2024·04·16 · 36:43
Joost de Valk on the Power of Raising Funds In Bootstrapping Ecosystems
I talk about why Yoast was bootstrapped and what I think we could have done differently if we had taken investment earlier. As an investor through Emilia Capital, I explain what we look for in WordPress ecosystem companies: not just growth potential, but whether the founder only wants to make money or actually cares about doing something meaningful. I cover how much early-stage investment makes sense in a bootstrapping ecosystem, why 200K revenue is probably too small for meaningful external capital, and what self-awareness in a founder looks like from our side of the conversation.
0:02 we don't really care about money we care about impact today's guest G Deval bootstrapped his business and grew it to a 12 million websites that use their Flagship product yast SEO he didn't take investment at yast and I will not tell you that everyone should take an investment yast and his wife mik exited the company which set them on a new exciting path into the world of investing with their company Amelia Capital if you are just in it to make a certain amount of money that's fine but then probably don't take investment from anyone in this episode we're going to jump into how much you could expect to
0:33 raise from an early funding round 200,000 in Revenue a year is probably not enough to take like meaningful investment why you might want to raise capital from investors like Y what I think is actually the most important thing is that you I'm not saying we're time yast welcome to the show thank you for having me um okay so Yost SEO you grew it to 140 people a 12 million website were using the regular Yos
1:04 plugin which is incredible you've exited and now you are an investor in software products why um I guess just genuinely like why why do that I uh I I think a lot of people who listen to the show are software craters and there is no end to that Journey for I think a lot of these people so why end that journey and start a new one well first of all I didn't end it I'm releasing new product uh and I don't think I'll ever really stop creating stuff but I've fallen into the Trap of thinking I know
1:37 better and and I can I can and ma can help uh other companies grow faster better more while doing meaningful stuff so we don't just invest in products we only want to invest in things that we think actually does something more for the world than just make money and um and we think we can help those uh those companies we we've obviously done fairly well with yast um for a while we thought that that
2:08 was an accident and as you help more companies you realize no it's not an accident there's actually quite a few things that we've done right that we can help other people replicate there's also things that we did wrong that we can help other people prevent prevent themselves from doing that's where I'm an expert I'm an I've out I I think other people learn in other ways I definitely only learn
2:39 through definitely made Aon mistakes Y and and I think we can help people with with that experience but we but we can also show them like hey we did this and that worked you can make these changes and that'll really work and um yeah I think that's very valuable and then on top of that we well we made a good amount of money when we sold y uh and and we want to bring some of that back into the WordPress ecosystem because that's how I we think it's supposed to
3:10 work uh you have to reinvest back into what what made you rich yes I love that I and I uh I I remember seeing your uh word Camp Europe talk in um yeah that was en lighten yeah yeah but so I saw a talk from you 10 years ago and that lines up with what you're saying now about reinvesting hey I'm consistent you yeah I I I truly truly believe in open source and I also truly believe that we
3:41 need to build business models around open source to make this ecosystem work I like that let me actually ask when I think of investor I think of people who only care about returns is investor the right word well the thing is I want those companies to make money because I because if you you've seen that talk on the victory of the commons and if you haven't I urge you to go and watch it because I still think it's very relevant companies need to make money H if companies make make money they can do more of what they do and if they have a
4:12 purpose to to exist other than making money they can do more of that other thing now so we invest money and time slash opinions slel um and for most of our invest portfolio companies that is one two hours a week it's not like uh like we're investing full days but it'll be in Sprints right so sometimes we'll we'll look at one thing for four hours and then we won't look at you for for a couple of weeks but I think every
4:43 investor helps their portfolio companies especially when you invest like we do pretty early stage we're usually the first investor um so you need to help people build a company and the first time you're building a company that's scary stuff you're you're setting up things you're maybe hiring some people you're you're uh incorporating or not or well you're making all these decisions and that that that is what we help with and and then we help you well make the
5:14 product better it's not philanthropy we we we intend to do that truly with well with the idea of making money and then reinvesting that money into other things again and of course that goes wrong like nine times out of 10 yes I I do agree with that uh early on you said it's about once you make money then you can kind of do anything feels like you're teaching someone how to fish like they now know how to fish they're they're making enough money to pay for
5:48 their costs and now they can really add yeah and I think I'm also not necessarily the biggest fan of the system of doing a round and then raising another round and then raising another round and because that only works when you're building stuff for like the really really big market and not everyone is and that's fine um and I think we have the the added benefit of basically being well we only invest our own Capital so we don't have other
6:19 investors investing into our funds that have to get our money back so we don't really care if we get our money back in two years or in 10 years I yeah I really don't care yeah that giv a lot of flexibility I'm sure as an investor yeah what is the what is the argument for for working for having an investor for for taking raising Capital what is what is that argument because I I don't think we hear it enough in the WordPress world so we didn't take investment at yast and I will not tell you that everyone should
6:50 take an investment that being said in hindsight would I have taken investment at Yos I I would we probably at some point would have but it really depends on who's investing and what they can do to help you the thing is that a lot of the processes that you're going to run into as your company grows bigger are entirely new to you and and you're basically figuring it out all on the Fly you either hire people to help you do that or you get an investor on board
7:21 that helps you do that there's multiple ways around that and and I I'm not saying that one is better than the other but sometimes it's to one is too expensive and you can only do the other um and I think that investors can also help you with things that you might not even realize that you need one of the things we had and we we'd been thinking about selling yos for a while so we we had run a uh a sales process before covid and it broke because of covid and
7:52 because of that we learned when we were selling Yos the second time to run a proper process with a banker now that is not something that a startup will do on their own easily we got lucky I had some friends in the right places and I found a Dutch Banker who was incredible helped us through the process um and we were big enough to actually find a banker that wanted to help us and could do that because a lot
8:24 of those Bankers will only take deals above like 10 million or 100 million or there freshh hold stay working um that sort of thing becomes easier when you have an investor and it's also I think an investor also makes it easier for you to determine whether you want to get out of your business at some point or not I do think that when you take investment you have to really really think about do I want to get out of this business at some point and if you don't
8:56 which is fine pick an investor that's fine with that too I mean we'd be very happy to take like a 10% stake in the company and then take 10% of returns from the company every year for decades if if that company's running well so I'm just taking some notes here but is the idea um is the idea you can structure the deal differently if you do want to get let's say you want to get exit in five or 10 years do you structure the deal differently or or why do you have to think about that early on um well you have to think about that because if you don't you bring on you might bring
9:27 investors on board that need to get rid of their money need to get their money back after a certain point in time so either you need to buy them out or something else needs to happen so to they'll look for what they call a liquidity event um and I mean I if you're not ready to think about that yet that's fine but then you have to make sure that you keep investors that you get investors that they're fine with you keeping your options open yeah there has to be a liquidity event which is either you know like all the way at the end of the
9:58 progress is like going public on the stock market that's the ultimate liquidity event but there's also other ways there's other other St think most of the time it's selling your company to some someone bigger correct and I hope to invest in something that goes public at some point but it also looks like a lot of work yeah yeah that's it's a lot of work yeah yeah I I can't imagine I can't imagine so so let me ask you this so you talked about you didn't rate you didn't take Capital At yast what if you did take Capital what do you think would
10:29 have changed would you have gotten bigger like instead of going up to 140 people you would have gotten up to 200 people would you would you have gotten to the same size but faster like what what would have been the differences if you did take capital I don't know whether we have hired that more people that many more people I think we actually probably hired a bit too many at some point um which is something that maybe an investor could have prevented us from doing um I think we would have gotten bigger I think we probably would have expanded into other platforms
11:02 sooner with had we had the cash to not make that a big risk we were very risk ofers because it was all our own money and we were paying a lot of people's salaries um and you can you can play a bit more well a bit faster if you if you have cash that that not is not really bad if you lose it we've invested in some companies where that have not gone well and then used to speak to those Founders after and they're surprised that I'm still friendly with them and
11:35 I'm like we were in this together I mean this happens businesses fail it's fine and I think that that that is something that well the the idea that losing a couple hundred thousand dollars or or Euros um on trying something and then having it fail is not the biggest deal in the world can really change how you run a business but it's also very
12:06 scary because it also yeah I I want you to have that drive so it is about finding that like yeah you have to find that equilibrium where where you're where you're taking chances but you're also still thinking about how are we going to turn this into a profitable company every day I I guess the so the way I'm thinking about it and I'm also I'm probably also risk adverse I'd rather build something longterm even if it takes forever to get there sometimes it doesn't even doesn't even make sense like the math doesn't work out but in my brain I just want to take the safest
12:38 route and I think if I took capital on if I had Capital to spend I might be a little bit more free flowing with the money and try crazi your ideas that I wouldn't have tried it it was just my money so if you're risk averse it might help you it might help you grow it like might help you overcome your limitations of being a risk adverse person which is a superpower in some circumstances but is also a weakness when you want to when you really need to get your profitability you need a bit of both right so you need to be able to take the risk yeah H but you also like to need
13:11 need to you need to have that gut feel for hey I want to do this and you and you need to really want to be that entrepreneur it's it's not necessarily easy and not everyone needs Investments to to do that um but if if that makes it easier for you to do it and there's so many reasons why it can be very scary I mean I can I can imagine if you have kids for instance that it that it it really changes how you look at these things Marik and I have four
13:44 kids we we we know how this works and we've been raising kids as we were building yast we can we realize how hard that is and at the same time it's also very rewarding yeah let me let me let me ask you about uh Amelia Capital so you built this with M K uh your wife and can you tell us like I guess how does the company operate are are there companies that you target for your portfolio you know are you giving people $10,000 or you giving people a million dollars like what a lot of people in the WordPress world and including myself
14:15 really don't know how this works especially with tiny software or service companies as opposed to the lar yeah uh so we we don't necessarily Target companies they target us so they come to us for investment it's we we get a lot of decks every week where people basically ask for money I do shows like these to make people aware that they can ask for money and then they come to you that's
14:46 sort of how how it works um we invest somewhere between 25 to 250,000 e usually in the first goal where I would probably for if if you're just starting out it would probably be on the lower end of that if you're a bit farther further it might be a bit on the higher end or we take anywhere between 10 to 25% of uh Equity not much more than that because I want you to run your own company uh and we don't want to be the boss and we very
15:18 specifically don't want to be the boss so you are running your your company and we we will help you we will advise you and we will actually test when we when we're talking about investment whether you would actually listen to we what we were saying okay okay but um nice but we don't want to well it's you who who runs the company yeah well let me ask you about that okay so 25,000 to 250,000 Euros or dollars I guess they're close um what do people typically do with that
15:51 in my brain and do you give do you give people advice on what to we think this is where the money would be best yeah it's not like we only talked to them once and then I talked to most of those people every week every other week so it's continuous advice uh and I and I think that's part of why you take the investment from us H usually people can choose and you choose for an investor that fits you and we look for that as well we look for that click do we like you can we work with you um I'm going to
16:23 be on a lot of calls with you or in meetings with you or uh or at parties at conferences with you do I like that do I do I see that as something as a good use of my time does ma see that as a good use of her time um do we think that we can we can help you um and that's something that you have to do the other way around too so um that's what people taking the investment have to think about as well like do I want to look at y head every day
16:54 uh um let me re ask the question in a different way here I think when I think of um I listen to a lot of you know Tech podcasts about investing and and like with some classic e-commerce Brands especially the start of the pandemic people were like oh my God DDC is exploding every Just Launch a product on your own website everyone's going to buy from you and I don't know if it was the investors I don't know if it was the companies but everyone just like bought paid ads but they were like never really profitable it was just the strategy my bias is that the investor said use the
17:27 money to buy as many paid ads as you can to get customers in the door but they never figured out they never figured out if it was the right marketing channel I probably have the fear of a lot of word pressers of like I don't want to lose my Independence you know in my 250 euros I might be able to buy or buy hire two incredible top-of-the-line Engineers who can solve every product problem we've ever had and that might that to me is probably how I'd spend that money is have an incredible developer have an incredible designer make the product the absolute best it can while I figure out
17:59 all the business stuff like is there is there that flexibility absolutely yeah and and um well we we'll help you with that but uh yes there is and I think that's that's definitely what some of the people that we've invested in have done with that money um we actually have an designer inhouse as well who can help you a bit so and we also have a a very good developer who uh uh who I do code reviews of most of the code of our
18:30 Investment Portfolio companies with so we we we go quite deep wow um the thing is you're valuing a company which basically usually most of the time isn't really a company yet so so there's a plugin and there's an idea um and then well you value those assets but we go quite deep I mean it is it is a close relationship and we we like to be fairly close to them um and yes we be we are
19:01 fine with with you hiring a developer and we'll probably even help you hire one so I I've done job interviews with the companies we invest in I I look at uh resumés I uh I will point I will refer people to the companies we've invested in like this would be a good hire having a great idea is one important part of raising Capital but you also need business defense ability which we'll talk about later in this episode let me go back to the question of like why would someone want
19:34 Investments so let me tell you my um my ideal is to make enough money every year that I can have an easy life that's also a rich life by that I mean like let's say I can magically make $200,000 a year and I only have to work 20 30 hours a week that is that is like the perfect I don't if I can ever make that happen I don't want to grow the company anymore because that means hiring more people having more overhead um having to deal with more convers just just more meetings oh my God meetings like the more people you hire the more meetings
20:07 you have oh like how is how do you I I think a lot of investors want unlimited growth and I think there are some owners who want hey I just want to get to this place where I'm comfortable I'm making whatever your your magical salary number is and I don't want to work 40 hours a week maybe I just want to work 30 I'll be honest if you don't want it's not that we want unlimited growth because I I don't necessarily care for that and I think we are weird in that way because we don't necessarily care about money which is weird because a lot of this is
20:41 about money but um yeah yeah we we don't really care about money we care about impact H which is what we've always cared about a Yos to impact was was more important than making money and um that's why there was so many features in Yos free when if you were running it as a commercial business you really wouldn't have done that um there is this this thing where if you are just in it to make a certain amount of money so that you can have your life
21:13 that's fine but then probably don't take investment from anyone because you'll get okay um another voice in your company and you have to truly listen to that voice uh and they will and they will want to grow more because if if I have 10 or 20% of your company and you make 250k a year and I've invested then it takes quite a bit of time to make that back whereas if
21:44 you grow like yeah twice as much then it makes it a lot less time to make that money back um but if you that so it depends a bit on where where you're coming from like that 200,000 in Revenue a year is probably not enough to take like meaningful investment but if that becomes like 10 million and you don't want to grow Beyond 10 million it's fine there is this limit of like and and that sounds
22:16 like a whole lot I I realized that but I mean Yos was over that and um there are more businesses in the workplace world I know that are over that and and even at 5 million the do your life becomes very different you you're managing people and you're managing a lot of different things yeah but what I think is actually the most important thing is that you have this other goal that you have for your company which should be bigger than just making money um what do you want to achieve
22:49 that you're that we help you achieve that so at Yos that was SEO for everyone if you look at equalized digital one of our investments uh they make an accessibility Checker they want to make accessibility better for everyone they're they're super passionate about accessibility and to them too money is accessibility and and that's what we go for I I get excited when people are
23:21 passionate like that about a topic and want and want to make something better for the world the web whatever and I think that if that's your drive then you want to continue doing that that then we are well a good investor because that's what we really like helping with um yeah I think most investors will be okay with uh with
23:52 you saying after a certain point like this is big enough for me but then they'll ask you to leave and put in another CEO yeah yeah ah okay okay got it it's good to know I I I so I genuinely don't know like how many people in the word and I forgot the the I don't think I used the word earlier but how many people in the WordPress World want a lifestyle business and how many people I I genuinely have no idea I W I wish I understand stood that Dynamic a little bit better um but you know what
24:23 people in this podcast probably skew a little bit more towards growth and growing a much bigger business than the annoying thing about about making money is also that if you make 200k a year you'll end up thinking I could do a more that's true every every time my salaries increased I'm like what where that it's also like 200k in the especially in the US is not what it was 10 years ago so
24:55 they I mean these things grow but I think that you have to be honest about what do I want to achieve with my company when you take investment so you have to you have to have a like a longer term idea for what your company needs to be let let me let me dig into that and sorry one quick thing first actually at my uh day job right now we're actually working with equalized digital so I just wanted to give you a Kudos and a little pat on the back they are awesome at accessibility they found a I mean not good for not good for me they found a ton of issues on the website that I now need to fix but they're very good at
25:27 finding those accessibil rockars of really really like what they do yeah first of all do you invest in anyone that doesn't have a big idea it's just like hey I found this plugin it makes money do you work with people to refine their Vision or do they need to have that Vision before they come to you I think what we we'd like to help you refine it but we'd have to see that it makes the world better already before we that um I mean investing in large part especially if you're as early stage as
25:58 we are is also investing in the people the founder H do you trust the founder or the founders to do the right thing do you think that they can handle it do you think that they can grow and so yeah we'll we'll try and help them and I actually really like helping them but it's also like they all have they also have to be open to to listening and to well sometimes very harsh feedback when you say hey you've built this nice website I don't I really don't
26:29 understand what you're what you're writing on there which is funny but that a lot of what we do is is feedback like that like yeah your story is too hard make it easier to tell um there's a lot of that there's a lot of marketing a lot of me going through code and seeing that a single developer has worked on code and going like yeah this is fun um please start using uh wpcs start documenting your code start making sure that if we hire another developer it's
27:00 not going to take them three years to figure out what this code base does um yes it's that sort of thing that you don't necessarily think about in the beginning uh where yeah will help so you mentioned um investing in the founder what are the qualities that you want to see in a Founder do do they need to be a you know an excellent public speaker who actually are sorry are they are you also interested in people who want to raise more Capital Beyond I I kind of assume
27:32 yes yeah in fact I'll help them if we can um um oh nice we we don't care about public speaking necessarily I mean what what's important to me is that you can reflect on what you've been doing so far and then improve um the the willingness to learn and grow is probably the most important thing for an entrepreneur because there in the beginning you're there with a couple of people then you get an investment you hire a few people you need to start managing
28:03 other people you need to do things that you might not have done before um and then if it goes well you'll be hiring more people and you'll not be managing just a few people but you'll be managing dozens of people um which really changes your life uh and you need to grow along with that and and and be okay with that and then figure out like hey what's the best role of these people within this company and our they best suited to be the CEO or should they be the CPO or what I mean
28:34 one of the things we did at Yos was that I Ste back at a certain point from the CEO role and became the chief product because I'm better at product and code than I am at managing an entire company of of 100 plus people and ma was better at creating company culture and and and keep and doing all those things so there what we look for I think most well we look for a good idea which we believe really helps the world in
29:05 some way we look for some defensibility so something that allows you to say hey we've built this and not someone else can come in and copy this in two days um which is getting harder because AI makes it pretty easy to copy things but defensibility can also be brand I mean a yast I think a large part of why Yos is still very popular when rank is still around which is a copy of yast is because the brand is better and MH well
29:37 so there are there are things you can do to make it make it defensible but that's what we look for um and and then we look at like hey are these Founders the people that can do this and do they have the team that is needed to do this so if you if you say hey I'm going to figure out the business side of things and you're not a developer yourself which happens a lot then I will often enage you to find a technical co-founder because I want a developer would skin in the game uh to well to be in it because
30:09 otherwise it's going to be hard to run a Technical startup yeah I I'm stuck on the founder my brain is stuck on the founder I you said um you want to know that the founder has the ability to reflect on what they've done so far and improve and to me that sounds like self-awareness and that seems like an like not impossible very hard to judge if someone is is self-aware and they can like to me it's like looking at yourself from above and going oh that wasn't a good move Patrick and there's a lot of
30:40 people who don't seem to have that no but it becomes it becomes pretty clear when we were in like one of the first calls with you and and we'll give you some feedback and then we see how you deal with it and got it and if you and I will literally will probably already tell you some things that you should do better or ma will do that and then we look at hey are they taking this to Heart what are they doing with this um or are they coming back to us and saying hey you set
31:11 this and that can you can you help me work through that or uh you said this and that but I disagree because and I mean we're not always right and I don't care whether you say that I'm right and do it or whether you come back to me and and say hey you you said this I didn't do but I want you to think about it and reflect and and and and well and grow I so you know what ghost I will disagree with you disagree with you respectfully here I don't know if I can I don't know maybe I don't have the skills to judge
31:43 if someone is that self-aware that that I'm not saying we're doing this perfectly 100% right all the time we're definitely not near the end of the show we're going to get into what yoast could have done better and in short do more and do it faster stick around for those details to me when I think you're hire when you hire someone in general for any business you're judging their judgment and that's a really hard like whatever they're good at whatever you're hiring them to do it's your your judgment their judgment that you're hiring it's really hard to figure out if someone has good
32:14 judgment and it feels like it just takes a long period of time to figure that out or it it is hiring is hard don't don't get me get me wrong and and this is not dissimilar I agree we've hired more than a 100 people at yast I it's a trick that you do get better at I think and it's also like sometimes it takes a bit more time Investments are not like a a 20 second decision let let me ask about like business stage right so there's different stages of your business if someone's open to investment at some
32:46 points at what point should people reach out to either you or a different investment well done or before or after no okay you're pretty open there's no like there's no right time or wrong time to reach out what works for you and then sometimes we might say it's a bit too late or the the evaluation you want is too high for us so you've had this awesome awesome Journey uh at yoast making I guess I I would call it um essential infrastructure for a WordPress
33:17 site is um which basically what you've made which is incredible and now you've sold that and now you're an investor um looking back at that decade plus of experience what advice would you give yourself and other creators move faster move faster more I should definitely have made a premium yosio premium faster we had more ideas for other stuff which we should have moved faster on I think one of the problems of the WordPress ecosystem is that we look inwards a lot and outside of us the world is changing
33:48 so outside of us Shopify and others have have built products that are actually fairly cool they are outd developing Us in some of those areas and I think the the entire ecosystem needs to speed up and and needs to build better and more product faster yeah I love that I uh uh here's here's one of my crazy business ideas this you'll probably tell me how this is wrong but in my mind the faster you go the more likely you are to succeed because you'll quickly you'll find those
34:19 mistakes faster and fix them faster that is I mean that's theel mindset right and and also very much the open source mindset is release early release often and and just continue going I think that works to to a degree so sometimes you might want to polish a bit before you do your first release and then you do release early release often after that well time to Market Is Not A New Concept this is this is a fairly old concept where people in the 80s were already very much about time to Market and I think that that is it's not something that's gone away just like marketing has
34:53 not changed in the last 100 years the platforms have changed but people essentially and how to respond to things have not changed all that much what is important is that you move fast on things that matter if I can urge everyone listening to this to do one thing is to build something that does you that that does more than just make money if it has a bigger goal than just making money it's a lot probably going to sustain you a lot longer yeah I I can definitely say anytime someone's reached out and said wow Patrick this has been really helpful or something like that
35:26 like the just when you're genuinely adding a lot of value in the world that uh it feels good I mean the fact that yio runs on millions of sites is something I'll always be happy with love that um Yos thank you so much for joining us and sharing all of your incredible insights my absolute pleasure thank you for having me and listeners thank you for tuning in if you enjoyed y's insights please hit like And subscribe so that we can continue to bring on influential guests onto the show to share their knowledge experiences and expertise if you're more
35:58 of a social kind of person then we'd appreciate it if you share this episode on your social channels to get the word out about the content we're creating for entrepreneurs like you if you're looking for early bird access please visit plugin. FM's website if you're not already on it and click on the Subscribe button to find out who and what's to come before anyone else plug onfm is brought to you by freem miss your all-in-one payment subscription taxes platforming for selling software plugins themes and software as a service if you're struggling to grow your software Revenue send a note to contact atr.com to get free advice from fr's monetization experts my name is Patrick Rollins and thanks for listening to plugin.
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