aware of, you know, what you sort of give up, at the same time as you accept that. So this time around, I made a conscious decision that I was going to be a solo founder. So that’s something we could obviously drill into in the in the follow up q&a but that was, I felt like, the biggest decision in terms of trying to maintain autonomy for as long as possible wasn’t necessarily ‘don’t raise money’, but it was actually don’t start by splitting the pie in half or more, if possible. So that’s one decision that I made. And what I observed in doing that was kind of one co founder is the equivalent of roughly three rounds of funding in terms of dilution, which I think a lot of people don’t realise how congruent that is, but it’s kind of it’s amazing how we as maybe, you know, entrepreneurs, or engineers, or whomever we are, just find it easy to partner with somebody and you know, give up a large percentage of our business. But then as soon as an investor comes along, and wants to buy 10%, we kind of recoil in disgust that we would do something like that.

I observed this, and I said, Okay, I’m gonna start in the left column, and kind of work my way down and see, see where it goes. And what about this axis. So I just built a business and raised some money. And so I knew what that journey was, like, I also knew that that journey was going to have its own challenges. So what I said was this time around, you know, would I like to bootstrap perhaps, and maybe bootstrap the entire way? Don’t just get it to profitability, but stay there. And, you know, when I started my first company, I was 23 years old. And of course, you know, everything then so I knew that I could do anything with, you know, give me 24 hours in a day and I couldn’t do anything. But this time around, so this was 2009 versus 2017.

So 2009 There’s my kind of bootstrap claim to fame. I’m tweeting about the fact that I had built a walk fi, which is taping a Wi Fi receiver into the middle of a Asian fryer, and pointing it out my apartment window so that I could save $50 a month on my DSL bill, because, you know, by hook or crook, we’re going to start this business. So super into whatever it took to save money and be frugal, build a business and maintain ownership. Then, fast forward eight years, you know, there I’m on the right, this is actually a few years ago. So wife and family, we actually like to do things, we like to have a lifestyle that allows us to buy, you know, DSL, when we need it, maybe even go to the movies and things like that. So very different situation than I was the first time around.

By virtue of that, I said, Well, why don’t I try to bring family and business together. So this is a shot that I found with Mark in the background. But then in the foreground is actually my daughter, Emma, who’s 17. And she carried the mic around in 2019, at Business of Software. So when I had the idea, the first time around, she was actually three months old. And this time around, she’s carrying the mic around at BoS, which was kind of kind of a surreal experience.

So she’s going off to college, and I just realised that, you know, this time around, it wasn’t going to be good to put my family likely through that bootstrapping experience all over again, I think it’s, we often call them lifestyle businesses. But I think we can admit that the lifestyle isn’t great. Maybe it’s great in one way, but it’s not great in others. And I just, you know, I don’t know if you can start out with a comfortable lifestyle starting your own business great. But I didn’t feel like I could so I ended up raising. And I’m looking for ways to raise money. That would still give me optionality. So I wrote a couple articles. And I spoke about these a BoS a couple years ago. But essentially, you know, is it possible to raise money in a way that allows you to maintain this flexibility in terms of, you know, we’re not necessarily going to go gung ho, VC. But we’re also not going to bootstrap in the way that I did, where I was, you know, pointing my fryer out the window and trying to save 50 bucks a month, we’re gonna find some kind of happy, sustainable middle ground.

So that’s what I did actually work with a firm called tiny seed, who is accepting applications annually. And they gave me $200,000 to start this new venture. And the new venture was this idea, which was a tool called Summit, had different name in the past. So if you find it, but the idea was, I wanted to build something that does financial planning, piece of software, this financial plan, so I was going to take on Excel!

Which right at the surface, you know, you probably should realise that this is more ambitious than you can do, you know, bootstrapping, but, you know, I kind of learned things the hard way. I had $200,000 in my pocket, I had then, you know, at least a year or more of time to work on something without stressing out the family and I got to work. So I built the first version of the product, which was essentially allowing users to fill out a form and get a forecast for their software business or for their business specifically focused on SaaS.

And so time started ticking, I launched a v1. And these are months at the bottom. So I’m gonna try to sorry, just has numbers instead of dates, I try to remind us the timeframe. But this is April in May of 2019. I launched a v1 and I found out people were willing to pay Oh, my gosh, the most exciting thing ever. So again, you know, the idea was, yes, I have some money, but let’s get to revenue, because you know, being able to pay yourself from customers is great and better. And also, you know, what, if nobody wants to pay, we need to know that. So launched the v1. Super exciting. But we were on to something, because after all the charts going up into the right. But then the next months unfold and this is essentially the number of customers I had while in kind of testing mode. And then the orange is churn. And the the blue is new customers.

So like this new customers, new customers, then no new customers, some cancellations, just kind of bouncing along the bottom of the barrel here in terms of, you know, building up some kind of customer base. And, you know, lots of feedback, but revenue is very slow going. And so here I was kind of coming up to the end of this initial runway and saying “Great, okay”. I validated that there’s interest, but I didn’t build a business. So what do I do now? Do I give up on the dream or do I keep going and I was fortunate enough to say to some angel investors that I knew for my last business, which was definitely luxury, say, Hey, I think I’m onto something there’s people willing to pay. It’s an idea. Can I raise some money on a debt basis to essentially buy myself more time and if you listen to the there’s a great talk by Rahul of superhuman about fundraising as well, which – if he didn’t give it a BoS – he’s given it on few podcasts, but essentially, how superhuman raise money in these steps as well kind of along the way and broke up the seed round into several phases. So that’s right up doing raise $300,000. And it bought me a little bit more time.

How to raise money on a debt basis to buy yourself more time

I did something which I do a couple of times throughout this, which was, I worked on the heaviest lifts immediately after raising money. So it’s kind of like, raise the money buys 12 months/18 months. And then rather than postpone, you know, the heavy lifting the deep product work, basically get started on the next big bet. Right. So the next big bet for us was flexibility.

So we launched we wanted to build a v2, people said, I fill out the form, I got a forecast, but it really isn’t flexible enough. And so essentially, for these months here, 10 through 14, we said, let’s work on another version that’s more flexible. And I launched it. And, you know, it’s like, big step change, super exciting. And because of the way the market responded, I said, I’m gonna keep going down that Y axis, kind of already gone down one step. But, you know, I’d love to work on this some more look at the step change. I mean, if you squint, this graph is basically going up into the right, just, you know, that struggling slowly up into the right.

So I raised another round of funding, which we can talk about kind of how and why the strategy behind that. But really, the the thing that I learned during that period was, I had moved away from that lightweight version, and build something more flexible. But this was actually going into the winter. So this was COVID. This was the COVID year that I built this version. And I partially believe that without being locked in my house for 12 months, I probably wouldn’t have been able to write this version of the tool, it was almost like, what are we going to do today, I guess, I’m going to play some board games and write code and eat dinner and write more code. And so life kind of slowed down in a way. So we built this launch this, but then I put the little emoji there of the moon over the city, because I just found myself working and working and working and working and becoming increasingly consumed with this product. Not just in building it, but also in how it was delivered. So in order to get this step change, I found customers wanting us to do custom work, consulting work extra work on the side, Hey, your product doesn’t do this. But, you know, is there any way I could pay you more to do something else for us. And so I kind of got drawn into that. I’ll call it a trap, but also kind of a positive trap, at least I thought of, you know, if I write this extra feature, if I do this extra work, I can charge more money, and I can build revenue, at least which is going to help me get to where I’m trying to go.

But then I kind of entered the long winter. And the long winter in Austin was literally the long winter. So we ended up having a blizzard in February, it was, you know, five degrees, which basically approaching zero in Celsius. And really, really brutal. And another thing happened in this in this turn is we suddenly had no new customers this month. And we started to lose customers again. And it was essentially a real crisis of, you know, have I really figured this out yet. Essentially, because, you know, you look at this graph, it’s like okay, promising, putting in the extra, you know, 13 hours a day, if you will, and then this. And then something else happens which back to the personal side, I got this app, you know that those days after Christmas, where you lose track of time, I got this app called Dailyo, and it’s an it’s a mood tracking app, I’m really terrible at journaling, I wanted to do more regularly. So I started recording my, just how I felt about my day each day. And so if you look in December, all the dots are green. And I remember telling myself in December, I mean, it’s post Christmas, the chart looks like the one before the screen. And like I think I’m pretty much green every This is the most boring app ever. Like it’s gonna be green all the time. And then you notice something changes are on the 12th of January. I ended up having kind of the worst day of my life. And it you know, I call it the call.

What happens when you’re in a crisis.

So there’s my kids in the left standing in our old house there. It’s snowing. It’s kind of a weird winter in Austin. On the right hand side you see a bunch of boxes and there’s like a moving Dolly. And then if you squint through the window, the front door, there’s like a moving truck out front. And because we’re actually all packed up ready to move to our house. And what had happened is I sold the last business and one of the dreams you always had was, you know, owning our own place, which is a delayed gratification that we had all endured so that daddy could bootstrap his business and essentially earn have little to nothing for years and years and years, but, you know, finally paid off that business was a success. And here I was working on the next thing. And then 15 minutes before we were supposed to move, I got a phone call from our lender saying, we always hate to have to tell somebody this in the day of moving, or they’re close, but we’re not going to be able to offer you the the mortgage that you need to close today. And I said, Okay, what you mean like today, just not today? Or what? said, No, never, we’re not gonna be able to do that for you. So you’re not gonna be able to move today, and we’re not gonna be able to help you at all.

And, you know, having spent 15 years working on something, so that you kind of have this realisation, this delayed gratification of you know, we’re finally going to be able to your family of six, by the way with a cat and a dog. So we need space. finally be able to have that realised dream. It was a call, but it was also a pretty gut wrenching call because I think what it did for me was had me realised like, when you bootstrap when you build a business, you know, there’s kind of this inescapable cost that comes with that of, you know, what, it’s not just you sacrificing. Right, but what is your family sacrificing? What are you delaying for them, really, to realise, you know, what you want out of life.

Now, fortunately, I have super supportive family, as you can imagine, 15 years of that, and 45 days of hellish uncertainty later, we did get to move into our new house. And I could definitely talk to folks about successfully getting a mortgage as a founder in the United States of America or elsewhere, probably. But the short version was they told me that it was because I had changed the incorporation type of my new venture from a LLC to a C Corp in the year 2020. And because of that, they could not recognise any of my income for the entirety of 2020, which meant I was not lendable and I could not, we couldn’t do it. So then basically, I quit working on anything other than trying to get a loan and figured out a way to do it. And we moved. But what I essentially realised was that going through that crisis time, you know, regardless of optionality on any of those axes, time, is the inescapable costs, you know, of entrepreneurship, and what you put yourself through and what you put your family through, cannot be mitigated out of the equation, there’s no trade off where you can’t, where you don’t sacrifice. And so, you know, yes, Daddy had made sure that I had an income. But what I was giving up was the long nights still, the obsession with the problem space, the consumption with that, you know, and kind of losing sight of the fact that I was still putting risk on my family that, you know, even I didn’t realise, and it’s unfair, don’t get me wrong. But it was there.

So I took a step back, and I said, Okay, maybe instead of optionality, I’m going to cross that out. And I’m just going to walk down this venture path at this point, and say, clock’s ticking, but let’s go big or go home. And the GO HOME part never stood out to me before, I’m gonna be honest. But for some reason, it just really spoke to me. And I said, Hmm, you know, that kind of sounds nice, actually, like, I could either go big, or if this doesn’t work out, I’m gonna go home. And that’s where I’m going to live. And I’m going to be present, and I’m going to be home. And it’s not just about having a salary because I raise a little bit of money, it’s about maybe I go work for those lovely people at Stripe finally, and I get to actually leave at 5pm, or whatever it is, and not think about this over dinner.

So binary outcomes actually create clarity. And I think that was something that was really lost on me for a whole 18 years of my career before then. It’s easy to trash that and say, you fools, you know, your rockets gonna blow up. But, you know, there is kind of something satisfying about that kind of clarity. And so what I did is I hired two people. I said, Let’s really go big. So I hired an ops person to do everything except for products, so I could focus exclusively on product. And I had one more big idea, which was kind of taking the product that we built up until then, and making it even more broad, more flexible, more horizontal. And essentially, postponing revenue, worst than postponing revenue, basically saying revenue doesn’t matter.

The first rule of success is to fail small. The second is don’t die.

You know, what I’m looking for is product adoption and engagement. That is essentially off the charts. And really do what the venture playbook says to do, which is focus on growth, and not really worry about monetization, which was anathema to me and my earlier philosophy, but I was evolving. So I hired a team. On the left hand side is a screenshot of kind of a demo that the fellow on the right Giles had built. I saw that and I said okay, You’re going to build the front end, I’m going to work in the back end, Ryan, there in the left bubble is going to take care of everything else. And, and then I got an email from mentor of mine, who’s also an investor and a BoS attendee. So if you’re watching, this meant a lot to me. And this is not hitting me wrong. But he said, I got an email this month is 25th month into this journey, saying,

The characterization I took from your podcast with this was your last big idea. And last push, which was alarming, you have multiple paths still, you can talk about them, the first rule of success is to fail small, the second rule is don’t die.

And what I was essentially doing, though, is assuming all of that wisdom and saying, Actually, daddy is happy with and I use that term on purpose, I am happy with either dying, or giving up and saying, if this doesn’t work, I give up. And I think in my previous venture, I never figured out how to give up and it worked out. But I was saying this time around is no, I’m actually going to either succeed or die. And I’m okay with that.

And actually, I think that’s better for everybody. Because the last thing I want to do is put my family through more of this. So what’s going to happen? I had no idea. But the first thing we did is burn the boats. So we went all in, we actually churned every customer on purpose. We took revenue to zero, because we didn’t want any legacy clouding what we were about to witness and say, cancel everybody cancel everything, burn it all, and start back at zero and say, let’s pretend that this is day zero, but we only have 90 days. What can we do?

And so we launched a private beta in June of 2021. And we held our breath, we actually launched his free version. So that first month 26, that was actually June, no revenue, no new customers, because there was nothing to subscribe to, we hadn’t built out the stripe billing integration yet. Because again, we just wanted to know that the product was right. And this was July. So July came in, and I said, Oh my gosh, maybe just maybe we’ve actually built the thing that the market wants, and things are gonna go our way. So we had, we launched stripe billing in July. And we saw this happen. And then we turn the calendar, and we watched August happen. And I said, Oh my gosh. Is this actually happening? That will be really nice. But you know, if if you squint and you look back at the 15th and 16th month, it’s really not that different, a little bit of churn growth.

And I tweeted out on September 4 of this year, I said there’s nothing more misleading than doubling in month two, compounding growth is 10/20/40. linear growth is 10/20/30. The third month is the tell.

And I had been like nobody knew it. I work in public a lot. But I don’t share everything. And what nobody knew when I sent that tweet was here I was in the back of my mind going, yes, the third month is the tell like this is either going to be another one of these contraction months where I didn’t figure it out. Or it’s not. And I’m happy to say that this is actually September. So that’s September is not done yet. But this is September of this year. We’ve had one cancellation in 90 days, and we’ve had more new customers each month than we did the month before.

And I honestly think that we’ve solved it. However, the question is, is this it? I don’t really know. I hope so next month could be back to where we were before. But you know, these last three months are really what I was looking for all along.

Yes, I raised money. But I also had that optionality. I kind of had one foot in the old world, but, but we went for it. And I think my kind of my lesson that isn’t advice is keep evolving. You know, I think going through that personal journey along the way is inseparable from the business side, but, but listen to yourself, and also listen to those around you. I like this. It turns out this is not actually Darwin, the species that survives is the one best able to adapt that was actually a business professor at LSU Louisiana State University that said that it’s attributed to Darwin, but But it’s true, you know, holding to pragma holding to dogma, if you will. Really isn’t how you’re going to get to the next level of your career, your business I believe. Now, this is not advice and maybe you need to kind of go around the block a few more times with whatever is you believe today but stay open minded. And I appreciate you guys spending 30 minutes of your journey listening to me share mine.

Matt Wensing

Founder, EQ Systems

Matt is an expert data modeler and product builder. He’s been an entrepreneur since 2006 when he founded RiskPulse, a company offering predictive risk analysis from weather data for supply chain planning. It was acquired by DHL and private equity in 2019.

In 2018, he started a side project applying his knowledge and insight of data modelling to create a model to help entrepreneurs understand the value-drivers of SaaS businesses and shared some of his insights in a Lightning Talk at BoS 2018 – 1 Startup In 10 Years vs 1,000 Startups in 10 Minutes.

The next year, and after exiting RiskPulse, he spoke again on whether you can use data to predict your company’s success. The side project became his next thing and he pursued a bootstrapped path to building his next company.

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