The best advice I have ever heard for founder entrepreneurs. Balsamiq’s Peldi

Peldi, Founder and CEO of Balsamiq talks about all of the things that he worries about, some of the things he doesn’t and the secret to sleeping well at night.

If there is a better, more concentrated source of advice for the founder of a startup or growth business, let us know. We will give the person that offers the best answer a guest pass to this year’s Business of Software.

My notes from the conference including some of the slides.

Transcript of Peldi’s talk.

Joel Spolsky: All right. How many people use mockups, Balsamiq mockups? Is that everybody yet? OK. What? That was like a little bit less than all. OK. For the other three of you, let me explain what it is. And I don’t normally do advertising for the speakers here. But this is a brilliant product. Well, actually let me tell you a story about something a long, long, long time ago. Does anybody remember ERwin? Does anybody use ERwin? Some of you used that. So this was a wissy-wig Windows-based application. You can still get it. It’s like $12,000 because it’s Computer Associates and they’re just milking it. It was a wissy-wig thing where you would draw entity relation diagrams and you’d put your tables and your columns in there. And there was absolutely no way to make an ERwin diagram look good. It was impossible. Because you had to align everything manually and then you had to like select like the four little boxes and then click, “Align Left”, and then you had to select the four little boxes and say, “Make same width,” and then you would get real tempted to make the table names be bold. And then that wouldn’t look really good so then you’d try Helvetica and then you’d come up with a color-coding scheme for the thing and you would spend 98 percent of your time basically doing PowerPoint when you’re supposed to be diagramming your databases for some reason, I’m not sure why. But, (Laughs) I guess some people do that. And if you ever tried to like automatically import a database which it could do for you, you got all your lines were crossing and everything was all a big mess and you spent four and a half hours untangling it and then the fonts were bad and the default font was ridiculous and you couldn’t read it. And it was just a complete nightmare. So Mockups is the exact opposite of that. It’s a way to mock up it’s not for databases it’s for your user interfaces. And it forces you to use one font which is Comic Sans. (Gagging noise) It forces you… everything is sort of scribbled so nobody thinks that this is what your app is really going to look like. When they look at your Balsamiq Mockup they understand that it’s a friggin’ mock up and that they should be paying attention to the words, the relative position of things, what the buttons are and what the functionality is and not fonts, typesetting, choice of colors, etc. So it’s a really, really brilliant app for mocking things up and I’m really excited to hear from Peldi. [Applause]

Peldi: All right so, you don’t know this Joel but I was recording the whole thing so it’s going to go on the website tonight.

So I know there’s no break so I put in a little bit of music at the beginning if you want to stretch or go to the bathroom. We need audio urgently. I’m going to restart because the beginning is the best part. But I’m serious about getting up if you need to.

Audio: Expectations? Expectations, watch. (Music) (Applause) (Laughter) (Music) (Laughter) (Music) (Laughter) Sp 2: Yeah. (Applause) So this was, Bobby McFerrin and I sort of took the title of my talk from what is most famous song. He’s a brilliant man, I love this video. It still gives me goose bumps.

I’m going to start with a story. Parents in the room might relate to this but I think it’s a relevant story which is that, I had a baby five years ago and then you’re in the hospital and it’s very blurry what’s going on and then you come home. First of all it’s kind of incredible that they let you take your kid home out of the hospital without any sort of license. How can that be legal? I really don’t understand. So then you get home and it’s the first night and one thing that nobody told me at least is that newborn’s respiratory system is not fully developed and so when they sleep they’re totally erratic, they sound like (breathing noises). And you’re like, “OK, something must be clearly wrong. We’ve got to call the doctor right now. This is horrible.” Right? And then two minutes later they get totally quiet and peaceful and I’m like, “OK, now they’re dead, obviously.” (Laughter)

So, they make noise you worry, they don’t make noise you worry some more. You know, welcome to parenting. But then you know, you get used to it and you’re able to sleep on it and then the baby becomes this amazing kid and adult and they’re so independent and they’re able to do crazy things and you’re so proud of them. And yet you worry. Like, “How deep is the water there?” And, “What’s going on?”

So, my name is Peldi and I am a startup founder. You’re supposed to say, “Hello Peldi.” (Laughter) This is sort of a therapeutical group session here or something. All right. So first of all I want to thank Neil and Joel for having me. This is unbelievable. And I can’t understand why they got me but I do have a hint which is that I went to speak at Red Gate, Neil’s company last year and after the talk this woman came up to me and said, “You know we get a lot of people come to talk to us and they’re all so polished and well-dressed and they really seem to know their stuff. And they’re at a level where… I can never be like them but you.” (Laughter) You! Like this I guess. So I can be that guy. I’m totally comfortable with that because I can’t quite understand why this is happening to me.

So the other reason why I’m really excited about being here is that when I go and did all these talks, it was all practice for today, in my mind, I have this slide where I say you have to find your heroes and follow them and read their books and follow them on Twitter and everything, and this is the slide. I swear I didn’t touch it. OK, let’s see. Neil, Seth, Scott, Jason, Dharmesh and Joel. Right? So this is like, my Pantheon is all sitting here and so I’m totally crapping my pants. (Laughter) Excuse the Italian expression. So let’s get started.

On today’s agenda. First I’m going to get rid of,. you know talk about a couple of things you should not worry about, not worth your time, don’t worry about it.

But then, we enter the epic journey of fear and worry. We’re going to start with early-stage fears, growing-phase fears, enduring concerns that never go away and my current set of worries in the hope that you guys can help me out a little bit.

All right. So let’s get started, I have a lot to cover, so we’ll go pretty fast.

Things not to worry about.

Asking for money from customers. You guys pretty much get it. But our industry is so weird where we’re like, “I’m going to do free and then somehow we’ll make money.” Dude, it’s normal, OK? You go buy bread and you pay money. Buy flowers… same, you know. What’s the big deal, right? But I understand in the beginning I couldn’t believe anyone would part with their hard-earned money to give it to me, you know, why would they do that? And then… sorry about the cheesy stock photo but I put an alert there… it can be like this. Right? (Laughter) That looks like me.

So anyway, another thing not to worry about is pirates. So as you notice, I’m fully compliant. I have the obligatory cat photo, I’m dressed just like Jason, I’ve got the khakis, I’m doing the best here. But anyway, pirates. Don’t worry about the pirates really. I mean you can’t fight them technically, they don’t hurt the bottom line at all. In fact, I get Google alerts for Balsamiq, right? And half of them is “Download the serial,” or “Key generator,” or whatever. And I notice that the number of those emails that I get is pretty much parallel to the revenue. So if those slow down, I’m going to start worrying. So don’t worry about it, just take it… everybody says this

Another one is lack of time. Well guess what? It’s not just your problem, it’s the problem of the generation. I think they need to start teaching GTD in high school or before that even. So you know, it’s never going to get better. This is something Dharmesh told me. And so don’t worry about it. Somehow you’re going to figure it out. All right.

Let’s start with the real stuff, early stage worries.

Making the jump. This is terrifying right? I’ve got a nice, cushy job, I’m getting promoted, you know. And I’m pretty good. I’m good enough to think that maybe I’m able to do this, so super-scary times. All right? So one advice I have if you’re considering making the jump is this little book called, “You Need to be a Little Bit Crazy: The Truth About Growing and Starting Your Own Business.” So in 2004, maybe, I… you know I was totally pumped and I thought, “I’ll either go to MBA, take an MBA or I’ll start my own thing.” And then I bought this little book. And I made it to page 16 before I was like, “No this isn’t… duh, duh , duh, duh, mm.” It really, really scared me. I closed the book and I said, “OK, this is not for me at all. Actually my job is pretty good.” And so I stayed at my job for four more years. And those four years were fantastic because I had a bunch of failures and I learned a whole bunch of other stuff that had I not known it I would’ve failed, right? Right away. One of the things that I learned during these four years was to be wise enough not to read the book again. Excuse me. So this is really helpful, if you’re debating, I like this little book. It helped me.

Another thing that to do, when I was really thinking about starting is a business plan. This is it. It’s the ugliest PowerPoint thing, it’s 20 slides. It’s something like, “OK, what do I believe? What is my value proposition? What is my customers? How’s the revenue expectations?” This is something that you know, I have no idea how to do any of this but I thought it helped me structure my thought about what I wanted to do. Why I wanted to quit my job. And this was very helpful because I was able to show it to a few people that I admired and nobody said, “You’re nuts.” Right? So that was a good sign. And it took like a couple of days to put together, right? It’s not a huge investment. If they said, “You’re nuts,” I would have said, “OK, maybe next time.”

Another thing that this is important for is revenue projections. And it sounds crazy but basically it means how much money do you think you’re going to make over time, OK? And so I was doing those in Excel, watching TV with my wife and I was sort of putting some numbers in and I was like, “Mariah, this is nuts. What am I doing? We’re going to be dirt poor. There’s no way. Like this is stupid.” And then like an hour, “But maybe… what if I put in some like maintenance recurring revenue?” Five minutes later I’m like, “Whoo, this is pretty good.” So the number were completely wrong, OK. I had 150 customers after two years, we just passed 28,000 after two years so way wrong. But even with those very low numbers, that was enough for me to say, “OK, how much am I going to be in the hole before we’re profitable?” Right? And that was lower than what I had saved up. So that was a good exercise to convince myself and my wife that, “Yes, we could take this risk,” and then, who knows? Right? So I would recommend just to help you frame your thoughts.

The other thing is read. Read, read like crazy. It’s… a bunch of these books are by these people, which is kind of interesting. But it’s the best way. It’s kind of like parenting books, you want to read them before you start because you’re not going to have time later, before the baby comes. And this is great ROI. For $30 you get Guy Kawasaki telling you everything they know. Or for $30, their best work. I totally recommend it. But then there will come a point where you’re feeling like, “OK all of these books all say the same things.” Or you become like Jason and you say, “Hey these things are contradicting, I don’t trust…“ Those are both signs that, “Hey, maybe you’re ready.” Maybe you’re ready because you can only learn so much from books, you have to start sort of… make the jump at some point.

Another common problem is finding advisors or cofounders, right? People ask me, “How do you have a Board of Advisors?” Well, guess what, these are people that I worked with for seven years and that I really admired and that I earned their trust and we became friends and when I quit, I said, “Hey, I’m going to miss you. I’m going to miss working with you. What can we do? Can you be an advisor?” There’s no formal agreement or anything. We’re just friends and we get together once every month or two, Skype call for an hour, but I know that they can be there for me and it makes me look good on the website that I have… because I started just by myself, single founder so, “Yes I’m alone but I have these people that I can go to for help.” So you know, the secret here is to maybe stay at your job a little longer so that you meet more people. You build your network.

Another one is raising funds, right? At the beginning… I need funds. Well my advice is maybe don’t. Maybe pick a smaller problem or maybe stay… when I decided to quit, I decided, “OK, I’m going to quit in ten months.” And then I sold all the stocks that I had in the company. I took all the 401K and put it into cash. I started amassing all the cash that I could because I wanted to have enough in 10 months to be able to quit. I wanted to have a year’s worth of salary before I quit. In the bank.

So again, so the lesson here is do the time. OK? Pay your dues. So here’s our chart for our cash flow. This is the last three years. I launched in June, 2008, so it’s 27 months. And this is the cash flow and this is the number of employees of the company. And you know $2 million…”Whoa, I want that.” I can’t believe that’s my chart, by the way. But you see this and you think, “It’s a success.” Right? “This is the definition of internet success.” Well, I would like to put it in context a little bit. So this is the same chart but this is the time when I started my job at Macromedia in 2001, right? 2002. January, 2002. And I spent seven years at Macromedia. Then we became Adobe. Learning and failing and learning. And trying to be a sponge and understanding how software is sold and marketed and all that it takes. Seven years, it’s not just two days. And here’s the same chart. This is when I started programming, oh it doesn’t come through very much, but I started coding when I was twelve. My dad bought me the, “Teach Yourself Basic,” floppy disks. And so I noticed that I reached the sort of 10,000 hours where I became a, you know, good at what I was doing. You know about that, right? I reached them right around there. Dude it’s been 20 years. No wonder. Right? So it took me long enough. But without that I wouldn’t have been comfortable, I was thinking, “The coding part. I can do that. I’m comfortable with that.” But then if I didn’t have that I wouldn’t have been comfortable jumping into the complete unknown, right? Because I had one piece I knew I could do. Last chart is, this is my whole life. So not that big of a difference. I’m not saying I’ve been working on mockups ever since I was born. But it’s also not an instant success. This is sort of the pinnacle of my career. The culmination of a lot of years work. So my advice is, do the time. Time is un-shrinkable. All right.

Next fear is work/life balance. This is a good fear to have because it’s going to suck for a little bit. Make sure that your spouse, your partner, your family, they know that you’re going to be pretty much unavailable for the next two years or something like that. And make sure that everybody’s on board with that and… but it does get better. And if it doesn’t get better, that’s a really bad sign. One trick that I have in this area is to work while they sleep. Get up before they do. Go to bed after they do. It’s the best kind of work because… anybody does this? I’m curious. Yeah man. You know it’s great because they don’t even know you’re ignoring them. (Laughter) (Clapping) It’s totally guilt free. I love it. I love it. Sure it ends up that you never sleep, but that’s all right, whatever.

So no niche is too small. All right this is a common thing that I hear from people who just start up. “I need to build a software for all small business because if I only target a subset that’s not enough.” Or even just, this is very common where you think that if you only target a few people it’s not going to be… and you’re probably going to get one percent of the market because you’re new and insecure, then that’s not enough. So you have to expand and make your idea a little bigger. Big mistake. One is this article, Kevin Kelly, I don’t know if you know about it, “1,000 True Fans.” He talks about the music industry. But any sort of artist, and we are all artists here. What he says is you really need a thousand people to buy whatever your output is and say if people spend $100 a year on whatever you produce, that’s $100,000. That’s a good salary for one person, right? A thousand people is not a lot. There’s 300 here, already. It’s three times this room. So not a lot. And then, where’s Patrick? Bingo Card Creator. OK? This is a software for people who need to make Bingo cards. How many here have had that need? (Laughter) This is like the tiniest, tiniest thing you could think of. Well guess what? If you’re an AB testing genius… where are you Patrick? Stand up. Genius. So now he went full time. He’s able. It took him awhile but he’s able to sustain himself on Bingo cards, all right?

So no niche is too small. And in fact, the smaller the niche the better it is for everything else because it’s a smaller niche well guess what? It’s easier to lead it. It’s easier to be the leader of that tribe. It’s easier to find that tribe and market to it. All the stuff that Seth was saying. So don’t be afraid to go small. I thought that Mockups was going to be for only a few people the smallest public I could think of. I was wrong. But anyway.

Competition. Someone stealing your idea. Or clones. These are classic fears at the beginning, right? And it’s totally normal. It’s totally, totally normal. But what you hear over and over is you shouldn’t really be afraid of this. I remember thinking that I’ve got to find something that no one else is doing you know a little niche that is completely zero, no competition so that I can dominate it. So here’s what a place that no one is looks like. And instead here’s a place that has lots of competitions. So where would you rather be, right? Sure there’s lots of competitors here, but look at all the customers. There’s a… you can get a little booth and find some way to make yourself stand out but at least there’s people there. You don’t want to be in the desert. So competition’s a good thing. I always say, “Try to find a niche where there’s two or three companies serving it for each price level.” And that means that there’s probably room for you too around there. And if they’re bad? Even better.

Another view that I have about competition is from this O’Reilly article, he says, “Work on something that matters to you more than money.” This is what Guy Kawasaki says, “Make meaning and then you’ll make money.” Don’t try to make money just… don’t do it for the money basically. But basically the idea is here that you want to create more value than you capture. What this means is this. That say, my thing in life is that I hate bad software. It’s like… I hate it with a passion. Don’t get me started. So my goal in life is to improve the world’s usability, just a little bit, OK? And if you think about it that way then all my competitors… well, guess what? They’re also helping their customers improve the world’s usability a little bit. So we’re all growing in the same direction. So the more the better. Right? Yes, that’s great that you’re doing well. Maybe I hope to do better than you or… but still we’re all… we’re not competitors. We all care about the same problem and we’re trying to solve it the same way… or in different ways.

And then the other one, take the long view. And then another thing about knockoffs. We started… I published all my revenue numbers and people were like, “Ding, ding, ding, ding, ding.” And so they started, “Oh I can do the same thing. I can clone his software.” And so we have a bunch of knockoffs. But my views on that, I don’t get mad about that because of this article by Jason Calacanis who said, “Welcome your competitors to the race because no one is going to tune into a one-horse race.” And this is so true. I’ve noticed that. Ever since we started getting knockoffs, that pushed us up as the leader. Every time they get a review they compare it to us so this is… it’s a good thing to happen. In fact I’m going to go as far as to say, if no one is copying it, try harder next time. I’m serious. You want to do something so good that people will want to copy it. OK? That’s something good to aim for. And if you see someone copying it, it’s like, “All right. Good. They’re doing it.” And then pick your battles and then deliver. This is how I think you fight competition. You know we say we compete on usability and customer service. Two things that have nothing to do with features. You know competing on features is so ‘90’s. You compete on things that don’t change and have nothing to do with the product and so usability and customer service. These are things that are hard to do and I’m confident we can do a better job than anyone else at it. And we say it on our website, “This is what we compete on.” The way I see it is as if someone does a wireframing tool that has better usability and customer service than we do, they deserve to win. So deliver. So don’t be afraid of competition. Be afraid of your inability to deliver on the things you want to deliver on.

All right. This is another one that somebody sent me on Twitter, one of their fear is that, building the wrong product. Absolutely a very valid fear. We heard Eric yesterday, nineteen months, no one wanted it. Big fear. Well guess what? First advice I have is fall in love with the problem and not with your solution. If you understand the problem then maybe you understand that the solution to it is not just the software. Maybe a book or a blog. Or something. You give it away to a certain, specific kind of people because they need it and they can afford it. But you care about the problem so much that you do a better job addressing the whole product, not just the software. And then, there’s these guys, they made it a science. I wish I knew about Lean Startup Customer Development when I started. Google them up. It’s good stuff for sure. Make sure the one thing that, I don’t know if Eric’s still here but, couple this with what Mark said about talking to people, I’m not an analytics guy at all, I’d rather talk to people. It’s hard to make friends with numbers and analytics. So one thing in the beginning.

Feedback is more important to you than money. We used to give our software away to any blogger because we wanted feedback. Honest feedback. We said, “We’ll give it to you. You don’t have to give us a good review, we want an honest review because it helps us.” And that was very good for us. We got great feedback that way. And then like you’ve heard before, user experience forward to win. You want to give your software some character. It’s all about the experience. It’s interesting to me that my talk is pretty much all that they said, but this is pretty much who I learn from. So I’m sorry about that. The last couple of days I’m like, “No, that’s in my talk! No.” (Laughter) Anyways. But this is at least applied to my situation. Again, remember, I’m the guy… I’m what happens if you put what they say into practice, all right? The other thing is do it with your customers. Build your software with your customers. This is, we used to get satisfaction for forms…we do this all the time. We have an idea for a feature and we mock it up with Mockups and say, “Hey, this is what we think. We think we’re going to implement it. What do you guys think?” And so we do this all the time and we get a ton of feedback. Look at the size of some of these threads. And some people put their own design on them. Because the idea here is that I’m too busy building the software to use it. You guys use it, you live in it, you know it better than I do. You’re smarter than me most of the times. Help me out, all right? And this is not design by committee because I have the vision. I know that if I do it this way it’s going to hurt everything else. But I am able to make such better, more informed decisions by doing this than if I just did it in that reality free zone that Eric talked about. Another thing that, it’s a little secret that this is a great way to buy yourself some time on some features you don’t have time to do is, “Oh yes, we’re thinking about it. Tell us everything you want.” So this gets you four or five months if you want it. They catch up to you, like, “Hey, wait, we’ve been talking about this for awhile.” But it’s a little secret. People say, but, “Hey, the competition is going to know what you’re doing.” Forget about it. It doesn’t matter.

Don’t compete on features. Big, big problem. The Internet is huge. There’s a million companies coming up every day. “Hacker News” is like three or four days… “Rate my startup.” All the time right? So this is really hard and the mantra that I repeat myself almost every day comes from a comedian. Audio: (Charlie Rose) Somebody stood up in an audience and said to you, “How do you be successful?” And you said you had to be “undeniably good at something.” Steve Martin: Well, it really is this, when people ask me and say, “How do you make it in show business?” or whatever. And what I always tell them, I’ve said it many years and nobody ever takes note of it because it’s not the answer they wanted to hear. What they want to hear is, “Here’s how you get an agent. Here’s how you write a script. Here’s how you do this…” What I always say is, “Be so good they can’t ignore you.” And I just think that if somebody’s thinking, “How can I be really good?” People are going to come to you. It’s much easier than…doing it that way than going to cocktail parties, you know?

So be so good they can’t ignore you even if they want to. Try to make everything so remarkable that people will want to talk about it. And you’re not going to be able to do this, this is insane, you can’t be good at everything. But at least it’s a goal where you can aim to it and sometimes you reach it and if you don’t then maybe you’re pretty close, right? So basically it’s give it all you’ve got and make it sort of remarkable. This is again, in all the stuff that Seth Godin talks about, etc. I’m going to give you an example of how we put this in practice. Since the beginning I’ve had this concept of a golden puzzle. Which is what Scott calls, “Always be marketing.” Everything you do, every kind of output you have, try to make it remarkable. So the puzzle is a jigsaw puzzle and every piece is something that somebody says about you or your company that is not about your software. That is about everything else.

And so I’m going to share with you some puzzle pieces. I track Balsmiq… apologies, I’m not bragging, I’m just saying. Just the only example I know. A dataset of one. So you know people that blog about are the best About Us page in the world. Or Jason blogged, your little company now I collect also on our About Us page. Or we made the New York Times “Man writes software, blogs about it, makes 100K in five months,” because of a blog post that I posted. This guy read our licensing, our EULA, people like to read EULA and he blogged about it. “The perfect licensing model,” so this is about the EULA, right? Crazy. Transparency. Corporate value. Or let me read another one. So we made Inc. because we give our software away to non-profits and they thought that was cool and remarkable so they wrote about us. What you’re going for is this one. “I have no clue what Balsamiq does but three minutes on their blog and company pages has me stoked. I loved the mood of it.” Or this other guy, on “Hacker News,” “The Balsamiq story is really quite addictive, I want to buy the application despite having no solid need for it and a yearly income below his daily income.” (Laughter) So I guess if you try to do everything kind of right it helps. We get press for all these other reasons.

Here’s a funny story. Well, funny now. Around Christmastime, December, I check in some change, launch the release and my wife is like, “We’ve got to go shopping, Christmas presents, right now.” And so we get in the car, we’re starting and then I’m in there and I’m totally stressed out. I hate going Christmas shopping. And the phone just starts vibrating, on fire, right? So the release was bust. It was horrible. You couldn’t do anything. It was the biggest mistake ever, it sucked. So I’m like sweating bullets and I’m running back and my wife is really pissed and I come home and I fix the thing and it was a one liner stupid mistake. And then as the build machine builds it and deploys it I write this little, tiny blog post saying, “Dudes, I’m so sorry, this sucks. I’m sorry.” Well guess what?

A week later, “apology of the week”. “Balsamiq Studios Apologizes for Improper Testing.” This guy wrote a book called, “Effective Apology,” and so he blogged about… (Laughter) I’m like, “You’ve got to be kidding me.” Right? He gave us an A minus. We didn’t get an A because I forgot to say how this was not going to happen again. So anyway. There’s one more puzzle piece which I have framed on my wall which is kind of nice. So let’s move on.

Growing Phase Fears. Oh, this is crazy. Incorporating. You know you’re getting a little traction and now you need to make it into a business instead of a hobby, right? Accountants and lawyers and I’ve got to find payroll people. I don’t even know anyone who knows a lawyer, how am I supposed to hire one? I don’t even speak their language, OK? So this is crazy. I remember. You have to do sort of at least the top three, you have to do them pretty much at the same time and you’re faced with these enormous walls, like, “Oh, no.” And there’s three of them. So the way that I’ve dealt with this is something that I’ve learned over time which is that walls all look so much smaller on the other side. There’s sort of this, the space-time continuum warp where after you’ve passed the wall it shrinks. Look at the view on top of that, right? So if you know, “Yes, it looks bad but I’m going to laugh about how worried about this after I do this,” if you know this then it’s so much easier to take that first… you know, send that email, ask somebody if they know a lawyer, etc., etc.

Then there’s these crazy, “What?” moments like PO’s and voices in terms of what I’ve never heard before. I get a call. One week I’m a lowly programmer at Adobe and the next week I’m a CEO. So I’ve got a CTO of a big pharmaceutical company on the line and he’s asking me all this stuff and he says… oh, I messed up, that’s later. But anyways, this guy says, this other guys calls and he says, “Do you take purchase orders?” I’m like, “No, it’s just me, I’d rather you go through the website that way it’s all automated.” And I hang up and I’m like, “What is a purchase order?” (Laughter) I thought it was some sort of Nigerian scam, you know. I don’t know. We take purchase orders now. But like who’s going to… nobody ever taught be about that.

I’m a coder, dude.

I’ve got to write a EULA? I’ve never even read one. I’ve accepted a million. Now I’ve got to write one? Come on. Or like, “Dude, do you do it on cash or accrual basis?” “What are you saying?” Or people are like, “What is your DUNS number?” “Huh?” Or another one. I don’t even know how to pronounce these things. It’s crazy right? You’re supposed to know all of this stuff all of a sudden somehow. And then there’s these like, “This is way bigger than me,” moments which happen all the time. Like we were saying, the CTO is saying, like, “How do you deploy to… ?” “Uh, I don’t know. I can’t believe you’re on the phone with me.” (Laughter) Or you get these partners, you get the like, the friends that come in and they see you and they say, “Oh I see you’re just yourself. I’m going to take over and you’ve got a good idea, I’m going to eat you up.” So you’ve got to say, “No,” to these guys.

And then you’ve got the first VC call and that’s very scary. Acquisition offers. Forget about. So, the thing that helps me get through all of these comes from Business of Software, 2008. Audio: “So there is something really important to have. I’m actually writing a book about it over the next year or so.

Something that every startup needs if they want to succeed in this world.

Now I don’t mean mega or even tera but giga’s sort of the right amount of balls that one needs to succeed in Web 2.0.

Because really, if you’re not exuding total confidence, you’re startup is doomed.” All right, so this is a joke of course. It was lightning talk. But I don’t think it’s a joke. It’s like you’ve got to sort of fake it. Like, “Yeah, of course CTO, I’m the CEO, look at that.” (Laughter) Of course it’s just me, but you know. So fake it until you make it and then if you fake it long enough and nobody catches, maybe that’s the right thing. Maybe you’re saying the right thing, so, it works. Pretend not to be afraid of some things. It works, it works.

All right. Big problem, hiring someone, right? You’re gaining traction you’re going to have to hire your first person. Scary. I mean just the fact… I wouldn’t have anyone else depend on me for their livelihood, that’s really scary. That’s why I didn’t have a cofounder or… well. I didn’t think it was going to work out so I thought, “I’ll just do it myself.” The advice is when to hire, right. The rule of thumb I have is have a year of their salary in the bank and maybe do a one year contract. So you know you’re going to be able to pay them for at least a year to start with. And then the other thing is, don’t do it too early, do it when you think you’re going to die. (Laughter) I woke up one day and I was sweating cold and it was like, “If I don’t hire someone today, I’m going to die.”

I wasn’t afraid of being bankrupt or, I was really just… so that’s a good sign. That’s when it’s clear as day that that’s the time to hire. At least the first one that was good. It gets easier later. And then finding the right person is also very critical because the team is the most important asset you have. And so it could really kill a startup, the wrong hire. And we’ve learned that firing isn’t the worst possible thing. So the advice I have is treat it as sort of a project. There is a science to finding and understanding how people… you know if they’re telling the truth, if they’re talented and everything, do paper programming with them maybe. There are a lot of techniques. Google it up. There’s a book called, first, “Break All the Rules,” and then the other one is, “Discover Your Strengths.” That book is something that’s all about finding talent. So Google it up. Don’t just jump into it.

Another problem, which is a nice problem to have, it’s opposite of the problem no one notices me is getting too much attention. This is a nice problem to have, don’t get me wrong, but it is a problem because of an article that I think about almost daily, it’s probably one of the most important articles, by some guy on Inc. Magazine and this is the four pillars of organic growth, right? You’re revenue, your employees, the amount of PR you get and your software quality, have to grow along the same line more or less because if one gets ahead of the other, you’re screwed. If you get so much attention that you don’t have people to support your customers that sucks. Especially if you’re trying to compete on customer service like we are.

So this is why we have Comic Sans still because once we change it, I think a lot of people that don’t give us a second look are going to look at it but I need to hire some more people before then. So I wanted to mention this because this is probably the most important chart that I think about all the time.

Enduring concerns. Things that never change.

Classic things, fear of confrontation. So you’re going to have the blogger that doesn’t get it at all, hates your software. It’s going to happen, OK? Regardless. You’re going to have angry, angry customers. Your software crashes, it’s not your fault but it still crashes for some other reason and they lose their work. So you’re going to get people that are pissed off. So you’ve got to have some sort of system. Especially if you’re a programmer and you’re not like a sort of people person. You’ve got to have some sort of algorithm. So the one thing that I, the one thing, the mantra that I have is simple. (Laughter) You know, you might not agree with his politics but the guy can debate. I’ve watched all the debates. The guy knows… he’s definitely good at that. And he has a system, and over time watching him debate I reverse engineered it so I give it to you today.

The Obama Debating Flow-Chart. And I use it and it works all the time. So here we go. First step, listen carefully. Which is, what Mark was saying. Listen, really listen. Don’t get emotional, OK? Try to listen. Then, is this the first question, the first interaction I had with you? If so, thank them. “Thank you so much for taking time off from your busy day to shred me to pieces.” (Laughter) You may not think that but it’s true. They did have a busy day and they did take the time off and so, and just the fact that you thank them, it sets the mood.

I noticed every debate, Obama, before he answers the first question, he thanks the audience and everybody. It works, it works. It definitely defuses the situation a lot. All right. Let’s keep going now. Are they hurt? Are they angry? Are they really emotional about this issue?

Apologize. This is something that in the US you’re not trained how to do because an apology… I don’t know why. It’s not… I think it is ridiculous. Because you’re like, “If they sue me then I’m obviously…” Dude, you’ve got a EULA, remember you had to write a EULA? That says that the worse that can happen is that I give you your money back. Your ass is covered. Apologize for crying out loud. It is your fault. If you didn’t write that code they wouldn’t have that problem, OK? So apologize. You heard them. Come on. And then go back to listening, wear their shoes for a minute.

Try and understand, “Why is this person so mad?” Right? Maybe they’re going through a divorce, you don’t know. It could be something that you were the last straw. Try to wear their shoes. There’s this quote that I love. “An enemy is a person whose story we have not heard,” and this by, sorry, a guy who does work in the Israeli-Palestinian conflict. They’re just people. OK? They have their problems. Of course they get mad. If you understand that and you try to explain to them that you’re a person too, everything gets easier.

So then, answer but stand your ground. Don’t just say, “Yes, you’re right. Get out of my face.” Right? Which is what you really want to do. But this is tough, so, “Yes, you’re right, this broke. I’m fixing it.” Or, “It’s already fixed.” Or, “We’re not going to fix that because it’s never going to happen again.” Right? Something like that.

You have to have a strong moral compass here. You have to have some corporate values. This is where they really help you as a person to answer… to give a good answer. So take a photo or something, this works every time.

All right. Next thing, juggling too many things. Well, guess what? That’s your job. You’re the CEO, the founder. That is your job. That is always going to be your job. So write it down. I use a simple note that then syncs to the Mac to Notational Velocity, whatever, paper, whatever you have. As long as you can have it mobile too. Write things down because the stress comes from thinking, “Oh, I hope I don’t forget this.” Not about the problem itself. If you write it down then you know it’s going to be there, you’re not going to forget it. The stress comes from, “Crap, I don’t want to forget this.” If you need something more multi-media Evernote is a good one. If you need a little structure, we use Pivotal also as a to-do because that way you can prioritize stuff.

But one thing, one way, one thing that I do when I have a tough problem that I really need to think through, you could discuss it with a cofounder. I don’t have a cofounder. So what I do is I blog about it. That way I write it down and it helps me think it through because I’m trying to explain to people what the problem is. And so that’s already very nice. But then it’s magic because you publish it and then people see you as a human and they give you their advice because remember they’re smarter than you. And you get all this advice and it builds community. And guess what? It turns out it’s a fantastic marketing thing because they say, “Oh, look how transparent this person is.” I did it for myself, but it works. So it’s another way to write things down that has worked a lot in our case.

All right, current set of worries. So these might be a little specific. One is this one. And believe me it is a big one. Six months I’ve been thinking about this one. So, so far so good. Done, check. (Applause) No, no stop it. (Applause) It was one of my goals in life like write an O’Reilly book, OK, I did that. Speak here. Anyways.

Big, one problem that we have right now is that I have an employee in New York, San Francisco, Paris and then Bologna, where we are. And where’s the office? That’s the question, right? How can I make sure that the people that are around don’t feel like second class employees? And so we do it with a collection of Skype, Dropbox, Conference for Internet and Yammer. We use Yammer quite a bit actually. And so this is our office. This virtual space is our office. We’ve got a space in Bologna now because there’s three of us and we don’t fit in my house anymore. But I don’t go to it that often because I feel like I should be able, everybody should be able to do their job from home just like everybody else in the world. So if you ask 37 Signals, because they’re also distributed, they say that Campfire is their office. But then again, if you look at the pictures of the new office… uh, I don’t know how many Campfires there are. It’s pretty sweet.

Then there’s this article, by another guy here, Jason, “Why I feel like a Fraud.” So this is a problem that I have, like, “I can’t believe this is happening to me. When are they going to figure out that I don’t know half of the stuff that I do?” Turns out it’s normal. He quotes that 40 percent of all successful people feel like frauds. Jodie Foster is always afraid that they’re going to take the Oscar away because she’s not talented. OK? It’s normal. This is a big one. I feel this a lot and I’m not… you know, it sounds like I’m lying but I’m not. So if you’re also feeling this it’s normal. It means . .. Jason says it means we’re perfectionists and so we always feel like we should do a better job than what we have.

The answer to this sometimes is just to get help. It really helps. I go to the team. This is my team and they’re fantastic. Right? Sometimes I feel down and I just say, “Hey guys. You know I’m feeling pretty down this week.” And they’re like, “OK, got it. We’ll self-manage for a little bit. Tell us when you’re back.” It’s awesome. It’s awesome. It’s normal. Maybe I wasn’t sleeping enough for some reason and then I felt bad. It’s totally normal. People go through cycles. And then when that is not enough I have two advisors that I go to over and over Sarah Allen and Michael Fitzpatrick, people I used to work with. People I totally respect. She’s a Ruby guru now and he has ConnectSolutions, an online meeting startup. But they’re great. I know that if I have a problem I can call them on Skype and I always get a nice solution or at least they say, “It’s going to be OK.” You know.

So I recommend having some outside advisors. If even that’s not enough, reach out. One time I had this question and I was like, “I need help.” And so I emailed Dharmesh. I don’t think he’s here. I think he had another topic. But I emailed him, like, “Please Dharmesh, I love you, please answer me this.” And twenty minutes later I had this beautiful answer. Like, OK, don’t abuse this… (Laughter)… but they do, people like to help other people. It makes you feel all nice and important. One time I had a really, really big problem and I was like, “I don’t know who to call,” and I emailed Jason Fried, like, “Please, can you please talk to me.” And we had a 20 minute conversation. I was talking to Jason Fried, on the phone, incredible. So you know, get help. Reach out. Don’t be scared. You know it feels like a wall, “I’m going to email Jason Fried, oh my God.” But it’s OK. It happens.

Another thing that I’ve been struggling with the last few weeks is the needs of the market versus my initial vision for the company. When I started I thought, it’s going to be six people, $3 million in revenue, numbers I totally made up out of the sky. And now we’re there and I’m like, “OK, this is going to be it, right?” And then we have 400 new customers a week. Now I’m like, “Oh crap. This is not working.” You’ve got to grow, right? But no, my vision was to create this little family restaurant, right? Guess what? It took me a little while to understand but that was a non-sustainable vision so now we’re going to hire more people. And then there’s the big question, right? How long is this going to last? I think about this all the time. And the answer is, who knows? Two years ago we didn’t exist and look at us now.

Remember Friendster? It was big once. Like people move. Who knows? Everything goes so fast that you don’t know. So there is just, enjoy every moment. Enjoy the ups and enjoy the downs. Put it in perspective.

This is your adventure. This is your time. So enjoy all of it. And in the end, fear is a good sign. It means that you’re really pushing yourself. It means that you’re about to grow. You’re faced with a decision that is going to make you grow. So if you think about this, “Well I’m really scared, but guess what? I am going to get through this and then I will have grown.”Then it puts it in perspective again.

OK. So let’s recap. Asking for money is normal. Learn to manage your time. Don’t worry about pirates. Do the time. Pay your dues. Work while they sleep. Niches are bigger than you think. Competition is good. Pick your battles and deliver. Be so good they can’t ignore you. Learn about Lean startup. Walls are smaller on the other side. Have total confidence. Four pillars of organic growth. Obama flow-chart. You’re not a fraud. Ask for help. Write things down. Enjoy every moment. Fear is a good sign. How’s everyone feeling? Time for a group hug? (Applause)

So all right. So it says I have nine minutes, which is nice. So we can take some pictures… some questions but… (Laughter)

But before I leave you I want to give you an important trick that really has saved my sanity. How to go to sleep. Because you are going to worry all the time. So you need a way to put yourself to sleep, to say, “Brain, please stop.” OK? And people use alcohol, but then, you don’t bounce back like you used to. You’ve got to work in the morning. And I can’t drink because I live in Italy and you all wake up after my dinner time. So after dinner, I’ve got three hours of work. My busiest time of day is after dinner. So I can’t drink anymore. But you know, I’m working on that. I’m working on that. It’s not that I’m a big drinker, but come on, a little wine? Anyways.

Some people use pills. But I found a way that is totally, no side effects. And it’s called, “How It’s Made.” How many people know this show? (Clapping) Yes. This is the best thing ever. Watch it on YouTube or buy the thing, it’s on Discovery Channel. It is basically machines building stuff, right?

This is about Oreo cookies and the first time you watch it it’s pretty interesting so it’s not going to work but watch the same episode a couple of times. (Laughter) I tell you, it works without fail. There’s this certain monotone voiceover and… Dude, “How It’s Made,” I’ve watched it every night for three months . .. for three years, sorry. This is how I go to sleep. Last night I was really nervous I was like, “Oh, I’ve got to pick a good one.” (Laughter) So it works. It works. Believe me it works. All right, that’s all. (Applause)

 

Any questions? One and then two.

Audience: How did you get your first initial customers at Balsamiq, how did it happen?

Peldi: I’m not sure. The first sale was four days before I launched. Some guy Googled it, then found it and… I have a blog post called “Startup Marketing Advice from Balsamiq Studios” that I wrote a long time ago. I emailed some bloggers. I tried to find a niche. Tried to find a community that would be interested in this and then maybe I posted a comment on a blog post that was relevant. But just make sure you don’t spam. Make sure you only do it if you really think that this is what… your tool is what they’re looking for right now. I used to look on Twitter for “I hate wireframing,” “Visio sucks.” And then I’m like, “Hey you know what, sorry, but I do this.” And I used to put a dollar, dollar sign in front to say, “Hey this is a pitch.” But again, I only did it like a dozen times to people who really, I thought would benefit from my tool. But go look on the blog. There’s the whole, like the text of the email that I sent to all the bloggers, so you can just copy and paste. (Laughter) Michael.

Audience: That picture. That second picture after the wall, is that your house, where you live?

Peldi: No, that’s near. That’s, my family has a house in the country and so we were there a couple of weeks ago. So, I was, “I’ve got to find a big wall.”

Audience: That’s you, right?

Peldi: That’s me. I have the rights to that photo. (Laughter) Yes?

Audience: When it was just you in the beginning, how did you do support? What kind of tools did you use?

Peldi: I used the same tools that we still use which is Gmail, Twitter, Facebook, Skype. I have a Skyp-In number, it’s a 415 area code, but it rings in Italy. Basically what I think is, we have to go where they are and serve them in the way that is the best way for them. So I have IM. If you go to our contact page it’s like, “Here’s a million ways to find us. Pick whatever you want.” I feel like it’s kind of rude to force them to use a way that they’re not comfortable with. And then we have forums. We have guest satisfaction surveys that are really good. Anything else? Whoo. No? One more? Yes?

Audience: How much did you have done before you quit the job?

Peldi: I shipped four days after my last day of work. I worked nights and weekends for about ten months. And it’s a lot of work, but I’ve got a family to feed, I had a baby, so. I wanted to have something ready to go. Right after. So it’s really hard to work all those nights but like Gary Vaynerchuk says, “It’s amazing the amount of damage you can do between nine p.m. and midnight every night.” Even if you’re fried from all day of work. You know if you’re really fried just tweak the website. If you have a little energy do a little feature. And I used to work, I had this deal with my wife where I used to work Sunday mornings from whenever I woke up to noon. So I would keep the hard stuff for that thing. And I would go to a coffee shop and wait until they open and then just code like crazy. So it was rough, but then again, that sort of funded my startup, right? My day job.

Audience: The name Balsamiq, what’s the meaning of that?

Peldi: So I knew I wanted a condiment. That’s obvious. Right? (Laughter) I don’t need to explain that one. But actually, no, it was a condiment because my initial vision was to create a wireframing tool for a class in conference. I didn’t want to sell the desktop version or anything like that. I thought, “That is the smallest thing I can do and I want to do it as a plug in because that way I get all their marketing help, you know the sales channel is clear because it’s their customers are only going to take a little bit of it and my EULA is a little bit modeled after theirs so that they’ve already agreed to that one, they’re going to agree to this one too.” So it made everything a little easier because the plan was to just be me and have 150 customers. Then people started begging me for the desktop version. That was when my business plan didn’t survive the first impact with customers, right? Because people were like, “I don’t have conference, I still want it.” I was like, “No, no. I can’t support you, it’s just me.” Right? It was like, “I don’t need support. Let’s do it without support.” “OK.” So now that’s 80 percent of my revenue, the desktop. I’m a shareware guy, weird. Who buys that stuff? I guess a lot of people. So anyways, going back to the name, I wanted a condiment because the plug in makes something better, right? Like the condiment makes… ah, ah. And then I thought, Balsamiq because my grandmother lives in Modena where Balsamic vinegar is from and she always gives me this amazing, hundred year old Balsamic. And it’s the sweetest little nectar. And I love it. Every Christmas I get some. It’s fantastic. And then that takes craftsmanship to make. And then it’s sort of like a treat. And so I thought, “It has all the stuff that I want,” it’s made in Italy, “All the stuff that I want my software to have.” And so… and then I gave it a Q because I’m not in the vinegar business. I like how the B and the Q sort of look the same.

Eh, I don’t know. (Laughter) It works, I guess. (Applause)

Business of Software, Boston, MA, October 24-26^th 2011http://businessofsoftware.org For people growing sustainable, profitable, software businesses.