How to Find Your First Customers by Living in Their Basement

Introduction and what Qualia does

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Most founders think their first customers will come from cold outreach or marketing. Nate Baker found his first customer by wearing a Stanford sweatshirt to a conference—then lived in that customer's basement for a year. Barry Feingold didn't just sign up as a customer. He taught Nate the industry, made introductions to competitors, and helped him understand what actually mattered. That relationship—and the network-based selling strategy it unlocked—set the foundation for Qualia's growth to over $100M ARR.

Nate Baker is the co-founder and CEO of Qualia, a software platform for title companies that helps coordinate the complex process of buying a home. Today, Qualia generates over $100 million in ARR with a team of 600 and has raised more than $200 million.

In 2015, Nate was 21 years old and decided to build software for the real estate industry. He had no experience in that space. He didn't talk to any customers. He just did some research and decided that was the thing he was going to do.

Then he started building. Still without talking to anyone.

Nate admits this was a mistake. He and his co-founders got key things wrong about how the business would work. They wasted months building things they eventually threw away. It wasn't until they found their first customer that they started making real progress.

Their first customer was Barry Feingold, a state senator in Massachusetts who also ran a real estate law firm. Barry believed in the vision, taught them the industry, made introductions, and helped them understand what actually mattered.

The relationship was unconventional: Nate and the first 25 employees rotated through living in Barry's basement. New hires would get a call Sunday night: "Your onboarding is in Andover. You're going to live in Barry's basement for two weeks. He's going to teach you title. You have to tutor his kids in math."

But then Barry's existing software vendor found out he was working with Qualia and shut off his access overnight. Nate and his team didn't even have the core features built yet. They had to figure it out fast. It became the most productive month in company history.

Barry didn't just become a customer—he introduced Qualia to his competitors. Those network-based relationships became the foundation for the first 10 customers. Nate learned that your first customers must come from your network, not cold outreach.

In this episode, you'll learn:

How to find your first customers through network-based selling instead of cold outreach
The multi-year upfront contract strategy that brings cash forward and locks in commitment
Why geographic focus beats national expansion in the early days
How to embed yourself with customers to truly understand the problem
When to hire your first sales leader and how fast to scale

This episode is part of our First Customers series.

Key Insight

Nate Baker built Qualia's first 10 customers entirely through network-based selling after living in his first customer's basement for a year, proving that deep customer immersion beats cold outreach for early-stage B2B.

Key Ideas

Your first 10 customers must come from network-based selling—Barry introduced Qualia to his competitors
Living with your first customer for a year teaches you more than months of user research
Multi-year upfront contracts (5 years paid upfront at 80% discount) align incentives and bring cash forward
Geographic focus (one state) beats boiling the ocean when building complex B2B products
Crisis creates productivity—when Barry's vendor shut him off, it became their most productive month

Key Lessons

🎯 Your First Customers Must Come From Your Network: Nate says for your first 10 customers, it has to be in-network sales. Cold outreach rarely works when you're asking someone to trust an unproven system of record. Barry introduced Qualia to his competitors, and those relationships built the foundation.
💰 Multi-Year Upfront Contracts Align Incentives: Qualia offered 5-year contracts paid upfront at 80% discounts. Customers got a great deal, committed to the vision, and became invested in Qualia's success. The cash came forward when it mattered most.
🏠 Embed Yourself With Your First Customer: Nate and the first 25 employees rotated through living in Barry's basement. "To actually understand what your customer does, you just have to be so in it." Companies fail when they're not sufficiently embedded with customers.
🗺️ Geographic Focus Beats National Expansion Early: Qualia stayed focused on Massachusetts for the first year, building deep relationships and understanding local competitive dynamics. They had more salespeople in one state early on than they do today nationally.
⚡ Pressure Creates Your Most Productive Moments: When Barry's vendor shut him off overnight, Qualia didn't have core features built. That crisis became "the most productive month in company history" because they had no choice but to deliver.
🔧 Engineers Must Respect Sales as a Skill: At $45K ARR, the co-founders thought the product would speak for itself. Their VP of Sales said: "I've never seen such a gap between great product and incompetent sales execution." Within 12 months, they hit $3.5M ARR.

Watch the Episode

Chapters

00:00Introduction and what Qualia does

02:12How Nate picked the title software market at 21 with no experience

06:25The academic approach to market selection (and why it was a mistake)

08:52The real problem: coordination across multiple stakeholders

10:35Finding first customer Barry Feingold at a conference

13:18Living in Barry's basement for a year

16:57When Barry's vendor shut him off overnight

17:42How long it took to ship the first version

19:33Why narrow geographic focus beats national expansion early

21:08Early customer conversations and what they actually needed

22:58How to get customers to pay before you've built the product

25:06The multi-year upfront contract strategy

27:37Network-based selling vs cold outreach for first customers

28:07The wake-up call: "Great product, incompetent sales execution"

31:40Moving upmarket and the "you don't understand Texas" objection

34:46Strategy for geographic expansion state by state

37:15When Nate realized they had real traction

39:07How the opportunity looks today with AI

42:03Lightning round

Episode Q&A

Q: How did Qualia find their first customer?

A: Nate Baker's co-founder wore a Stanford sweatshirt to a conference. Barry Feingold, a state senator who ran a title company, walked up and asked if he went to Stanford. Five minutes later, Barry agreed to be their first customer. Nate says Barry was "singular"—most early customers won't take that risk on an unproven system of record.

Q: What is the multi-year upfront contract strategy for early-stage SaaS?

A: Nate recommends offering 5-year contracts paid entirely upfront at a steep discount (80% off). At $45K ARR, Qualia closed a $20K/year deal with 5 years upfront—$100K in cash. The customer gets a great deal, commits to the vision, and becomes invested in your success. It brings cash forward when you need it most.

Q: How long did Nate Baker live in his first customer's basement?

A: About a year total. The first 25 Qualia employees all rotated through Barry Feingold's basement in Massachusetts. New hires got a call Sunday night: "Your onboarding is in Andover. You're going to live in Barry's basement for two weeks. He's going to teach you title. You have to tutor his kids in math."

Q: Why did Qualia focus on one state instead of going national?

A: Every state has different regulations—title is at the intersection of mortgage and insurance law. Focusing on Massachusetts let them understand the local competitive dynamics, build relationships, and become relevant in that market even while small nationally. They had more salespeople in Massachusetts early on than they do today.

Q: How did Qualia go from $45K to $3.5M ARR in 12 months?

A: They hired a VP of Sales who told them: "I've never seen such a gap between great product and incompetent sales execution." The co-founders were engineers who didn't see sales as a real skill. Within 4 months of hiring him, they scaled to 30 sales reps and built a proper inside sales motion.

Q: What happened when Barry's existing software vendor shut him off?

A: Barry's vendor found out he was working with Qualia and shut off his access overnight, mailing him a thumb drive with his data. Qualia didn't even have the title and escrow features built yet. It became "the most productive month in company history" because they had to deliver for Barry immediately.

Q: Should your first customers come from cold outreach or network selling?

A: Network selling. Nate says for your first 10 customers, it has to be in-network sales. Even if you cold call someone, you'll close them because of some network connection. After 10 customers, inside sales volume will overwhelm network effects, but early on, intros and relationships are everything.

Book Recommendations

Peasants into Frenchmen

by Eugen Weber

More on First Customers

Richard Hollingsworth, Fyxer

Agency to AI SaaS: Scaling from $1M to $18M ARR in 9 Months

Richard Hollingsworth is the Co-founder and CEO of Fyxer, an AI-powered email assistant that predicts and drafts emails for busy professionals. Richard and his brother Archie grew up on a farm, but they knew the slow pace of agricultural life wasn't for them. They saw tech as the opposite environment—fast feedback loops, results within your control. They started by building the UK's largest executive assistant agency, bootstrapping it to $5M in revenue. But from day one, they had a bigger vision: turning the service into software. For years, they tried to build "tech-enabled" solutions, but nothing worked to pull the price down enough for the mass market. Then GPT-3 launched. It was the breakthrough they'd been waiting for. Unlike other AI SaaS startups starting from scratch, Fyxer had a secret weapon: six years of detailed logs from human assistants. They knew exactly how an EA organizes an inbox because they had thousands of hours of data on it. They used this proprietary data to train their AI models, ensuring their product was more accurate than a generic LLM wrapper. The growth was explosive. They started the year with $1M ARR and a team of four. Within 9 months, they hit $18M ARR. They moved to San Francisco, joined an AI residency, and shifted their focus from "Tech Bros" to "Professional Services"—real estate brokers, consultants, recruiters—people who actually drown in email. One of their biggest wins came from a single signup via a Facebook ad. That user turned out to be the CEO of a massive real estate brokerage. Within 7 days, Richard's brother Archie flew to Seattle, met the CEO at his lake house, and closed a $1.2M deal to roll Fyxer out to 5,000 employees.

Stefan Bader, Cello

First Customers From a Notion Page and Python Scripts

Stefan Bader is the co-founder and CEO of Cello, an all-in-one referral platform that helps SaaS companies reward their users for bringing in new customers. Back when Stefan was Chief Revenue Officer at a payment processing company, he noticed something odd. His users were bringing in tons of new customers, but there was no way to reward them. Every tool out there was for affiliates and influencers. Stefan saw the opportunity. And in 2022, he quit his job and started Cello. But building it turned out to be way harder than he'd imagined. Paying individual users meant navigating compliance laws in dozens of countries, international banking regulations, and tax requirements that no one had mapped out before. And his MVP was embarrassingly basic. Customers got their analytics through shared Notion pages. No login portal. No dashboard. Just Stefan's team running Python scripts and configuring everything manually behind the scenes. "This is not a product," one early customer told him. But Stefan stayed focused on what mattered - could it actually generate referrals? The answer was yes. He also made pricing dead simple - pay nothing until you make money from referrals. However, most SaaS companies didn't even know they needed this product. Stefan had to educate every prospect about why user referrals were different from affiliate programs, and why they were leaving money on the table. As early customers started seeing results, word spread. But the real breakthrough came from something tiny - a "powered by Cello" link in their widget. As customers grew, millions of their users saw it. That little link became their biggest growth driver. Today, Cello generates $2.5M in ARR, powers referral programs for companies like Miro and Typeform, and reaches over 7 million users each month.

Jonathan Festejo, Salesbricks

First Customers: Why Selling to Enterprise Almost Killed This SaaS

Jonathan Festejo is the CEO and co-founder of Salesbricks, a deal-closing platform that handles quoting, billing, and subscriptions for SaaS companies. Before Salesbricks, Jonathan ran RevOps for multiple unicorns. He knew the pain of "Quote-to-Cash" intimately. But when he started his own company, he made a classic mistake: he built for the Enterprise first. He spent nearly two years over-engineering a robust platform designed to replace Salesforce CPQ. But when he tried to sell it, he hit a wall. Enterprise buyers had 3-month sales cycles, complex approval chains, and often decided to "do nothing" because switching was too risky. The breakthrough came when he pivoted down-market. He realized that early-stage founders ($500K-$2M ARR) were the ones with the most urgent pain. They were hacking together Stripe and spreadsheets late at night and were desperate for a solution. Jonathan used these 3 strategies to find his first customers and reach $1M ARR: 1. Targeted founders who were personally doing billing at night - they felt the pain and could make instant buying decisions 2. Built a "Powered By Salesbricks" button into every contract sent, turning each transaction into a high-intent lead channel 3. Leveraged founder-to-founder referrals from his network, converting warm intros into paying customers By shifting his focus to founders, sales cycles dropped to 5 days. The product roadmap started writing itself based on real user feedback, and Salesbricks hit $1M ARR with over 100 customers.

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