Apr 30, 2024 · 51m · startups-for-the-rest-of-us
Episode 711 | Finding Early Customers, Horizontal vs. Vertical, P...
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In Episode 711 of Startups for the Rest of Us, host Rob Walling and guest Ruben Gomez answer listener questions on customer discovery without an existing audience, no-code MVP tradeoffs, vertical versus horizontal SaaS positioning, and the economics of prosumer business models.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Rob holds 56.8% of the talking time here. How this is scored →
Rob as informed peer 7.8 Guest teaching 2.5 Guest disagreement 1.3 Rob pushing back 2.5
speaking balance: gold is Rob, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 37:49 Divergent Definitions of Prosumer
Ruben politely challenges Rob's definition of prosumers, asserting that anyone making money in a business context is B2B, while classifying hobbyists who spend on software as true prosumers.
Hardest push from Rob ▶ 26:34 Refusing the False Dichotomy FramingRob directly rejects the caller's framing that horizontal apps are inherently low-touch and cheap while vertical apps are high-touch and expensive.
Biggest teaching moment ▶ 48:02 SignWell's Unexpected Revenue DistributionRuben corrects Rob's assumption that the vast majority of SignWell's revenue comes from mid-market/enterprise tiers, noting that low-tier and high-tier MRR are unusually equally split.
Rob holds their own ▶ 41:18 Masterclass on Prosumer Churn EconomicsRob outlines the fundamental unit economic limitations of selling to prosumers, explaining how high churn prevents typical B2B price hikes and requires multi-product expansion.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Rob as informed peer | Guest teaching | Guest disagreement | Rob pushing back | Why |
|---|---|---|---|---|---|---|
| Finding Early SaaS Customers Without an Existing Audience | 8 | 3 | 1 | 2 | Rob Walling draws heavily from his TinySeed investment data and past Drip marketing playbooks to explain early customer validation without an audience. He and Ruben Gomez align closely, with Rob offering specific tactics like lurking in forums rather than cold-asking questions. | |
| Sponsor Spotlight: Developer Hiring with Lemon.io | 6 | 2 | 1 | 1 | Following an ad read, Rob and Ruben address listener Ashish's question regarding no-code code export limitations. Rob articulates a balanced philosophy on no-code as a tool with known platform risks rather than an ideological either/or choice. | |
| Spinning Out SaaS: Horizontal Low-Touch vs. Vertical High-Touch | 8 | 2 | 1 | 4 | Rob immediately rejects the caller's false dichotomy that vertical SaaS must be high-touch and horizontal SaaS must be low-touch/cheap. He cites TinySeed portfolio metrics demonstrating that higher ACV and lower churn drive faster ARR growth. | |
| Navigating Prosumer SaaS and Dual-Funnel Business Models | 9 | 3 | 2 | 3 | Rob provides an extensive taxonomy of customer tiers (B2C, B2P, VSMB, SMB, Enterprise) and explains why bootstrapping prosumer SaaS is precarious due to high churn. Ruben offers a mild surprise when revealing SignWell's split is evenly distributed between low-end and high-end tiers. |
Statements from this episode (14)
Walling: Under 5% of TinySeed's 170 Portfolio Startups Had an Audience
“Less than five percent of all tiny seed funded companies, which is like a 170 now less than five percent had any kind of audience when they started or even have any kind of audience today.”
Gomez: Building a Unique SaaS Product Carries Higher Risk Than Competition
“If you're trying to be unique and do something that nobody's doing in the space, then just, I think that's a valid approach, but I also think it's higher risk because no one's proven that people will pay for that thing.”
Walling: Drip spent around $1,000 monthly on early Facebook ads
“With Drip, I was spending a non-inconsequential amount of money, maybe a thousand a month, maybe more on Facebook ads.”
Walling: Target LinkedIn for job titles, Facebook for psychographics, Google for intent
“If you want, if you know the job title, you go there. If you know the demographic, psychographics, you go to Facebook. And if you want intent and there is actual volume, then you go to Google if you have any money to spend.”
Walling: Early validation ads are research costs to buy conversations, not sales
“And to be clear, you're not going for any type of ROI on these ads. This is a research cost. You're not trying to make sales at all. It's, you're just paying for the privilege of speaking to folks.”
Gomez: Founders should prioritize distribution and expect MVP code rewrites
“I think of it more as almost like an MVP or first version and I'd expect it to be rewritten or, you know, maybe rewritten from scratch from code. The harder part really is like, will people pay for this? Can I get distribution for it? And those are the things …”
Gomez Passed on Acquiring an E-Signature App Due to No-Code Stack
“About a year ago, I talked to somebody that had a no code app that was in the e-signature space very, it didn't do the whole thing, but it did, you know, it was pretty aligned. I was like, oh, this is interesting. It was focused on some forms and they'd gotten…”
Walling: The idea that all SaaS can be built with no-code is inaccurate
“Anything, SaaS, everything can be built with no code, and you should. And I'm just like, no, that's a factually inaccurate statement.”
Walling: Higher SaaS pricing typically drives lower churn and faster growth
“The higher price, typically the lower the churn, the faster the growth. Like we see this in the state of independent SaaS when we ask about churn and lifetime value and ticket price, and then we compare it to growth. It's obvious that the higher lifetime value…”
Most of Drip's Late-Stage Revenue Growth Came From $500+ Monthly Accounts
“Even with Drip, I talked about it being a 50 dollar starting price point. Most of our growth, especially as we got later, were folks paying us between 500 and 2000 dollars a month. It was the big lists that made, that moved the needle for us, and that's the pa…”
Rob Walling: TinySeed has not invested in direct-to-consumer software startups
“And in fact, at Tiny Seed, I believe we've invested in companies who do every one of those, except I do not think we have anyone who sells to consumers.”
Rob Walling: Prosumer SaaS cannot sustain paid Google AdWords due to high churn
“They're going to churn way higher than businesses. They'll churn similar To consumers. I don't know if it's exactly, I mean, I'm sure it depends on the space, but no, you're going to have a high churn, low price point, high price sensitivity. Therefore you are…”
Rob Walling: Copying Notion or GitHub's cheap pricing tiers is dangerous
“I think it can be dangerous to look at a company like Notion and get up and say, well, if they're doing it, then I also am going to have a free plan or a full four dollar a month plan, because you don't know how their economics are actually working.”
Walling: Dual-Funnel SaaS Generates 70-80% of MRR From Higher-Tier Plans
“Most of, you know, I have insight into a 190 something companies, and most of the companies with this type of dual funnel where you have either free on the bottom end or super cheap, and then you have people paying you 500, a 1002 thousand and up, they make th…”