Omer (00:09.280)
Welcome to another episode of the SaaS Podcast.
I'm your host, Omer Khan, and this is the show where I interview proven founders and industry experts who share their stories, strategies and insights to help you build, launch and grow your SaaS business.
In this episode, I talk to Dave Rodenbart, the founder of recaptcha, a SaaS product that provides abandoned cart recovery and email marketing for e commerce merchants on platforms such as Shopify, Magento and WooCommerce.
Dave is a solo founder who's bootstrapped his SaaS business to mid six figures in annual recurring revenue, and his product has helped recover over $190 million for merchants of all different sizes across the world.
But prior to that, Dave had several failed attempts trying to build a SaaS business.
He spent $60,000 to acquire an early stage SaaS product, believing that he could grow it, but ended up shutting it down and barely made back the money that he had invested.
He spent 18 months building another SaaS product, but didn't talk to customers.
And when he finally did start having conversations, he quickly realized that there wasn't a market for his product.
And about 18 months after that, he.
He decided to try again and acquired another early stage SaaS product which became Recaptcha.
But he didn't understand his market and it took him almost a year before he could start focusing on growing it.
In this episode, we talk about the key mistakes Dave made, the lessons he learned from those experiences, and how he overcame the challenges with recapture to finally get traction and start growing his SaaS business.
Dave Rodenbaugh (01:46.100)
So.
Omer (01:46.355)
So I hope you enjoy it.
Dave, welcome to the show.
Dave Rodenbaugh (01:49.790)
Thank you.
Glad to be here.
Omer (01:51.550)
Do you have a quote, something that inspires or motivates you that you can share with us?
Dave Rodenbaugh (01:55.550)
I do, I do.
And this is a really old one.
This is from Bill Gates and he had this quote one time I don't remember exactly from.
I think it's from his book, like the the Long Road or the Road Home or whatever that one was called.
It was like back in the 90s, long time ago.
And he said, success is a lousy teacher.
It seduces smart people into thinking they can't lose.
And that.
That one quote just haunts me all the time.
Every time that I'm successful, I can't always pinpoint exactly how it all came together or what made it all work.
But almost every time I have a failure, I can immediately just go, oh, that's what went wrong right there.
Like that was the thing that blew it all up.
And so that's Just something that I've always thought about as an entrepreneur.
Is that that quote?
In fact, I started a whole blog on it a long time ago called Lessons of Failure.
Please don't visit the site, it's terrible.
It's 10 years old.
I haven't updated it in that long.
So yeah, I mean that's old stuff but that was the whole premise of the blog back then.
Omer (02:58.380)
Love it.
So tell us about recaptcha.
What does the product do, who is it for and what's the main problem you're helping to solve?
Dave Rodenbaugh (03:05.700)
Yeah, sure.
So if I'm going to give you like the elevator pitch, basically.
Recapture is the email marketing solution for busy e commerce store owners who can't afford or don't want to deal with an agency with their store.
Typically we serve merchants that are under like 2 million ARR.
They need effective and simple email marketing campaigns that are pre baked with best practices and then have excellent customer support.
You know, our tagline is give us five minutes and we'll boost your revenue 10% or more.
We've been around since like 2015.
I'm actually the second owner of the business at this point.
I bought it from a couple of guys that were running a Magento store back in the day and they basically were like, okay, we're running this custom iPhone case business and we're also running this abandoned cart thing over here.
One of these is making six figures a month and this one over here is not.
So we have to do something and sell it.
And I basically took it over from them in 2016 and have been growing it ever since.
We've processed like almost $2 billion in gross merchant volume and recovered over 190 million for merchants of all different sizes all across the world.
Omer (04:14.980)
And then give me a sense of the size of the business.
What are you doing in terms of revenue?
Dave Rodenbaugh (04:18.900)
Yeah, sure.
So we don't publicly publish our revenue at this point, but I will say that we are a comfortable mid six figure ARR business.
We are a team of three to four.
I've got three permanent, one contractor and yeah, so it's really just all of us that are doing.
I have a tech lead and I handle support marketing, pretty much anything else that needs to happen.
I have a sales guy that's doing some contract work and we have a QA engineer and she's taking care of all of our testing needs because that kind of the technical side of things grew more than anything in terms of needs and ability to manage it.
So.
Omer (04:58.940)
And is the business bootstrapped or did you raise any money?
Dave Rodenbaugh (05:02.380)
We are 100% bootstrapped.
I have taken not a single dollar of any kind of funding.
I've actually looked at it a couple of times in terms of like, does funding make sense for me?
Does it make sense for the business and where I'm at and what my goals are and what I'm looking for?
It hasn't.
So to this day we remain bootstrapped.
And for the the foreseeable future, I think will remain that way.
Omer (05:25.000)
Okay, so before we talk about how you have got to where you are, let's start with what you were doing before you got into the SaaS business.
You were building basically WordPress plugins, right?
Dave Rodenbaugh (05:36.760)
That's right.
So about a little over a decade ago, I basically was looking at my long term career prospects and my plans and I was like, what do I want to do?
Where do I want to be?
Do I see myself as being a developer all the way to retirement?
And I didn't really.
And I've been freelancing for a very long time at this point.
So I was like, I kind of want something different.
I want to own something, I want to control something.
I want to have a reason to do that instead of just building stuff for somebody else.
So that's when I started looking at being a founder.
And in 2011 and 2012 I bought these two WordPress plugins.
So one of them was for a business directory, the other one was for classifieds and they were not being run particularly well.
They seemed to have like solid customer base.
There were some sales going on, but I saw a lot of obvious things that I could go in and fix.
And so I use these as how can I grow my marketing chops?
How can I grow my sales chops?
How can I grow being able to run and understand and manage a business?
So those basically became my pet side project from like 2012 through 2020 when I finally sold them.
Omer (06:43.480)
And then probably about a couple of years later was when you started to Veer into the SaaS space, is that right?
Dave Rodenbaugh (06:52.330)
That's right, yeah.
So one of the things about the plugins that I don't want to say I don't like it because it was probably just one of those frustrating things.
I had a hard time getting recurring revenue out of it.
Like you could get it on an annual basis, but the renewal rates on the products that I had were not as high as I liked.
I managed to get them up as high as like 30%, but they were as low as like 15 to 20%.
At one point.
So that's terrible.
If you're trying to run a predictable business, you want growth and you want the recurring renewals in there.
High churn rate kills every business, right?
So looking at that and seeing that trend, I was like, gosh, all my friends are running sasses and they, it looks like their lives are so much easier than mine.
But obviously that's not true, right?
That's so not true.
But it looked that way, right?
And it seemed like SaaS was the golden, the golden calf or the holy grail that was going to take me to the promised land of where I wanted to go in a business.
So in 2014 is when I started looking in earnest at various other options.
So I tried to buy one, I tried to build one.
And SaaS is hard.
SaaS is unbelievably hard.
To get product, market fit and understand your customers and do that marketing and maintain the retention, all of those things have to come together, even more so than when you're just doing the one off sales.
And so my initial forays into that were not terribly successful, unfortunately.
Omer (08:22.250)
So let's talk about the first attempt because you have a really interesting story on things you tried that didn't work.
Eventually, I think there were a lot of important lessons you learned along the way which have helped you to where you are.
And we were talking about this earlier, before we started recording.
We hear a lot of people on Social telling others how easy it is to build a SaaS business and you just need a product and, and a way to charge for it.
And before you know it, you can get to, you know, a million dollars in ARR.
And that's not the reality.
Right, we know that.
So let's sort of unpack this, unpack your story a little bit.
So the first business, was that the one that you acquired?
Yeah.
Dave Rodenbaugh (09:04.930)
So I was trying to remember what the exact order was.
I think it was the one that I acquired.
So this one was, it was called UW Robot.
And what this, this SaaS did, it was written by a student at the University of Washington.
And he basically saw this real pressing need as a student there.
What they basically had is they had some really poor registration software.
And when you hear the story, you're going to be like, why didn't this do that?
And the answer is, nobody knows.
They just didn't.
And for whatever reason, they continued not to do it and they wouldn't enhance it or whatever.
But anyway, so the problem was when you registered for classes, if the class filled up, what you thought should happen Is that there's a wait list.
And then when an opening in the class happens because somebody drops it, you should get notified in the wait list.
Right?
That's pretty obvious.
However, that's not what happened.
Basically, there was a wait list, but then they didn't do anything with the wait list.
It was super weird.
And so what happened was classes would get these openings.
Nobody on the waitlist would get notified.
And so everybody was frustrated trying to register for really popular classes.
So what he did is he built his own version of the wait list.
So you basically said, hey, I'm looking for Psych 101, and Psych 101 fills up and there's a wait list.
So then when an opening shows up on Psych 101, everybody on that wait list from that service got notified via text message.
And then you'd run over and go register for the thing.
And the guy was actually making pretty good money on it.
And from what he was saying, he's like, okay, well, there's some risks associated with this.
And I'm like, all right, I see these risks.
These make sense, basically, that the university could shut you down or they could go and change this feature, and the whole thing blows up.
And I'm like, yeah, that looks like a problem.
But I think I can find other schools and take the same model to those other schools, and then that's going to lower my risk, because then I'm not dependent on any one school.
So I went ahead and bought it, and I kept running it for a while at Seattle, and it did exactly what he said.
And all of that was great.
But when I tried to actually bring it to other schools, what I found was his ability as a student to basically spread this through word of mouth with his friends and their friends of friends and posting flyers and all this kind of stuff was hugely important to making this thing successful.
And me not being a college student, it was almost impossible to get that marketing.
By the time I figured this out, that the windows of opportunity were closing.
UW had basically banned the app and stopped the ability to go to this API.
And there was a whole bunch of other factors that kind of just blew up in my face, and I had to shut the thing down.
Omer (11:44.130)
The.
Dave Rodenbaugh (11:44.850)
In the end, I basically made about as much money as I paid for the app, so it was a wash.
Omer (11:50.130)
How much did you pay for the app?
Dave Rodenbaugh (11:51.650)
I was like, 60 grand.
Yeah, I took the proceeds from something else that I had bought, built up, and sold for a profit.
It was like an AdWords thing or AdSense thing.
And that was right before Panda and Penguin.
So I managed to get out just before the rug got pulled by Google.
And then I invested it in this and it was like, oh, that's a wash.
Okay.
Bummer.
Yeah.
So that's the story of UW Robot.
Omer (12:13.250)
Got it.
And then the next one was a help Desk product.
Dave Rodenbaugh (12:17.430)
Yes.
Omer (12:17.910)
Was that a buy or a build?
Dave Rodenbaugh (12:19.350)
This was a build.
So the last one was a buy.
And I was like, I always like to buy because I feel like that reduced a lot of risk.
Right.
So you've got, you've basically got like a bunch of things that you have to align in order to make a business work.
You've got to have a product, you've got to have an audience, and then you've got to have the ability to sell that product to that audience.
So there has to be product market fit.
And putting all those things together can be very challenging because if you don't build the right product, you don't have the right audience if you don't know the way to sell it, like any of those things can tank the business.
So if you buy a business where somebody else has figured that stuff out, it makes the whole thing a lot less risky.
Right.
So that's been my thesis for quite a while, but this time I was like, I saw an opportunity and I was like, it can't lose, which by definition means it's going to lose.
Right.
And that's exactly what happened.
Spoiler alert.
But we'll get there in a minute.
So there was somebody who had built a cloud based help Desk application.
And this is at the time that like Help Scout was one of the top help desk out there, so was Zendesk, so was Groove.
And people love these solutions.
There was a lot about them that was very flexible and easy to use and that was priced very well.
And all of these things were a tremendous advantage.
This one app was trying to like take a little different take on it.
And then I saw them get to 5k mrr and then they shut it down for these weird technical reasons.
And I'm like, aha, I have a successful business idea.
All I have to do is replicate exactly what they did.
So I started doing that.
Should be a red flag right here.
I didn't talk to any customers.
I didn't actually bother to validate the idea with anybody.
I just looked at what they had done and I was like, I can do the same thing and it'll be fine because I know they got 5k mrr.
But that just like Totally skipped all these important steps.
So then I started investing $50,000 from that last venture, built a good chunk of the app, got it to a point where I was like, ready to put some MVP stuff in front of people.
And I did.
And they're all like, well, why wouldn't I just use Help Scout?
And I'm like, so then I talked to some other smart entrepreneurs, like Rob Walling and others, and they all were like, well, have you tried to niche it down?
Like, who is this for?
And I gave the general pitch and they're like, that's just, that's too horizontal.
You can't make that work for a single audience.
You have to find somebody that wants this for specific purpose.
So I like tried to niche it down in like three different ways and I tried to dig up that audience and I got a bunch of people to talk to and every single one
Omer (14:58.650)
of them was like, which, what were the niches?
Dave Rodenbaugh (15:01.850)
So I tried to do one specifically for WordPress.
I tried to do another one that was like oriented towards specific verticals.
So I actually did look at like construction or I'm trying to remember what the third one, it's not healthcare.
I know I threw that example out earlier, but that wasn't it.
But basically I was looking in those sorts of things, like, could I make this specific to that vertical for those things?
And the answer was all of them looked at this and they were like, eh, Help Scout does what I need to do anyway.
Like, I don't care about this.
Like, this doesn't offer me anything I can't get from Help Scout.
And that's when I knew I had really screwed up.
Omer (15:39.130)
And the product that you modeled, do you know why they ended up shutting that down?
Dave Rodenbaugh (15:44.090)
Yeah.
So they had built the whole thing on Ruby on Rails and they were getting like these weirdo kernel panics.
So they were basically getting, they would run this traffic, it would work fine, and then in the middle of the night it would just blow up for no particular reason.
And they couldn't like figure out exactly what it was.
So they ended up shut.
That was the public reason that they claimed that it was shut down.
Now it is entirely possible that there were other reasons why they did this and that wasn't something I was privy to.
There's another reason.
Like if you don't have that connection to that audience, to that market, and know exactly what their pain points are, how can you really validate that your solution is working for them?
So maybe part of it could have been, yeah, this current, this kernel Panic thing was a problem, but maybe their customers were also like, yeah, this is okay, but yeah, I don't need it.
Omer (16:33.610)
Yeah.
And so you spent about $50,000 building this.
How long did it take and did you talk to any customers during that time?
Dave Rodenbaugh (16:42.730)
Took 18 months to get to the point where it was viable enough.
And it wasn't until like month 17 that I talked to my first customer
Omer (16:55.170)
and had the good news.
Not.
Dave Rodenbaugh (16:57.410)
Not good news.
Very not good news.
Omer (17:00.050)
Yeah.
And it sounds like even when you try to niche down, people were.
I think that was a good sign there.
In terms of, are people really this concept of like leaning in, Are they.
Do they feel excited?
Do you feel excited when you get off the call or a meeting with them?
They love this thing.
Right.
Versus reminds me of Larry David.
Dave Rodenbaugh (17:19.250)
Right, exactly.
Yeah.
I mean I had the Larry David response to every single call I was on.
And when you get 10 of those in a row is telling.
Like the first one you can blow off the first three, you're like, okay, maybe I just don't have the right audience.
But after 10 of them in one niche and then you repeat that in another niche and you get another 10, it's like, oh man, I really screwed up here.
Omer (17:40.339)
So now you look back, what do you think was going on?
Obviously the niching down didn't work.
There are some dominant products in the market like Help Scout, and yet there's still no shortage.
It feels like every week I hear about a new help desk support product coming along and most of them, after a while you don't hear about.
That's that much.
Dave Rodenbaugh (17:59.610)
Yeah, that's the thing.
Right.
Omer (18:01.170)
So what do you think was going on?
Was it just like there's a few products that are doing a pretty good job and there just isn't a compelling reason or most founders haven't been able to figure out the right differentiator?
Dave Rodenbaugh (18:12.690)
Some people, well, so based on the experience I've had talking with other founders, it seems like there's a maybe three different camps here.
So one of them are the ones like Nick Francis actually found an itch to scratch and a real customer need because he was looking at Zendesk and it was like super expensive.
And he's like, hey, we could do a lower priced version here and make it really compelling for the non enterprise small medium business market.
And then they built that.
Okay, great.
So that's.
The early movers found a missed opportunity in the market and really went after it.
Omer (18:44.770)
The other thing I would add to that with Nick, I interviewed him a while Back, I think the differentiator for Help Scout in many ways was he was saying, look what he was seeing.
There was a lot of ticketing systems and this kind of weird experience that customers were having and he wanted to be more personal.
And so it was really creating this experience where you were communicating with a support team over email.
But it didn't feel like there was even a Help Desk involved.
Dave Rodenbaugh (19:11.890)
Right.
Omer (19:12.010)
Which I thought was a pretty nice way to think about this.
And that is a good example.
Maybe that's why Help Scout had more success than some of these other products.
Dave Rodenbaugh (19:20.930)
Right, right.
And Groove went that same tactic as well.
It was basically support over email.
It was like a conversation.
It wasn't like a ticketing system where you felt like you were just a number and you pulled your little tab and you waited for somebody to call your name to get some help.
It definitely had that personal touch to it right then.
So in the other niches in there, I think so there's the second group that I would say are like the founders that for whatever reason they don't like the solutions that are out there and they think that they are going to scratch their own itch because they're, they think their itch is different than other people.
And I think in some cases that's genuinely true.
Like let's take Fresh Desk, for example.
So Fresh Desk is another competitor in that space.
But what they did that Help Scout didn't is that they basically addressed the needs of a lower cost market.
And specifically, like, they were hugely popular in India, the founders are all Indian and the whole team really understood that market.
So freshdesk could really penetrate and support that one market and understand their needs really well.
So that's why I think you saw a lot of success with freshdesk.
It's not because they were wildly different than Help Scout or Groove, it's because they knew a market, they were able to get in there and get into the minds of their customer and do a really good job for them, which is awesome.
But then there's the flip side of that, right.
The ones that scratch their own itch but don't really understand that market.
And so they build a niche product that's like good for themselves and maybe a handful of other people.
And those are the ones that I think come and go.
So you got your bigger players, you got your smaller players, and then you got these tiny players that end up disappearing because they're just, they haven't figured out what piece of the market they can carve out.
That's big enough to support them as a business.
And I think that's the key to succeeding in a business is that you have to carve off a chunk of a market that's big enough for you to eat from.
You got to.
If you can't eat, you can't survive.
Right?
Omer (21:16.850)
Yeah.
And I've seen a number of these products come through where, you know, maybe they're trying to come through an app sumo launch to try and get some market share, which is fine.
It can be one way to.
To grow a business.
But the downside there is you're basically attracting a whole bunch of people who are paying you.
One time, there's no recurring revenue, and then you still.
That might give you some additional revenue to work with.
But beyond that, you've still got the same challenge.
You know, you offered a deal on a product, but is there enough of a differentiator that gets people interested enough to keep paying?
Dave Rodenbaugh (21:53.330)
Right.
Or can you use a platform like Appsumo to support growth in a different way?
Like, if you're a product that has virality to it, using AppSumo to get that initial exposure, which then generates more virality from it, like, that's hugely beneficial.
But there aren't, you know, a ton of products that can go that route.
You have to have the right product with the right set up in there and the sharing mechanisms and a broad enough audience and usability and stuff like that.
So, yeah, AppSumo is.
Is a very targeted thing that works for very certain businesses.
But if you just think you're going to spray and pray with that solution and hope that it's going to give you the same success that it did, you know, Noah and others, you got some harsh realities coming to hit you, I'll tell you.
Omer (22:38.250)
Yeah.
Okay, so how long did you keep going with this product before you decided it's time to move on?
Dave Rodenbaugh (22:43.330)
So after the 18 months, I was kind of like, all right, I'm done.
And that was like mid-2015 at that point.
And at that point, I really just sat down and said this was a terrible approach.
And so clearly I have to revisit and revamp what is it that I'm going to need to do in order to have a successful SaaS business.
And so I sat down, I talked with my mastermind, we talked about why it failed.
We talked about what I need in order to, like, support myself and my family.
We talked about what would make a successful SaaS, because there were other successful SaaS founders in there and things to avoid.
And so basically I created a laundry list of all of these things.
Like it had to, it had to have a significant amount of mrr.
And by significant, I mean at least in the four figure range, four to five figures somewhere in there.
Because that's roughly what I could afford based on the cash that I had.
And that basically gave me the product market, fit some customers to work with, an audience to go after some kind of validation, but also not zero revenue.
So I'm not growing it from nothing.
It would be really good if that SaaS was what I call close to the money.
So what do I mean by that?
I mean that the value that you provide in that SaaS is so obvious that basically you can turn around and say, look, I delivered you 10x this value and I charged you 1x the value that you got, or 20x and I charged you 1x.
And that's a value equation that sells itself all day long.
If you have to sit there and convince other people that your product is valuable, you're already in a losing proposition.
They should know or they should be able to understand, or they should be able to look at a graph and say, wow, that thing is making me money, I love that product.
Or it's saving me a ton of money.
I love that product.
That's the kind of product I wanted.
And there were some other minor things in there as well in terms of like maintenance and technology and stuff like that, but they were far less important than those two things there for sure.
So that's when I started another 18 month search for trying to find a business that fit those criteria.
So I started looking on all the brokerages, I started keeping my eye out on Flippa and some other forums for businesses that were for sale.
And then eventually recapture popped up.
And after a few missed attempts trying to acquire some other businesses, I managed to grab that one.
Omer (24:59.730)
So what was it about this business that got you interested in?
If somebody is thinking about going down the same route and buying and acquiring a business, what was it that you looked for to help you make that decision?
Dave Rodenbaugh (25:12.970)
Great question.
So in my particular case, it really had to have two key things before I looked any further.
So one, obviously, is it close to the money?
And the answer for recapture was yes, because you're doing abandoned cart recovery.
I can basically tie the number of emails that I send to how much money I'm making for your store.
So I can't get any closer to the money than that.
Like if you were taking payments, you were putting up a checkout or something like that, you could Take a cut of that checkout.
That's close to the money.
So this is as close as I could get.
So that was perfect.
The other thing that I was really looking for was can I grow this business?
Because if somebody has put a business up for sale and I can't see a way to, you know, take it further, to blow it up 10 times or something like that, that doesn't have anything for me to glom onto and really take it somewhere else.
If it's stuck where it is and it's plateaued and I can't see a way to get it off that plateau, it's a dead end.
So that was another thing.
And I definitely saw with Recapture, like they were only on Magento at the time, they only did abandoned carts and review reminder emails.
So I saw expansion both horizontally in features and across a bunch of different vertical platforms.
So I could go to Shopify, I could go to WooCommerce, I could go to BigCommerce, et cetera.
And those are all things that we support now.
But there was actually a third one and this one was like it was a criteria that I had after talking with my wife.
The business had to be something that I was actually proud to discuss with my family.
So, you know, that eliminates a whole class of businesses that are out there that are very much get rich quick or scammy or borderline illegal or gray, whatever.
These things just were not the kind of businesses that I wanted to be involved with for a variety of reasons, morals being the top of that list.
But in terms of like longevity, like you want a business to be around for a while and those kind of businesses are not long lived, generally speaking.
So those three things were really the top important criteria that I was looking for in a business.
And as I was going through it was usually pretty easy to tick off.
And if I couldn't check all three of those boxes on a business, it got tossed to the side and I waited for the next business.
So that's why it was 18 months.
I was getting stuff once or twice a week and it'd be like one, two, Nope, okay, nevermind.
One, nope, nevermind.
Nope, nevermind.
Omer (27:36.430)
Was it generating any revenue at the time?
Dave Rodenbaugh (27:38.990)
It was.
So when I bought it, it was like at 3500mrr.
Omer (27:43.070)
How did you figure out how much to pay for it?
Dave Rodenbaugh (27:45.230)
So they had priced it based on, I want to say it was like three years revenue.
So it was like a 3x multiple or something like that on the net profit.
And that was a pretty standard Multiplier.
At the time, the market was heating up for SaaS businesses.
So I actually overpaid for the business by I think it was like $10,000.
So they were asking one, gosh, I don't know, it was low six figures.
And then I took that number and I added 10 and I said, I want to be exclusive, exclusive on this.
And they basically agreed.
So then we went into due diligence after that and went through the process of buying.
Everything was super smooth.
Like, the code base was just beautiful.
Like, this guy was so anal retentive about how he organized his code, how he architected everything.
He had basically already built it for scale.
So by the time that later I got to that point where we were hitting scale, I almost had nothing to do, which was awesome.
Omer (28:43.940)
Do you know why he sold it?
Dave Rodenbaugh (28:45.380)
Oh, absolutely, yes.
So this was a guy, he and his brother ran a custom iPhone engraving business or custom iPhone case in business.
So they took these wooden cases and they'd put these custom pictures on it with a laser engraver and they were making like six figures a month.
So if you compare six figures a month to 3,500amonth, like, which of these two businesses is going to be far more important to you?
They built the business, they built Recapture because they were like, oh yeah, we really don't like the abandoned cart solutions that are out there from Magento.
And they really did a good job with that.
But once they got it and they built it up with some merchants, they were like, yeah, growing this thing is a slog, whereas over here we're killing it.
So yeah, let's get rid of this business and then we'll just keep using it for a while, which is what they ended up doing.
Omer (29:34.040)
Great.
So you've got this business, the 18 month search is over.
What did you do to start growing it?
Dave Rodenbaugh (29:40.920)
Well, you would think that I just like dove right in and started killing it right away.
But in all honesty, my first year was a little bit of finding my footing because this was my first real foray into E commerce as a full fledged business.
So prior to that with the plugins, I had experience in E commerce through easy digital downloads, which I used to actually license and sell the plugins.
But here I got dumped into Magento, which was a whole new world.
And so these merchants had all these other problems that they would ask me about.
Say, hey, do you integrate with the shipping extension?
Hey, how do I deal with reviews over here on this other extension?
And I'm all, I don't know, I gotta figure that out.
Give me a minute.
So it was a lot of.
It was a solid six months of scrambling just to learn all the ins and outs about this platform.
And while I was doing that, I also didn't have a full time developer on this.
So, you know, it was me trying to do the development.
I have a technical background, I can do development.
I've been a freelance developer for years, but I was also running the plugins at the time and I also had a freelance job.
So like my time was very divided.
Plus I have a family and so that was hard to split that and make that successful.
So it was very obvious that what I was going to have to do is take the MRR that I was making from Recapture and hire a developer to really get that effort moving forward.
So it was like almost 2017, so a full year into it, where I basically hired my tech lead that I have now.
And he was the one that did like our first Shopify integration and was starting to fix bugs and do some other stuff.
So I finally could take that off my plate and I could think about other things.
So that's when we were able to move over to Shopify, get some success over there.
But it wasn't like huge success.
I thought moving to Shopify would just like turn on a faucet and customers would come flooding in, but that wasn't the case, which was really interesting.
So it took a while to understand that there was key pricing change that we had to make before I could actually get to that.
And that was a big problem.
Omer (31:49.130)
Okay, so let's talk about pricing.
So how much were you charging for the product at the time for Shopify customers?
Dave Rodenbaugh (31:55.530)
So our lowest plan when we migrated initially to Shopify from the Magento side was $49 a month.
And my initial thought and reaction was like, all right, we'll just keep the pricing charge the same for Shopify.
I looked at a few other competitors.
I'm like, well, there's a few that are cheaper, not a big deal, that's fine, charge more, right?
Woohoo.
And I did.
But then crickets.
We didn't get a ton of signups or if we got signups, we basically didn't get conversions to paid.
And I sat with this for a while.
I tried some more marketing, I tried to talk to the customers and the only feedback I ever got was like, oh, your solution's too expensive.
And I'm like, I mean, didn't totally feel like it made sense.
It seemed like it was pretty reasonable.
And by comparison I felt like we weren't charging a whole lot more than other platforms, but that's when I discovered.
So what I did was, so Shopify charges 29amonth to be on their lowest level of E commerce platform.
Right.
So it used to be 29, 79, 1 99, and then way higher than that.
So if you were charging more than $29 a month for your service, on top of that, what I discovered is that the merchants looked at you and they were like, yeah, you're too expensive.
But the second that I went from 49 down to 29, all of a sudden I am now at the same price as what they're paying for the platform.
And so for most merchants, which was the majority of the ones that were signing up for my plan and starting out, they looked at that and they were like, oh, that's totally reasonable.
And that's when I started getting.
Just blew my mind.
Like, everybody's saying, charge more, charge more, charge more.
I actually charge less.
And then the business blew up after that.
Omer (33:41.460)
Yeah, it's like there's a price sensitivity depending on what platform you're selling.
On the iOS store people are very used to paying a couple of bucks for a product.
So if you go in there and say, I'm going to charge you 29amonth, you might have a hard time.
Dave Rodenbaugh (33:57.059)
Exactly.
Yeah.
So you really have to pay attention to that platform price sensitivity.
And what was interesting is when I went to other platforms, I could look at their base pricing and be like, oh, we're 29, we're down below.
BigCommerce is more than $29 a month for their base plan.
So we're good there.
And Magento didn't charge anything.
But there was always this.
They had to spend tens of thousands, if not hundreds of thousands, to get a full Magento bill done and customize their store.
So they were always like, oh, $29, $49 doesn't matter.
It's just a tiny amount on top of what I've already paid.
So you got to watch that platform mentality really carefully and make sure that you're not above that base price for your base price.
And that's where I saw I got more success out of it.
Omer (34:40.420)
And it sounded like at the time, the advice you were hearing from most people was charge more.
Dave Rodenbaugh (34:45.700)
Oh, yeah.
Well, in fairness, I still believe that charge more is probably the right answer for a ton of bootstrappers and single founders that are out there.
And here's why I think people want to offer their product, but what they are is that they're afraid to charge what it's worth or they're not sure what it's worth.
And so they dramatically undercharge themselves.
And the same thing happens with freelancers.
You can get freelancers that come out there and they're charging like $49 an hour for their service for something that I could easily go and find other freelancers that are charging $100 an hour for the same thing.
It's about the value that you deliver.
So there's part of this is you should have the confidence and the understanding of your audience to be able to charge more.
You cannot run a business at $9 a month for most B2B B2C businesses.
Like, you're going to probably have so much support that you're just not going to get enough income from that $9 customer to justify spending all that other money on them.
Because I'll bet you haven't done your CAC calculations on that $9 a month customer.
So you probably spent a ton of time, money, effort, energy, just trying to make them happy, set them up, onboard them.
And I would be willing to bet good money that you are not breaking even or even being profitable on that $9 a month customer.
Omer (36:14.070)
Yeah.
Unless you're a very well funded startup that is, you know, just focused on growing market share and losing a lot of money, at least for the future.
Foreseeable future.
Dave Rodenbaugh (36:23.460)
Right.
That is a very funded strategy to go out there, undercut the market, have a super cheap price, build out your market share and then all of a sudden turn on your premium plans and then you'll convert 10% of that huge customer base.
You can't.
Yeah.
Unless you've got millions of dollars in the bank to spend and blow on.
That strategy is really rough.
Omer (36:41.460)
Yeah.
And as a bootstrapper, you gotta be making money from pretty much day one, otherwise you're not gonna be around for long.
Dave Rodenbaugh (36:47.180)
It's gonna be a slog.
If you've got a personal savings that you've set aside, you're gonna go through that very fast.
And so the faster profitability, the faster you can get to paying customers, the better off you are, for sure.
Omer (36:59.520)
Okay, great.
So we're integrated in Shopify, you have figured out at least better pricing than you had before at 49amonth.
So.
And you're starting to see more sales coming through.
You also tried, I think, paid acquisition, using Shopify ads as a way to presumably drive growth even faster.
How did that work out?
Dave Rodenbaugh (37:21.780)
Spoiler alert.
Not so well.
But the problem was it took A long time to figure that out.
So here's my Shopify ads story.
So Shopify app store ads were a brand new thing only a couple of years ago.
So I noticed that they started running some beta tests and I immediately like dove on that and I was like, oh, please let me into the program, please.
And they did.
And they were like, oh yeah, sure, go ahead.
Because we're not letting the bigger partners in yet.
We'll let the small partners try it and see how it is, work out the bugs.
The problem was is that this was, I mean, it was a brand new product, so everything had to be built from scratch.
Their analytics were not that great.
Their the calculations to like figure out how many paid customers are you getting, how much are you getting from those paid customers, and calculating your return on ad spend.
These things were not in the initial version.
In fact, it took months and months for those basic things to come into the analytics in order for me to determine whether this was a profitable thing to do.
So the good news was is that initially for like the first three to five months, they gave me some credits to spend, but it was also very low competition.
And it was cheap.
Super, super cheap.
Like I was paying less than 50 cents a click for a good portion of those three months to get some really high juice keywords like email marketing and abandoned carts and stuff.
Things that are now costing $50 a click today in Shopify.
So for a period of time, I was able to acquire these customers, but I couldn't tell how profitable my acquisition was.
It just, it felt profitable.
So I kept going and then I doubled down and I saw my MRR go up and then I doubled down again and I saw my MRR go up and then I doubled down a third time.
But then the MRR didn't change and I was like, all right, well, I'll be patient on this for a while.
And I let it go.
But my MRR was just hovering at this one spot.
It was like not, it was going up a little bit, but it wasn't like going.
And that's when I realized that things were probably not so great.
So I let that go for probably about six to nine months, which is probably about six months longer than I really should have.
And finally about the, the, the end of that period I was getting, they finally released those analytics on the dashboard and I went back and I looked at the last six months of my ad spend and I looked at the last six months of the revenue that I had put on there.
And then they finally put on My marketing efficiency on the return on ad spend, and it was 53%.
So basically, for every dollar I was spending, I was making 53 cents back.
So that was absolutely terrible.
I don't feel like that was the way it started.
I didn't have that, but I could feel like I'm spending this much a month and I'm seeing this much of a jump in my mrr.
Like it felt like there was a pretty clear.
And the churn was pretty reasonable too.
I didn't have the exact data, but it still had a good feel to it.
And then that feel stopped being so good.
Omer (40:26.180)
So, I mean, you knew what the total ad spend was every week, every month, and you knew what your MRR was.
Were you not able to see how many customers were coming through these ads?
Dave Rodenbaugh (40:38.000)
That was one of the things that they did not give you, the transparency.
I could.
They would tell me that X number of customers came through, but I also was getting ones through organic search on the App Store.
And so the whole thing got mushed up together.
And so I could see that total customers on Shopify was like a hundred.
And they'd say 43 of them came through unpaid.
I had no idea which 43 were paid.
And that makes a huge difference in those calculations.
Right.
So if I assumed they were all my paid customers or all the best customers or all the worst customers, the numbers were very different on those calculations.
So I sat there just throwing my hands up in the air going, well, I think it's working.
Maybe it's working.
I don't know.
Is it working?
I can't tell.
Omer (41:20.230)
But it wasn't working.
Dave Rodenbaugh (41:21.830)
Well, in the end it was not.
And when I finally shut that off, I was saving myself thousands of dollars a month.
But my growth didn't tank.
So that told me that I was definitely pulling in some bad fit customers.
And that's the thing.
If I had been able to tell that earlier on, I probably could have looked at and said, oh, look, these customers, I'm paying this much to get them and they're churning out within 90 days.
Great that they pay upgraded to paid, but they were totally not worth it because I'm spending this much to get them and I'm only making this much on them.
The CAC to LTV is not worth it.
Omer (41:53.650)
And then the other way you grew revenue here was through partnerships.
Dave Rodenbaugh (41:57.650)
That's right.
Omer (41:58.690)
So how did you figure that out?
Dave Rodenbaugh (42:00.370)
Well, so this one, I actually took a cue from my friend Jordan Gall.
So you've interviewed him before, and he's run he's the former CEO of Carthook and Carthook was actually an old competitor of ours before they went up to the Upsell Cross Sell checkout replacement.
And so when I started on Recapture, I had already known Jordan for a while through our founder community.
And so I went and talked to him and he was actually very gracious and very helpful and gave me lots of tips and things.
But I was asking him, like, what were the things that you helped grow Carthook with?
And partnerships was very top of his list.
So of course I'm like, great, do you have any suggestions?
And he like started listing off all the ones that he had already done with Cardhook at that point.
And I'm like, cool, I'll go try some of those.
And they had already integrated with a bunch of other email service providers.
So it's not like it was going to hurt his business or it was going to hurt other people's businesses.
The other people that I was integrating with definitely wanted to integrate with as many people as they wanted.
So it was like folks like Recharge and one click Upsell and Crate Joy and stuff like that.
So we set out and you know, I had my tech lead do the integrations and we got to a point where we could do an integration pretty fast, like in under a week's worth of engineering time on the technical side.
So the rest of it was just negotiating the partnership and getting it out the door and writing the articles and stuff like that.
So building out a bunch of those.
It wasn't immediately obvious on launch which of those partnerships were going to be the lucrative ones.
So I just tried to get out as many as possible, trying to increase my luck surface area as far and wide as I could get it.
And some of those partnerships like took.
I had one partnership with Liquid Web where I basically was hounding their VP approach product for over a year to start the partnership.
And then finally once I got able to make that meeting and we connected and we did the whole thing like now they're one of my most lucrative partners here.
So that has been like a great relationship, but it took a lot of time, energy and patience and persistence.
Omer (44:07.200)
So.
So there are different types of partnerships from just a simple integration through to cross promotion of products and more strategic type partnerships.
So what was the structure of the partnerships that you discovered worked the best for you?
Dave Rodenbaugh (44:23.720)
Well, the deeper the level of, we'll say, integration with that partner, the better it has worked.
So I've had with the hosting company, basically it was they were going to feature us on their plugin install dashboard.
Like, here's the recommended plugins.
When you use us as a hosting service, we're going to recommend these plugins.
So we got on that list specifically for WordPress managed WordPress hosting and WooCommerce hosting.
So that made a huge difference.
And then they also did like webinars and articles and stuff like that.
So those, the more promotion you got, the more access to their audience, the better off it was.
And of course the, it was a reciprocal thing on my side as well.
So I would turn around and say, hey, use these guys for hosting.
So I would go and promote them to that segment of my audience where it was relevant.
And for those kind of customers or those kind of partnerships, that's where I saw the most success.
So I did another one with a WordPress e commerce solution and basically I got embedded into their onboarding series.
So we became their recommended abandoned cart solution for that platform.
And we were like email number five and their standard onboarding.
And so that just becomes like a constant source of customers.
And they did a blog post and we do webinars with them and all of that kind of stuff.
So the more cross pollination you get with the partnership, the better off that is.
That's the ones that I found a lot of success with.
Omer (45:51.550)
And doing that kind of partnership is not easy.
I mean, like you just said, you were hounding the VP of product for a year before you had one progress with one particular partner.
And we could do an entire episode just on how to do great partnerships.
But if just in terms of summary, if we were just talking about like the key takeaways, what would you say were the lessons that you've learned in terms of if somebody's going out there looking for partnerships, you need to get.
The deeper the integration you can get, the better there's.
Obviously you need to be persistent, you need to find the right people to talk to.
Things are not going to move as fast as you would like because your partners or potential partners are going to have their own priorities.
But beyond that, what, what are some pieces of advice that you could offer somebody who maybe wants to do something like that and maybe hasn't been able to get that type of partnership in place yet?
Dave Rodenbaugh (46:44.270)
Yeah, well, before I answer that question, I just want to reiterate that everything that you just said is so key to even getting in the door with a partnership.
Like the persistence piece of that, finding the right person, making sure that your priorities are aligned with their priorities, like those things already make this really super difficult.
So what I'm going to add on top of that is another piece.
But those three already are pretty hard obstacles to jump over.
I'll just state that from my experience with partnerships thus far.
But in addition to that, like you really need to have a value proposition that is two way.
So you have to be able to show clear benefit to their customers and they should have some clear benefit to you.
It shouldn't just be a one way partnership.
If you have only a one way partnership, I guarantee you that's a deal killer.
They won't even talk to you if they look at you.
Like you have to be able to pitch that on the very first time.
Even in your outreach.
You've got to be able to pitch and say, hey, I think that we could offer this value to your customers.
You got to really put that up front because if they don't see the value of what they get out of this partnership, forget it.
The partnership is off.
So that's the one thing that I think in addition to those other ones that you mentioned because that persistence piece cannot be understated like that.
It took me a year of two follow up every two weeks.
So how many emails is that?
Like at least 26.
Right.
That is a huge amount of persistence to get to that level of even having the conversation.
But then you have to have all those other things lined up too.
So yeah, all of those things have to come together.
Omer (48:18.670)
I think the two way value prop is so key and I would just add one thing onto that because I see I've seen a number of people trying to build these partnership and they're trying to go for the two way value prop but they haven't really done the work.
They haven't really tried to understand that partner's customers and their pains and how your product is going to help them.
So there's a two way value prop where you say our product is awesome and it's going to be great for your customers.
Okay.
And then there's the.
Our product is going to help your customers in these three ways to help them overcome these issues.
I think that it's just connecting the dots and going there, being really prepared with a pitch where you, you've been thoughtful about how your product is going to be of value.
Dave Rodenbaugh (49:08.920)
You really have to understand how their customers are struggling or what things their customers specifically are having problems with.
So if you don't know what that looks like, you're not going to be able to solve it.
You basically are just throwing something out there and hoping that you're hitting this little spot.
But if you understand what that pain looks like and you can usually like, you probably might be asking yourself, how can I figure that out?
Well, you can talk to them and say, what are the things that your customers really struggle with around this piece of.
And obviously this piece is what you are solving, right?
But you have to couch it in a generic way and ask them, hey, what are they really having a hard time with here?
And then you can come in and say, well, guess what?
My solution fixes X, it fixes Y, it fixes Z.
And those are all things that you just told me are problems.
So that makes it a value proposition for your customers and valuable to us.
Omer (50:02.380)
Yeah.
All right, we should wrap up.
We've been talking for quite a while and I think we could keep talking.
So let's go on to the lightning round.
So I think you know the drill here.
I'm going to ask you seven quick fire questions.
You ready?
Dave Rodenbaugh (50:14.530)
I'm ready.
Go for it.
Omer (50:16.130)
What's the best piece of business advice you've ever received?
Dave Rodenbaugh (50:19.810)
Talk to your customers.
And you have to do it in person.
Talk to your customers, period.
That's it.
You will never learn any a better way.
Omer (50:28.690)
What book would you recommend to our audience and why?
Dave Rodenbaugh (50:31.650)
Oh, that's easy Traction by Gino Wickman.
So it gives you the entrepreneur's operating system and it really helps you organize how your business is going to run.
And the great thing is it scales with your business.
So that's what I've been using here for the past couple of years.
Omer (50:48.220)
What's one attribute or characteristic in your mind of a successful founder?
Dave Rodenbaugh (50:53.340)
Grit.
Persistence.
Omer (50:55.420)
What's your favorite personal productivity tool or habit?
Dave Rodenbaugh (50:59.100)
You're going to laugh at me for saying this, but I love post it notes.
They're simple, they're idiot proof.
You can't ignore them.
You can't forget the app.
It doesn't require batteries or anything like that.
It's just it's a relatively easy, low friction organization tool for me.
Omer (51:15.280)
What's a new or crazy business idea you'd love to pursue if you had the time?
Dave Rodenbaugh (51:18.880)
I would love to build a new e commerce platform for WordPress that is not WooCommerce.
Omer (51:25.040)
What's an interesting or fun fact about you that most people don't know?
Dave Rodenbaugh (51:28.640)
Well, looking at me, you would not guess this, but I actually hold a black belt in kung fu.
Omer (51:32.960)
Wow.
What mess with you?
And finally, what's one of your most important passions outside of your work?
Dave Rodenbaugh (51:39.920)
My wife and I love gardening.
Omer (51:41.760)
Awesome.
Thank you for the great conversation and particularly for sharing a lot of the mistakes that you made along the way.
I think a lot of the gold and the nuggets in helping founders is hidden in there and that's a lot more valuable than some of the stuff that we talked about.
People tweeting how to build a seven figure SaaS business in three simple steps.
So thank you for sharing that.
If people want to learn more about recaptcha they can go to Recapture IO and if folks want to get in touch with you, what's the best way for them to do that?
Dave Rodenbaugh (52:13.420)
I spend a lot of time on Twitter so you can hit me up.
Averodenbaugh My last name is spelled R O D E N B A U G H awesome.
Omer (52:23.280)
We'll include a link in the show notes to that as well.
Dave thank you so much.
It's been a pleasure and I wish you continued success with your business.
Cheers.
