Episode 847 | What Second Time Founders Do Differently, Pricing AI Agents, and More Listener Questions (Rob Solo)

0:00Welcome back to another episode of Startups with the Rest of Us. I'm Rob Walling, and in this episode, I'm going to be answering your listener questions. It's the dog days of summer right now. Most people aren't around. I'm having trouble scheduling people for interviews and to join me on the pod, so I'm doing another solo episode today. But I look forward to some upcoming interviews and co-hosted Q &A sessions here in the next couple months. Things always tend to ramp back up in the fall. Speaking of the fall, it's only four weeks until MicroConf Europe. That's in Iceland, September 21st through the 23rd.

0:36We are sold out, but producer Sonia has added a couple more tickets. This is the last chance to get yours, microconfeurope.com. If you want to attend and see a phenomenal list of speakers, incredible outdoor excursions, including the chance to check out the Northern Lights if the weather cooperates. But let me be clear, there's no guarantee of that. I am just very hopeful and crossing my fingers. MicroconfEurope.com if you want to hang out with me and 170 of your favorite bootstrapped founder friends.

1:14Let's dive in to my first listener question. Actually, I'm going to take a few text questions today. They're about starting your second startup. One is about launching an AI agent, which I'm curious to weigh in on, and someone caring about third and fourth startups, the things you think about differently. So they are, in effect, later stage questions, but I think everyone can benefit from them. And then I have a couple audio questions as well. If you want to send a question in, it looks like I'm down to 22 total questions right now, which is the lowest level in a very long time. I've spent this summer kind of cleaning them out.

1:53But if you go to startupsoftherestofus.com, click ask a question in the top nav, you can submit audio video, goes to the top of the stack, or submit a text question and I will get to it when I can. And of course priority always goes to questions that are a bit later stage. As I've mentioned on the show, a great source of questions for me these days are the emails that I'm sending to my email list. and I've been trying to send a weekly email and had for about probably like four months straight and then in finishing my new book, I did get a bit behind on that but have been about every other week for the past couple of weeks and I plan to ramp that back up here.

2:30So robwalling.com slash emails if you're interested in receiving new thoughts and essays from me that don't appear on this show. And several people respond and give me feedback, input, questions, thoughts and I love answering them here on the podcast. I can give so much more of a thorough answer on this show than I can typing text out into an email inbox. So Anonymous Reader wrote, my current biggest challenge is idea selection. So typically when I get questions like this, I get this a lot and it's often, almost always frankly, from first-time entrepreneurs, they just can't figure out how to select an idea.

3:08And I get that question so often, I don't tend to answer it much anymore. I point them to resources that I've already created on this topic, like upcoming book, Idea to Traction. I also have some YouTube videos on it. But this reader has a different experience. He says, I have around a dozen, which I believe to be good ideas, but I'm having trouble prioritizing which one to pursue wholeheartedly. The embarrassing thing is I'm a successful founder with an exit under my belt, and I'm also an advisor of a bunch of startups. I should be able to quickly move out of the idea stage. Oh, I know this feeling.

3:40Yet in some ways it's more difficult now because I apply more stringent qualifiers on my ideas than I did before I had my exit. Things like meaning and impact and personal enjoyment rather than simply profit and growth. My next success feels like it needs to be bigger and better than the previous success, which creates a lot of unnecessary pressure. How have you dealt with this? Thanks for everything you do for the startup ecosystem. I love this question because it is almost inevitable if you have an exit, whether you sell for half a million dollars or$20 million, if you're going to start another startup, it is a different calculus.

4:19And of course, people can say, well, first world problems, right? You know, you have all this money and now you have to have meaning and impact from your startup. First world problems are still problems. And there's still things that you have to muddle through and you don't want to make the wrong decision and regret it down the line. I will say that I think it does depend on if you sell for a nice chunk of change versus never have to work again money. Because if you never have to work again, I think it becomes really hard to want to do the grind again. I think index heavily on meaning impact personal enjoyment.

4:52And it can be a real struggle to get motivated to put in the work like you did before. I have talked to, no joke, dozens of founders who've been in this situation. I was in this situation myself a couple times. It's an interesting position to be in. The biggest thing that I would say is given the position you're in where you're an advisor, you obviously have a network of people, maybe you had prior investors, prior co-founders, maybe you have just confidants, folks who've been alongside you on your journey, I would turn to them and ask for advice. And I think the way I would frame it, if you have a dozen good ideas, I would try to narrow that a bit.

5:34And I might put them all in a spreadsheet. I mean, it depends on how spreadsheety you are. But for stuff like this, is there a meaning scale, an impact scale, a personal enjoyment scale? Is there a likelihood of success scale? Like invent four, five, six columns and figure out, is meaning on a one to 10 scale, does that make sense? Or is it just a binary? Is it has enough meaning or it doesn't? You can invent this. You can make this up as much as you want and you can weigh these things such that they produce a single number, right? They multiply together or whatever and give you a single number on the right-hand side.

6:11Now, I would not make that decision based solely on that single number, but can you go from 12 ideas maybe to six using that? Like the bottom six or the bottom handful? Maybe. That's what I'd be looking for right now is ways to filter out ideas that I don't think fit where I want to go. And usually the way I do this is by a little bit of gut instinct. I will crank up a spreadsheet like this. I will talk to advisors, friends I know who know me well, whom I trust. I've been in mastermind groups, a coach if you have one. So it's this mix of internal and external feedback. And I think for me, the viability of the business and the size, like you said, it needs to be bigger and better than the previous success.

7:02That totally makes sense to me. I have felt that. When I sold Hittail, or I guess I kind of put it on autopilot, I hadn't sold it yet, I wanted Drip to be 10 times the size of Hittail. And after selling Drip, I wasn't going to do another SaaS app that got as big as Drip again. Like Tiny Seed, well, I guess we could say it's 10 times the size in terms of, I don't know, we raise a lot of funding, right? We've raised almost$60 million. So by some measures, I think TinySeed is, I guess it's just different. It just impacts a lot more people in a deeper way than building a piece of software. So for me, it's very rewarding, right?

7:37I do. I like these metrics you've thrown out. I get a lot of meaning from TinySeed. I have a lot of impact and personal enjoyment from TinySeed. And in fact, the profit that I get, the earnings I get from TinySeed are significantly less than I made when I was building Drip. but that number is less important to me right in this moment. Now we are building something that I think is bigger and better and it's more impactful but I totally get that and I would not undervalue that. I think your gut instinct, your gut feeling on this is pretty solid and I think it's just a matter of trying to filter and narrow on your own and then trying to get folks who know you well and who have some knowledge of the startup space It's not to necessarily evaluate the ideas, because I think you have the vision for that, but it's to help you evaluate which of these is a fit for you.

8:31I've remembered questions that Ruben Gomez asked me, where he said, do you really want to serve that customer base? And I hadn't thought of that. And that particular customer base was an app that I didn't start, but I was like, I don't know that I have an affinity to work with, insert whatever industry it was here. And he's like, do you want to work on that for five or ten years and serve those customers? And I was like, you know what? I'm not sure that I do. So it's things like that that I just wouldn't have thought of on my own. So getting a trusted friend or two involved, and it can be helpful, as well as doing a founder retreat.

9:01I haven't talked about founder retreats on this show for years because frankly, I haven't gone on one probably since before COVID. But you can look up the Zen Founder Guide to Founder Retreats. It is a book by my wife, Dr. Sherry Walling. It's an e-book. I think it's, I don't know,$20,$25. and it's a really cool guide like a really thorough and intelligent guide to getting away for a couple days even if you have kids, you go solo somewhere and you just basically spend a very quiet couple days two, three days on your own thinking through these types of decisions I think this is a great use or a great use case for going on a founder retreat and really thinking these through and maybe that gets you down to your top three or your top five, and then you go to, you know, again, friends and advisors and such for it.

9:49But I hear you. I think your pain is very real. And even though it seems like a first world problem, it's still, it's a big deal when you're deciding what to do next. My next question is from Daniel Humann. He has written into the podcast many times with great questions. He runs IntelligentEditing.com. And Daniel writes, we've listened to episode 681 why launching a second product is usually a bad idea. That's where Ruben Gomez and I talked through why it's usually a bad idea. And Daniel says,

10:36what do you see as the key differences, if any, if the product is an AI agent? I like this question because, you know, SaaSpocalypse is what I keep saying. Yeah, I get it. Some SaaS apps are going to, you know, I've said on the show, I think it's 10 to 20 % of SaaS apps are going to eat it. Like they're going to have real trouble. And it's some specific categories and things that AI can specifically just replace or people will build themselves or whatever. But AI agents, how else would we think about selling them? You're going to sell them a lot like a B2B product. For example, doesn't it make sense if TinySeed is funding B2B SaaS and someone applies with an agentic business that we would fund it?

11:18Well, of course it does, because it's subscription software where software provides most of the value. It's still, by definition, or at least my definition, it's still SaaS. But obviously there's a couple hurdles maybe. Number one is a lot of folks are promising that AI can do everything and that you have this agent that can just make all the decisions and you don't even need this employee in this role anymore. So an example maybe is a receptionist, someone answering the phone. Or if you say you're going to have an agentic SDR, someone who is doing cold outbound on LinkedIn and Twitter or via email or even cold calling, and you're going to replace the SDRs.

12:03You can promise that. and the odds are it'll be 80 or 90 % of that and that's not enough. So I think a big thing is to figure out what can you promise? What can you stand behind? Because you can make the sale but with subscription software people can cancel your app in a month or two and that's churn. So I think that's one thing is to be careful with what it can actually do rather than what you think it can or want it. You wish it could do. That's one thing. The next thing is I would price it differently because B2B SaaS requires a human to log in and do things. So if you're charging$100 a month per seat for your SaaS, I would consider if an agent could come in and do an 80%, 90 % of the job of a human, isn't that worth$1 ,000,$2 ,000 a month?

12:54I think so. Could it be value-based on the salary of the person, the receptionist or the SDR that you're eliminating? Could it be a portion of that? I do think so. Now, rule of thumb that can be broken is often if you can save someone a million dollars a year, then you charge one-tenth of that, $100 ,000 a year. So if you're going to eliminate the salary of an SDR that would make, what,$80 ,000 to$100 ,000 a year, just throw out a number, then what do you think of charging$8 ,000 to$10 ,000 a year? Yeah, probably it's a reasonable place to start. Maybe it's twice that, maybe it's half that, maybe it depends.

13:33because are you really replacing them if you're only doing 80 to 90 %? It's more like, does it take a team of five down to a team of one that's then monitoring and exception handling the agents? Yeah, you get the idea here. Okay, 10 ,000 is 10%, but I think it's 80 % is good. Maybe I'm charging eight grand, whatever. I mean, we're talking rounding errors here, but that's how I'd be thinking about it, right? Is what is the value that you are actually replacing? Because B2B SaaS for years, if not decades, has been replacing humans. and B2B agents are going to be doing, or if they're not already, are going to be doing the same thing.

14:11But again, the big thing is if I was going to launch an agent, to me, I want the brand and the reputation that this thing actually works. I want people to say, holy s***, I've never seen an agent this good. Rather than, wow, yeah, it kind of gets you most of the way there, but you still have to babysit it, and you still have to do a bunch of manual, and you still have to do, because that's what I see and hear with so much of the AI hype. when you actually double click in, all the bullshit that we see on X Twitter or LinkedIn, people talking about, I have agents running my whole business. Have you actually looked at their marketing and looked at their copy and looked at the cold emails that are going out?

14:44They're not good. Like they're solidly mediocre. And this is my, I had this rant in the past that unless the AI is tuned and optimized to be exceptional, it's going to be very average. And if average produces the results that you're selling, fine. but if not, it's a problem because people are going to skip and this is one reason we see AI software with these outrageous churn rates of 20 to 40 % per month because the promise is there and then you dip your toe in and it doesn't actually work. So that's the biggest thing I think I'd be thinking about. In the end, I think agents, if they work, are amazing and I would not shy away personally from building an agentic business.

15:27And in fact, today, if I had software, Anar Volset and I were talking the other day and he was saying, hey, if you have software that right now has a seat and there's an operator, like an individual contributor doing a thing, it is very logical for me to think about how can I build an agent to replace that operator or replace half of their job or 80 or 90 % of their role and then charge 10, 20 times what I'm currently charging per seat for that agent to just do it. And if you build that and if you get some traction, you should apply to the TinySeed Accelerator. That's tinyseed.com slash apply to hear about our next application period.

16:09So thanks for that question, Daniel. I answered it kind of broadly. If anyone has more questions about AI agents, this is the Wild West. And I have yet to see what I would consider a definitive call on all this. I think people are feeling it out, but it really does feel like B2B AI agents are sold just like B2B SaaS. And B2B AI agents are priced very similar to B2B SaaS. I don't mean the pricing is the same, but the philosophy. If you go to read the SaaS playbook and look at how I talk about pricing based on value and having a value metric, etc., etc., I would apply all of that to AI agents. I would just expect that potentially the AI agent could be priced a lot higher than just the SaaS.

16:53And finally, of course, you have to keep in mind that if you have an AI agent, it could be very expensive and they could hit your profit margin. There's a chance that you can charge 10 times for an AI agent and it makes you the same amount of net margin of net profit as your SaaS seat did. So that's just another thing to keep in mind. Thanks again for that question, Daniel. My next question came into our email. Questions at startupsfortherestofus.com and Alexi from clicklyapp.com asks, what does a founder care about during a third, fourth, or fifth startup? And Alexi writes, in the last episode, you mentioned that founders care about different things in their third, fourth, or fifth startup than they did at the beginning.

17:35And also you care about other things during the 800th episode of the podcast than what you cared about 16 years ago. So what do you care about now? What does a founder of their third, fourth, or fifth startup care about? Thank you. I appreciate you and your guests sharing your wisdom on the podcast? It's a good question. You know, a bit of this was answered in the first question, right? About, he's only on his second startup, but I think it holds. It's like, you start to care less just about the money and the outcome, and you start caring a little more about enjoying your life. You can only grind for so long.

18:07And some people, I mean, there are some anomalies, right? There's Heat and Shaw, and there's David Cancel, and I guess Jason Cohen, I think I said three startups, which is like three big ones. And that's tough. I say it's tough. It's a lot of work, right? There's not a lot of folks I know who do three, four, five. That's why serial entrepreneur is actually such an impressive moniker when you really mean it. But all that said, second, third, and fourth, I think depending on what your earlier outcomes were, you just care less about, it's not that you care less about the money, but that's not the main driving factor.

18:38If you have had a successful exit or you made enough money that it kind of doesn't matter anymore. And most people are less willing to do the early grind, right? And that's obvious. You might be a little later in life. Even if you sold your first one in your 20s, now you're in your 30s, maybe you're married, maybe you have a kid, maybe you're in your 40s and you're kind of like, I want to slow down a little bit and enjoy life a little more. These are the types of things you start thinking about. So you start factoring that into your decision and become much more picky about what it is that you want to invest your time in.

19:06Another thing you care about is, look at what Ruben Gomes did with Signwell, which was his second successful app after BidSketch. He started with distribution. 18 months before he launched SignWell, he built a website and started doing SEO. With Drip, which depending on how you count, I think, what would we say? It's my fourth company. And I think it was eight months before we launched. I had a website up, I was running ads, I was building that launch list. I cared much more about validation and interest and being more certain that this was a decent idea. I did a lot of keyword research, had customer conversations.

19:44I did all the stuff that I talk about on the show that I put in the book, Idea to Traction, that's coming out in a couple months. I think second-time, third-time founders care a lot more about distribution and making sure that they're building something that people want. You can never get to 100 % with validation, not until you build it. And the story of Drip is just that, right? We launched and got to 8, 9K MRR, which was pretty good, right? But I was miserable. I was unhappy with it. And that's another thing, as a third, fourth-time founder, I was super annoyed with the fact that Drip plateaued at that number.

20:18But if I was a first-time founder, I'd have been overjoyed. I'd have been like, yeah, I can quit the day job. So that's the difference of just your aspirations increase. And my aspirations didn't increase just to do it. Number one, I wanted a bigger financial outcome than I had seen in the past. But number two, I wanted to learn. And in order to learn, you have to do some new things. And building an app that's the same size as the last one, for me, wasn't that interesting because I wasn't going to learn new things. So that's another thing I think that folks think about. And so it's not just distribution you think about, but it's like, how can I be more careful and not just have to luck my way into this?

20:54I don't know of any successful founders who are on their second, third, fourth effort that build 10 things and see what sticks. I know literally zero. that is an approach for someone who I would say just doesn't know any better. You know, when you see someone coming back for their second, third, fourth, fifth effort, they know a little more and they have a usually better gut feel, a little more intuition about it. They do a little more conversating, a little more researching, a little more validation. Yeah, it's the pattern I see. And finally, one part of Alexi's question was, what do I care about, right?

21:35doing the 800th episode of the podcast, what do I care about today that I didn't care about 16 years ago? For me, I did care about learning the whole time. These days, for me, it's impact. I'll say I weighed money a lot more important than impact 16 years ago because I needed money. And I had a goal of A, for supporting the family, and then it was having enough money that I never had to work again and having that freedom, right? I was going for freedom. So I have that now. So what do you look at next, right? There's a little bit of legacy that I think about. Part of that is writing books. I've written four books in the last 10 years after having written two in the prior six years.

22:16You can do the math. I guess I'd say I've written three books in the past four or five years. SAS Playbook, Exist Strategy, and Idea to Traction. Books are part of that because books just last a long time. They're so not ephemeral. Then this podcast, the reason that I doubled down on it and it was in 2018, 2019, and really upped the production value, tried to improve just the quality and the focus of it, and honestly shared more of my honest opinions on here starting around that time, put more of myself into the show. That was a turning point for me because I valued continuing to do the show because I think the show itself is a legacy.

22:57It's an artifact that will live on even if someday I retire from all of this I think it can be an interesting resource for folks. So thanks for that question Alexi. I hope that was helpful. My last question of the day is an audio question from Andrew.

23:21Hey Rob, love the podcast. I've been listening to it a long time. I've been looking to build a company focused on hospitals specifically clinical laboratories. I think there's a clear regulatory and workflow pain point there that I can address. My background is I'm a physician that works in this field. The challenge I'm wrestling with is that the hospital sales cycles are long and the budgets move slowly. So it's going to take a while to realize the kind of revenue or validate product market fit. I work with another healthcare startup, and I can see that it takes them anywhere from 12 to 18 months to close a deal.

23:57And so I guess my question is, from your experience, is it worth pursuing this path despite the slow adoption cycle if the problem space and need are strong? Or is it smarter to apply the same skill set to another vertical with similar regulatory compliance needs but faster sales? So if you're in my position, how would you evaluate whether to stay focused on healthcare or pivot towards another vertical? Anyways, thanks. So thanks for this question. Yeah, we have tiny seed companies, and they're microcom companies as well, that sell into healthcare or just sell where they have 12 to 18 months sales cycles.

24:29I've seen them make it work. So it's not a hard no. I wouldn't do it myself. I wouldn't enjoy it. I find having these long, drawn-out sales cycles with big enterprises exhausting. And unless I also had customers that will buy on a quicker sales cycle, and I don't know what that looks like here, if that's even possible. but unless I had that, I would just get demotivated with the business. To do something like this, you either need to raise funding, you need to have enough money in the bank that you're kind of burning your own runway personally, and that's a really tough sell for me on this, or you're doing it nights and weekends.

25:07My choice probably, well, I mean, I guess raise funding or nights and weekends, but if you haven't closed a deal, it's very, very hard to raise funding unless you have a great network or a prior exit. So my answer is, would I do it? No. It just wouldn't be fun for me unless I had deals that can close every month, two, three months to keep that motivation going. Because without MRR going up, I mean, I just imagine MRR or ARR being basically zero for 12 to 18 months. And then you get this huge jump, right? We'd sold a quarter million dollar a year contract. Wow, 250K ARR. Then you have another six month wait, you know, because you're working on multiple deals at a time, right?

25:44But another six month wait to jump again. it's like, that's not the business I want to build. I don't enjoy those types of businesses. However, have I seen incredible businesses built that way? I have. Are there some within Tiny Seed that do exactly this? There are. And those founders are different than I am. You know, they get, I guess, get their motivation from something else. They're willing to grind and do it because the opportunity is there, right? So I'm not saying don't do it. I'm saying, you know, part of your question is if you were in my position, you know, if I was based on me, I wouldn't do it.

26:13But I think there's a couple ways to think about this. As I said, are there customers in the space who are able to make decisions faster? Or do you start this as a slow roll and you get five, six, seven conversations going such that in that 12 to 18 month timeframe, you start closing some of them? I guess you're going to need to do that anyways because it's a sales funnel and what are you going to close out of five, six, seven? You're only going to close a couple, right? So yeah, if given the choice, I would be thinking about a vertical where something closes sooner. because the problem with this is if you truly have a new product with no sales, you want to optimize your learning speed.

26:49And if you're waiting 12 months to learn, ain't nobody got time for that. You have better things to do with your life than spend 12 to 18 months only to learn that nobody wants to buy your software or your software doesn't solve a problem worth solving at that price point so it's not viable. You want to be learning constantly. So that's really the question I'd be asking is if the sales cycle is that long, is there a way to learn quicker than some big enterprise sales cycle? Is there an MVP possibility? Is there a way for you personally or for you to hire someone who goes and does the task? This is like the MVP, right?

27:24Human automation I talk about. Can AI do it? I don't know, probably not in healthcare. But you get the idea. I think it's dangerous for a bootstrapper to have a feedback loop that's this long because you're just going to waste years of your life. I can't imagine taking, that's such a risk. The opportunity cost of this is significant. So I would either be looking for smaller customers or a vertical where there are customers that can make a decision quicker. But that's just my opinion. I could be wrong. So thanks for that question and thank you for listening to this and every episode of Startups for the Rest of Us.

27:57The back catalog is deep, folks. If you haven't gone back and listened, go back 100 episodes and pick a few out that you remember or that maybe you don't remember. I've been listening back to some of the episodes to refresh my memory and honestly sometimes there are frameworks or ideas I come up with on the show spontaneously that I just don't remember and I realize, oh, I should pull that into a book or I should write an essay about it, robwalling.com slash emails. So if you feel like you want more startups for the rest of us in your life, it's pretty easy to go back 100, 200 episodes and pick a few or you can go to the greatest hits on the website in the top navigation.

28:33So thanks so much for listening this week and every week. This is Rob Walling signing off from episode 847.