A version of this article previously appeared Forbes.
Jim Semick (left) with his Co-Founder, Greg Goodman
I have been watching ProductPlan for several years, as the founders are both friends and pillars of the Santa Barbara Startup Community. Without taking a dime of outside capital, the company has achieved impressive success in a competitive, SaaS market segment, landing companies such as Nike, Intuit, NASA, AutoDesk and PBS. What makes their story more remarkable, in the age of 20-something billionaires, is that both of the company’s founders are in their 50’s.
Curious to learn more about the pain and joys of bootstrapping a business, I sat down with Jim Semick, the company’s Co-Founder and Chief Strategist.
Greathouse: We’ve known each other for a long time but let’s start with the basics for my readers. Who is Mr. Semick and what is ProductPlan all about?
Jim Semick: I’ve been launching and managing software products for 15 years now, going back to when you and I worked together at Expertcity before it was acquired by Citrix. I have always worked on early stage products. Some of the products I’ve helped validate and launch include GoToMyPC, GoToMeeting and AppFolio.
Greathouse: Great products and companies that came out (of) Santa Barbara.
Semick: They are. I’m really proud to be a part of launching those products. Now I’m one of the founders of ProductPlan. We build product roadmap software – it’s a SaaS company based here in Santa Barbara, California. We’ve been in business for about four years now.
Greathouse: I’m familiar with product roadmaps, but what’s the big problem you’re solving?
Semick: We’re solving pain around communicating a company’s strategic plan. Most companies have a roadmap describing what they’re planning to build, deliver or market. It’s usually a spreadsheet or PowerPoint (deck) of the upcoming changes to a product or service. The challenge is that these roadmaps are a pain to plan and prioritize, get agreement from everyone, and then communicate it internally.
A roadmap is quickly out of date, especially in software product management. The problem is that stakeholders, like marketing and sales, don’t know what the latest version of the roadmap is. That causes friction internally.
Greathouse: Having run these groups, I know all about the inherent friction between sales and marketing with regard to lead quality, volume, etc., but what type of friction are you referencing here?
Semick: Yeah, right (laughs). In addition to lead issues, communication around the product plan is very common. Product managers have challenges with getting the right information at the right level to the right people. The roadmap that you share with the VP of marketing is probably different than what you share with the engineering team. There’s often a lack of transparency.
In so many companies, the VP of Product is trying to aggregate the roadmap from each Product Manager who plans and prioritizes differently. It’s chaotic. These are some of the problems that ProductPlan solves. Our software helps companies save time, improve their communication, and ultimately build better products faster.
Greathouse: Your collective experiences have clearly made bootstrapping a viable option for you, more so than might be the case for a typical, younger entrepreneur who needs more direction, doesn’t have cash discipline, etc. I assume you would you go this route again, if you had a do-over.
Semick: Things have gone really well for us right from the beginning. I chalk up our success to doing a great job validating the opportunity before we started to build the business.
We’re now used by thousands of product and IT teams all over the world. We have customers from so many different industries like software, financial services, healthcare, and media. I’m really proud that companies like Expedia, Intuit, Mozilla, Fidelity, Starbucks and Time are using our software.
Greathouse: Yea, that’s an impressive list. How did you and your co-founder, Greg Goodman, get started? Had you worked together before?
Semick: No, we hadn’t worked together, but we knew each other through the tech community here in Santa Barbara. It’s a relatively small entrepreneurial community, and Greg has a great reputation. When I was considering doing something, I reached out to Greg for advice. We had good chemistry and that led to us deciding to do something together.
We spent a lot of time going on hikes and paddle boarding before we actually made the decision to go into business together. Oh, and drinking beer (laughs)! That time spent together talking about our goals and working together showed us that we had the makings of a great partnership.
Greathouse: How did you come up with the idea for ProductPlan?
Semick: It wasn’t our first idea. We validated several opportunities before landing on product roadmap software. But we really started by figuring out what kind of business we wanted to start. We spent a lot of time talking about what type of company we wanted to create, how many employees we’d eventually have, whether we would take funding, our lifestyle, and a dozen other things that had nothing to do with writing software.
We both had the experience and luxury of previously building companies and launching successful software products. That taught us what we personally wanted to accomplish — and what we wanted to avoid. We then in a sense reverse engineered the business to fit that.
We both had a laundry list of potential ideas and went through a validation on those ideas and eventually picked this opportunity of ProductPlan, because, based on our market validation, it has so much potential.
Greathouse: Did you decide to bootstrap the business from the start or did you initially plan to take in investor capital?
Semick: In the beginning, many of our conversations were about whether we wanted funding from angel investors and eventually VCs. It was a viable option for us. But we made a deliberate choice at the beginning to not take capital and instead bootstrap the company. We may make a different decision in the future, but for now it’s the right approach for us.
The benefits of bootstrapping are many: we can focus on building the company, not raising capital. We could also spend time talking with customers rather than updating investors. We can make all the decisions ourselves. The path for the company (such as an exit) is not dictated by needing to reach a specific valuation that will be a win for investors, and the list goes on.
I’m not claiming that bootstrapping has been easy. There have been so many tradeoffs. We both made personal investments in the company. We haven’t been able to grow the team as quickly as we wanted at times. We have had to take sub-market salaries. We can’t hire for every position — we are the chief hamburger flippers (well, in our case, sashimi slicers).
Greathouse: I know it’s difficult to estimate, but how much further along do you think you would be from a customer acquisition and revenue generating standpoint if you had taken in a few million in investment dollars?
Semick: Bootstrapping gives us focus that we wouldn’t have otherwise. I think in the end it’s helped us build a better product because we are resource-constrained. I’m fairly certain we got to market faster as a bootstrapped company. I know that sounds counter-intuitive but a large bank account balance doesn’t always help you move faster or make better decisions.
Within six months we launched with a minimum feature set that a few customers were willing to pay for. After they gave us their credit card we worked hard to build the features we knew were essential for their happiness.
In a venture-funded company, it’s amazing how the luxury of time and resources makes it harder to get a product to market. I’ve been there. Like many projects, work expands to fill the time available.
Another risk with taking capital is that we would grow the organization quickly and sales might lag behind expenses. We could need more capital over time which means we would own less of the company.
Today, if we had a few million in investment dollars in the bank, we could build product faster by hiring more engineers and touch more prospects with a larger sales team. But as I said before, that comes with tradeoffs.
Greathouse: How have you handled inbound discussions with interested potential investors?
Semick: We’re contacted pretty regularly, and occasionally will have a call. We’re clear that we’re not currently seeking capital. I think it’s important to establish connections, but for us it’s a question of prioritizing our time.
Greathouse: So how do prospective employees react when you tell them you are bootstrapping the business? Do they ask about your exit plans? Would they prefer to have an institutional investor in the mix?
Semick: We’ve been lucky to recruit talented people that buy into the vision we have for the company. We focus very much on finding employees who are a cultural fit and we share equity when appropriate.
Not every employee is the right fit for a bootstrapped SaaS business – especially if their expectations are not aligned.
But for those employees who want to wear a lot of hats, work on a close-knit team, solve challenging problems, push their talents in new directions, and have fun, we’re a great fit. Building a SaaS business in Santa Barbara California has many benefits.
Greathouse: One of the things an outside investor brings to the equation, in addition to money, is a set cadence with regard to planning, reporting and honest post-mortems of initiatives. What have you done to instill such discipline without an outside forcing function?
Semick: We’re a very metrics driven company, and we have been from the beginning. For a SaaS business like ours, there are so many benchmarks available to help us determine if we’re on track. Metrics related to customer acquisition, lifetime value and churn. In a sense, because we’re bootstrapped, we’re more accountable to scaling a viable business.
We’re transparent with our employees about these metrics and where the company stands with monthly marketing and sales goals. On the product development side, we conduct retrospectives twice a month — there is an open exchange of ideas for improvement.
I’ll also add that Greg and I have a great network of advisors and friends who we can ask for advice and insights, especially at different stages of the company.
Greathouse: You mentioned market validation. I know first-hand that you and Greg are Pros in this regard, from working with you on GoToMeeting. What advice you can offer entrepreneurs validating their new products?
Semick: Don’t start building until you find a big, repeatable customer problem. I’ve seen entrepreneurs spend months writing code or even launching the product without really understanding the core problem they’re solving.
Once entrepreneurs find this big, repeatable problem within their market they then need to understand whether customers are willing to pay to solve that problem and whether it’s a priority for them. Then entrepreneurs are in a much better position to discover the right product.
Greathouse: OK, it’s easy to say you have to understand your customers’ problem. How do early-stage entrepreneurs go about doing it? It’s hard to convey the concept of a software or hardware product with no code or prototype.
Semick: Agreed. Validate the problem with 10 interviews with potential customers. The interviews should be an hour long and open ended, not just a list of survey questions. And the customer should do most of the talking. We keep a list of key learnings and even record the calls, with permission, so we can share what we’ve learned with others internally.
Just simply figuring out where you’ll find those potential customers is part of the validation. In our case, Greg and I found and interviewed a dozen Product Managers to understand their challenges. Once we started recognizing patterns around product roadmaps, we conducted 30 more interviews to validate the product features, value prop and pricing.
We spent a lot of time showing them rough prototypes. We also ran landing page experiments to understand customer acquisition and cost. Only after we understood the business model, did we started coding.
The other bit of advice is that, once you validate a great opportunity, get to market as fast as you can.
Greathouse: So, let’s just say you’re not in your 20’s (laughs). You had a good career, were earning a good living and have kids. Why take the risk to start a company?
Semick: That’s a great question, but no more gray hair jokes, please (laughs). I get enough of those from my kids. In my career I’ve been a consultant, a tech book author, started a training company, and I’ve been an employee. Each role tends to suit a certain stage of my life.
For example, the consulting lifestyle has a lot of freedom and flexibility. You have the opportunity of earning a good living, but there are downsides to it. You don’t own anything at the end of the day.
As an employee the downside is that you’re helping someone else achieve their vision and goals. There can be quite a bit of satisfaction in that in itself. But being an entrepreneur and starting something of your own, there’s nothing like that feeling.
Of course there are risks. There’s financial risk. There’s time away from family and friends. You’re spending a lot of time with your co-founder, and you need to have a fantastic relationship with that person in order for it to work. Luckily we do. We have a terrific relationship.
Greathouse: Thanks Jim. I know you and Greg are cranking on many fronts, so I really appreciate you taking the time to share your startup insights with me and my readers.
Semick: Thanks John, it was fun!
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