We caught up Rob Hoehn – the CEO of IdeaScale and our dear friend from Seattle. He had the best t-shirt on – for this casting and take a listen / view this podcast below;
- 8M+ in ARR for 2020
- 50% of it is Federal Government
- Spend 10k on your logo after you hit 2M in revenue
- Send the invoices to your renewal customers 90 days prior to renewal
Transcript of our episode with Robert Hoehn, CEO IdeaScale.
All right, this is our inaugural episode of BootCast with the lake and the Romy and so we’re excited we’re super excited we have
Rob Hoehn from IdeaScale, Rami. Do you want to say a couple of words before we get started and then jump right into it.
08:19 Every week, I’m just thrilled to do this with you. I mean, you know, you are the definition Camille bootstrapped entrepreneur and I’m maybe the definition of the opposite. And so
08:29 We’re going to have an incredible time talking to amazing people like Rob and and so on and so forth. And just
08:35 You know, this is the no spin zone, like, you know, I hate to use that term because O’Reilly did but you know the end of the day, this is the no BS no fears that we’re going to say what we feel, and we’re going to project every bit of emotion, we have around the topics that we cover so
08:51 Let’s, let’s get started. So
08:54 Before we get started, are as we get started I have. I’m gonna play a clip and I want you to, I want you to tell me who it is. All right, you ready
09:03 All right, Jason. I can’t do it. We’ll do it live.
09:12 Don’t lie, I can write it and we’ll do it live.
09:21 Brings back so many memories. Well, first of all, thanks for having me on your show of his and and Romy and excited to be here for the first one fantastic opener. That is a really old mean that’s Bill O’Reilly apropos to Romans comment from Inside Edition before he had his own show.
09:43 Oh, yeah, yeah.
09:44 Yeah, bit of a meme dictionary here and it’s actually a great story. He they are trying. They’re like recording all the intros and he kept messing up
09:55 And so he’s just like, forget it will just do a live
09:58 And that’s actually a great segue into idea scale because a lot of what we did was just doing it live. That’s a huge part of bootstrapping right
10:05 Absolutely. So yeah, let’s get right into revenue, tell me how much, how much, how much do you guys make and
10:12 What you learned 2019 and what are you gonna do in 2020
10:15 So 2020 we’re going to finish pretty close to 8
10:21 Million. Yeah.
10:22 Yeah. I’m actually already doing my coven adjustments. So we did about 7.4 and 2019
10:32 Good, good, good. So that’s a good reasonable growth.
10:34 Yeah yeah
10:35 plugging along
10:38 So don’t feel a bit hundred you get started to scale, you know, don’t tell us a story. Go on, just
10:42 Well yeah, I mean, I’m gonna have to out you a little bit here so vivid. I actually started it together.
10:49 And I mean basically like we had this idea and I was working with you actually as a sales engineer and we had some customers that were asking us questions around
11:02 Basically, having common questions where people could see the comments from other respondents on surveys and then they could vote on them. And I think around the same time, you can corroborate me on this, but I think it was Dwayne saw a posting to build a Reddit style community for a company
11:21 Them, I think. Dig
11:22 Back then it was days me. Yeah.
11:27 Yeah, and so we we basically stole that idea and kind of rift off what question Pro is doing by making a self service survey model, which at the time was big deal right 10 years ago so that that was the initial genesis of ideas scale.
11:44 Rob. I have a question for you. I mean, you sound like you’re doing great and you know you continue to grow the company. I mean, you know, look 10 or 12 years ago.
11:52 There was this whole wisdom of the crowds idea and and this whole new ideas come from everywhere, but most of the companies that did that final they frankly do. I mean, did you do
12:02 Oh yeah, right.
12:03 Yeah, passing fad or how did you make this real
12:06 I definitely there’s a bit of it. There was a passing fad. There’s like no question about it. I think just like a lot of technologies in the hype phase when it comes to software, there’s this idea, you just like, flip it on. You don’t have to do anything.
12:21 But the reality is, is like you have to be a moderator, you have to work with the crowd and, you know, frankly, a lot of what we do is actually services around running those campaigns.
12:36 And and and moderating the crowd. So our customers that are successful are the ones that engage with the crowd have focused campaigns.
12:47 And really kind of understand what they what they can they can get from the crowd. Right. I mean, in the early days, you know, a lot of people just asked, like, Hey, give me some ideas.
12:58 Which isn’t really. I mean, that’s how we ended up getting a lot of ideas for legalizing weed. When we work for the White House.
13:05 Don’t worry about actually not a
13:06 Bad idea.
13:10 Yeah, I mean, hey long they worked out. Right.
13:13 So tell me about the
13:14 White House and the Obama administration and does the story around that. I know you know how you guys got it, got into that.
13:21 Yeah, and I think, I think, you know, this is a podcast about bootstrapping. So I’m just trying to suss out the stories that are relevant for your listeners.
13:30 So we actually knew some people on Obama’s tech transition team and Obama actually when he got into office in his first hundred days he was pushing this idea of open government. So he wrote the Open Government letter.
13:46 And required all the major federal agencies to basically basically expand participation.
13:54 With their constituents with the citizens and so basically the GSA picked a basket of startup that the time that we’re working on various crowdsourcing initiatives.
14:07 To make it part of the the software package and specifically, one thing I want to point out that actually get it get give credit to you live and
14:16 You know when we’re working with federal government. It was, you know, obviously, a little bit terrifying. When you’re a startup with just two or three people.
14:24 But one thing that Viv, you held your ground with was the branding and I think that comes up a lot with with startups, especially with Bootstrap startups in the early days because you’re really hungry to get the brand out there.
14:37 But you’re also hungry for dollars and you have to make that choice right
14:42 And, you know, they were negotiating with Twitter, Facebook, YouTube.
14:49 And we just said, look, we’re not taking our logo or the URL off these communities. We’re look we’re doing this for free for you.
14:57 We’re doing this because we want to get our name out there and you’re asking us to remove the logo i mean it’s it’s absurd, right, and it’s it’s actually funny because a lot of the other startups.
15:07 That were picked as part of that early movement are gone now. And I think a lot of that is because we push to keep our brand on there. That’s
15:17 Amazing. That’s awesome.
15:18 Yeah yeah
15:21Are you too bro
15:22 I mean, I gotta give credit to Viv, I think I was silently terrified on the phone.
15:27 When we’re
15:31 When you negotiate with the White House, you’re always terrified. But you gotta, you gotta, you gotta stick to your guns.
15:35 I mean I house today.
15:38 Look, look, I, I admit I learned a ton from that one phone call. And that’s a practice that you do viv is record. A lot of the sales calls that you do and share those with the team. I think that’s huge.
15:53 So obviously you guys are doing about seven 8 MILLION BUCKS. How, what percentage of that comes from federal government versus enterprise versus small, medium, break it down for me.
16:03 Yeah, it’s growing. I mean, we’re up to 50% of our revenues half is from state and local federal and international governments, Coast Guard and he do it. We have all the major, major federal agencies, for the most part.
16:20 And you know, we have like a lot of small federal governments throughout the country and state and local as well.
16:28 Got it, got it.
16:29 When you
16:30 When you guys grow or you grow you grow through sales efforts, mostly or you just get inbound traffic. In other words, are people coming to you because of the resonance of the brand, are you pushing it out there with your sales team.
16:44 Um, so, admittedly, we actually three years ago now, we made a pretty serious decision we we defund it. A lot of our new business acquisition and focused on customer attention.
16:56 And kind of like improving usability NPS all that stuff. It was a pretty hard, hard decision, actually, a lot of the sales reps are obviously pretty pissed, including my CMO
17:10 But I think it’s like one of the best things we ever did, I think, a huge thing with being boot. I want to say boot cast it
17:16 bootstrapped is that you know you don’t
17:19 You just don’t really have the ability to focus on too many things.
17:24 And I really felt like we were trying to fill an empty bucket.
17:29 Basically like getting all these customers, but then we couldn’t keep them on the other end and I started to look at some of our customers in our portfolio and they weren’t really executing the use case that we’d built the software for and then I kind of knew they would cancel.
17:45 And you know, we just just totally shifted our resources towards that. Granted, we’re really lucky because we were pretty good at SEO. In the early days. So we had a really low cost inbound funnel already
18:03 So basically we improved our retention quite a bit and now we’ve actually shifted back so I long answer, but now we’ve actually shifted back to more outbound customer acquisition. We just hired two new enterprise sales reps and we’re hiring another
18:20 Sales Rep.
18:20 That’s a great story for Kobe times right hiring net additions. That’s awesome.
18:25 Yeah, totally.
18:26 So tell me a little bit more. I mean, I want to dive into like you’re saying that like retention and which, if you talk to our private equity guys VCs everybody in the SAS world is like retention retention retention. If you can
18:36 Get customers. You know, you kind of money.
18:40 What have you learned in terms of retention. Give me, you know, give us all, like, you know, two or three like hats, or even just one hack that said like, you know, to do this and you’ll get you’ll get retention out by at least 10 points don’t do that.
18:51 Oh yeah, I mean like, look, there’s always low hanging fruit. And, you know, like when when you’re bootstrapped and you’re stretched six ways to Sunday like that. There’s always gold sometimes. And I’m embarrassed to admit. A lot of it was efficiency, you know, like getting invoice timing corrected.
19:11 Even just like
19:13 Yeah, do you try to send the invoice 60 days 100 days 200 days prior tell me
19:19 What do you mean by investing. Yeah, that’s that that’s a great question. So first of all we did
19:23 We, we only allow our accountant to create an invoice. They used to be anybody. So that was just an easy way to like
19:31 Funnel everything into one person and just fix all the policies. Okay, so the next thing was is obviously we created a whole schedule for like you sent you send an invoice 90 days out. That’s it. Full stop. Like, you can do that. I mean,
19:46 Tons of companies send invoices early, but for some reason all my account rep for terrified of that and I had to basically relearn them on that. So that was a really big one. And also just getting our subscription start and end dates. Correct.
20:01 Yeah, was an easy one. We had a lot of account drift.
20:06 Which some early SAS companies had problems with that. Right.
20:09 So we’re just, it was just free money, right. It’s as simple as that.
20:14 So that was a huge one, so that that’s a basic there’s a few other like low hanging fruit ones that was. It was just process like getting all the process. Right. Um, the next big thing was actually implementing QB ours.
20:27 So we’re like a very consultative business. And frankly, I’ve been kind of dragged kicking and screaming into that.
20:36 It isn’t my, my best sweet but now I’ve been getting better at it. So basically, you know, just really cracking down on checking in with the customer every quarter.
20:48 But really, checking in, not, not just like, Hey, how you doing are like having an automated email that just this is goes out from part out or whatever your marketing automation tool is
20:58 Um, but we actually sit down and craft a presentation. We look at their usage.
21:04 We learn about find out information about like what they’re doing in their job like where are they in the organization. How’s the company doing. It’s a ton of work. Right. And I believe I believe you guys are doing that to question pro
21:18 Rob I have a quick question for you. Talk. I’m, you know, I’m a marketing person and you talked about your CMO earlier. What do you think your biggest tension is like what you guys disagree on you know you’re the CEO, you’re looking at the whole business CMOS looking as a marketer.
21:33 And a marketer. It’s like the hammer the nail. Right. You know, everything is to a hammer, everything looks like a nail.
21:38 Whatever biggest kind of source of conflict.
21:42I think one of the biggest ones is
21:46 You know, agreeing on
21:49 On where capital should should be spent.
21:52 I’m always looking to try to buy or acquire eyeballs, like for instance we bought a blog about three or four years ago. And to me, I see those as like the long game.
22:09 But I think, you know, and I understand why why Jessica, our CMO is thinking this way is you know she’s looking to fill the sales pipeline in the short term, so she thinking like lets you know by by more ads or or, you know, you know, the sales reps is another big conflict actually want to go to conferences. I mean, it sounds Baroque now right but they want to attend conferences, all the time and I just said no way like that does not convert
22:41 Interesting. That’s almost role reversal because yeah my perspective as a CMO I always say, let’s think of the long term and the CEOs. I was like, well, just stop the pipeline.
22:51 Because that’s all. Yeah, she cares about. So it’s very interesting to see that role reversal. Yeah.
22:56 I don’t know.
22:57 If I know your company’s pretty heavily based on SEO like like low low margin leads. Like I feel like that’s part of it is just were born from from having this constant feed of fleets that really don’t cost us that much money.
23:16 Oh, one thing I will say, like, I mean, I was
23:18 You know when you bought innovation management, per se. So that’s the blog. That was really
23:23 Kind of strategic kind of interesting opportunistic obviously more read where you buy out a blog that has media content and has a ton of traffic but
23:31 They can’t really monetize it obviously media monetization is extremely complicated. You know, it’s not good Romy and I are not going to monetize this thing, I’m telling you right now.
23:39 Yeah yeah
23:42 This is definitely not a retirement strategy. So yeah, but it actually helped you in terms of driving kind of driving leads on the, on the, on the other side, right, like you know you can. No, no, no. You have a ton of content and ton of leads accordingly coming, coming through that content.
23:56 Yeah, and I’ll admit, actually, they don’t
23:59 They don’t convert that well i mean it’s it’s it’s an interesting. It’s an industry blog right
24:04 Right. Um, but look, we
24:08 And this is a common thing with SEO like
24:11 We have deals that close like four years later.
24:15 Yeah, I mean that that that’s the future of sales to Dotto. Everybody knows that. I mean, that’s, that’s, that’s why I think like
24:25 Romy I think you’ve said this many times like building that brand takes years and you can’t put $1 on it like you know but but when people think of like, which
24:35 Idea management platform. Should we use, it’s like not even a question of idea scale get their newsletter all the time. You’re right. I follow them on Twitter and they’re great.
24:46 So that that that’s that’s why we do those things.
24:49 There’s a long sale. I mean, you’ve got put them in the funnel and then over the next couple of years at some point.
24:58No, I was gonna say like it. I think it’s also from being in government where it just, it just takes three, four years to close the deal.
25:07So tell me something about like, I mean, obviously, when you start off, you’re in pain that you’re going to be in the government, you know, you will not. You’re gonna sell to the TSA and then I astronautics oh
25:16You feeling about that, you know, and now 50% clearly at least 4 million boxes coming out of
25:23Coming out of government, realistically, I do see standing on, given what’s going on with the federal government right now. Do you think that Scott continue on. Or you can try out. What do you, what are your thoughts.
25:32Yeah, I mean, look, when when when our latest President came into office. We actually had a pretty nasty down downturn in contracts, mostly, most of them were there just pushed out
25:46So, and we’ve actually managed to kick that back and do pretty well. So our thinking is, if we can do well under this Presidency, we can do pretty well under the next one.
25:59But, but everybody that sells the Gov. I mean, even if it’s like any president you always have that transition period where it’s really noisy. So we’re kind of expecting the next year to be a little rough anyway with the election and everything going on.
26:14But you know we have a lot of multi year deals. It’s actually one of our big achievements last year 40% of our new business was multi year
26:23I have a question on that one. So,
26:24Yeah. Similar deal vs multi year deals. Right. Do you
26:29Do you got highly incentivize people to do multi year deals single year deals. Where do you stand on
26:35So funny you bring that up. Um, yeah. So we do, we do a little bit
26:43Sales Reps. Push it really hard. They also push for bonus if they pay all three years up front are all multi years up front, which I don’t do
26:55Yeah, we pay we pay an extra kicker. I think it’s like seven or 8% if they get a multi year deal and we pay it all up front. We don’t wait till the following year.
27:07That sounds generous.
27:08Yeah, I think that’s pretty fair
27:10Well, you know, with them. I know we’re probably gonna run out of time soon.
27:13But you talked about the new presidency and review renewing contract and stuff. Don’t you think with all of the
27:21Things going on in the social world with Black Lives Matter and everything else that the whole notion of ideas and democratization. It’s really coming into the four, and if so, how are you either going to benefit from that or support that or but
27:36Yeah, yeah, it’s a good question. I mean, I look
27:40To your point earlier about it being a fad. I think like what we’re seeing is that there’s people are embracing the idea of having an editor.
27:49Right. Like, I think we kind of miss having a little bit of editorializing happening instead of just allowing the Karen’s of the world to speak on equal footing.
28:02And and and i think i think that’s kind of the next honestly next phase of ideas scale like we’ve
28:09We’ve done a lot with natural language processing lately, and we’ve realized that a little bit of machine learning, mixed with the crowd is actually a really beautiful combination
28:20So we can kind of direct people towards a goal right so we can be the curator and that’s actually why we acquired better ethic and we launched idea scale crowd. So we can actually get better at doing that. Even ourselves and build our own practice just
28:38Music to my ears. That’s Back to the Future right i mean we’re coming full circle right back to curation editorializing the role
28:45I love it. I miss it so bad. I’m like, I missed Dan Rather, what can I say
28:55So totally so you guys made a deal about six months ago live according a crowd, and now you guys have an internal design thing in crowd. Right.
29:04Yeah, yeah. So we’ve been
29:06Will give you and I have known Mika in DC for a long time and Jonathan and we’ve talked to them on and off so better if it is a yeah basically a design thinking community.
29:17That that basically produces high quality ideas on almost any topic that we’re about we’re about 50,000 people
29:28From all over the world. And yeah, we bought them about CF four months ago, actually. And it’s, it’s been it’s been awesome. I’ve learned so much. And it’s really funny because basically, we are now using our own tool.
29:43Which I’m embarrassed to say we didn’t, we haven’t actually done that much in the last few years, especially
29:49You just get so in the weeds with actually like closing deals and running the company like we weren’t really using the tool as much as we probably should have
29:59So we actually implemented a company policy. It’s about six months ago where everybody has to run their own community, and it has to be something real.
30:10Not just like an imaginary community where you’re testing.
30:14So, a lot of us are actually running ideas scale crowd, but some of us have started their own communities and they’re actually really popular.
30:22I have a question. Do you have everybody in the company do it only the sales guys only the account guys are everyone in the company that goes to that process.
30:30Well anybody that’s new has to do it.
30:33Most people now are an idea scale crowd and then some people that have been here a long time, of just voluntarily started doing it. It’s not a hard and fast rule.
30:43Yeah, how did that, like, you know, you know, in terms of new new, you know, new as they got new as into the system didn’t force them to do like a marketing exercise that you have to run a blog.
30:53Totally everyone involved. I guess that’s it. We don’t do that. Question Pro. But I think it’s an amazing idea is to kind of force people to kind of actually like go down the path of using the tool and fully like you know fully embracing the tool from soup to nuts.
31:07Yeah and we push this idea pretty hard, like if you see something, say something. I mean like anything like just doesn’t matter how detailed, it is
31:16Like because. So that’s a big thing with bootstrapping. And I think that’s what’s really special about being bootstrapped is everybody I talked to that does it runs a company this way. Everybody understands like when to do something.
31:31Like famously at Idea scale. We use stock logo.
31:37For like way longer than we should have. I think we’re at like 2 million in revenue. And we finally made our own logo.
31:45But like the lesson is like, look, we made it to 2 million with a stock logo, like there were all these other things we had to do that were way more important than that right
31:54But when you get to 2 million, you get the luxury of making your own logo right and and there’s like a billion other decisions like that all the time.
32:03You have to be before you get your own plane.
32:06Yeah, my own Gulf Stream.
32:09I mean, probably what 50 million
32:15Just a couple more years.
32:17A couple two or three. Yeah. Yeah, good question. Um, no. I, I have a question, since this is a brand new podcast. Like, what would you guys say is the definition for a bootstrap company.
32:31Really want to go first.
32:33Well, I mean, look at
32:35The actual definition right where you’re pulling yourself up by your bootstraps and and you’re
32:41Basically, creating on your own versus farming things out. I think it’s from what little I know it’s about a mindset, more than anything else. Not even just about how you deploy capital, but about the the notion that you can use your own energies.
32:55To build the test, right.
32:57And to enter it quickly interview wrong and to be imperfect right you know
33:03You got an imperfect logo, but it still worked. And so I think it’s very much about a mindset. And now you know I spent most of my career in big companies and
33:12The mindset immediately vanishes. When you have legions of people and lots of resources right
33:18And I think you can have a bootstrap mindset, even in a big company, but you have to bring that mindset to it. So given that, you know, I would say it’s a very expansive notion that’s not just what capital deployment.
33:32That’s, that’s, that’s a very different way I would describe it. I just a simple, you know, if you said fuck you to the museum’s then you bootstrap so that’s
33:40My definition of bootstrap simple
33:49And that’s why I wrote, I took your photo from today in the, in the, in the car, for I know see a lot on the on the website. I took your photo from today and I took my photo from actually 15 years ago and I kind of juxtaposed between the two of us to tell the difference, or do you mean
34:04That’s fair. Oh boy.
34:06Well, so that’s why you know that’s why when you go to broadcast on FM, you’ll see your own his father and my photo but they’re like no literally radically different. Although
34:15Knife. Obviously, and I made a little joke and wrong. He’s like, he said like, Hey, do whatever you wanted up the website. I’m not sure I’m
34:24Gonna outsource that to me. And I’m like, Okay, I’m just gonna
34:27Leave me, Rob. I did bootstrap I outsource
34:33Good stuff. Thanks, guys. I think
34:35You are incredible. Thank you.
34:36Thank you, Ronnie. Thank you give
34:39Thanks to you guys.
34:40I love you. Bye.