How to Start a Company on the Side | Mike Potter, Founder of Rewind

Intro 0:00 Building software is not like building widgets. You're not building something physical. You're using your brain to build something, and it's sort of a creative process, and your brain needs to work properly in order to be able to do that. If you've got stress, if you've got other things that you're thinking about, or that you're worried about, your brain is not going to be free to do its best of work. We didn't have the pressure of, quitting our jobs and needing to make mortgage payments or car payments or support our kids and families. It was whatever we were doing is what we were doing. Pablo (Host) 0:35 Welcome to the product-market fit show brought to you by Mistrial, a seed stage firm based in Canada. I'm Pablo, I'm the founder turned VC. My goal is to help early-stage founders like you find product-market fit. Today, we have Mike Potter, co-founder and CEO of Rewind. Rewind is a backup platform for SaaS apps. The platform automatically backs up all your data on apps like Shopify, QuickBooks, and many others. Rewind i s based in Ottawa, Ontario. They have about a hundred employees and have raised over $60 million. The topic of today's episode is how to build a start-up on the side. And we're not just talking about any start-up, some sort of side hustle here. Mike was able to, on the side, launch a start-up that is now well on its way to becoming one of the latest Canadian unicorns. Hey, Mike, it's great to have you here. Mike (Guest) 1:24 Hi, Pablo. It's great to be here. Thanks for having me. Pablo (Host) 1:26 Before we jump into all the details and the ins and outs of what it's like to work on a start-up on the side, which I believe you did for about 18 months, let's go back to the beginning. It's 2014, 2015, as I understand it, you're working as a senior product manager at a different company. You'd started a start-up before that. And so, my first question is just while you're working as a senior PM at this company, are you in this mindset of, I'm here for now, but it's just a matter of time until I come up with an idea and I leave the start-up to be a founder again. What's your mindset as you're working at this other place? Mike (Guest) 2:02 The first start-up that I ran , it was a great experience, but I learned a lot in it, and it definitely took a lot out of me. I don't think I was quite ready to do a whole other start-up at that point when James and I started working together. But it's definitely interested in just, having a side project and tinkering with something and spending my spare time working on something that could become successful. But there was really no interest, in quitting my job and working full-time and making some of the same mistakes that I made the first time, which was, quitting my job too early and leaving a really stable job. But at the same time, when you're a software developer and you love building things, it's just natural to want to tinker on the side in the evenings and weekends and build stuff. I approached James, I think it was in the winter of 2014, to do that and to start working on something on the side. And we actually had a whole other project that we worked on for about six months before stopping that and then moving onto Rewind. Pablo (Host) 3:13 To be clear, it didn't even start with a problem, and oh God I got to fix it, it was more of, I want to do something on the side. You knew James. Was he your friend? And then you went to him, and you said hey, let's just start working on something? Mike (Guest) 3:25 Yeah, I'd worked with James at another start-up in Ottawa called the Crew, and I really enjoyed working with him. And I think in November of 2014, I emailed him and I said, "Hey, I really liked working with you. Would you like to work on something on the side?" And he was certainly open to that. He had tried that with a couple of people in the past as well, his experience was that they never went anywhere. You need to start with an idea when you go out to it. It's not just like, hey, let's work on anything. You really need to be solving a problem that you're quite passionate about when you get going on something. Coming up with the idea Pablo (Host) 3:59 When did the core idea for Rewind, this backup for SaaS apps, when did that come along and really how? what was the origin story for Rewind? Mike (Guest) 4:10 Yes, we were six months into this other app that we've built, and it's really not going anywhere. There's no customers, we are having a hard time figuring out a channel to go to market through, we can't attract anybody to it. And I'd seen that before in my first start-up, I kind of recognized that pattern. I said, "Look, this is not going to turn out well, I know what happened in my first start-up. I don't want that outcome again, so we need to move on to something else." James really thought it was a good idea. I remember the conversation we had around that time was him saying, "No, I want to keep working on this. I think it's got a lot of potential," and me saying, "No, we need to find something else." It might be a good idea, but it's not necessarily a good business if you can't find people that will use it and find a way to get customers. So, I suggested backups because I'm a big backups guy. I've lost data in the past. I know the pain that you get when you lose data. I've got a hard drive here on my floor that mirrors my Mac. And I remember telling him and saying, "I'd really like to work on backups. I think, API-based backups". And what you can do in Amazon was storing data without having to really, build a lot of infrastructure i s really sort of game- changers in terms of the backup space. We looked around and said, "What can we back up?" We're in Ottawa, Shopify is in Ottawa. This is April or May of 2015. They're growing like crazy at that point. We said, "Let's build it for Shopify. Let's see if people need backups for Shopify." To validate that idea, we went o n t o the forums, we posted, we searched in the forums for people that were looking for backups, we posted messages and replies to those, we set up a quick little landing page where people could give us their email address to show that they were interested. I think within a couple of weeks of launching that l anding page, we had about 20 people that did sign up for pre-access, if you will, before w e'd built it. And that was a pretty good indication that we were onto something that was much, much better than the first idea because now we've got 20 people that are interested in it where the first one we built it, but we didn't really have anybody. Launching the app Pablo (Host) 6:23 Before you built and launched an app, you'd mentioned you'd done some validation. What exactly did that look like? Was it just... did you get anybody to pre -order it, did you do a bunch of interviews with Shopify customers, or was it more high level ? Mike (Guest) 6:43 I don't think we did any interviews with them. I think that would have been an improvement on what we did. We also didn't get anybody to pre-order it because when we launched it, we made it free for the first six months. We launched in June of 2015 and the thinking behind launching it as a free app was a couple of things. One, we wanted to validate whether people actually had the problem, and we didn't want price to be a barrier to them validating that assumption or not. So, we removed price as an option, which, there's a big debate, I think, online about whether you should be charging people right u pfront or not. The other thing that we got, though, was, we got a bunch of f ive-s tar s tar reviews in the app store from those customers. Although it was free from a monetary perspective, we didn't charge customers, they did provide value to us by rating us in the Shopify app store so that when we did move to a paid model in January of 2016, about six months after launch, we already had dozens of five-star reviews in the app store telling people that it was a great app, that they needed it. Pablo (Host) 7:47 You decided to work on backups, and you're doing all of this while you still have a full-time job. And the other question I have for you is. You have kids, right? How old are your kids at that stage? Mike (Guest) 7:59 About six years ago, were around three to seven years How to find time to work on a side project Mike (Guest) 8:04 old. Pablo (Host) 8:04 You've got really young kids, you've got a full-time job, you're launching a brand-new product . First question is, just how much time, per week, do you think you were putting into Rewind back then? And the second thing is when? Which part of the day are you devoted to Rewind? How are you balancing everything? Mike (Guest) 8:23 It's a good question. I think, it was in the tens of hours a week and it was mainly after the kids had gone to bed. So, it was 8 to 12 to 1 in the morning, sort of thing. Maybe occasionally waking up early and working on it as well. I think that's the most. And as I look back on our early time, I think that's one of the most impressive things about what we did, was just how long we were able to sustain that. We also, six months in, f ound t wo other friends, who also h appened to have worked with us at the Crew, who joined us. So, we were four people at that point. Pablo (Host) 9:03 All part-time? Mike (Guest) 9:03 All part-time, yes. Everybody kept their full-time jobs. Again, kind of amazing to find four people that are willing to put in hours on evenings and weekends and spend time working on this side project. It was certainly really difficult. You worked as long as you could on it and whenever you could, there was no pressure from anybody to say, "You need to get this done by this time." Everybody's sort of was in the same boat. Everybody's got families, everybody's got other jobs that they want to do. And there was a bit of indirect peer pressure of seeing the work that others were doing and pushing you along a nd say, we're getting somewhere, these guys have worked on this, I'm going to work on this. I know that's something that James talks about a lot really early when it was just the two of us, feeding off, of each other and having one person do something and then feeling like, I got ta do something too, and then you do something and then you sort of feed off of that and you get a lot done. Tha t ce rtainly helped compared to, my first start-up when I was working on it mainly as a sole founder initially, really different dynamic to have a co-founder there to help push you along. Pablo (Host) 10:13 Was there any frustration at the speed of execution, even if it wasn't directed at each other, like, "Hey, you got to get this done by X time," just as a whole, was it a benefit to not have the pressure that early on or was it a detriment? Mike (Guest) 10:27 I think early on, we were still wondering how big could it be? Because there was so many people... the feedback that we had really early was... So, we talked to another Shopify app developer in Ottawa, for instance, who said that you could charge customers $5 a month for the product that we were building. We talked to somebody who worked at Shopify, who said that it was a good idea, but customers would never pay anything for it. There was still a question mark in our head around how big could it be. For the first few months we added about $500 of revenue, recurring revenue a month. It's clearly not...you're not crushing it, you're not adding $10,000 a month or something like that. You're doing well. And over time, that's going to build into a really great business and maybe one day you can quit your jobs. But the early sort of indications that we had were 500 bucks. It's okay, well, that's not much. We went from 500 to 2, 500 within the first six months. We increased our prices. We just kept increasing our top line, our top plan price and we just kept making it higher and higher and higher because we got these larger and larger stores that were... this is ridiculous. We're charging some of Shopify's largest stores $20 a month. We could be charging them $200 a month. So, we just kept testing that higher price point as we went and as we grew. Why going part-time at first might be an advantage Pablo (Host) 11:47 Would you go as far as say that there's an advantage to that? If you had gone all in and you were doing 2000 a month, you might be, holy crap, how do we...we need to get to 10 and 20 yesterday, sort of thing. When you're on the side, that pressure is not at the same level because you can kind of go, you can go to a different pace and it's not a huge deal. Is that a good thing, a bad thing, how did that play out? Mike (Guest) 12:08 I think it's a good thing. I know there's a sort of a debate around what you should be doing, but in my experience and opinion, building a software is not like building widgets. You're not building something physical, you're using your brain to build something and it's sort of a creative process and your brain needs to work properly in order to be able to do that. If you've got stress, if you've got other things that you're thinking about or that you're worried about, we didn't have the pressure of quitting our jobs and needing to make mortgage payments or car payments or support our kids and families. It was whatever we were doing was what we were doing. And our first year in business went really, really well. We sort of benefited from the success, but I think the success came because we didn't have that pressure. We didn't have stuff that was weighing us down and we were free to stop and think and solve problems and say, "Okay, how else can we do this?" Pablo (Host) 13:13 In the earliest phases of a start-up, it's really not a company. A company is not the best analogy for it . It's much more about a project, it's about testing things out, trying something and just the creation process, the discovery process of i t all. By setting it up that way and removing this pressure of needing to turn a project to a real company, you actually get there in a better way because you get t o t reat a project as a project and not put in these artificial milestones and goals that, frankly, are maybe not a good fit for start-up at that stage. Your startup is an experiment Mike (Guest) 13:50 I think that treating it like an experiment is really good analogy. You're not sure of anything. We weren't sure of our pricing when we launched it. We didn't know what the price point should be. We had one local developer who told us that the price should be $5 a month. So, we said, okay, that's our low end. And then we went, what more could you charge? We thought, three times that would be a lot. So, we went to 15, and then we thought, what's the highest you could charge that. And then we thought, we'll double that. Our initial pricing was 5, 15, and 29. And we just kept experimenting with that high-end price point. And then it went 29 to 39 to 59 to 99 to 199 to 299 to 399 to 499. We just kept trying new things. We never looked at what we were doing as we have to make this work. It was, is this the right thing to be doing? And we questioned it as we went. Like I said, we rebuilt the backup system. We wiped everybody's data three times in order to get to a system that we felt could scale up and scale out t o handle all the load that we had. If you had thought about that more as a company and trying to find efficiencies, as opposed to an experiment and be willing to throw o ut everything that you've already worked on for months of work and just say, "Okay, that didn't work, try again." I think that mindset was really important or is really important as you go into it because we still have that mindset, to be honest with you. I tell almost all of our new employees, "Don't assume that anything that we're doing is the right way to be doing it, you should be questioning everything. And if there's a better way to do something, we want to be doing that. We don't want to be doing something that w e're currently doing, just because that's what we're currently doing." Pablo (Host) 15:38 Got it. So, it actually was almost built into the DNA and the culture of Deciding to jump in full time Pablo (Host) 15:42 the company. When do you start talking to people about, either maybe it's time to go all in or was it more of a conversation of, okay guys, like once we get to this MRR or this many customers, then we'll go all in. How did that discussion unfold? Mike (Guest) 15:59 It was more around the revenue. We had a couple of key principles that we wanted to maintain. So if somebody went full-time, first of all , we never thought we had to go all in. There was really never a discussion point where we said all four of us has to quit our jobs at the same time and a ll go in at the same time. It was, let's try one person and let's see if one person can go f ull-time, and we got our revenue to the point where it was more than what we would pay a full-time person. So, we 're l ike, okay, well, Se an c an go fu ll-time t hen. Sean w as the one that was willing to leave his current job and work on it full-t ime s o Sean. So, Sean left... Pablo (Host) 16:41 And you were at what, 10K 20K MRR at the time? Mike (Guest) 16:45 Yeah, exactly, we were in the 20K kind of range. You've got some basic expenses. I think we pay... I don't remember if we paid ourselves a small, small salary early on, just to... here are a couple of dinners that you can do to take your wife or girlfriend out to make up for the time that you've lost, sort of thing. I can't remember if we had a couple of small salaries back then, but yeah, we get it to 15K or so of MRR. And then you're like, okay, great. That supports one person's salary, plus all the expenses and everything, that's good. So, Sean went full-time and based on what you are adding, it's just basic math of when can the next person quit their job? Julian and I quit in February or, I guess we quit earlier, but we joined Rewind in February of 2017. Then a couple of months went by and now we were making enough money where James can join us, and none of us had to take a salary cut when we left our old position, we could maintain our old salary on the new salary. And that became like a really easy conversation to have, especially personally speaking with my wife, who... like I said, my first start-up didn't really work out all that well. And she was very, very hesitant to have me do it again. But I was telling her, I said, "It's not going to be a start-up where we work 24 hours a day. We're actually going to be working less because we'll work 9 to 5 in the real job and then on Rewind, and then we'll come home and we won't have to work in the evenings and weekends like we were doing. Pablo (Host) 18:19 Was there something about Rewind or the way you guys structured it? I get part of it is, by the time you joined, it was a real affair, with real MRR o r whatever, but a lot of people would say, "Well, now I don't have this job and I'll go all in ou r R ewind, but I'm not going 9 to 5. I 'm still go ing t o d o 9 to 9 or whatever. You've made a conscious decision to no, I co uld d o it in eight hours. That means your whole team obviously is go ing t o w ork eight hours, eight hours being an a rbitrary number, maybe it's nine, maybe it's 10, whatever. Yo u ge t the point? Mike (Guest) 18:48 Yeah, yeah. Pablo (Host) 18:48 Was there something... was it just a decision, this is the way it's going to be? Was there something about Rewind that allowed it to be that way where you didn't have to have a 24/7 situation with it? Why working 8 hours is enough Mike (Guest) 19:00 I think we're influenced by the team at base camp, and DHH and Jason and the stuff that they've written about maintaining that sort of work-life balance. We had also just spent 18 months working two jobs. I don't think there was a lot of appetite from our standpoint to say, "Look, let's keep that going." Because that was working out really, really well. You could see some of the strain that it was having on family life at home with the four of us. When we went full-time, we were very explicit about that. We said, "We do not want this to be a 10, 12, 14-hour day kind of thing." We were just doing that. That was clearly causing some problems from a personal standpoint, let's make sure that that doesn't happen. That's number one, people can't get divorced starting this company. That was off limits for us to say that we want to make sure we're avoiding that. And making sure that you avoid that is, part of that is working eight hours a day and making sure that people aren't taking time away from family and friends and stuff like that and having a good personal balance. But I'd say that the team at base camp was an influence. What we would experience was an influence. What I'd gone through in my first start-up was an influence. And we were very explicit about that when we started that to say that, "No, this is how we want to run this company. We want to be a great place to work. We want people to enjoy it." And to be honest with you, there's a bit of counter culture at Rewind where, when people do something, we kind of do the opposite. I think it takes a special kind of team to build backup product, which is fairly boring, not machine learning or AI or anything like that. It's not the most exciting technology when you think about it initially, it gets a bit more exciting as you start doing it at scale and what we're doing in terms of 25,000, 30,000 customers. But, it's definitely its sort of niche, and you have to be, I think, a special person to be able, to want to work on something that's not the coolest technology. And so that counter culture sort of extends from the product into the company, where we do things that most companies don't do, where we try and work eight-hour days and not 12 or 14-hour days in a start-up, where in the summertime we get every other Friday off and work nine out of every 10 days during the summer from the May long weekend to Labour Day. There's a lot of stuff that we do that's a bit different than what a lot of other companies are doing, and we're pretty proud of that. Recap Pablo (Host) 21:51 That was great, a really, really great story of how you... originally a friend and an idea, and you started working together fully on the side on really a project and experiment and actually the first one didn't work. And then you shifted over to the new experiment , which became Rewind, brought in a few other people and had four people working part-time for around a year and a half, and consistently making progress each time and deciding to stick it out part-time. And frankly pointing out a lot of the benefits of doing that. And now turned it into a a hundred-person organization. Like I said, i t's worth $60 million and as you mentioned, has 25-30,000 customers, so it's quite an incredible journey and only the beginning. So, it was great to have you here, Mike. I really appreciate your time. Mike (Guest) 22:39 Yeah, thanks Pablo, was a ton of fun too. Pablo (Host) 22:40 Thanks so much for listening. If you want to see more content, check out pmf.show.