In this episode of SaaS Origin Stories, Dan Martell, Founder, and CEO of SaaS Academy, joins host Phil Alves. SaaS Academy is the number one coaching program for SaaS founders. Dan has over twenty-two years of experience in the SaaS space as a serial entr
In this episode of SaaS Origin Stories, Dan Martell, Founder, and CEO of SaaS Academy, joins host Phil Alves. SaaS Academy is the number one coaching program for SaaS founders. Dan has over twenty-two years of experience in the SaaS space as a serial entrepreneur with three successful seven-figure exits.
Dan shares his insights on critical but rarely mentioned skills that SaaS founders need in their toolkits before building their SaaS. He also unpacks the playbook for implementing successful exits and how each exit paves the way for your next and bigger venture. Dan is also the author of the best-selling guide for entrepreneurs, Buy Back Your Time.
Guest at a Glance:
Name: Dan Martell
What He Does: Dan mentors SaaS founders at his company, SaaS Academy. He equips founders with the foresight to capture demand for the best product-market fit and implement successful exit strategies.
Dan on LinkedIn
SaaS Academy Website
Dan’s Book Buy Back Your Time
Topics we cover:
Expand Your Horizons by Reading Books
Every SaaS startup has two sides: a technical and a business side. Most SaaS founders come from a technical background and have the first one covered. The technical side is essential for the design and proofing stage, but once your SaaS hits the market, your success pivots around your business skills. Every SaaS founder needs technical skills and business nous in their toolkit.
Books like Purple Cow by Seth Godin and Start With Why by Simon Sinek are must-reads. Reading books like Atomic Habits and The Power of Positive Thinking is essential to building your core strengths. Make it a habit to read at least ten pages a day.
“Books are so powerful, and that’s how I learn the things that I know today to run my business”.
Timing Your Customer Conversations Delivers Product-Market Fit
Dan shares a story about a salesperson for an office supplies company who, for fifteen years, consistently outperformed his peers by a wide margin. His modus operandi was simple; he would wait outside the competitor's warehouse and follow the delivery trucks as they made their monthly deliveries. He noted the delivery addresses, and next month, a week before the competitor’s delivery, he would contact the company and offer his office supplies.
Learn to insert yourself in customer conversations when your customer is problem-aware. You can have the coolest software, but if you pitch it to a customer who is unaware of the problem, you’re not going to make a sale. If your sales cycles are consistently at sixteen to twenty-four months, chances are you’re talking to customers who don’t have a problem. Timing your customer conversations is critical for creating product-market fit.
“The moment our target clients realized they had a problem, we became the most obvious and responsive solution”.
Every Exit Builds Your Net Worth and Opens Doors for a New Venture
Let’s address two universal truths. Most successful startup founders have an endless chain of ideas. And all profitable startups will eventually hit an inflection point and come up against someone larger who has been doing it for longer. Don’t let your passion blind you; learn to cash in if you get a good offer.
The ability to let go and exit, and knowing when to do it, is a critical skill in your toolkit. Every successful exit teaches you valuable lessons on the technical and business side, and investors love entrepreneurs with proven exits. On all three fronts, a successful exit eases your segue to your next venture.
A seven-figure exit when you own 80 percent of your company puts more money in your pocket than an eight-figure exit down the line when you only own five percent of the company. With every exit, maintain the discipline to invest half of what you get while keeping the other half as your seed capital for the next venture.
“In the valley, if you’re a founder with a successful exit behind you, investors will move their calendars around to meet with you”.
The First ‘Oh Shoot’ Moment – Be Open to Pivoting Post Launch
Dan’s first ‘oh shoot’ moment came with his third startup, Clarity.fm. The SaaS solution pivoted around monetizing the time spent by an influencer while talking to followers seeking advice. The app used Facebook connect to reach the follower, and the call was placed through an 800 number, and the follower was billed via Stripe at the end of the call.
The unique concept generated much interest among the investors, and Dan was able to tie up just under two million dollars in thirty days. The problem arose at the proof of concept stage, where it was discovered that the followers wanted to talk to the influencer but were unwilling to pay for their time. This is when Dan pivoted on the target audience and started focusing on investors who would pay high dollars for advice on their planned investments.
“We pivoted out of my passion area and targeted investors who were willing to pay four to five thousand dollars for an hour with someone who could provide insights on their planned investments”.
I can only grow to the level of the management bandwidth I have around me.
So I got to keep buying back my time by bringing people into my life that can free up that time, right?
But when you start off and you've got very little revenue, the task and the cost of buying back that time is an executive assistant. It's not an engineer. Welcome to SaaS Origin Stories. Tune in to hear authentic conversations with founders as they share stories from the earlier days of their SaaS startups. We'll cover painful challenges, early wins and actionable takeaways.
You'll hear firsthand the do's and don'ts of building and growing a SaaS, as well as inspirational stories to fuel you on your own SaaS journey. Here is your host, Phil Alves. I'm excited to have Dan Martel on the show.
Dan, welcome to the show. I'm super excited, Phil. My mission today is to make this the best podcast you ever had a guest on. I know that's asking a lot because you had some great guests, but that's what we're going to set as an intention for the day. Let's make it happen. I think it's possible. I have been following you for a while.
You have a lot of experience in the SaaS space and I think there's a lot that we can unpack for our listeners today. So let's just start talking a little bit about your backstory. Tell a little bit about your who you are and your upbringing and things like that.
Yeah, I mean, there's a whole backstory that if people are interested in kind of like my journey, but the shorter version is I learned how to code in rehab when I was 17.
So it's a crazy story because I got in a lot of trouble, ended up in prison, released to rehab and at the end of an 11 month program where I learned how to rebuild my self-esteem and the trust I'd lost with my parents and just my self-worth, honestly, and just like reprogram my beliefs and my anger issues. I literally discovered Java programming.
There was this old computer, it was an old camp and it was built on a church camp and in one of the rooms was this book and that became my new obsession. So like I learned to code when I was 17.
I get out, don't know anything about business really, and then just start building stuff, building tools, building scripts.
I mean, I built apps for my friends to upload their photos. I built websites. I learned I would go to the bookstore at my dad and he would buy me like that was the rule. If I finished the book, he would buy me whatever I wanted. And I like read books on ColdFusion and PHP and Pearl and Java. And I mean, you name it like ASP, ASP Classic, then.NET.
I became a Microsoft Certified Solutions developer. So like went super nerdy down the technical side, had a bunch of failed companies, did a hosting company that didn't work out, did a vacation rental site because my dad had cottages and that didn't really work out. And then it wasn't until I was 24. So I just like spent seven years of just like starting and failing and starting and failing.
And I mean, it's funny because like obviously I grew up with a bit of a, you know, I was a dark sheep in my family and my dad would beg me over this like seven year period of just like, can you just get a normal job?
And I was like, no, like I'm, I want to build something.
I'm like, I'm a creator, I'm a builder. And it wasn't until I was 24. It was actually 23.
I decided, it sounds crazy, Phil, but I decided to finally read a business book, which is like, because I had read probably up to that point about 150 technical books, like all these, literally all the books inside the computer section at your bookstore. And then I read the, my first book was a book called Love is a Killer App by Tim Sanders.
And that kind of turned me on to the love of reading. I grew up with ADHD, just, you know, diagnosed. I was on Ritalin my whole life for like 15 years, Adderall, all these different medications. But I listened to audiobooks. That's how I like cracked my teeth, like just got into it. And it was this book called The E-Myth that I eventually hired.
I read the book and I was like, yes, that's how I want to build a company. That's the missing piece. And then I hired an E-Myth coach. I was paying this guy Bob 1500 bucks a month as a 23 year old with no business idea. Like I had, I was like consulting, doing contract work. And he's the one that kind of like taught me what it meant to be a CEO.
And that was the business that finally we did enterprise portal consulting. We ended up building different products. So we were like a service company and then eventually built some software. And over a four year period, we grew 150% year over year, got named top company in Canada, fastest growing, best entrepreneur in the province and sold the company to a US firm and became a multimillionaire.
So like that, that's like, that's the short version of my origin story. And then I'm still, you know, at the time I'm still pretty young and have done many other things since then.
But yeah, it was just a lot of struggling, a lot of trying and some incredible people that showed up in my life. There's so much to unpack here. Thank you for the short version. Now we're going to go deeper and unpack a lot of the things here. By the way, I also learned to code from books.
That's like old school, right?
You go to the bookstore, buy the book. I learned PHP first. I remember I bought a huge PHP. You're making me feel old, Phil. Like the fact that you just said that, I was like, oh yeah, it does make me old. Like I learned to code from books.
Yeah, you don't do that anymore. I guess not. That's so funny.
Yeah, that's not how we do it. So let's go back a little bit.
How do you end up in jail?
I mean, the long story short is, because again, I could spend 45 minutes telling you the story, but I grew up in just a challenging family. My mom was an alcoholic. My dad was in sales, second oldest of four. And I didn't have an older brother. And I ended up over the years just like through different things that happened in our home, had an anger issue, diagnosed with ADHD when I was 11.
And then just because of a bunch of personal things that, because my parents are still alive and whatnot, I don't really talk about. But eventually I got taken out of my home and put into group homes. It started with a crisis center, then foster care, then group homes. So I was kind of in the system for a while, a couple of years. And then I discovered drugs when I was 13.
And then just my life spiraled out of control. I just started selling, started using, and pretty much ended up in prison the first time in juvenile detention when I was 15.
Got out, thought I was going to transform my life. I lasted a day. And then just, again, once you're an addict and you try to get sober or try to get better. And I've gone through all these 21 day programs and other therapy and stuff. It just never worked for me. And it's just like every time I relapse, it would just get worse. It was darker and darker.
And it just got to a point when I was 16, I found myself high and drunk in a stolen car. And I took an exit off the highway to get some gas. And there was a routine roadblock and I took off.
Took off on the cops, got in a high speed chase, had a handgun sitting next to me in a backpack and told myself if the cops catch me or stop me, I'm just going to point the gun and let them take my life.
And ended up in a neighborhood and I saw an open garage door and I came in carrying way too much speed and just smashed into the side of the house and airbags go off and just noise everywhere and smoke. And then I went for the gun and kept pulling on it. And for whatever reason, it got stuck between the seat and the top of the bag.
And next I knew the door opened up and the police just grabbed me and kind of dragged me across the front yard, threw me in the back of the cop car. And I woke up sober the next day. Not really sure what my life was going to look like. And I just kind of gave up. I hit rock bottom.
I pretty much said, you know, if there's a God, I don't know if you can hear me, but you know, I need your help. There was no grand plan. I was literally like desperate. And I just, I remember just, you know, asking for forgiveness.
And if, you know, if he's listening and he helps me get through what I was about to face, because I didn't know how long I was going to go away for, but I ended up getting sentenced almost two years at 16 years old for, you know, severity of the crimes that I had committed and ended up in prison for six months before I got released to rehab.
So that was, that was my journey, just like getting in trouble with the law, addicted to drugs and not feeling like I had a whole lot of self-worth. Thanks for sharing that then. It's like when you're sharing this story, the short version, you tell me about how books, this is what kind of like took you out of that.
So how did you get into books and to learning that you could read?
Because basically you went and you found the Java book and then you got into coding and myself personally, I believe I wouldn't be who I am today if it weren't for the books I read. Like the books I read, it's, it's better than any schooling that I did or anything else because you can learn from people like you that went to hard times, but I also build amazing companies in books.
But like, how did you get like into making book part of who you are, making reading part of who you are?
It's kind of nuts, but like, I think like I wasn't a reader, right?
Like with my ADHD, I would like read a sentence on a page and then just go off into the distance and then like come down and I'm like, whoa, I just read three pages, but I don't even remember what I read.
You know what I mean?
Like that kind of stuff. I read when I was sentenced away or like, you know, the Bible and other things. But when I started reading computer books, I think it's because I had like a desire to build something. So like that's when I started to understand this concept I call just in time. So I don't read for things unless it's a now thing.
So if I'm going to build an app and I need a database, then I read the book on how to build the database. So it's a very like connected thing. Whereas reading books to be entertained, I could never do. And what happened is, is like reading these computer books for literally years.
I mean, I started at 16, 17, and it wasn't until I was 23 when I finally and I remember the moment in my life, I was in Ottawa, Canada. I was working for the aviation department in Canada and I was on break at lunch and I was walking down to the mall where all the food court was and there was a bookstore there in Canada.
We call it chapters, right?
Like an Indigo or Borders. And I walked in just because like, you know, I like the smell of books. Like it's kind of like a library and it reminded me of like having all these books open on my desk with like code. And I went to the business section, you know, because I tried business. I just failed so many times.
And like, this is how crazy it was that I didn't even buy a book. I bought CDs. So like the, the, it's this like orange CD called Love is a Killer app. And it's because the guy was the, the ex chief solution officer of Yahoo. So I was like, okay, he's in tech. He used to be the Yahoo guy.
So like, he probably has some things that I should learn. And I bought the CDs because I knew I would listen to it maybe. And this was my strategy. It was literally was like, I went back to the office and I put it in the CD tray at the, the company I was working for on their time. And I didn't do any work.
I just sat there and listened to the stories and that like pulled me in. And then what was funny is I wanted to read more, but again, my, my attention deficit would be like really tough. So I would literally drive around listening to CDs because it would force me to listen.
So I would like buy books on like marketing or buy, you know, good to grade or seven habits or thinking grow rich or all these like classic books. And I would just drive around for two or three hours on a Saturday morning, you know, go to the gym and then go for a drive, get some coffee and just like absorb it.
And eventually that transitioned to even the E-myth like that book transformed my life. I listened to it on a six hour road trip between Akron, Ohio and Baltimore, Maryland. So it's like, I didn't read physical books for a long time.
Now, now it's kind of funny because like I don't take any medication for my HG. I self-medicate through nutrition and you know, my structure, my time, my energy management. And you know, I read, I've read over 1500 books at this point in my life.
You know, it was literally 20 years ago next year that I read my first book. And then obviously, you know, we're talking because I've got a new book coming out.
I mean, it's crazy.
Like, it's just nuts to think the impact of those books that I've had in my life and how I went from not being able to read to now I read 10 pages every day religiously, like minimum. That's amazing.
Again, I think to reiterate, books are so powerful and that's how I learn the things that I know today to run my business. Let's go back to the first business that you start that was successful.
What are the things that you did different and why do you think the first business was successful?
Yeah, I mean, success is a funny thing because like I like to joke with people when they're like, you know, my first business.
I'm like, how many projects did you start?
Like how many domains did you buy?
How about that?
Right. Like I probably bought 30 different domains before I ever had like financial success, even like my first company, Maritime Vacation. It was a vacation rental site and we probably made close to $30,000. So it wasn't like it was nothing. But you know, after a year and a half of working on it, it's not a lot of money. It paid for the servers, it paid for some contractors.
But like, you know, so I learned it's kind of like every business kind of taught me a little bit more about like how business worked. And then what was different about Spheric was, you know, I started this company. I'd worked as a contractor for a couple of years prior, saved my money.
I literally would pay myself 60 grand a year and I was probably I think I was billing myself at like $75 an hour, so making like 150 a year, but living off of 60. Saved my money, traveled Australia for a while. That was really fun.
You know, I was 20, 23 at the time. And then when I started the company, I like right off the bat, I hired a business coach. Like I hired this guy, Bob, and I didn't even have a business idea when I first hired him. I just read the E-Myth and was like, I need a coach. And I was paying like, I think it was $1,500 US a month, right.
And I'm Canadian, so that's real money. And you know, we'd meet twice a month and he would teach me about the business stuff.
So it's like, why was I successful in that third company?
I would 100% credit, you know, investing in myself and having somebody else like as a business partner. Like Bob was as committed to the business as I was.
When we talked, he was like, hey, did you do this?
You know, last time we talked, did you do this?
And like, you know, we were only supposed to talk for an hour, but oftentimes we went 90 minutes or two hours because he was just like excited. But what was different about me as a client, I think, is I took action. Like when he would say like, you need to call the top 100 companies that look like this.
Next time we talked, he's like, how did they go?
And I would walk him through like cold called, cold called, cold called. Like I would just do whatever he told me to do. And I'd say I just got really good at like understanding how to insert myself into the conversation with the customer. And I'll tell you what I mean by this, Phil.
A lot of, you know, technical founders or people that are just starting off don't realize that in a market, there's a moment where the customer has a pain that is now ready for your solution. Right. So they're problem aware.
And I think oftentimes when you ask, you know, first time entrepreneurs, like, who's your customer?
Like every small business, it's like, it's not everybody. And what Bob taught me, he gave me this great story, this fable of this like top sales guy. He was older, had sold office supplies and was like the number one sales guy for 15 years, never came to the office. Everybody talked about him as almost like he's the legend. And one day the new guy finds out that he's retiring, the top sales guy.
And the new guy had been reaching out to him for months to mentor him, but the guy would just ignore all because there are so many different salespeople coming and going. And he eventually tried again because he thought, OK, you're retiring. Like teach me your ways, old sage legend. And the guy finally agreed to meet with them.
And he says, meet me at the industrial park on Thursday afternoon, three o'clock in this parking lot. And the guy's like, this is weird. OK. So he like shows up, sees the legend sitting there in his car, you know, parks next to him. The guy like waves him over to get in the car.
He goes over the other side, gets in the car and the guy goes, you know what we're doing here?
And he goes, no.
He goes, you see that building across the way there?
He goes, yeah.
He goes, do you know what that is?
And the guy looks around for a sign and he sees their competitor's sign on the building.
He goes, oh, well, that's that's our competitor.
He goes, yeah, it's their distribution center.
He goes, why are you sitting here?
What are you staring at?
And he goes, what I do is every time the trucks go out to deliver the product, I follow the trucks. I write down what businesses they went to visit. And then next month, a week before today, I call all the companies asking them if they want to talk about buying more office supplies because I know they're buying office supplies because I followed the trucks. And the sales guy was like, holy cow.
He goes like, so they just take your call?
He goes, yeah, because I know at that point, they need more office supplies and they can either keep ordering from the same company they've been using or they could at least be open to have a conversation with me. And that story stuck to me because all business is, you can have the most coolest software in the world. Like this software solves a real problem.
But if the customer doesn't know they have the problem and are in a search mode of trying to find a solution, then it can be really frustrating. This is where people are like, you know, our sales cycles are 16 months or 24 months. The only reason they're 24 months is because you're talking to people that don't have a problem.
Like, is that simple?
If they have a problem and it's a hair on fire problem, it's like, I need to solve this right now.
What do you do?
Oh my gosh, that solves my problem.
Can you please talk to my team?
When can we buy it?
When can you start?
Like that's when you get product market fit and you're really smart about the go to market. That's the thing that changes. And I would say that's what I learned building Spheer because I got really good at inserting myself into the communication. The moment our target clients had the problem and we became not only the most obvious solution, but the most responsive.
It was almost like they were like, were you listening to us in our office?
And I'm like, no, but you know, you're somebody we thought would probably be at this stage of building out a portal. And it was funny, but we actually built a strategy on how to do that. The lesson for me here, and I talk with that about a lot with my own customers is the creating demand versus capture demand. You're telling me about how you capture the demand.
And another mistake that I see, because you're talking here about your first ventures, I see entrepreneurs, that's their first business or they don't have, they're not very successful yet. Like there's no competition, there's a blue ocean.
And that's such a mistake, right?
You have to go where there is a demand. You don't have the means to go create a demand. You can't afford to lose money for a long time. You have to capture demand that's already there.
And that's what this story that you're telling me about, right?
We are first business successful because you figured out how to capture demand, not how to create demand.
Do you agree with that statement?
That's exactly it.
And this is where, sure, there's innovation where you got to create the new market, but that's very rare, right?
I would say virtual reality, kind of like virtual worlds right now is in that space where you're introducing a completely different use case and it's a little early and you have to create the demand.
But even within that space, there are businesses that are problem aware solution, like they want that solution and if you can figure out how to insert yourself into the conversation at the right time, the sales process can be accelerated. For sure.
And another lesson here too, it's like even though you had the technology background, what made the real difference for you was get the business background, right?
That's what took you off. It didn't matter that you knew how to code or how to build whatever. What really matters was the deep knowledge about an industry and that was what move you forward. That's 100% right. And that's where it's kind of funny the amount of technical books I read for a seven year period.
And look, I wasn't that old, like 23, 24 to start reading business books. I'm grateful. I've read over 1500.
But yeah, I sometimes think how silly was it that I was a business person, an entrepreneur and full time trying, not like side hustle. I was absolutely trying to be successful and just kept falling, coming up short and falling on my face.
And it never occurred to me like I should read, you know, Purple Cow by Seth Godin or like, you know, all these other like you could literally say what are the top, you know, 100 business books, marketing books, personal development books and just start. And you can't go wrong.
It's like, well, you should read these books, but it took me a while. For sure. So now let's move into like your exit. You leave this business and go to your next business. Walk me through the process. Yeah.
So, I mean, we built it over a four year period. I bootstrapped it myself. We ended up towards the end where we had it was an enterprise portal company. So we had Procter and Gamble, Dole Foods, Johnson and Johnson, you know, a lot of Fortune 100 companies as customers. And we had built this, these integrators, they were called portlets.
Essentially the way it works in the enterprise portal space is there's like these platforms like at Microsoft SharePoint or WebSphere or whatever. And we built the connectors for their like financial systems or their ERP systems or their, you know, project management tools. We like built these portlets and connectors and that was what eventually people started buying and that's why we got acquired. We had a great customer base.
It was almost like a low cost lead magnet for a lot of these, you know, like we always made more on the integration and the custom development, but we got in the door by building this these integrations.
And then, you know, that was kind of nuts. I was 28 when I became a multimillionaire and I thought, this is cool. Like I still remember like the moment it happened. I was because I grew up in a small town of a hundred thousand people.
And even though all of our customers were like in major cities and like New York and the West Coast and Toronto and other, we had customers in Warsaw, like all over the world.
You know, I was kind of a big deal in a very small pond, right?
Like we had won several awards, fastest growing company in Canada.
You know, I had won, you know, entrepreneur of the year award. And I still like even though that was like incredibly rewarding for me, there was still a part that was like kind of scared. It was kind of weird.
I was I was worried that if I don't get out of this small town because I was getting so much praise that I would like somehow slow down and take my foot off the gas and like wake up in 15 years. And that would have been the best, biggest, best thing I ever did in my life.
You know, and that like for whatever reason, that personally like really concerned me. I was like, hey, I don't want to be known as just that guy. I want it like, I think there's more. And just out of like, just I remember just like I got, I got freaked out because I started building my dream house. I had bought a boat.
I was hanging out with my friends and it was like life was getting pretty easy. And I just remembered like, I got to get out of here before I wake up. And it's just like solidified around me. And I'm just like this lazy person that used to be successful. And I just booked a flight one way to San Francisco. I packed up my suitcase. That's all I brought.
I left everything behind the house that wasn't even finished being built. I just like decided I want to go. And I literally originally was like, I'm going to stop in San Francisco and eventually go to China because I thought China is the future. And I ended up falling in love with this city.
I mean, you know, as a software guy, when you go to San Francisco, it's kind of like going home to the mothership. Like it's kind of crazy because like you go to coffee shops and everybody around you has like MacBooks and these early days of iPhone, like the iPhone 2. And like it was just the vibe.
There was like events going on every night and you'd run into other founders and they were trying to build billion dollar companies. And I remember walking downtown and I'd be like, there's the Twitter building and there's the Salesforce building.
And like, and you like see them.
It's like, oh crap, that's where the CEO of this company that use their product like works. Like he comes every morning and you know, it was just, it was crazy.
And that was, that was the beginning of going down the path of building, you know, my first true SaaS, right?
We'd built technologies and licensed the software and stuff, but then I started Flowtown. And what was different was, is I took a year off. Now I'd made financially, I was, I was wealthy because my, I had a mentor of mine, he gave me some great advice. And then the next time you sell your company, half of it goes into like, can't lose the money, low risk kind of index funds.
And then the other half you use for your next thing.
So very quickly here on the exit, how big was the exit?
It was a seven figure, eight figures?
Multiple seven figures. It wasn't quite eight, but it was, it was substantial.
And yeah, it was just me. So there was no co-founders. So like now you're in San Francisco where everyone wants to have like a huge exit. Like you being a small market and going for the smaller exit was a huge advantage for you. Because I know so many founders today, they, they will feel like they fell if they had a seven figures exit.
You know, but that gives you so much optionality to move forward.
But what can you say about like having a smaller exit before going to the bigger ones?
And like, even like, I guess you didn't have that pressure from other founders that had bigger exits. Yeah.
I mean, here's what a lot of entrepreneurs don't think about.
They don't think about like, what, what would, what, what is the craziest life you want to live and how much would that cost?
And, you know, if you think of like, you know, a kick ass house, right, depending on where you live, if you're downtown Manhattan, it might be a little different story, but like, you know, I could live in a million dollar home. I could drive exotic cars. I could fly business all over the world. Like I could, I could eat out at restaurants as much as I want.
Maybe that would cost me 25, 30,000 a month. Right. So like I was living a life as if I exited for nine figures. And most people don't realize this is the average company that goes public. The CEO only owns 5% of the business. Right. And you think it's a billion dollar exit. It's like it might have went public at a billion. And then there's a lockup.
If you go look at the stock market and the market caps, like it's down into the 200 million range, you only have 5%. That's 10 million dollars. Right. Like it's not people think it's, oh yeah, you sold for 100 million. You had three co-founders and three rounds of funding. Like you made six.
Like, so I, I personally, like you said, I didn't feel the pressure to have had a big exit.
Now, the truth was, is because nobody, I didn't build a consumer web app and a social platform and raise venture capital, didn't go to Berkeley, didn't go to Stanford. People definitely did not act like zero part of them was intrigued by my exit. Like they were like, they didn't care. Now I was writing checks as an angel investor. That got me some attention. Right. So I started investing in tech companies.
I've done 50 investments so far, billion dollar companies like Hootsuite and Udemy and Intercom and a bunch of awesome SaaS companies.
But yeah, it gave me the time. And then what happened was, and you know, it's where, you know, obviously the book that I just came out with, Buy Back Your Time, that's where I like started leveraging my capital to buy back my time.
So what did that mean?
I had a dedicated CTO named Scott. Scott wrote literally he would just build apps for me all day long. I'd talk to Scott in the morning.
He was on the East coast and I'd be like, Hey man, could you like, you know, grab the Twitter API and connect that with Google maps and then like maybe put Instagram on top of it and like, I just I'm curious what it would look like, you know, using my follower graph or whatever. And we would just build these prototypes and ideas. And that was like what became the foundation for Flowtown.
And even Flowtown, like I didn't even want to start another company because like I was good. I was taking like a year sabbatical that my co-founder, Ethan, what was happening, Phil, is that I would offer two weeks of growth consulting to all these startups.
So when I moved to the Valley, didn't have to work, right?
Had a beautiful apartment near Dolores Park in the Mission. And I would meet these founders at meetups and like the ones I liked, I'd be like, Hey, like I can write code, I can write copy, I can do sales, I can do biz dev. Like if you need some help, I'll come in for two weeks and I'll help you out. And that's all I did.
I would just do these two week engagements. It didn't cost them anything. And I built my personal relationships by adding value first and got to know the investor community and started doing deals together. And it was through that process that I started building tools for these startups.
And that's where the original Flowtown kind of feature, which was taking email addresses and getting all the social media data and demographic data on that email so that we can do like influencer analysis and identification when people would register for the product. That was where it came from. Just helping companies build growth hacks into their business and building repeatable tooling with my buddy Scott.
And then I met Ethan and I was so busy. All these startups wanted to like hire me to keep working with them. Ethan just got laid off by this company called Cake Financials and he was like a young hustler. He reminded me, he like taught himself how to code. He was more on the business side and I just like gave Ethan these clients and the code.
I was like, here's this tool I built, go help these people deploy it. And you know, I got to give credit to him. He's the one that came to me within a few months and said like, dude, we need to build a business around this. I need you involved, you know, et cetera. And I was like, I kind of fought him for a while and then I wrote him a check.
I think I gave him like 50 grand so that he could like focus on it. And then he had another developer, David helped him out. And then within months, he got it to like Ramen Profitable. And then that was when he's like, hey, I think we should raise a round and here's where we're at. And I got involved as his co-founder.
But yeah, like I even, you know, I bought back my time by saying, hey, Ethan, you're the CEO. I don't want to be CEO. You run this thing. I'll support you. I understand the go to market stuff. I understand how to build a marketing engine. We ended up building a blog over a two year period to like 350,000 uniques a month. Big community. And that was the Flowtown story.
I mean, we got acquired two and a half years after raising a million in funding. So we didn't raise a lot. We owned a lot of the company and eventually the company that bought us like a month after got exited for 600 million. So it was a company called DemandForce that sold into it.
And it just literally it was like they bought us and then an acceleration of our stock because of their exit.
And it, you know, Ethan was about five, six years younger than me and it created like just this awesome opportunity.
Again, I was financially wealthy. Like it was going to change my life a whole lot, but it definitely set him up for a different future. That's a great story.
And what's kind of like the first old shit moment that come to mind from like your first SaaS building, your first SaaS business?
I think it was when we actually built a smoke test.
So like, you know, this is back when the Lean Startup was in it. Like I met Eric Reese before he ever, he may have written a blog post about the Lean Startup, but his book didn't exist. I was at a Web 2.0 conference and he was the one that was kind of talking about, but that's like how we always, I always approach business anyways.
It's like, I don't want to build it unless I know there's demand.
And like, and we actually, if you search Flowtown Lean Startup Conference, Eric had us, me and Ethan speak about how we ran this process because we essentially created an app for Flowtown that didn't exist, that took a credit card. We just didn't charge it. So we like faked the whole thing. We literally said like, here's a tool that helps you identify influencers on your product.
And then, so we literally had a flow that looked like a real signup. And then it would, when you went to pay, we didn't save the credit card. We would just say like, uh-oh, our servers are overloaded. We've queued up your requests. We've not saved your credit card and we'll follow up to let you know when it's available.
And we just use that to launch, to validate that people would pay five cents in email, that they thought what we were building was useful. And we just use like what percentage of people that signed up would actually pay. And it was like 30%. So we knew, all right, now let's go build this. And that was, we had no, there was no code written originally like for the app.
It was just an idea that we built these fake wireframes.
I mean, it was, it was HTML, but it didn't actually do anything. It like even gave them a fake report of like, you know, a pie chart of like, hey, we analyze your emails and like 75% are on Facebook and 20% are on Twitter and the other people.
And like, it was, it was the same for everybody. And people are like, whoa, cool. I want to see that. And you click here to pay and it didn't do anything. So like we were just really scrappy like that. And when we eventually raise funding from investors and even that was like more of a ego thing than a requirement thing.
I think it was just more, you know, Ethan and I both moved to the Valley from different cities to like pursue the venture world.
It was, it was more of like feeling good about building something that other people thought could be a hundred million a year company. And when we would tell the investors this story, they were just like, okay, we like the way you think, we like the way you solve problems. And it was a big part of just like our culture, the scrappy bootstrap culture.
And how you guys were finding customers, like, cause you had to send customers to the smoke test page. You have a lot of experience, like you were the CMO of that business.
So like, but what work for you guys at that company to, to bring those customers?
Yeah. But I mean, this is the thing about growth. Yeah. Growth hacks can work, but they're only hacks as long as nobody uses them. Back then our killer strategy was content marketing, but not any kind of content marketing. We actually created infographics about social marketing. And then we use dig. Yeah. We use dig.com to drive hundreds of thousands of views to the infographics.
So we would spend like five, $600 to produce these infographics. It would like analyze the state of the social media world, then use dig. And we had like a network of friends that we'd built up like 25 different top dig users. And when we would publish it, we'd have a private chat that we would like tell them like, Hey, we just put this.
And then they would all go up and up vote and it would just like drive traffic.
I mean, people do this with like hacker news and product hunt and other sites. We're doing it back in the day with dig and Reddit and delicious. Like there was all these like kind of viral sites and we just got really good at that. So we could take a hundred thousand views and convert that into five, 6,000 email addresses.
And then when we finally did the smoke test, we just sent the email to the list we had built. So we use content marketing to build an email list to then use the email list to run tests. That's great. So let's get moving on because you have so many SaaS products that we build.
I want to go to the third product, but specifically I would like to know what was different because now you are a founder with two exits and you're going to build your third SaaS company. This time you're the CEO.
First what drove you to want to do another company and what was different from like, I like to think the size of the baths that you made from the first company that was kind of like a service company with a little piece of software that you were licensing to your like actual SaaS. Now you have your third company, which I imagine would be like your biggest exit.
What was different like yourself personally, the person that built that third business?
I think like most entrepreneurs, I can't stop building. Like I see the world through one lens, which is problems all around. I see business opportunities. Some people actually are like, I don't have any good ideas.
I'm like, I have a hundred. The reason why I have a hundred is because I know that it's not the initial problem that becomes the big thing and I'm willing to like pull on the string and refine it until it becomes a thing. My third company was called Clarity.
And what happened was, is after we exited Flowtown and we like, we exited the company in like August, but didn't announce it till October because the company had bought us wanted to wait till like their Q4 like kickoff.
And the day it went live, like press coverage, et cetera, essentially my inbox flooded, you know, in the Valley, if you were Canadian, there's a good chance you knew of me because I was writing a blog and I had an audience and we had success with Flowtown. We had a lot of customers and all of a sudden my inbox was just flooded with people that were like, Hey, congrats on the exit.
I'd love to pick your brain. We're raising money or I'm doing this. I'd like to get your advice. And I actually built a tool that was a productivity app. It was literally a call list. So if you were one of those people Phil, I would reply with a link. And that's why it's called clarity.fm because I just needed a domain.
So I just like bought the $18 domain and it was called clarity because it's like, I was going to give you clarity and.fm because I was broadcasting myself and you would fill out the form and it would just be like name reason for the call and your cell number. And then it would add it to my call list.
And whenever I was free, I would have like three or four people on the list and I just hit start calls and it would cycle through. It would literally say in my ears calling Phil and it would proxy the call through a 1-800 number. I was using Twilio and it would call you. You would only see the 1-800 number.
You wouldn't get my cell number and it would be like, you've got a call from Dan. Click one to accept or two to call him back. And you clicked one and then it would connect us and I would go, Hey, Phil, it's Dan. You're like, Holy shit. I can't believe you called me back.
It's like, yeah, you know, blah, blah, blah.
And I'd be like, how can I help?
And you would talk for 15 minutes. And as soon as you hung up, it would call the next person and then the next person. And what happened was, is like, I built this tool for myself. I showed it actually to Eric Reese.
He's the one that said to me, he goes, could you make this?
Can I have a link?
Like, can I, can you build me a, like a, a username like clary.fm4 slash Eric Reese, but can I donate my, can I charge people for my time and can I donate it?
And you know, I was building this myself. I was literally writing code at night, so I would like work with the acquire all day. And then I'd go home and I'd like work on this like side thing. And I added the ability to charge using Stripe. This is early days of Stripe's API. So it was like super simple. The Apple is like Facebook connect for your account.
You gave it your cell number Twilio for the call Stripe for the payment.
I mean, it was very simple and I gave it to Eric and he started using it. And I was like, Holy cow, that's cool.
He's like, people are paying him like 200 bucks an hour to, or like for 30 minutes of his time to get advice.
And then I remember one night I went on the roof of my condo building and I thought, what would happen if I tweeted this out?
Right. I had about probably, I don't know, 10, 12, 15,000 followers at the time on Twitter. And I just said, need startup advice question. I should find the tweet cause it's, it's kind of nutty, but I just said that needs startup advice. Let's talk. And I linked to my clarity link. That was the form you filled out. And I went up there and I stayed on calls for like four hours.
And it was people from all over the world, Phil. It was like Japan, Argentina, like Europe. And people were like, I can't believe I'm talking to you. I've been following you for three or four years or five years.
And like, this is the first time we've ever talked and like, thank you so much for doing this. And it was that moment that I realized, cause I was like overlooking downtown San Francisco because of like where the mission is, it kind of like overlooks the city in the San Francisco.
And I just thought like, there's like all these incredibly smart entrepreneurs that live in the city that would make themselves available if there was a very easy way to do that to all the people that I used to be like the Canadian entrepreneur and small town Eastern Canada that would die to talk to somebody that's done what I'm trying to do. Right. Like I would have, I would have paid whatever.
And I just, it occurred to me that like with social media growing and influencers growing and like all these different platforms, like, you know, early days of like, you know, photo social networks and Instagram. So and like all these things, like people will want to monetize using this because it's the easiest way. It doesn't require you to create a course. It doesn't require you to be a consultant.
It doesn't require you to do anything. You literally just share your link and people pay you and you just take a call. And I just couldn't sleep.
And I just, I remember my wife, I would like step till two or three in the morning working on this thing and she'd be like, are you going to go start another company?
And I'm like, I don't, I don't know how I can't do it.
Like, this is, this is one of the best ideas I've ever had. And that was, that was the bet I made and raised 1.6 million within like probably 30 days.
I mean, it was, it was nuts.
You want to hear the crazy story, Phil?
I hope it's not too much.
Like I was at the acquire and I just got off the phone with Phil, the founder of Evernote and I showed him the, the, the prototype, right?
Of clarity. And like he, I called him and he got paid and I told him to check his email and he's like, holy cow. And I got so excited.
It was, it was like one o'clock in the afternoon that I just said, I got to do this kind of like that same moment that I decided to move to San Francisco. I just like in my head, I said, if I don't do this now, I won't do it. Like I'll stay, I'll like lose momentum. I just won't do it.
And what I, what I was saying to myself that I've got to go do is go pitch investors. Right. And not that I didn't have the money to fund it myself, but you know how it is when you make a commitment to somebody else and they get involved in something. It's like bringing on your first employees. It's like now all of a sudden it's not just about you, it's about them.
And I ordered an Uber and I said, I'm going to Sand Hill Road and I need you to like come off like the meter. I'm not paying Uber for all this drive. I'll just pay you like, you know, he's like 500 bucks.
Is that work?
I'm like, yeah, 500 bucks for the afternoon. Perfect. And we drove to Sand Hill Road and while we're driving down there, it's about 40 minute drive from downtown San Francisco. I was texting all the investors that I had met when we were pitching Flowtown. Like I'd built a network of investors and it's crazy because Sand Hill Road, they literally like work next to each other. If you've never been there, it's the weirdest.
Imagine having all your competitors within a one mile radius. Like they all work in the same building. Like I would go to Red Point and I'd walk out and I'd walk into freaking whoever like right next to them. And I would just text them and I'd be like, hey, I'm working on this new thing.
And like in the Valley, if you're like a founder that have exited and made investors money and then you're working on the next thing, like investors will move their calendar around and meet with you. And I just spent the afternoon, I probably met with 15 different investors and I would do this like 20 minute pitch.
I literally would come in, I'd be like, hey, Phil, you want to see something cool?
And you're like, yeah, what is it, Dan?
I'd say go to Clarity.fm. You'd open up your browser on your phone and you'd Facebook Connect. And then that's all you had to do, Phil. You just Facebook Connect. And then I go watch this, answer your phone when it rings. And then I would leave and I would see you in the admin interface and I would call you and then you would answer.
And I'd be like, and then I would do the demo over the phone in the conference room. They were in the office. And then after like seven minutes of doing the demo, explaining to them, it's the easiest way for any influencer that has a follower to monetize their time.
And then I would come back in their office and I'd say, you know, and then I'd hang up and I'd say, check your email. I default everybody to a dollar a minute. And it would be an email saying, you just made $8.22. And they were like, holy crap. And I'm like, that's real money. You can literally click the link and pull it out into your PayPal account.
And they were like, oh my gosh. And then I go, hey man, I got to go. And then I would like leave and go into their competitors.
And what was funny is after I did the demo, I would show them the admin interface and it would list all the investors who just, it would say like recent signups, right?
Like recent accounts created and it would list all the other investors that I'd met with. They saw that. I didn't say anything.
I'm like, look, we're already like adding all these investors and entrepreneurs and they're like, holy crap. And I'm like, yeah. So I don't know if we're going to raise money, but we're considering it. I just wanted you to be the first one to know. And they were like, we need to talk.
Can you come and meet with our investment board?
And that was how Clarity started off. And that's why we raised 1.6 million in 30 days. We went on AngelList at the very end and we were already oversubscribed. Like I just did that to just let people know I was raising, but we actually had already kind of closed around. I love this story.
Again, there's so much to unpack here. I think you have to go to the John Reagan podcast because this could be a three and a half hour show. Easily.
So, but I love first that you were like solving a problem that you have. You're like, and it was so organic. You didn't know that that would become a huge thing. You're solving your own problem. Eventually you saw, okay, this can be huge. I also love how you were pitching because you're like, is the show, don't tell. You're like just showing them how it works. It went to raise the money.
So how big did the company become?
I don't know if it's public information, but for how much did they sell eventually?
Yeah. The company I would say wasn't a huge commercial success. And I'll tell you why. It turns out that the amount of people that pay for advice is actually a lot smaller than I thought. Right.
So if you think of like, you know, what do people pay for advice?
What formats does it look like?
Well, it's courses, it's books, it's seminars, it's consultants, it's mentorship, it's accelerators. Right. So it's like this whole realm. And if you take like most people, they don't value their time enough to actually like pay for advice.
So then it was like, okay, it's entrepreneurs and out of entrepreneurs, how many people pay for advice?
Well, the truth is like most business owners, they don't value their time that much at all. Right. So it's like a very small percentage will even buy a book. So they value their time. Think about it. Six hours on average, read a book, $25 a book. That's how much they value their time.
They're like, I will spend 11, you know, whatever it is, six bucks an hour to learn something, but they're not going to pay $100 to talk to somebody for 30 minutes. So the challenge was, we eventually pivoted into building what's called an expert network and our customers were hedge funds and private equity firms and stuff like that.
They're the ones that were willing to pay, I mean, three, four or $5,000 an hour for advice because they were making investment decisions. And it just, we pivoted out of the passion area I was in love with. So we got a great return for our investors, but it was never like a nine figure exit. And I mean, it was successful. It still exists today.
Like this was crazy as Clarity as a marketplace continues to grow organically because of the marketplace dynamics we built. Right. We built Clarity answers, we built Clarity live, we built the whole infrastructure to get two people on a phone call to get advice. And if you go to Clarity.fm, the acquire startups.com, Will and his team bought the company and integrated into their platform.
It's still a core component of their business and they haven't even had to touch the code base.
I mean, that's the thing I'm most proud of because like my previous company Flowtown got acquired, integrated into the product, pretty much shut down the domain. Previous company, same thing. It's very rare that a company that gets acquired is still around eight years later. Like I sold it in 2014 and it's still a product that people use that I hear about that they're like, oh yeah, I still use Clarity.
And I'm like, cool. Yeah. I'm not involved in it, but yeah, I would say it wasn't as commercially successful as my second exit, but it was twice as hard and twice as fun. Because if you've ever built a marketplace, it is like having twins. That's awesome. And so you moved to now become a coach for other SaaS founders and just recently you wrote your own book, Buy Back Your Time.
Could you tell us a little bit more about that?
Yeah, this is if you can't, if you're listening, I'm tapping the book. This is the new book.
I just, I literally just got it today, Phil. Like this is the first time I've seen my book. Buy Back Your Time is the title. About five years ago. So I kind of like, I retired. I said retired. I lasted about 16 months, moved to San Diego, like started a YouTube channel just because like I wanted to teach. I wanted to share.
I've always been somebody that shared on Twitter and wrote blog posts. Five years ago, I started SaaS Academy, which is, you know, it started as me being a coach, but eventually like now it's become the largest CEO coaching program for software CEOs. We have a thousand active clients.
You know, we've probably coached 3000 founders. Many of them bootstrapped. 70% of our clients are bootstrapped. And the thing that happened every time I started working with a new client is a lot of them couldn't execute fast enough because they didn't have an understanding of their time and leverage. Right.
So what I mean by that is most entrepreneurs will work hard and then they'll cap out about a hundred hours a week, 120 hours a week. Like you can only work so much. But here's what I learned is a $10 million company was not built off $10 tasks. Right. So there's this methodology I designed that's based on the buyback principle and the buyback principle states you don't hire to grow your business.
You hire to buy back your time. So I call it calendar over capacity. Most people, they have money. They like more engineers, more developers, more marketers, more salespeople, more of the stuff.
And what happens is that you get as a CEO, you get to a place where you hit this pain line, right?
Where growing any much further is painful.
So you don't want to grow, right?
Because it's like you wake up all day and you manage people and it's like, it's just chaotic. What I teach my clients is to do an audit of their time for time and energy.
So like what's the low cost stuff that's in their calendar?
It's things that take their energy and create a bucket of that stuff and get really good at transferring it. Right. So it's called the buyback loop. It's you got to audit your time, transfer it off your plate, and then eventually fill it with things that make you more money. And that's what all the best founders do. That's what I noticed in Silicon Valley.
The reason why, you know, these 22 year old, like, I mean, Travis Kalanick from Uber, he was an investor in my company Flowtown and I watched him build a 5,000 person company in four years. And if you ask him how he did it, he'd explain the same methodology that I'm teaching my clients, which is, you know, I can only grow to the level of the management bandwidth I have around me.
So I got to keep buying back my time by bringing people into my life that can free up that time. Right. But when you start off and you've got very little revenue, the task and the cost of buying back that time is an executive assistant. It's not an engineer. Right.
So there's just this methodology that I teach in the book and the strategies that really it's a different way of building a company, completely different, that once you see it and you do it, it's going to help businesses build companies they don't grow to hate.
And that's like my mission I'm on, is I want to create a movement where every entrepreneur looks at their buddy and says, you need to buy back your time. Like that language has to be the conversation. And when they go, well, I can't afford it or I don't know how to do it, I don't know how to do it. Then they go, go get the book. This is the book.
I will, I will dismantle every belief you have about all the things and nobody can do it as good as me.
And where do you find great talent and how do you train them and all that stuff?
Like none of it is true. You believe it to be true, but it's not. And there's just proof based on like other companies around you and CEOs that are operating at a higher level. Because I want to show people what that looks like. I can't wait to read your book. I hope you're shipping to my home. I have been following a YouTube channel for years and learning a lot from you.
And again, that's such a huge lesson. So I live in this neighborhood and here in the United States, I'm not from here, I'm from Brazil. People have this proud and take care of their lawn. And like everyone that lives in my street, they go and they mow their lawn and they take care of their lawn. And I'm the only person, I'm the youngest that lives there in the neighborhood.
It's like, it's kind of like a scale neighborhood. And I'm the only one that pays someone to do my lawn. And everyone kind of looks at me weird. And I'm like, I just don't have time for that. I work.
And if you think about your time, like you say, you have to buy back your time and you have to keep thinking about what can I not do?
And then at the end of the day, also, I feel like having money, it's about the only resource that we cannot buy more, it's time.
You know, and if you don't put your money to work.
And also, like one hour that I would spend outside making my grass look the greenest, it's one hour that could be reading a book. And the book that I could be reading could be making my business bigger, that would be make giving more people jobs. And that's again, like entrepreneurs, sometimes they don't see that.
And the first book that I learned about that was the emit that you talk about how he talked about how you can't keep being the doers, like people that run like seven figure business, a business is probably seven figures because they didn't figure out how to get out to make that eight figures business. And I'm not sure yet how to run a nine figures business, didn't get there yet.
Hope your book is going to help me with that. But it's like there's little things that you have to learn and not to be so involved and also have a team around you like building a business, a team sport, and you have to hire to help. Awesome. So then thank you very much for sharing everything on the show today.
If people want to follow and learn more, get your book, what's the best way to do it?
Yeah, buy back your time. I've made it super easy.com. Go to Amazon, go buy there. The book should be out if not preorder and then come back to buy back your time and claim the templates. I literally created the perfect week template, the preloaded year. I give you my SOPs for how to manage your executive assistant, how to hire them, how to train them. It's all in there.
It's my gift to you. And then I'm on all social platforms, Instagram, YouTube, LinkedIn, Twitter, TikTok. Whatever is your flavor, you can find me at Dan Martell at 2LzandMartell. But I would love if you read the book and it adds value to your life. Please leave a review on Amazon. It would mean the world.
And Phil, it's been an honor to share with your audience in this time. Thank you so much. Yeah. Thank you for your time, Dan. Have a great day. SaaS Origin Stories is brought to you by DevSquad. To find out more about how we help entrepreneurs launch new products and help larger businesses plug in a ready to go development team, visit DevSquad.com.
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