The Pomp Podcast - 331: Hiten Shah On Building Successful Startups & Products

Episode Date: July 9, 2020

Hiten Shah is the co-founder of FYI, a company that helps you find your documents in 3 clicks or less. He previously co-founded CrazyEgg and KISSmetrics as well. In this conversation, we discuss lessons learned over the last 20 years in the tech industry, venture capital vs bootstrapping, the future of remote work, why labor costs decrease and marketing costs increase, and why creators are so well positioned to build massive companies in the future. =============================== Blockset by BRD is your hosted blockchain infrastructure. Blockset enables enterprises and developers around the globe to deliver high-quality blockchain-based applications in a fraction of the time, at a fraction of the cost. Using the services provided by Blockset, businesses can build professional custody solutions, accurate and near real-time portfolio management solutions, auditing platforms, commercial block explorers, and much more: https://www.blockset.com ===============================  Crypto.com is the only all-in-one platform that allows you to BUY / SELL / STORE / EARN / LOAN / INVEST crypto all from one place. Join over 1 million users currently using the Crypto.com app. Download and earn $50 USD using my code ‘pomp2020’, or use the link https://platinum.crypto.com/r/pomp2020 when you sign up for one of their metal cards today. ===============================  Pomp writes a daily letter to over 50,000 investors about business, technology, and finance. He breaks down complex topics into easy to understand language, while sharing opinions on various aspects of each industry. You can subscribe at https://www.pompletter.com

What's up, everyone? This is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Let's kick this thing off. Heaton Shaw is the co-founder of FYI, a company that helps you find your documents in three clicks or less. He previously co-founded Crazy Egg and Kiss Metrics as well. In this conversation, we discuss lessons learned over the last 20 years in the tech industry, venture capital versus bootstrapping, the future of remote work, why labor costs decrease and marketing costs increase, and why creators are so well positioned to build massive companies in the future. I really enjoyed this conversation with Heaton, and I hope you do as well.

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easy to understand language while sharing my opinion on various aspects of each industry. You can subscribe at Pompletter.com. Again, Pompletter.com. All right, let's get into this episode with Heaton. I hope you guys enjoy it. Anthony Pompliano is a partner at Morgan Creek Digital. All opinions expressed by Pomp or his guests on this podcast are solely their opinions and do not reflect the opinions of Morgan Creek Digital or Morgan Creek Capital Management. You should not treat any opinion expressed by Pomp as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. This podcast is for informational purposes only. All right, guys. Bang, bang. I have Heaton here.

Thanks so much for doing this, man. Thanks for having me. Yeah, it's always fun. For sure. Let's start with just your background. I know you've been all over the world, but give us kind of a quick two minutes on your background, what you've done. Yeah, I started building software back in 03, 04. I got real lucky with one called Crazy Egg after trying to build 12 different products within a couple of years. That one's self-funded, still running. It's like over 15 years old now. My wife actually runs it, creates heat maps for people are clicking on a page. Then I'm probably most well known for starting Kissmetrics, which was back in 2008. We started that 2008, 2009. And then that one went through a whole bunch of ups and downs. I wrote a whole blog post called My Billion Dollar Mistake and how I personally screwed

it all up, of course. And then I've also invested in about probably over 150 companies now through kind of the last like i guess 15 plus years of being in tech and then more recently i started a company called fyi that helps you find your documents in three clicks or less across all the different services you use and we go beyond just a search box so i i build software i help other people build tech businesses for the most part and i've invested in all kinds of different companies some that have turned into unicorns others that are kind of failed and across the board not just software so So different hardware companies, D2C, before it was called D2C, stuff like that too.

I think one of the things that when you look at the companies that you've built and that you're known for, they all have kind of the same type of feel, right? You're not out building what would be considered kind of consumer social applications. You're not building the next marketplace in terms of Ubers and Lyfts and Airbnbs of the world. You're very focused on like, hey, I built this piece of software. I sell it to you or I give it to you for free or whatever the monetization is. but it helps you do a very specific thing. Right. And so maybe talk a little bit about like,

why are you attracted to that type of model or why have you spent so much time building that type of software? Yeah. Uh, that's a really good question. The, the pithy dumb shit answer for lack of a better answer is like, I don't know. It just happened. Uh, so, you know, like I think a lot of people pretend to be smarter than they are, like try to give you a solid answer. Look, hindsight's 2020 so like i fell into it um at a time when we back in the day i started a consulting business doing marketing uh in 2003 i did that with my co-founder and brother-in-law neil patel and we just didn't want to keep doing the same type of consulting where we get built we're charging hourly right we're built for our hours and our team's hours we started building software

and neither of us are engineers i fake it now i don't think he tries to i don't think he even wants to touch a lot of software if he can help it uh i myself just found that like um the for me it's a personal joy of being able to build something and have people be able to use it but use it in a way where like the value they get is extremely clear and you can talk to them about that value and make the product better i think with a consumer product the the criteria and the way you think about it is a lot different even though the actual software development might be very similar at this point and then when you talk about like other types of businesses like e-commerce or other ones like I feel like I gravitated towards software the main reason

is just because I started with it got good at it and found my spot where like I enjoy it and the whole ecosystem around me has developed around building software and having more than one software company i work on or have or own or whatever um in short though it's like we just fall into what we fall into like it's like asking you like dude why'd you fall into bitcoin you probably have a damn good answer right now but at the end of the day you just lived your life you were open to opportunities and boom right and like i first met you when you were starting a company right not not i don't know you as the bitcoin person or the person who talks about bitcoin and monetary value and economic you know the economic system in the world and stuff like

that which like i know a lot of people know you for probably a lot of people are listening yeah i tend to think that uh things just happen i think it's a great way to kind of to uh to position it um and then crazy egg was uh self-funded you took no outside capital for if i understand correctly kiss metrics same thing uh kiss metrics we raised money for so that was our first sort of venture-backed company and then with uh with crazy egg it's been self-funded since day one and like we we continue to like self-funded and have no plans to take outside capital we also like tend to like uh not with the venture funded stuff but like with self-funded businesses just keep the team super small focus on profit not worry so much about growth rate and things like

that in the same way that you would if you were venture funded and had a bunch of money to kind of pour ahead of revenue got it and in that uh sense what is kind of the um pros and cons right you've kind of seen what happens when you don't raise money and end up being successful. And then you've kind of seen the pressures and accelerated timelines that things are on venture capital. And I think it's kind of become cool to talk about not raising venture capital now. But obviously we have plenty of examples where when a model works,

it really, really works. And so being an entrepreneur that's done both, like how do you kind of balance the two in hindsight? uh there's so many camps right like for everything like there's a camp for this like dhh over there you know who i have a huge amount of like admiration and respect for and at the same time sometimes he says things i'm like you know that's i get it i understand you at this point you know like like they were role models back in the day for us in a number of ways not the self-funded side but the software side more than anything else i love how they write copy and build products so that's one camp then you have almost like an artificial camp i would call it which is

all these investors right and you know i'll give a few anecdotes and then i will i promise answer the question um first of all like i don't know anyone else that's done both and i think that changes my perspective and i don't care if i have authority to speak on stuff i'll speak on stuff i don't have authority, but it gives me a little bit extra authority to be like, look, I've seen both sides. I'm neutral. Like, I'm like, you gotta, you gotta do what's right. And if you pick the wrong option, you can change later. Probably not the business you're in if you raise money, but that's even possible. We've heard of companies being bought back and sold and all kinds of funny stuff. Look, at the end of the day, I think like, are you driven by

short-term freedom or are you driven by long-term value creation and and depending on those and your sort of lens on like time and your horizon in life like whether it's how old you are what phase you're in or how conscious you are to this you're going to make a choice one way or another so if you feel like hey i have this ambition and i want to go really far um you might just say other people's money is the best way to do that because it can get me further faster if you're saying hey i have a job and i want to quit my job it's likely that raising money unless you're in the ecosystem already isn't the best option for you right so i think this is very personal and what ends up happening is people get don't think of it that way and instead they're

like i'm in the barrier i'm going to raise money and do a startup right so around here where i am i'm in the bay area most people are not self-funded there are very few self-funded companies here just because there's so much uh uh of the of the energy like the the work energy is all oriented around raising money right well if you look out there in the rest of the world it's not the same uh in most places uh i think there are exceptions like new york might be exception la might be an exception but i've seen so many self-funded businesses from la and new york as well and not as many from san francisco and it's not even like you don't hear about them they just don't exist here um i think the the way i think about it though if i were to like sort of take a much

higher level view on it is like we're the amount of weight that people put on investors and their knowledge i think is unfair and also their consciousness we're giving a lot of credit to other human beings that are just stewards of capital just like an operator just different type of capital different type of goal and so when i think about investors it's funny i was on a call right before we started talking now and and i had to hop off it to get on this and the person i was talking to straight up said this to me which is basically hey and this is just ironic and very timely but hey you know those investors that like we talk about i'm like yeah he's like well they don't know anything either and i'm like what do you mean and he's like you know like uh and we

were talking about software and the things that i build and he builds as well and he's like you know self-service and like you know low ltv and like 10 month payback periods and you know not having a multi-year ltv guess what i'm like what he's like these investors are coming around to it and i'm like oh so they realize that like if your market's big enough and it's cheap enough to acquire customers it's okay if your ltv is not as high because your customer acquisition cost is low you talk to any operator any operator that has operated assessments to some level of scale a couple million bucks 50 million bucks whatever they're gonna tell you it's cac and ltv and like some formula in between there and that's it. And a lot of us that have focused on self-service

SaaS with higher churn have had VCs come back and say, that won't work. But then we show them it's working. And now after 10 years plus of it working, the investor's like, yeah, we'll fund that. We'll give you a $50 million valuation and a $2 million ARR with a 10 month LTV. It's like, wait, what? You weren't do that just like two years ago. What changed? Well, what changed is they need more companies to fund and there's more data that proves that it can work. I'm not saying it will work, but there's companies out there that are massive, right? Hundreds of millions of dollars in revenue with a relatively high churn, but so much customer acquisition at the top of the funnel that happens really cheap that like the business does work and it's viable and it's

long-term viable so that's really a good example of like you take an operator first model is how i think about it and what that means is as an operator of a business what's the right way what's the right path for you how do you start how do you go so if you're at a tech company you're an engineer and you feel like you're going to start your own company it's very likely you're going to go raise money right away because the money for you is around you there's like a half a million dollars waiting for you between 10 20 30 people that you've worked with before right or their network, right? And they'll vouch for you. So you'll get that first check. Why would you go think about self-funding if that's your scenario? Because it's just so easy. I'm not saying you

shouldn't. I think you should. But it's that easy to start getting that salary or whatever, some level of comfort. And some areas are expensive. Also, all these things are going to change. And I'm sure we'll talk about that in a second. But yeah. Yeah. So one of the things I want to talk about is what you just described is a model for building a business that the investor's perception of it changed. The model has always worked, right? You've shown that. But the way that companies are built is going to change as you're describing as well. And so whether that's the way we fund the companies or the way that we acquire users, the way that teams work from kind of a productivity standpoint, remote versus not, like how do you think about

the big trends there what's going to change and let's maybe kind of focus on like what do you think is almost guaranteed to change versus the things that people are like ah you know one percent chance it might change but if it changes it'll have a huge impact on the world but what are the guaranteed changes for you uh yeah i think the one guarantee i see is that the cost of labor of any kind is going to go down that's guaranteed we're probably going to see that hit on labor costs and people's ability to make money go down for the next five or ten years we see it it's cyclical it happens every time shit hits the fan so to speak i don't know how many shits have hit the fan this time uh so you know and how many more might come but my count is about three to

five, depending on how you think about chain reactions. But I was just reading a paper earlier today that was talking about, we don't even know the long-term impact. And it was a whole study on that that just came out this morning. And I'm like, okay, well, and I throw it back at you and be like, what do you know? Because you probably have a whole different lens than I do. But I think from a building business operator standpoint, the cost of hiring people is going to go down. the funny thing is the cost of marketing i think is going to go up and you can almost guarantee that um and that's just the cost of every marketing channel or tactic or approach to marketing has consistently always gone up especially compared to when it for when a

channel first starts and these are things i think about a lot having seen so many different marketing channels evolve and and sort of cost more over time and i don't just mean like channels where like you can pay for the traffic like facebook ads or something like that i even mean things like you know how easy it was to get on dig's home page back in the day and how much harder it got over time as a bunch of us figured it out and started monetizing our the attention we had on there you're seeing the same with twitter and things like that as well where i think twitter is a fascinating one because the paid side of it has never really worked out and i don't know if it ever will but the organic sort of social media ish aspect of it is incredible

in terms of reach and brand building and all that stuff so my my theory is that uh and this is like tried and true if you talk to any marketer that like every channel gets costly over time and it gets harder and harder to keep your costs down and because you have to learn new tricks because what happens is as people hop onto the channel more tactics are utilized they get drowned out they get copied. I mean, this is marketing, right? It happens all the time. The good news is there's new channels and new effective ways to even merge channels together to make things work so that you can keep costs down. But that means that the sophistication level of your sort of marketing and your mix and all that stuff goes up. So what's not going to change

is I think for a long time, costs of labor, any kind of labor is going to go down. There's many reasons for that. One of the main ones being people are now used to not having to work from an office, but just people, meaning everybody they're, they're used to it, whether they like it or not like it, or whether their kids are home and all that. I'm not talking about that. They're just used to it because they have to do it. Business wouldn't work if all of us couldn't figure this out. We figured it out. I mean, in fact, like I have some really good data that shows that like there's a massive spike in people looking for zoom sort of uh zoom like product video conferencing products that spike has completely died and it's back to the normal

levels that it was so it's literally like whoop and then like came down over the last like three or four months and so revenues of some of the sort of newer players spiked and are now kind of at a more steady pace obviously they captured whatever they're going to capture and now there's a lot more to do i've seen jumps in arr of like 5x for some of these companies not counting zoom even just some of the smaller ones and when you think of it like that it's like we've gotten used to it that's my point like the buying cycle like we've gotten used to it you can look at software buying cycles to see what we've gotten used to we've gotten used to that which means that we're probably going to be able to hire people from anywhere a lot more than we were used to as a

society as a whole i mean i've been working remotely for 17 years i used to say i don't wish it upon anybody. Now it's upon everybody, right? And a lot of the things that I do, I feel like for myself and my businesses, I don't like being dogmatic about recommending it as what someone else should do. Because I think people are different, the way they want to work, the way they want to do things are different. For example, I'll give one before I kind of sort of, you know, stop on this one is like, I am super surprised at the amount of Zoom fatigue and complaining about it. And the reason I'm surprised about it is because you can turn off the video. You can just turn off the video. I mean, I was doing this stuff back in, again, I'm going to date myself,

but back in the day, 17 years ago, I'd hop on a Skype and hit the voice button or whatever they had because they didn't have video and just talk to someone. I did not lose anything. I have relationships from back then of people I've worked with for three or four companies. I barely met them in person some of them I've never met in person right at my new company I'm trying to think who have I met in person there's I think only two people out of a 15 person company that I've met in person one's my co-founder and the others are head of engineering that I've worked with across three companies for eight years but I haven't seen them in like two years or a year and a half in person right but we don't get out video calls unless like they're with the whole

team or something it's usually like voice so anyway what i think is happening is that there is the way of working is completely going to change and it changed because we got a big shot in the arm and now we have to do things and the implications of that are the first one being i think because of the other factors that are that are kind of happening in the world labor is going to be cheaper and then when you add in remote work and companies like being super cool with it now compared to what they were four months ago, five months ago. Things are going to be cheaper to build, cheaper to make, cheaper to do things. Yeah, and so I guess one of the things that's interesting about this is,

of course, marketing gets more expensive. The cost of building goes down. Also, there seems to be this trend of education where there's more and more people who have the skills necessary to write code, market, whatever we see. Does that ultimately lead to more innovation or is it hard to predict just because we have more people who are skilled more people who are educated uh on these uh certain bodies of work it doesn't necessarily actually lead to

more successful companies i like the question um i think back to your prior if you take the prior thesis of like look there's there there was like a much clearer way where it was one path to build a large business which was you raise money now there's a second way which is don't raise any money figure it out yourself so we the explosion of self-funded companies is immense it's incredible so i think there are going to be more successful companies in the eyes of the operators so a vc might look at a certain company making a couple million bucks a year never going to make more money or maybe we'll make four in 10 years right go from two to four in 10 years but the operator if the operator is operating with a less

and five, 10 person company like there and is happy with that sort of growth. I mean, they could take home a million bucks, 2 million bucks, right. In the next 10 years, every freaking year, it's like the new, like, um, it's like the new, uh, doctor's office. It's like the new dentist. It's like the new, uh, sort of small business basically is all these self-funded software businesses in every niche, every category. And this is happening. There's going to be way more of that. Are those companies innovative? Very rarely, almost never, because they don't have the R&D budget, if you want to call it that, to go throw into innovation prior to revenue. So innovation happens at a slower pace and over time. If you look at sort of most

of the innovation that's out there, the fact that more people are skilled, you would assume that there would be more innovation i think there's gonna there's gonna be not as much increase in innovation as we might have expected because there's a lot more sort of um mimicking copycatting uh uh at best being inspired and we see very little sort of creativity around the solution that you're trying to sort of uh build for a customer because if you can solve it without innovation why wouldn't you right and in fact all this knowledge makes you makes people think more like that because like well we can try that thing over there we can try that thing over there it's not our thing it might work in our market it's a different market we're going to try the thing

and and and the ability to see what everyone's doing is something that people don't talk about as much as as sort of other things so like for example i think the thing that's changed dramatically is like the tooling to like see which apps are charting in the different app stores that's like new stuff it's five years old like it's not 10 years old and so our ability to see what other people are doing and imitate it has increased our skill set that means in my opinion needs to be a lot lower or can be a lot lower to achieve the same amount of sort of growth or or or create the same amount of sort of value just because the knowledge is all out there and the ability to see what another company is doing is like you

snap your finger, you can go look at a lot of their publicly available data and there's a lot of it that's available. Yeah. And we just recently were talking about this idea of like creators, I think are one of the groups that obviously are starting to kind of catch this bug, right? And what they've realized is kind of three things. One, I've got an audience, right? So most companies seem to go build products and go find the audience.

these people have done the reverse they've got an audience no product uh two is hey actually it may not be expensive uh to create a type of product whether it's a software product or literally a t-shirt with some slogan on or whatever and then three is they don't necessarily aspire to build these massive venture-backed businesses right they're not trying to build the next kind of billion dollar uber or you know whatever it is they're actually pretty happy with a million two million bucks a year right and maybe they can grow into something a little bit more So maybe talk a little bit about like, what do you see happening in that part of the world where it's almost like this, this graying of the line between the content creators and kind of the business owners and entrepreneurs? Yeah.

It's incredible. Like I used to talk about this stuff 10, 12 years ago about how you wanted to build an audience first because then you could guarantee that you actually can get at least the first shot of customers. now what we're seeing is that audience building is much easier than ever and and the knowledge is there and even the ability to create something really fantastic whether it's like a video a meme you know what have you even like text right like in the strategies in fact like one of the ways we met is when like you were really going off on twitter and i wanted to learn more about it uh and a mutual friend introduced us right and we talked about it uh and i learned a bunch from you about it like it's incredible like i think that what we're gonna see is more and more

creators get really large audiences and then they need to figure out what to do next and so the ecosystem of support for them i think is what's i wouldn't say missing but it's definitely something that we're going to see we're going to see i think a lot more uh development around it so a good example would be like a company like gumroad they let anyone sell something online we're not even talking about stripe right now right like that's i mean gumroad and other products are built on top of stripe i believe and so and so there's gumroad there's there's things like master class there's a youtuber that i that i bumped into recently who's a physician in the uk who was making like $1,500 or pounds, whatever a week at his job. And he's making 5,000 something a week with his

YouTube videos that are like equivalent of like tutorials and unboxing. And then he mentioned Skillshare. And it turns out he did a video in 2019. It's 2020 right now that still makes a hundred plus dollars a day for him. And this is a YouTuber. He shared a video about this. And here's the thing he said you're gonna love this he basically said and like he's just good i mean i think he's millennial ish or whatever but he's just really good at like hitting the objection early on in the video so this is the objection he had to just crack me up he's like look i know like you know something along the lines of like i know it's cliche or kind of you know stupid to share like how much money i make right but the thing is and this was the kicker for me i learned from

people who did this, how to do what I'm doing. And so I'm going to do this in the hopes that even if one or two of you watch this and get inspired, I've done my job here, right? He didn't say it like that, but like, that's, that's exactly what the message was. And I think that, that kind of, that drops, that drops the mic on the whole topic. It's like, yeah, you watch a couple of YouTube videos, you can figure out how to make money. In fact, I didn't know Skillshare enabled that kind of sort of uh ability for people because that ends up being like three thousand dollars a month that's a significant amount of money for a significant amount of people on the planet and all you really need is some level of of of i call a dedication to the practice because you're

never going to start out like good you might start out at some level of like somewhere between a three and a seven depending on your skill set or your natural inclination for something but then you you practice and you build it up and that's what this person did it's amazing and i didn't know skillshare was like at that level where it could produce that kind of income for somebody just because of one tutorial video they did on some photoshop thing or something yeah and the thing to me that i think that's really interesting is like what you're basically talking about is they created a piece of evergreen content right and that piece of evergreen content continues to monetize over and over again and i think if you kind of pull back into okay let's take a podcast

for example we were talking about uh joe rogan and rogan basically creates two types of content And he creates evergreen content where you could go back and listen to an interview he did with a certain person from five years ago, and it's just as valuable today as it is then. And this is things, you know, health or morning routines or kind of all that type of stuff. And there's a million people who kind of have similar type of content. And then he does things that are very, very kind of time sensitive. So COVID happens, all of a sudden he brings a doctor in and that doctor starts to explain, here's what's happening right now in the moment, blah, blah, blah, whatever. But when you then look at, okay, well, how does somebody like that monetize? I think the debate is almost like this false framework has been, should they sell ads or should they have some kind of subscription product?

Really where I think your kind of thought process in mind aligns is like, why don't they just build things to monetize that attention? And whether that's physical products, whether that's a software product, like ultimately you have the customer base and you're either going to rent out your customer base to somebody else because they're going to pay you for ads or you're going to monetize it yourself. and you monetizing yourself seems like that's the most profitable, sustainable thing to do, right? Yeah. I mean, why can't it be both? Why is it even like one of these things where it's almost like this. If you go down one path, that doesn't stop you from going down the other path. And I think that's what the deeper discussion you and I got into, which is like, well, there's going to be some inventory where ads make sense. There's going to be other inventory where like if you put your own ad or your own promotion to something that you've built, you're going to

make more off of it. But there's always like the equivalent of remnant inventory or leftover. There's rarely a time when there isn't that. So for example, like if someone buys one of your products, they bought it. If you knew they bought it, why would you pitch that product to them again? Right. And there's obviously with podcasting and certain mediums, like that level of sophistication doesn't exist yet right but like and i don't know if it's going to get there but i think the point is just like if you have an audience and you want to build a business well you have the audience and even if you want to build a business go get an audience because then the optionality you have of what you do next is like wider like the what the one issue with this

and this is i think where venture capital does destroy optionality that's probably the best thing i would say about venture capital for an operator it destroys your optionality and destruction is what happens and the reason is if you've sold investors on a certain type of business they bought into that type of business they're they're buying into it right they're buying equity in it and giving you money to go do it at some point around like the investment round and at some stage you don't get to change you don't get to change everything i mean you can but you don't really get to you know it's not easy it's probably not worth the drama so to speak and I think that's where that's where a lot of people's mindsets get get really stuck on there's this type

of business so a podcast business and there's this way that it's monetized but when you look at all the sort of stories we hear about of outliers of success they're outliers because they just went against the norm. They, they did the thing that was uncommon at that time. And that's what led to their massive success. Kylie Jenner, right? Really good example of going outside the norm. You can dig into the data and dispute the facts around like the numbers. Cause like there's a lot that's come out on that, but you can't dispute the simple fact that she had an audience and she really got an audience alignment with what she was selling them. That means that somebody understood the audience, somebody knew what they would buy, and then built out, built out whatever they had to,

whether it's business processes, hiring, or just picking the right partners to monetize. And those kind of options, even those multiple options, I said, you have that optionality, you can pick partners to do do things today, and sell to your audience, where you don't have to do all the work either, as long as you're able to vet the partners and find the right partners, it can be very successful. When you think of examples where kind of creators have built software products that ended up scaling, I think a lot of the examples that people normally go to are, you know, take the Kardashians, for example, where they use physical beauty products. You play with things around merchandise. Like it's always seems to be physical products. I would maybe make the argument

like Naval and Nibi with the venture hacks that eventually turning that into AngelList might be one example, but any others that you could think of where audience built first and then a software product was piped through? Yeah, absolutely. I got to see this firsthand and kind of had my little part in possibly being a fulcrum for this gentleman. So there's a conference called MicroConf. It's a conference that I think is now eight or nine years old. I went to the first five religiously in Vegas when they were doing it. Not because it was in Vegas, just because that's where they did it. I don't actually gamble. I like watching people gamble though. I'll put like all my money on red or black and blackjack and call it. So I don't play poker or anything. I

think life is the biggest gamble we have. And that's the one I like to invest in. So basically there's this conference, it's for self-funded entrepreneurs called micropreneurs at the time. And there's this guy named Nathan Berry who was there. and he had this this uh business uh where he was basically he he he was a designer and a writer is what i would call him i'm not sure what he'd call himself at that time but that's what i would call him because what he would do is he would blog and he would sell ebooks and he would teach people how to blog and sell ebooks and this is to a tech audience of folks who could program for the most part, like, and also our designers and in the scene, so to speak, or in tech. And he basically

was building these landing pages and sending emails and like doing the whole thing to like sell eBooks off of a blog, right? So he built the audience off of blogging, some really great stuff. He started sharing how he was doing it. And then he launched a product that I'm sure many of the people listening know called ConvertKit, which is a software product. And it was built on the back of the audience that he had built, not the software first. I don't even think he thought of the software first. And then at one point at a microconf, him and I were chatting. We were walking from one place to another after kind of after hours, possibly maybe walking to dinner or something. And he was just asking for some thoughts from me. And I just told him like,

look you should just like if you're not convicted on your software just stop like don't do it do the other thing because the other thing's making you like 100 grand or 200 grand a year or more i don't remember but enough that like you don't need to do this software thing and i think that that really was the was a big moment for him and he's talked about it where he decided to do convert kit because i said it in a crude way i was like like just stop it like if you're not going to focus on it it's probably not what you should be doing instead he went and decided to do it and now it's like a 20 million dollar a year business or something like that and so that's probably like the best example i have of somebody who started with the audience i don't believe he even had

any thought of building software and then it evolved and then he created this software and now the software even has landing pages on it that allow you to do what he did back in the day uh when he shared that i was like oh you're back you're going back to your roots right like this is like kind of what you know and how you started this thing um and now he's enabling other people to do the same they also added commerce where now you can charge so like i'm sure that business will get to kind of 30 40 million in revenue over time uh just because of the moves that he's making and that started you know humble beginnings as they say but as a personal blog writing about um how to make money selling ebooks about different sort of tech topics that people wanted to learn about

it always cracks me up when uh i see entrepreneurs thinking the path to kind of um large financial gain is oh i'm supposed to make no money for 10 years and then like there's this big windfall at the end if the company is successful and really what you're highlighting is like if somebody can make you know two three five six million bucks a year every year for 10 years like 20 to 60 million dollars is most is more than most entrepreneurs end up with when they sell their company for 100 million dollars anyways right yeah and like at some point you get so much cash you don't it's not that you don't know what to do with it but you don't need it so then you start investing in things right like i think he's investing in a bunch of land and a house and this and that like

you know and stuff like that but like that's what you end up doing if you have cash and and then it compounds too right if you make actual investments that are compounding i think the the windfall of a big lump sum is sort of um a fallacy uh as the only target or the way that wealth is created i think wealth is more commonly created even historically when it's compounded over time off of a business that's profitable right you're just taking taking it home or reinvesting it or whatever again i go back to that analogy these are smbs these are like mom and pop businesses this is the equivalent of a dentist office and running one and making a decent amount of money we're just able to do it from the comfort of our own home so to speak yeah i love

that i asked uh twitter for a bunch of questions and they sent um a number of ridiculous ones but then also some thoughtful ones so let me just run through the the thoughtful ones and kind of just give me your thoughts on the on the fly yeah okay we're talking about the future of remote work how do you think cities evolve uh kind of in response um i think that cities will are very good at adapting over long periods of time they're poor at adapting quickly uh very government oriented uh and so that would be the first thing i'd say so my prediction on on how cities evolve is like i think they become what they used to be which is hubs of commerce and the commerce is just going to change so when people need to meet in person they go to the city to go meet in person

because the restaurants tend to be there and all that now that's only if the restaurants don't start dispersing which i don't see them doing because you still need a centralized populace or population so i think cities are going to evolve and go back to kind of their roots so to speak where there wasn't as much residential and there was a lot more office space uh the other other question is if we really turn into a world in the in the far out further out future where there's a lot of self-driving cars and you might see cities turn into parking lots of some kind if i were to be silly for a second but yeah nobody knows that's my guess you know i think they are going to evolve but it's going to take a while for them to evolve because they

they change well but they change slowly i love that answer uh what is the greatest indicator of success for a product manager oh uh that's simple it's uh it is what you're producing what you create what you ship creating value that can be extracted by the business and i say extracted very specifically but can be delivered to the customer at the same time so it's this incentive alignment between the customer and your business and that a successful product manager is able to do both and both is hard because you can get growth with the customer and not create enough value for the business or you can create a ton of value for the business but kill the customer right and mainly make it so that you don't get more customers and a product manager's job is to figure

that out and the worst place a product manager can be in is when they've built a bunch of things and none of them are working because then neither of those things are happening you're kind of screwed when i was at facebook we had a saying uh deliver more value than you take and when you kind of think about that it was always this feeling of like look facebook's gonna be just fine right and it's gonna figure out the way to extract the value but if you can actually give the give the value to the customer and stuff, but it makes a lot of sense. When do you know to improve your product versus improve your marketing when things are not going how you want them to? Yeah. So I think these two things need to work in parallel. So you have product improvements

and you have value proposition. Let's just call it value proposition instead of sort of marketing. Cause I think the value proposition and the product kind of go hand in hand. So, you know, usually this is a product manager's task and that's why I try to take the marketing piece out of it for the moment. Cause if you're shipping product and you're not changing your value proposition or understanding what it is and who it appeals to, then you're not actually changing your product. You're literally just making improvements, hoping that something's going to change without changing the other aspects of the business. The other aspects of the business are kind of your doorway, right? Your doorway is your value proposition. That's what people know your

business for before they even come and use it. And so to me, it's not about when do you decide which one you change i think if this most successful businesses are constantly iterating both at the same time the the the sort of um evidence i have for this that anyone can look up is go to archive.org which is the way back machine find the place you could put the url there's like two search boxes there find the right one type in salesforce.com go figure out what their old home page looked like compare it to every home page you can find over the years and my point will be proven which is basically that as you ship product you change value prop if you're in the early days and your pre-product market fit you're constantly trying to figure that out and so then

what you realize is a product person's job founder's job whoever's working on the product itself and managing it needs to also think through how do i test value propositions before i build product and if you can do that then your value proposition your marketing so to speak could be ahead but if you're truly testing it whether it's with ads tweets whatever you're doing you're able to map what you build to what people want not what they actually not even what they want these days i'm all about what they need not what they want because that's the world we're in but like if you can figure out what they need with a value prop i think building the product it sort of goes hand in hand with that and you have to do it at the same time i don't think it's when do you decide

i think you're doing both at the same time yeah this is one of the things i think uh was the most surprising to me when I first moved out to Silicon Valley, right, was this idea of the best companies always seem to be a half step ahead in what they were testing without having built it. And then once they realized there's just enough traction or there's just enough signal that, hey, this is going to be valuable, then they would kind of scramble to build it and kind of serve that need. And to me, it was always one of these things where I think for whatever reason, you know, and obviously wrongly, like, oh, people just build things and, you know, reveal it to the world. and obviously guys you kind of see the under workings a lot of the stuff you're like

it makes a ton of sense to maybe i don't know ask people hey do you want this right and if they say yes then like go build it right the key word there is momentum right if you don't do it like that you don't build momentum you just build product or you just build marketing but really the marrying of the two and what you mentioned which is the testing ahead of what you have that's the only way you build momentum that's the only way you get to new places I want to spend a couple of minutes talking about Bitcoin and crypto because as you would imagine that was probably the most popular types of questions just kind of what are your general thoughts on Bitcoin crypto blockchain space and any kind of insights or takeaways there

I find the most fascinating thing with with Bitcoin and crypto was early on when for lack of a better way to say it without any judgment because these are friends of mine the shadiest non-tech friends of mine were into bitcoin before anybody else this is when it was like five bucks and i think that where something starts and who it starts with greatly dictates where where and how long it takes to hit like mass population and that's that's it that that kind of is my sort of bitcoin summary which is like it's going to take a while for it to unravel itself so that consumers understand it my my opinion is that it it's money everybody understands money as long as you understand simple math you understand money

this is the reason it's going to take a long time to like spread because we're used to money in its current form its current form at in the digital realm is wire transfers anybody that's ever done a wire transfer i'm sorry i do them a lot especially with international payments and stuff like that man like it's terrible and unfortunately i haven't seen bitcoin come to a point where like i can do a wire transfer much easier because i'm using bitcoin and what i mean is interface packaging i don't mean i can't do it i just mean i can't do it and then there's a big stigma which is like is it really money and so i know you know way more about this than i do you're way deeper and so is your audience but to me it starts

with the fact of where did it start and how much of that needs to be undone for the consumer to use it average consumer isn't trying to do shady transactions with it period and so if that's the case that where do how do we get to a point where it becomes not an underground thing and i know that might sound ridiculous because everyone's heard of bitcoin but not everyone owns bitcoin not every and more more importantly very few people are transacting between each other with bitcoin and i could be wrong about that that's my sort of objective view from my perspective and you might have better data and the things i've seen though it it's become a protocol not a currency that's why when you say bitcoin crypto like they're together right so i'm pulling

two things from there and i don't think that you're wrong on this the first being kind of the origination in terms of adoption, right, was kind of in this shady, and not even, I don't think people go as far as to say, like, it was all criminal. It was just, as your point, like, kind of the people who are always on the fringe in terms of ideas, actions. I'll go further and say it started criminal, right? Like, objectively, illegal activity is where it started. I'm not saying that's where it ended. I'm not saying it didn't go fast. But I agree with you. At the same time what i saw in the earliest days was people who could not who had trouble exchanging money yep and so i think like that part of it is it's this weird thing where like if you go back and

look at the arc of technologies most of them that ended up being really really big actually started there but to your point it took a long time for them to become mainstream right like i always go back to like who are the first people with beepers and cell phones like drug dealers right yeah totally totally it's totally right yes okay you know what were some of the the early websites on the internet that made a lot of money porn and you know all that kind of gambling yep yep yep even like downloading music and movies that's illegal right and and now we have spotify now we have netflix right absolutely so i i think that there's uh this weird balance between it's almost like the big technologies start out there and it takes a long time so like uh you have an

uphill battle in the short term but over the long term like history has proven that that's actually like a pretty good trajectory to take um but to your point takes a long time the second thing i think the more important uh piece is like and this is coming from somebody who you know is pretty bullish a lot of people kind of come to me and ask me those questions i said listen the user experience of this stuff sucks like it is horrendous and i always use two examples right one extreme is like we're still sending uh like material amounts of money to random strings of letters and numbers but like my heart beats if i send too much money in one shot right you're like oh like let me triple check that i really typed that in correctly then on the other side you have

things where even when you're not actually uh sending just using it storing it accessing it all that kind of stuff like there is a very distinct difference between the quality of product in kind of the non-bitcoin like consumer facing world in technology and the bitcoin world and like that should change right i think most people are generally like oh that'll improve you know over time but i think that's actually one of the biggest challenges right because to your point people have heard of bitcoin but how do i get it what do i do with it is it easy to do that right can somebody steal it from me like those are all the things that we've all heard people say a lot of it just comes down to user experience the consumer advantage is not clear

and and the transactions aren't happening on on on the most frequent purchases that are happening in the world that those are the problems right like how it gets solved yeah i'm bullish too i mean if you even think about the the vcr and the video cassette recorder like what were people doing they were recording things from the tv and in in retrospect you're thinking well that's kind of you record it then you watch it with a bunch of people that's illegal too in its own sort of form so everything starts that way i love that point um and we'll see like we'll just see like i feel like it's we're in the sort of forex trading world of it still and i'm just looking for the signs where we get out of it i thought we were going to get out of it sooner um especially

with like uh the crypto kitties and like stuff like that because that just starts creating digital transactions happening but that still stayed pretty fringe right great businesses and all that like were developed but like stayed pretty friends so you know we'll have to see we'll have to see what happens i'm i'm long as well uh i'm definitely not deep in it uh like you are uh but the things i've seen kind of point to the fact that like you said it's going to take a while for a consumer to feel like they're using bitcoin now the question that that still keeps popping in my head is are they ever going to feel that way because i'm guessing the way it turns out is a lot of the movement of money gets powered by it but the consumer side still feels the same for the

consumer credit cards and equivalents yeah we invested in a business uh out of chicago called zap and we got a product strike where literally i send you twenty dollars and you get twenty dollars but they're using the bitcoin rails to to do it um and i tend to think like that's a very easy onboarding because whether i'm using venmo or this like i don't care what the technology stack is i just want you to get a 20 bucks yeah the venmo venmo something like venmo built like this would probably do the trick the only problem is like you need one trick for the consumer to get hooked in and usually it's giving away money so we'll see what happens a little expensive there you go i i end each episode asking the same two questions and then you get to ask me one to finish uh

the first is what is the most important book you've ever read uh there's a book that i've read four or five times it's called the courage to be disliked and it's uh alderian psychology this guy alfred adler came up with this not freud not carl young a third one and i just recommend everybody read it especially if you've ever been the person that likes to be liked which i think is about 80 90 percent of the population so i've read it is fantastic so uh i plus one that uh second one's more fun which is aliens believer or non-believer it depends oh why what's your definition of an alien which what's yours i i've had the pleasure of asking this to 300 plus people so i i've got a warped view of uh of alien world

so good um if everything is energy then aliens are energy too and so if aliens are energy too then yeah aliens exist but they're just some energy that is foreign to us that we don't understand and that's if everything's energy so if you believe that like in quantum mechanics and everything being energy and the ability to like you know do all these things then like to me an alien is just a form of communication or awareness that we are not used to and so a lot of things are alien in that regard and so yes if aliens do exist they're a form of energy that would be my sort of response and if that's what We're talking about intelligent life.

Who's to say what intelligence is? We're defining it. So that would be my throwback. We could get very philosophical on this one. I've thought about this for a good part of my life. This is for another time, for sure. You are the first person to ever bring up the fact of everything is energy, right? I think it's a fantastic way to view it.

What one question do you have for me to wrap this up? What's the question you wish people would ask you? And I'd love for you to ask yourself that and answer it. That's the one I got. That's a really good question. I'm going to cheat because somebody asked me this just yesterday on the podcast, and I didn't realize that it was the best question someone had asked. Sweet.

But when you heard it, you're just like, damn, that was by far the best one. uh and cat cole asked me what's the thing that i have taken away from doing so many of these that i wish everyone knew and uh yeah that was a fantastic question um and after thinking about it it was just like we're all much more common than we are uh different right and i think that like we just have so many inputs in our life telling us like we're different we're different we're different we're different and whether it's the tribalism is divisive in the news politics all this stuff like we're all energy right we're all made of water like yes i tweeted that the other day i'm like we're 60 percent water because like there's a lot of drama right now yes that

was you yeah we're all 60 percent water right like oh my god like wow like we are much more similar than we are different and i think that like uh you just get to see it right people from all walks of life live in all these different places um and just if we can keep that in the of our head i feel like we're not going to solve all the problems but like the world would just be a little bit you know kind of more calm and nice and that's probably the direction to go i'm a believer awesome man where uh where can people find you uh and find out stuff about fyi yeah fyi is at use fyi.com and then i'm at at hn shah hn shah on twitter and the reason it's hn shah and not my first name because I own heaton.com actually is because it was the license plate

for the first car that my dad bought in America and he named it after me the car so his HN Shaw was the license plate so anyway that's the story just to drop a story on you I love that I love that all right man let's thank you so much for doing this and I'll do it again in the future absolutely thanks for having me