SFN198: Lessons learned while bootstrapping Grasshopper from $0 to $30M in revenue, with David Hauser
Stop trying to hack early-stage startup growth.
Get ready for real world, practical advice on bootstrapping a software business.
David Hauser has been there and done it and he isn’t brainwashed by some of the Silicon Valley methods for hacking growth.
David bootstrapped Grasshopper from $0 to $30M in revenue before selling it & founded Chargify, made it profitable then raised money through Mark Cuban.
In This Interview I Ask:
- 3:50 - Tell us about Grasshopper and Chargify. High level: what do they do?
- 5:15 - Where did the idea for Grasshopper come from?
- 7:10 - How did David start selling? Who were the first people he reached out to?
- 9:30 - What were you charging?
- 16:30 - It’s a whole different experience managing 6-10 employees. How did things shift? What was the shift like?
- 17:30 - Growth hid some of the problems that the company was experiencing. When did they start surfacing?
- 23:15 - So Chris learned about A/B Testing from the Obama campaign?
- 23:20 - How was David funding it all?
- 26:00 - Why did David decide to bootstrap, early on?
- 28:30 - When did Chargify come into play?
- 30:55 - What were some of the other ideas that Grasshopper tried, when growth started to slow?
- 31:50 - What were the biggest lessons that David learned after investing and losing $1M in Grasshopper Labs? If he were doing it over, what would he do differently?
- 35:00 - Looking back on all of this, what were some of the biggest lessons that you learned? Let’s start with $0 - $250k / year.
Grasshopper – From $0 to $30,000,000
“If you are not talking about paid marketing, it’s a lost opportunity. I think too many in the Silicon Valley trap feel like it’s a bad word to say they paid for marketing.”
David has always believed in creating a sales process that can close sales online. He didn’t want to talk to potential customers on the phone to discuss proposals and contracts. That’s wasted time.
At launch, the process allowed them to acquire customers through paid advertisements and build the product at the same time. This sales process also proved highly scalable.
David built a culture of testing and optimized everything.
They were profitably selling the product within three months – and they were profitable every month. Within 18 months, Grasshopper exceeded $1M in revenue.
“Growth was hiding a lot of problems. We’re still growing and we’re growing fast, so everything must be good… right?”
As the company grew and David hired more people, the company needed better structure and communication – but constant business growth obscured those problems.
The problems didn’t start to surface themselves until Grasshopper reached $10M in revenue.
- Multiple layers of management emerged.
- Performance management, evaluation and compensation became more complex.
- They needed different people. They needed to shift from hiring Doers to hiring Strategic Thinkers.
Choosing to Bootstrap
Raising investments for Grasshopper didn’t make sense to David.
- In 2010, there were fewer people willing to invest money.
- Investors wanted to know David’s plans for selling and exiting the company, and he was focused on building a great company that he loved working at.
Later on, instead of taking a large investment, they chose to go into debt to substantially expand their marketing budget – from $2M to $14M. Thanks to a culture of testing, they knew exactly how much money each dollar spent would earn. They paid off the debt faster than expected.
Lessons Learned from $0 to $2M
“Paid marketing works, no matter what people say. There are so many people saying don’t use paid marketing. No. Use paid marketing from day one.”
Lessons learned from $0 to $250k annual revenue:
- The idea isn’t that important. It might change.
- You need passion to serve a specific market.
- “Paid marketing works, no matter what people say.”
- Your goal should be to get traffic & sell something.
Lessons learned from $250k to $2M annual revenue:
- For David, this stage was all about hiring.
- They hired doers.
- They never hired people for a function that David or his partner had not spent time doing.