How WhatConverts Reached $3.6M ARR and 40,000 Customers While Staying Bootstrapped (Interview with CEO Michael Cooney)

Event intro and context

Nathan Latka

00:00Founders, what's going on? You guys know I love in person events and they are back. The recording you're about to hear is from our most recent event where we had hundreds of founders come together, share intimate details, templates, KPIs, OKRs about their business, and it was something special, something special. We'd love to meet you in person. If you want to see the next live events we have coming up via our schedule. The link will be down

00:23below in the description. If you're listening on iTunes, check this out on YouTube, you'll see the links in the description. Or you can just Google Founderpath or Latka next event. We'd love to see you in person. In the meantime though, enjoy this recording. It's a good one.

How WhatConverts was founded

Michael Cooney

00:36>> Good morning. So I'm Michael Cooney, one of the cofounders of WhatConverts. So how we got started is I was running a digital marketing agency. And I had a web developer that worked for me for about seven years. He got an offer from corporate. He went away. And eight months later came back and he's like, Corporate isn't working for me. So I'd like to come back but I don't want work for you. I was like, okay. He

01:03>> says, do you have any ideas where we can build a company? And I was like, as a matter of fact, that's just come from a client meeting And we had doubled the leads for this client in our campaign. I walked into the room and I said, hey, we doubled your leads. Isn't that great? And he's like, I don't know. Were they good? Were the leads any good? I'm like, yeah, sure. But he says, can you show

01:26>> them to me? Well, I can, but to get those specific leads, you know, there was like 500 leads and I'd have to get 100. It was like gonna take three hours of work. So I was fed up. And I said to Jeremy, you know what, this lead tracking and reporting issue has been going on too long and we need a solution. So I said, if you can help us, if we can track all phone calls and

01:49>> forms being filled in and chat back to the marketing responsible, store all that and report it, I think we can build a really strong company. And so he went away and the first thing he started was like how can we track every form on any website across the world without requiring them to change the form? So he went and worked on that for a week. Came back to us, I got it. We got it organized. And

02:12>> that's how we started the company. So we went and played a round of golf. And at the end of the round of golf, Jeremy and I, we had a discussion. We said, Look, how are gonna set this up? We said, Let's do fiftyfifty. He'll develop the product and I will go ahead and do the sales and marketing. So we wanted to do Bootstrap. And through our journey, this is the growth. You can see in the first

Early growth and the scary phase

Michael Cooney

02:35>> year, we started in March 2015 and we grew almost to $100,000. And I've got little labels there. So the first million, it took us four years to get to the first million because we're still working in the agency while we are building the product. And I call it the scary phase. It's scary because there's a lot we don't know. And there's so much advice going on and a lot of advice you get on Twitter turns out

03:00>> to be wrong. So,

03:04>> also, in addition to not knowing what we're doing and just trying to figure out the SaaS space, we came up against well funded companies. So there are a lot of companies in this space. You know, call tracking was one of the areas where there's a lot of well funded companies. And it turns out to be the feature that converts really well for us. So, on all these companies, there's a billion dollars of funding. So, I call

Competing against $1B in funded rivals

Michael Cooney

03:27>> it the scary phase because we're like, well, should we get funding or should we stay bootstrapped?

03:33>> We chose to stay bootstrapped, and the reason for that is, number one, over the years I've heard stories of founders starting companies, getting investments, and if they don't get traction, they're just in for a whole lot of hurt. And we weren't sure if we would get traction. We didn't know if the product would be well received. So that was the first thing. We wanted to avoid the risk. We wanted to build it in our own time

03:54>> and make sure

Nathan Latka

03:57we got traction. Michael, real quick. I'm in the back of the room to your left. There's a lot of people in this room. Actually, your hand. Guys, how many you started your SaaS company as an agency or professional services? Raise your hand. This is like by far the number one theme from successful SaaS founders starting as an agency. You did that. Speak spend more time speaking about how much revenue did the agency do? Are you still running

Why the founders chose to stay bootstrapped

Nathan Latka

04:14it today? And how did you use the agency contracts to learn about the SaaS product you could build?

Michael Cooney

04:19>> Yeah, sure. So, I mean, running an agency, I actually started an agency in South Africa, is still going. Now my brother runs it. And I have one in The USA as well. So, combined, we were less than 2,000,000. We're probably about 1,500,000. The agency in The USA, I just still manage about a handful of clients, and I sort of dog food our WhatConverts product with them. And then, South African agency is still running. They're about a

04:46>> team of 20. So, I think I covered everything. Anyway, so that's the reason we decided to bootstrap. Cause we're still getting some funding from the agency, and we could build it out at the same time. We also wanted the optionality. We didn't want investors getting involved and changing, you know, controlling how we develop things. So, we just wanted to stay focused on sorting the problem we had. Then, the other thing is we wanted to grow value

05:12>> before we got funding. So, the reason for this is people say to you, Do you want a tiny piece of a huge pie, or do you want the whole pie? Well, we're like, Well, we want the whole pie, and when it comes to the stage, we want a huge piece of the huge pie.

05:26>> Okay.

Problem, product, promotion framework

Michael Cooney

05:28>> So, when do you decide how you can skip funding? So, bootstrap versus funding. And I'll put it into three distinct buckets. You've got your problem, your product, and the promotion. So, with the problem, when you create a product, you're solving a problem. And if can't, if there isn't a problem to solve, you're gonna find it difficult to get your message across. You're gonna find it difficult to get sales. So, really have to have a real problem,

05:53>> and you have to understand that problem. And it really helps if you've lived that problem. So, as the agency, I'd lived that problem for twenty years, and more funding wasn't gonna help me define the problem any better. The next step is the product. Would having funding help us build the product? Well, my arrangement with Jeremy was he was gonna build the product. And we could've got more developers on the thing, but what we found is we

06:21>> sort of lucked out. Jeremy had worked for me for seven years so he understood the problem really well. And he had the development skills. So, that focused development allowed us to create a product and innovate where we came across certain features. And we just felt that if we had other developers who didn't understand the full problem, we wouldn't have created as good a product. So, it was a slow burn like getting the product developed. But at

06:46>> the end of the day, we feel that we have a much better product. And you'll see as I speak that that product allows us to compete with well funded companies. The last one was promotion. This is one area where we do feel pressure from well funded companies, and I'll show you an example of that in a bit. So, let's dive into the problem. So, by living the problem, what this enabled us to do is not only

Living the problem and 60% annual growth

Michael Cooney

07:12>> develop a great product, but it's also enabled us to develop the messaging. When we're talking messaging, we're talking to our target market. We know what they're feeling. We can position the product to solve the problem very nicely. So, that's allowed us to grow 60% year on year since we started. The other thing I've got here is avoid shiny objects. So, once you start a product and you get customers, what you're going to find is everybody's got

07:39>> ideas. And you have agencies come to you and they say, Gee, sorry, I'm not very good at a mic. You'll have agencies come to you and say, Hey, we need you to develop this this feature and if you do, you'll grow 10x. And you get lots of these, lots of suggestions, and you have to have a framework on how are you going to avoid these shiny objects? So, we call this our one hundred year test. Can

08:02>> I go back?

08:06>> There we go. Okay. We call it our one hundred year test. And it's just a simple framework where it's like your core value of your product. If you look one hundred years ago, was it true or was it valuable? If you look 100 years in the future, do you still see it being valuable? So, we took, for instance, call tracking. This is one of the main features we have. And we look back one hundred years ago, was

08:27>> call tracking valuable? Well, it wasn't really anything. So, no. Well, let's look 100 years in the future. Is call tracking gonna be valuable? And I think call tracking's already becoming a commodity. Is it still gonna be valuable? I doubt it. So, call tracking isn't our core value. Then we look at, okay, was marketing valuable one hundred years ago? Absolutely. Will marketing be valuable one hundred years in the future? I believe so. And if it's not, Google's in

08:55>> a lot of trouble. So, we see marketing as our core value. And how we determine our values is we collect a lot of lead data and attribution and we use that to make better marketing decisions. So, it's sitting under the umbrella of marketing. So, our core values is surrounded by, or it's around our lead data and marketing attribution. So, that's our one hundred year test. The next thing. So, this is an interesting story. So, Jeremy and

Building the best customer support in SaaS

Michael Cooney

09:25>> I were playing golf again. Jeremy's a golfer. I used to be a golfer. Now, a runner. I plan to go back to golf. But, we were walking from the ninth to tenth hole, and I remember this meeting very clearly, and Jeremy turns to me, and he's a man of few words, and he says, Michael, we have to have the best customer support of any software company. And I'm like, Yeah, sure. Yeah, it's important to have support.

09:46>> He says, No, you don't understand. He says, I absolutely hate it. When I send in a support ticket, it takes twenty four hours for them to respond, and then the response is not helpful. So, we are gonna have technically competent support people that respond like within fifteen minutes. And I was like, Settle down, Jeremy. Okay. So, kudos to Jeremy. I mean, he's made sure that this happens. So, in the early days, people sent in support tickets.

10:14>> He would respond within fifteen minutes. And our support team is not really a support or a customer service team. We call ourselves solution providers. So, if somebody comes in with a problem, we understand what are you ultimately trying to achieve, And then we provide a solution so when they walk away, they have a real solution. And this has enabled us to become a real growth lever and it's become a competitive advantage. And if you go to

10:38>> G2 and you look at the reviews about WhatConverts, most of them talk about our support. It really stands out. But they also talk about our product as well. So, here's one example.

10:50>> Just talking about how great the support is and how good it is. And we get this feedback quite often. So, that support has really been a great endeavor. It's almost as good as having a super product feature.

70% free trial conversion rate

Michael Cooney

11:04>> So, the product, having a better product, we believe,

11:10>> has really helped. And in one area that's really helped is, of companies that start with us, 70% that start with a free trial, they become customers. So, we didn't think anything of this, but when I shared this metric, or this conversion metric with some people, they were astounded. You mean of every trial that you get, 70% become customers? And we're like, yeah? And they said, okay, that's incredible. But, I think it comes back to that technical

11:40>> customer support and onboarding, as well as having a great product. So, what I mean by a better product, or a great product, you'll see this is our menu, our features, our feature set. And you'll see we have three buckets. We've got lead tracking, lead management, and lead reporting, which is analytics and insights. And so, what we do is we use call tracking as a mousetrap. The reason we use call tracking as a mousetrap is it converts

Land and expand through agencies

Michael Cooney

12:07>> really well. It's the only lead type that requires a third party software to work. So, we get people in for call tracking at a low fee. It's $30 a month. But once they join us, we automatically track their forms as well. Or we get their permission. So they join us for call tracking and then all of a sudden they're getting all their leads tracked with all their marketing attribution and then they're getting this great reporting as

12:32>> well. So it's just by having that great product and it's obviously better than our competitors who are well funded, has allowed us to grow and compete even though we're dealing with all these well funded competitors. Another benefit of having a better product than your competitors is you can use a land and expand strategy. So, our land and expand strategy is around marketing agencies. We don't have a sales team, or we haven't had one. We plan on,

13:00>> we're currently building one. But in the early days, it was pure software sales. We didn't have a sales team. So, the idea was when an agency shows interest, our focus was, let's just get one client. Just try us out in a free trial. We're not asking you for money. We just ask you to try and test us with one of your clients. So, it's a very soft sell and the hurdle's really low. It's a free trial.

13:24>> Come on, give it a good go. And we even, it takes time. There's friction in time getting somebody to try your product. So, we said, Look, it's gonna take you five minutes and we'll do the rest of it. So, we show the benefits with one client. They clearly see that the product's a lot better. It gives you a lot more than they expected. They came for call tracking and they get a whole lead tracking platform. And

13:46>> then, they bring over all their clients. So, this has enabled us to be very focused on targets that give us multiplication. So, we don't have to have a huge sales team. Just the ones that come in. We just get a lot out of them. And this is how we measure it. So, is our land and expand chart. It's basically monthly revenue. Interesting thing on this chart, you see the little dip at around sixty months? That's COVID.

14:15>> So, we're going nicely. And what you'll see is there'll be staged as sort of linear growth, and then there's these bumps that just increase. So, what happens here is we offer a usage based pricing, and we have very low churn. So, we continually add new customers and that's the linear growth. But the way you see sort of the exponential growth, that's existing customers using our product more and more. And we just found that the usage based

Usage-based pricing and revenue expansion

Michael Cooney

14:41>> pricing really helps. So, what we found is people start at $30 a month, but on average, they end up spending four to five times that a month, with some other customers spending in many thousands per month.

14:55>> And this led to an acquisition offer. Okay, sorry, I've got click troubles.

The $15M acquisition offer and the decision to decline

Michael Cooney

15:03>> We went on this podcast. I don't know if you're familiar with it. It's a guy called Nathan Latka.

15:10>> So, we were on his podcast, we shared revenue, and then after that, a competitor came along and made us an offer of 7 x. So, we were doing 2,100,000 ARR at that stage, and they offered us 15 to 20,000,000. And our response was, We appreciate the offer. This is not a small amount of money. This is great. But we like the game. We enjoy the game as we find it rewarding. And if we take the money,

15:38>> we're out of the game. So, I know Henry just said, It's not fun. I'm telling you, man, being bootstrapped, growing, and being profitable is a heck of a lot of fun. I enjoy it a lot. So, we kept on growing. So, from that chart, you'll see here that we are now at we're actually at 3,600,000 now.

16:00>> We're glad we didn't take the money. So, if you take a seven or even a 10x multiple, you can see the valuation is a lot higher than if we had taken it earlier. So, the third bucket is promotion. Now, you're gonna ask, What are you talking about Google Ads? Everybody does Google Ads. It's crazy. But there's more to Google Ads than you realize. And before I get to that, the next point down there says, our agency

40,000 paid companies and Google Ads strategy

Michael Cooney

16:24>> focus, because of the land and expand, we have a fairly small amount of customers, but we're serving 40,000 paid companies. And that's purely from the multiplication effects of going through agencies and franchise companies. So, our software is currently installed on 40,000 company websites. Okay, let's get into Google Ads. This is actually year one, this chart. And there's a few key things here. You can see the green line at the bottom. We started with a couple $100.

16:56>> Now, why Google Ads is important to us is, obviously, conversions. And search marketing, I call it the Triple T effect.

17:05>> You've got targeting, timing, and it's trackable. So, you're targeting people right at the time when they need the product, and you can track everything that goes on. So, what happens here is you dream up any keyword that you think will convert. You put it into Google. You set a budget. You create the ads. Anybody can do this themselves. And then, watch for the data. Which keywords get the most impressions? Which keywords get the most click through

17:33>> rate? And which keywords get the most conversions? That data is so key in determining your messaging, determining what you target, and determining what content you're gonna develop for your organic strategy, which comes next. So, in year one, what you'll notice is we have a 64% impression share. And what that means is every time somebody searched the keywords we were targeting, 64% of the time we would be somewhere on the page with our ad. And that was

18:02>> twenty fifteen. Our impression share was great.

18:06>> And we actually came at the tail end of the call tracking space. Call tracking went through a big disruption in 2011. It was a hot trending topic. We got in at 2015 fairly late. And for the first year, we got great impression share. But let's see what happens year two. The impression share drops to 28%. And this is where we felt the pressure of funding. The competitors decided they want to buy market share, and they just

18:34>> jacked up the cost per click for things like call tracking. So, before, it was $8 for the top spot for call tracking. Within a year, and with the funding, that top spot was now $120 per click. And, when you're selling a $30 a month product, and you may need 10 clicks to get one sale, you're spending $1,200 to get a $30 a month sale. It was like, Yeah, that's a bit crazy. However, even with the lowest

19:04>> share, we still got more conversions than the year before. We had to spend more and we're still getting that valuable data. But we then started looking at Google organic strategies. So, in year two, these are our top four marketing channels. One, the one that brought the most was Google Ads, even though we were under pressure there. The second one is direct traffic. So, here's a little secret and an insight that many people don't know, is when

19:32>> you advertise, your direct traffic increases. So, we actually attribute a portion of our direct traffic to our marketing channels.

Nathan Latka

19:41Michael, to your left, what percent?

Michael Cooney

19:45>> That's just whatever. 30%. Wait,

Nathan Latka

19:48you just made that up. Come on.

Michael Cooney

19:49>> Yeah. No, I sort of, I just, what I've seen is, and obviously I see the accounts of many different companies. For example, I've got one company. It's a company called AirSkirts that use us. They started marketing with us and they had a very small direct portion. They started doing Google Ads and that direct portion just increases. Pretty much the similar amount as they're putting into Google Ads. They started with a budget of $5 a month. They

20:15>> ended with a budget of $35,000 a month. And because with our software, can track it. It gave them the confidence. But what was interesting is as the Google Ads increases, so does the direct traffic increases. So it's almost

20:29To

20:29>> give you an answer, Nathan, it depends.

Nathan Latka

20:33I'm not publishing this podcast episode. Just kidding. That's great.

Michael Cooney

20:37>> Is that because the secrets are too valuable?

Nathan Latka

20:39There you go.

Michael Cooney

20:42>> Other thing you'll notice is the blue is Google organic. And what you find is insights from the keywords, you start building content around that. And because you know the problem, you can really provide authority in the content pieces you create. It starts developing traffic.

Google Organic becomes the top channel by 2021

Nathan Latka

21:01Go, sorry, real quick. Before we go on, no one knows and this is my fault because I edited your slides on the last slide. What is the y axis here?

Michael Cooney

21:07>> The y axis is the number of sign ups.

Nathan Latka

21:09Free or paid?

Michael Cooney

21:10>> Paid. It's a free trial, and then 70% of those become customers.

Nathan Latka

21:15Okay. There you go.

Michael Cooney

21:17>> Okay. Last year, this little label says 2022. This is actually a chart from 2021. These are our marketing channels that drove our sign ups. So, you see Google Organics now in the first spot. And Google Organic is really important. What you'll find is, in the first year, Google Ads is

21:38>> great. You can pay to play. But as you grow and you keep on going, you add content, Google organic's just gonna keep on delivering. So, we're getting sign ups from content that we added five years ago. And the key thing, why I think it's a hedge against well funded companies, is you can really focus on the top keywords that deliver a lot of value. And even if your competitor does a similar amount of thing, there's 10

22:02>> spots in organic. So, if you get second or third or fourth spot and they get the one or two, you're still gonna get more than enough to compete with them. So, I really recommend content marketing, Google Organic, using your authority in the space to create great content. Another secret that well funded companies may be able to create 1,000 pages of content. What ends up happening is a very small percentage of those pages actually generate the most

22:32>> of the value. So, if you can find out what pages generate the most value, you can be very effective. So, next goals.

22:42>> When we started the company, our goal was to get to 2,000,000 ARR. We thought with two founders it was gonna be terrific. And we got there in about, I think, six years. And the interesting thing is, once we got to 2,000,000, we thought we would've made it by then. We got to 2,000,000, and Jeremy and I went for a round of golf. And we discussed this like, hey, we're 2,000,000. This is what we thought. What do

Next goals: $10M ARR and mission alignment

Michael Cooney

23:07>> we do now? And we had a fairly small team. We were nicely profitable. We could live a very nice life, or we could exit. And we were both like, you know what, we're just getting started. We've barely scratched the surface of what we set out to do. The next goal is 10,000,000. This was set a year ago. And so, we're one year in. So, we're now at 3,600,000 ARR. And, the interesting thing is, if we just

23:31>> apply a 70% growth this year, we'll get to 5,900,000. Another chart says 5.2, but it'll be 5,900,000. And then another 70% year of growth will get us to 10,000,000.

Nathan Latka

23:43Go forward one slide, Michael. What was that? Go forward one.

Michael Cooney

23:47>> Oh, forward one.

23:51>> There you go. That's the one. Okay.

23:55>> Thanks, Nathan. Okay. So there's a 10,000,000 goal. That's the next one. Some interesting things. As your team grows, new challenges come about. And on the previous slide, we wanna be more mission driven. The reason for that is I sent a I did a homework assignment for our team. I said, Give me the five top benefits agencies have using WhatConverts. Our team went away, they did it. I collected all the benefits together, and we came out with

24:21>> 16 different benefits. So, you'd think that's a good thing. You know, Wow, we've 16 different benefits. No, it means we're totally misaligned and nobody knows what we really do. So, we've realized our product messaging has a few issues. We really got to nail that down. And then, yeah, just get more mission focused on what we're trying to achieve with our company.

24:44>> Okay. So, I just showed you, if you've got a problem that people really want to solve, you can create a product that solves that problem. That means you're gonna be able to make sales very easily. And then, you just multiply that effect with some promotion and live a happy bootstrap life.

Nathan Latka

25:02Guys, give Michael a round of applause.