Bootstrapping Userflow to $3M ARR with 3 employees
A seasoned, battle-hardened, towering warrior donning a spear, a sword, a shield, and a reputation that precedes him is about to engage in 1:1 combat with a 13 year old shepherd kid. Who do you think wins?
This battle should be over long before it even starts. But David (and Malcolm Gladwell) has other ideas.
In his eyes, Goliath is a lumbering dude with blurry vision weighed down by heavy armor. About to engage a kid who fights off Asiatic lions for a living.
Armed with a sling that can send a rock hurling with the stopping power of a .45 caliber handgun.
Yup - the battle is indeed over long before it even starts.
It’s a strange thing. Invoking the idiomatic use of David and Goliath in the ‘David vs. Goliath’ story, but with all cards on the table, makes David, Goliath and Goliath, David.
The advantages of the ‘underdog’ are not always obvious.
There are many VC-funded Goliaths with massive Sales & Marketing budgets and large enterprise Sales teams in the user-onboarding space. Watching on as a younger bootstrapped 3-person David races to $3M in ARR against all “odds” in front of their eyes.
If the ripple effects of Generative AI births the first one-person SaaS unicorn in history, they’d be right to look here for inspiration - to the three Danish guys who are flying closest to the sun.
Meet Esben Friis-Jensen, Sebastian Seilund, and Jonas Kelstrup. The founders of Userflow.
We sat down to interview Esben two weeks ago in a live event in an attempt to codify the Userflow playbook of bootstrapping to $3M in ARR with 3 employees.
On entering a crowded market
Appcues: 2013. Pendo: 2013. Intercom: 2011. Userflow: 2019.
Esben and Sebastian were entering a market crowded by players with a half-a-decade headstart.
The disadvantages are obvious. The advantages? Not so much. What are the advantages?
1. PMF is a solved problem
A five-year headstart has allowed your competitors to go to market and find product-market fit, so you don’t have to.
2. You’re forced to differentiate
With the quest for PMF out of the way, you’re laser-focused on differentiating your product. This is your entire play.
Esben thinks very deeply about differentiating Userflow from the early movers. Userflow does this across two dimensions:
- UX - With pureplay PLG, nothing matters more, arguably, than your users’ first impression of your product. The Userflow founders obsess over giving users the absolute best UX in the market. In a PLG playground, in a very Darwinian way, Userflow blows their competition out of the water.
- Sophistication - “Five years ago” is a long time horizon in SaaS. The late mover advantage Userflow had was this: they were able to rethink the onboarding category from scratch, and not stay married to assumptions from five years ago.
On being outsiders in the valley
Esben is a two-time founder. He scaled his previous company, Cobalt, a Penetration-Testing-as-a-Service product to 200 employees with $37M raised before he set out to build Userflow with Sebastian.
Cobalt was founded by four Danish guys new to San Francisco. Userflow, by two Danish guys, one of them new to San Francisco, and the other working remotely from Denmark.
There are obvious disadvantages to not being in the valley. The advantages aren’t so obvious.
“This is a common mistake I see founders making. US founders tend to focus only on the US market. European founders only focus on the European market. The advantage I had in moving from Europe to US is I had a focus on both markets.”
Userflow’s customer base is split 50-50 across US and Europe. Not being from here allowed them to widen the locus of their GTM.
Liftoff: 0 to 100
Back in 2018, Sebastian Seilund was building Studio1: a product that aimed to automate the production of screencast videos for customer support, marketing, and sales. Although Studio1 fizzled out after launch, early users couldn’t stop raving about something inside Studio1: the product tours.
With the Cobalt founder now on board, the duo now had a personal network and the Studio1 distribution list to take them from 0 to 100.
Liftoff: 0 to 100 but not counting friends and family
The next 100 customers came from a place all small businesses know and love. Userflow’s ProductHunt launch got them their first set of core users to absorb feedback from and fine-tune the product with.
Scaling: 100 and beyond
Blitzing past 100 users as a three-person company, bootstrapped is no easy feat. Esben breaks down the Userflow playbook:
1. Setting goals
Without external funding, stakeholders, or pressure, how the hell does Userflow set growth goals?
Do they even set growth goals?
“We don’t have to be that scared of not hitting the target, but we still set targets so we have the ambition to grow to a certain level, so we don’t become a lifestyle business. We want to be a growth business.”
Four principles stand out to us about how Userflow looks at goal-setting:
- The founders set revenue goals. “I want to 2x my ARR in the next year”
- They set 2-month schedules for features, etc. So they can easily change priorities and goals.
- They measure core metrics against peers and use tools like Chartmogul to automate their metric collection.
- “Constant iterative optimization.” They adjust goals constantly.
2. Funding growth
The secret to funding might appear to be common sense, but it’s still worth iterating. And Esben does.
“#1 thing? Charge for your product. You have to believe in your product and then charge for it. You’ll only get the right feedback if you charge for it.”
Userflow have 6x-ed their pricing in the last five years.
3. While we’re on pricing…
Grow with your customers. If you’re Userflow, you make pricing usage-based against MAUs so as your customers scale, so do you.
4. Adding Marketing fuel
Esben borrows lessons from Cobalt here, but here’s what worked for Userflow:
- Start with SEM
- Find words that work for your targeting, and funnel that into SEO.
- Parallelly pilot thought leadership and social selling.
“In an authentic way tell a story that is either directly about your product or is in the vicinity of your product.”
Cobalt went from the outbound grind that was *sort of* working to blowing up inbound massively the second they brought on Caroline Wong. Caroline was a thought leader in the security space who had even written a book about application security. Thought leadership works.
5. Conquering events
Userflow makes harsh selections about which events to sponsor or attend. These are no small spends for your marketing teams. All decisions here are made on the payback period.
“What’s the price of a booth, how many do users can we get approximately, how long is it gonna take us to pay it back?”
Userflow is sponsoring SaaStock this year, so you know the payback period calculation was made here.
6. Going upmarket
Five years later, Userflow has public market companies as customers. Names like Amplitude, Johnson & Johnson.
Without the machinery you’d traditionally need to run this operation. An enterprise sales team, customer success, onboarding specialists, legal - the whole nine yards.
How does Esben convince a large enterprise company to choose them over the Goliaths he’s competing with?
“We’re in the end-user era. You get someone at this org to try for free, make them your internal champion. Then make them fight for you.”
That aside, his principle with going upmarket to Enterprise is simple: Make your enterprise customers think hard about whether the friction they infamously crave is really necessary here.
- Disincentivize traditional enterprise requests. Userflow made it a lot more expensive to do custom paperwork & fill security questionnaires. You can get the same features at a much more affordable rate. Make them think “Are you sure you want the friction?”
- Make them really think about which plan they really need. “Are you sure you aren’t good with the Pro plan? Do you really want custom limits to start with? Custom contracts?
A Day in the Life
Esben’s official title is Chief Growth Officer. Code for one-man-go-to-market machine. He’s Customer Success, Marketing, and Sales all rolled into one. That’s at least a 20 person team at a run-of-the-mill SaaS company.
With 500+ customers to support, new features to market, and acquisition targets on his radar, Esben has to be ruthless with his prioritization and diligent with his time.
He gave us a sneak preview into a day in his life:
P0 - Help existing customers. Esben maintains a strict 24-hour SLA on support requests. Recurring support tickets are funnelled back to Sebastian as suggestive fixes in the product.
P1 - Get more customers. Generating content for SEO and social selling to get more customers. If you’re on any of the various PLG Slack communities, LinkedIn, or the other content watering holes, you’d be hard-pressed to not spot Esben on an average day.
“Any Productivity hacks, Esben?” - Yes. Automate. Always fix the root cause. Create GREAT documentation. Maintain backlog religiously. And about Sales…
“Those cookie cutter demos? Why would you waste time on setting up a meeting? Just watch them as a video.”
The Userflow stack: Zapier for automation. Userflow in Userflow for onboarding. Intercom for support. Hubspot as CRM. Chartmogul as a metrics tool. Notion for task lists, backlog. And Loom.
Why not… hire, Esben?
“If we’re still growing at the rate we want to, why hire more people? For me, hiring doesn’t reduce the work, it increases the work.”
Userflow’s support tickets have remained largely the same over the last year, and with the recent launch of a GPT-4 powered AI assistant, Esben expects them to go down in number going forward.
He ends the interview with a stark reminder to all of us that we’re in the product-led growth end-user era where traditionally human-driven channels are quickly being taken over by product-drivers.
The knock-down effect: Userflow have derisked themselves from bad hiring calls and knocks to productivity from just… managing humans while preserving the lean-hustle of a 3-person supernova.
“We’ll see how far it goes.”