 Welcome. Welcome to talk. So this is making the leap from Drupal shop to product company. So who here if you can raise your hand is building a consulting company or Drupal shop. Excellent. All right now who here is building a product company? Raise your hand. Wow. You are in the right place. Good work. Awesome. So here's my warning. We're about to cram literally 35 hours of business lecture into 35 minutes and leave plenty of time for Q&A. What could go wrong? Let's find out. So quick background. So my name is Zach Rosen. That's my email address. Shoot me an email if you have any questions or follow-ups. I'm a co-founder and the CEO of Pantheon. I am a founder of Chapter 3, a Drupal consulting company and also co-founder of Mission Bicycle and we talk about these companies at more depth. And I'm very happy to be here. I'm very happy to be here with Ryan who is a Drupal guru on many levels including business. Thanks Zach. I'm Ryan Zarama from Commerce Guys. I sort of started working in Drupal with Uberkart background like the Drupal 5 beta days. It was neither a product company or services company despite the fact that everybody thought we were a company. It was a project that then turned into Commerce Guys in 2009. And we've grown in various ways since then that we'll be discussing in this session. But we're now sort of creating a product internally that can find a life of its own called Platform.sh. And then, because I don't have enough to do in my life with businesses and a third child on the way, I'm also building a product company called Bellweather that's using Drupal as an application framework to sell things that we'll talk about. I don't want to spill all the beans now. I'm going to keep you in suspense. But just as a high-level overview for what we'll be talking about, we're going to begin with the next slide. Let's figure this out. We're going to begin with just a description of the business models that our histories represent. So between us we have I think six or seven different companies or products that we've contributed to or grown. We'll discuss the business models involved in those. We will discuss venture capital at a very high level. What is that all about? What kind of a company could receive funding? And if you're not going to go the route of capital, how would you bootstrap a SaaS business either on the side or as part of a services company that you then spin out? We'll briefly cover what product development at a startup looks like and then close with just a few words on kind of management 101. And a lot of this format here is lessons that we've learned along the way. It's less how to go and do this thing that we all want to do which is make money while you're sleeping. And more about what are the hard knocks that we've taken and lessons that we've learned and how can we inspire you to go out and build something yourself. So with that I will pass the mic back to Zach to take us. So here we go. So here's a founding story. It might sound a little familiar. It was 2006 and I was hanging out with Josh and Matt and we were 20 some things who were confused about our life and we were getting asked repeatedly as independent consultants to work on Drupal projects. And at some point we kind of looked at each other and said hey do you want to start a company? So that is the grand strategy of founding Chapter 3. Wasn't much to it and that's how we are going. So the company has been built kind of brick by brick ever since. It's evolved a lot over the years. At the moment it's and as of the last two years actually Josh Matt and myself have very little to do with the day-to-day operations of the company almost nothing. There's a team there John and Steph and the management team that runs it. It's about 35 employees. It's based in San Francisco. We never raised any outside capital. It's all been built off of profits and has a great life of its own. So here's another founding quick story. So it was maybe 2008 and I got around San Francisco on bicycle which was a lot of fun because the buses were not very good and cars are crazy and all my friends got around in bicycles and none of us liked our bicycles because they were kind of not very well designed for city riding and then then we all went through this process of building our own bicycle which was really fun and took about 30 hours and a ton of research and was a pain in the butt and at that point we started saying why isn't there a decent city bicycle? Why isn't there an awesome city bicycle company? And then we started talking about well maybe we could start an awesome city bicycle company and then it was oh my god we started a bicycle company and it's been kind of like that ever since. So mission bicycle has been a bootstrapped venture since then we've I'll talk about it more in depth but we have a little shop on Valencia Street and it's on a very different path from chapter three other companies. Our long-term ambition mission bicycle is to build the world's best commuter bicycle for American cities. The most personal reliable and remarkable city bicycles available and our vision for the company looks a lot more like does anyone know Heath ceramics in San Francisco? Anyone? Never heard of them. Okay it's one of my favorite businesses. Dirt comes in one end and people buy really great ceramics out the other. It's a local manufacturer in San Francisco. It's been around since 1948. We would love for mission bicycle to be around in 50 plus years and it's not at all a venture business. It's a kind of a passion manufacturing business. So yeah we have a little shop. We build bicycles. They're all built to order. It's really fun. It's totally different in many ways from software companies or consulting but also in many ways it's just the same stuff in terms of building companies. Maybe it goes without saying that they're able to use Drupal to like yeah to drive a lot of the construction. In fact you know Drupal commerce in fact. But that wasn't my project. You guys did a fantastic job. But no it's it's the idea is that you know Drupal is enabling people to build businesses that kind of transcend just thinking about software mission bicycle in the way that it you know exists today. I think I guess previously it would have been a mail order catalog. Yeah pretty lame. I called her by numbers where you kind of yeah piece it together and mail it in and get a bike hopefully. So the commerce guy's story and was similar to the story of chapter three which was I was working on uber carts selling restaurant equipment at the same time because we built it for a company called Prima supply that sold by the prep lenders and true refrigeration and all that stuff on the internet. And I just started to meet people in the Drupal community around Drupal con Barcelona ultimately met two guys Mike and Tim who decided they were just going to specialize in doing uber cart consulting and around the time that I decided to go Drupal full time. They said well hey why don't you join us instead of you know just working for an old Drupal shop. Let's try to build a business around uber cart. And so we got together in 2009 at Drupal con DC and you know signed the whole articles of incorporation and kicked off this grand adventure. And it was really stressful and and yet it wasn't necessarily stressful because like starting a business is stressful. We actually like made plenty of money that year paid ourselves fine. But there was this whole like shift with uber cart turning into the Drupal commerce that happened around the same time that took a personal toll. But we stuck it out and ended up merging with the French team of AF83. They put on Drupal con Paris and kind of brought their Drupal team to commerce guys and created a new commerce guys with the same brand but headquartered in Paris that then raised venture capital to both scale the services team and pursue a product roadmap that we would deliver services around. So we could have continued kicking it with uber cart and just kind of managing that conflict and building sites and whatnot as a small commerce guys. But making this jump enabled us to put me full time just on building Drupal commerce and then other people dedicated full time to creating kickstart and so on. It was just a very different path. And we were discussing this earlier that one of one of the challenges in raising money to like scale a services team is that with chapter three you could kind of grow the team organically so that as you had need to add developers you could hire more developers whereas at commerce guys it was almost like we had money and a budget that we had in a forecast for revenue that we had to hit. And so we're having to actually like scale to fit something that we said we could do a year and a half before. It's really challenging. And then we didn't have a product roadmap to start. There wasn't until our second round of funding really that we knew we were going to build kickstart and platform. I think that might be the next slide. You know platform was the product that we actually sort of put venture capital behind. And it wasn't until we raised the series B that we even were able to launch platform. And so it's a kind of kind of a roundabout path to going from being a Drupal services shop that started on ubercard turned into Drupal commerce consulting decided then to build a couple of products one that is actually said people don't know this but commerce kickstart itself is kind of revenue neutral. It wasn't a loss despite the fact that we spent a lot of money to build it. It also generated revenue on its own right and continues to not just thanks to Pantheon affiliate fees but also thanks to things like payment gateway integrations that continue to pay you know affiliate referral fees and things that kickstart enabled. So that all happened. And then of course platform happened and now that's kind of trying to find a life of its own in the enterprise hosting space. So that's that's kind of the commerce guys platform story. I have one more but first I'll pass the my back to Zach because the Pantheon story is kind of like in hindsight maybe what we should have done. So if you haven't noticed this is appeared apparently in random order is actually in chronological order which is random. So so Pantheon is on a very different path than Mission Bicycle and Chapter 3. So one way is just different is we have raised quite a lot of venture capital. We've raised $28 million to date and that's for a very specific reason. It's it's because the goal the mission of Pantheon is it's kind of you know stupidly ambitious. Our long term goal is to run 30 percent of the web. We currently run point one percent. So we have 29.9 percent to go. We're going for one percent in a few years. And you know the founding story of Pantheon was it came out of the consulting work we were doing in Chapter 3 at the time. It was really Josh Matt David and myself you know kind of idly talking about you know it was really a realization that we had that we thought that the demands for website customers so marketers and business owners what they demand of Drupal or the demand of their website when they buy a Drupal website was increasingly going to look like what they get from softwares of service companies. So Twitter Salesforce Google apps where there's no servers there's no kind of hesitation and fix things think like the website really should just work is the exhortation we think marketers are going to increasingly expect as they get kind of used to softwares of service tools and the rest of their portfolio tool sets. And we basically at that point when we had that realization we looked to where the state of the art for the industry was for infrastructure for Drupal and we became pretty convinced that hosting companies and hosting architecture wasn't going to get Drupal there quick enough. It just we didn't you know what we saw was a need for for example we thought running Drupal site should look much more like Heroku or Google App Engine and not like GoDaddy sorry GoDaddy or and we thought every developer needs like really good developer tools or version control and dev test live environments and all the stuff that you kind of need for every site. And hosting companies really weren't getting getting it done. So that that was the beginning of Pantheon and to try to achieve something on that scale we there was no choice for us we needed venture capital. You know we bootstrapped the company as far as we could out of Chapter three. It got us decently far. But at some point we've invested over 10 million dollars just in the technology alone. And that's something we literally could not do as a bootstrap company and we and it also works out that the kind of things we're trying to do with Pantheon which is a big long term technology bet is exactly the kind of thing that venture capital tech venture capital is built to do. So there's a really good alignment between the expectations and the kind of framework of venture tech investment and what we're trying to do with Pantheon that's why we're on the path. But it's a completely different path than Mission Bicycle or Chapter three where it's all bootstrapped or friends and family. And there was like a point which you made like a clean break. Yeah. To be full time focused on this one thing. And yeah. So we spun. I'll talk about this a bit more. We spun Pantheon out of Chapter three is a completely different company with different ownership and investors and basically insisted that we would do that. Yeah. Otherwise your your evaluation is tied negatively to this like services revenue that's clouding the picture. Yeah. So so one quick story and it's not my story. It's Drew Gordon's story and Ronan's story. It's the back of a migrate note scroll story. So I just want to call this out because it's actually I love this story. So so you know Ronan has been working on back of my great for eight years. Back of my grades used by 300,000 Drupal sites. It's kind of the de facto way you create backups and migrate your back above your Drupal site somewhere else. And then Drew and Ronan without any outside investment bootstrap that's no school business into a very successful and very nicely operating business on their own with no outside investment and you know did this out of the Drupal ecosystem. And we we he has a really it's a really cute squirrel and he's wearing a really cool t-shirt. We just so Pantheon recently acquired note squirrel. So Drew and Ronan are joining the team. But I thought their story was worth telling because I think it's very applicable to a lot of folks here in the room. Yeah and it kind of demonstrates that it is possible to take a Drupal module and provide a value added service on top of this open source code that then not only becomes like a standout like a good business in its own right but something that there is an exit for. There are companies that are interested in acquiring things that do that for various reasons I'm sure you know it made good sense for a number of reasons for Pantheon to move this direction. So quick plug. So the reason we did this we're excited about is this guy's now free. So note squirrel is now a free service. Anyone can use it and it was a thing that we wanted to do and Drew and Ronan wanted to do but we could only do it together and that's why we ended up merging. And so I'm pretty convinced there are other opportunities like this out there right. Backup and migrate isn't the only thing that could have a value added service that's built on top of open source code whether it's we've batted around ideas around administration and analytics and other things in the commerce space but I'm sure there are other opportunities like that. And another model that uses Drupal and Drupal itself as the heart of a product is is this model that I first learned about through a company called BioRaft. Anybody heard of that company? They're up in New England. Has anybody here from BioRaft? Okay that would have been cool I guess. But I first heard about them I think it was in Barcelona they were there because they were using Drupal as like the the framework for their software as a service product which sells tools essentially SAS tools to research laboratories so that anytime somebody has a need for some different type of research they could create a module you know to track all of your mice in your lab and then they would roll that you know module out to all of their other customers for free so you're paying a subscription fee and then sort of using this inherent like modular nature Drupal to roll out continuous improvements in your service to all of your customers. Pretty cool and it also kind of sounds a bit like where Drupal distributions come into play where you know typically the distribution I think is built as a project on Drupal.org to help other people build websites but it could just as easily be managed internally as as like the framework around which you build a SAS company and so that's what I'm doing now with Bellwether I'm actually had a friend who developed and this is kind of out in the weeds so I'll be really fast with it but he developed a new model for what's called weather normalization it's part of the energy forecasting process that every power company in the world has to do on an annual and at a micro level on a daily basis and he had this model and it was basically like in his head and in an Excel spreadsheet and so I said well I know how to help you productize this you know let's let's create a Drupal distribution that can serve as a front-end for a better statistical computing environment than Excel which is called R another open source tool and then we can provide utilities access to this portal and then as utilities have different needs we can build new products for them and release them to all of the other customers so they can quickly turn on and start to make use of all these tools so in a sense we're doing the bio raft thing but for the energy industry to start to build this sort of cloud of machine learning tools that help them better understand weather's impact on energy demand and various other things that they're doing and so this is pretty exciting that the model thus far has been what you call customer funded development so the idea being you know there there are people who wanted this to happen and we're willing to pay money for its site unseen the minimum viable product was literally just a PDF that we emailed and now we're finally getting the web portal up for them to make use of that and then we've discovered new tools along the way to then get you know thousands of dollars in annual revenue before ever really having something that looks good and so I'll talk a bit more about like what that bootstrap process has been like but it's it's a model of customer funded development that now is kind of at a place where it could reasonably raise at least a nice seed round of venture capital yeah so let's want to wrap up this section really quick because this was a random walk of chronological history so just to wrap it up a little bit so I guess the message here is there is no one right way right there are toolkits and strategies and practices you can take from one business to the other but there's no one right way of financing or building a company strategy or building a company at all and all these companies we kind of found our own way that was right for that company and made many mistakes along the way that we were work from yeah and we will continue to make those mistakes exactly okay so venture capital what's that all about this is a three-minute talk of venture capital so a couple of messages here so one of them is and this is a very hard point for me at first and I think for many people to kind of get their head around in terms of venture capital so rational people would think if you went to a venture investor and said you know hey venture investor I have this full-proof plan to take $20 and reliably turn it into sorry $10 and reliably turn it into $20 and it's never it's not going to fail and I've proven that it works and it's a just like money-growing machine will you finance me that they would say that sounds interesting actually turns out not to be the case those kind of businesses are not the kind of businesses venture investors look for because it turns out venture investment is what what they call a hits business actually has a lot in common with movies or in their entertainment where you have as a venture investor the way this really works is you have a portfolio of many investments sometimes it's dozen sometimes it's hundreds and you're looking for the outliers that really blow up so like the the googles or the uber's or the twitters the Facebook's where they have humongous outside returns where they can turn $10 and potentially a thousand or $10,000 but what that means is most companies actually don't make it most companies are not the outlier and so what they're looking for is these big outlier companies that make so much money that they'll pay for all of the risk that it took on everyone else that didn't make it very hard to get your head around this and so what it actually means we'll talk about this a bit more is most businesses actually are not really a fit for venture capital because the kind of risk they as a venture investor they want you to take you probably are not doesn't make rational sense for you to take for your business or your business is really not set up to try to be a moonshot so you know all the companies we ran through think three of them are venture investment and the other four aren't so and 99% of businesses are not venture investment for venture investment companies for this reason so how do people build businesses if they're not raising venture investment well again 99% of businesses many businesses are fortune 500s are huge companies went and built in a built huge companies without any venture investment how they do it well how about building a growing your company on profit getting bank loans some sometimes people raise your friends and family investment not from a professional investors but from you know their own networks this is the way most businesses actually are scaled and it's appropriate actually think for most businesses and business models to leverage these tools okay but if you do think you have a venture capital kind of business there's and and and you don't want to do this the normal way you want to do this the go for broke venture capital way the good news is that there are a ton of resources so there is this great blog that I love called venture hacks that has 20 or 30 posts which will run you through everything you probably need to think about but before you to start down this road there's this really great book venture deals that is everything you need to know about actually signing up for venture capital and negotiating a term sheet with a venture investor and there are really great incubators like tech stars and white commonator that are literally like boot boot camps for how to start a venture back company there are many more resources also in addition to this there's a lot of stuff on the internet and and you know for me with like my development I guess from commerce guys until now is it all a bit about like running while like trying to start running while moving I guess there's a there's an idiom there that I'm missing anyways trying to find my feet whatever and so all along the way even just doing ubercard and in triple commerce consulting like reading these blogs and reading these books there's just like preparation putting my head in the right like the right space so that when an opportunity like a bellwether came along like it didn't take me much effort to tell my friend well here's how you need to grow this business so it's kind of like if you have an idea that you want to do this someday like reading now is certainly not going to hurt you and these are the these are the resources that have really helped me as well as as a can I threw a link there to Paul Graham's blog as well and you can just kind of like go read everything he's ever written and be in a really good spot to avoid some pretty common mistakes whenever you start to build your product business yeah all right so but we're all we're also here to talk about making the leap from an existing consulting company to a product company which is the approach that we took to start mission bicycle and pantheon actually and it's approach that's actually not available to many people so for many folks out there who want to start a product company or want to start a venture back a product company they have to look at a life decision like quitting their job going on zero income having no resources to start with and literally building everything from scratch but if you're in this room and you're looking to start a product company you already have a consulting company that actually can be used as a vehicle as kind of a cheat or an accelerator to start to build your company your product company and that is the path that we took with both mission bicycle and pantheon so funny story this is actually the chapter 3 office in San Francisco the first 10 mission bicycles were built in the conference room of chapter 3 which was a great way to save money and made no sense to our clients so we found creative ways to explain that and in fact the first year mission bicycle actually got started as a web e-commerce business with no storefront so we literally incubated it inside the office of chapter 3 we built the website with the chapter 3 website development team we put the first couple hundred thousand dollars of investment to get the business going directly came out of profits from chapter 3 so we actually were you know chapter 3 was the incubator for the mission bicycle company and really got it off the ground and if we were to go back in time and think about starting mission bicycle without chapter 3 I don't think we could have done it or if we were to try to do it would have been a lot harder so we actually that worked really well in most respects and so we actually did that model again for pantheon so the first nine months of pantheon were pantheon was incubated inside chapter 3 so this is before we raise venture investment you know David Strauss ended up moving out to San Francisco he worked with us in this chapter 3 office we put the pantheon team behind closed doors their glass doors you can see through them it was very ineffective we tried our best funny story the first two employees of pantheon were not the founders they were actually chapter 3 employees we put on developing pantheon why we kind of extricated ourselves from operating the chapter 3 business again the first couple hundred thousand dollars of investment in the pantheon came from chapter 3 profits and we were able to get the pantheon business really going with first customers and early prototype of a product without any outside investment and when we raised outside investment we were pretty far down the path and we had enough runway to really know exactly what we wanted to do as a business which really helped us when it came time to raise money and you said it a couple of times now that you know you invested hundreds of thousands of dollars into these two separate businesses and I think you know what one of the takeaways from that is that we probably have to like up our game a little bit and how we're running our Drupal shops it seems counterintuitive if you want to build a product business you want to bootstrap it and spin it out of your Drupal shop then you may need to learn how to grow a business first that can have hundreds of thousands of dollars of profits to then incubate and spin out a side project yeah I think it's a really good point and I think if you if you're in this mid transition actually it's really hard it's very tricky place to be because you're always rationalizing your time and so for example at Pantheon it was more made more sense for Josh Matt and myself actually to work on chapter 3 and have employees work on Pantheon to make chapter 3 profitable enough to build the business and over time figure out how to build you know we had a team that from the bottoms up can't kind of took over the responsibilities that the founders and partners had within the next year or two but yeah just in general so if you were to go down this path it it it can work really well it's certainly not easy but you know to just you know be pretty blunt what I consider kind of a healthy growing consulting company should be able to run at about 20% gross margins that's generally the target that's very hard to do and if you're doing that like wow that's really impressive but if you can do that yeah it's very real money you can put into to building a business and it can be part of the exercise in our budgeting process was figuring out exactly how much of our gross margin we could allocate toward platform.sh development and then basically managing to that number obviously it'll be great to exceed it but yeah that was that was what we had to show the investors to bring them to the table you know to invest in this sort of combined commerce guys thing yeah oh yeah keep the slide so then we end up spinning out mission bicycles mission bicycle became its own company we raised it basically the equivalent of like a restaurant kind of friends and family investment like not a huge amount of money not from any professional investors and then pantheon we ended up raising money from venture venture capital groups and and spinning out in his own office okay so I'm gonna hand it back to Ryan all right so so another way to bootstrap it is just to not sleep to work to work a full-time job and then assist your friend on your vacation days and nights and weekends with a very forgiving wife but with Bell whether it's literally bootstrapped on Twitter bootstrap and again was born out of an existing need that my friend had discovered in the company he worked at so he was from a power company developing this model that sort of far exceeded the precision of the existing like industry standard model because I guess he discovered that the industry sort of just thrown up their hands at good enough with respect to understanding weather's impact on load but it's coming back around again of course because of alternative energy and so on and so forth and so so he discovered this need created a solution sold it to a CFO all the way down so they standardized on his model and then you know whenever like they started to talk about well maybe other companies might be interested in this you know that sort of you know he knew he had something special that was worthwhile to take and build and so bootstrapping meant he quit his job and lived on just his wife's income which I think runs out soon and I assisted and then we just started to try to find sales with a third friend who just started cold calling every utility company we could think of and and ultimately like there was there was like this problem that we knew we wanted to solve we had a solution that was good for to just look like our scripts and command line output that we formatted into reports for companies but we never actually we haven't actually yet sold that thing so instead there were these these other conversations with customers where they said well we we don't really need to apply your model to sales forecasting right now but I do have this like maintenance issue where I need to understand weather's impact on number of customers without power per hour okay so the same model can help them understand that and produce them a pretty report they're willing to pay thousands of dollars for and then there's just the tool that's even simpler you know it was a better weather forecast because the you know the company with 80 percent market share in the forecast data supply space literally gives you access to an FTP server to download your file and you're forced to then customize that reformat it and distribute it amongst your team and of course with Drupal we can quickly create a user interface that somebody can log into and download reports and so it's a really scrappy story right where we we knew a market and we knew people had problems that weren't being addressed and so then it was okay how can we use the tools that we have in the very limited time that we have to begin to address their needs and get money like coming through the door and so like this was a weekend project literally to create the prototype for them to get their weather reports but they're happy to pay six thousand dollars a year to have access to this site and you know who knows what other opportunities there are and so the basic framework here for creating a product and bootstrapping this business is that you have to have a problem worth solving that you've identified in a market that hopefully you know well so whether that's everybody should have automated backups of their Drupal sites or power companies shouldn't have to FTP CSVs off of servers and reformat the ministry with them there there are problems out there that you can find and solve so then you have to iterate your way toward a solution that actually addresses real customers needs so that's what's called that's what's called finding your problem solution fit it's the idea that the solution you think is going to solve somebody's problem a pantheon agency dashboard or you know a command line interface for platform whatever it is actually does solve people's problems and is usable then once you have this thing and people are paying you for it you now have a product that you're testing in the market pricing you know determining how to support it etc etc that's called finding your product market fit then once you've done that well that you can scale it happy day it's it's it's now a matter of creating this this sales and marketing engine that can that can take this idea and scale it and so the idea behind bootstrapping is like that you're not necessarily saying no to money but you're saying when you're saying that it's it's better to find some outside investor who's interested in multiplying their money at a time when you have a model that's ready to be multiplied so for all of the businesses that we've been involved with whether it's building bicycles and knowing that this is something that people are going to pay money for and and then it can scale or building website platforms or e-commerce frameworks or you know tools for power companies you find where it can scale and then that's a great time then to raise that friends and family round if you want to take the next level or in the case of bellwether begin to talk with you know early stage investors to put together around that can help you accelerate specifically that sales and marketing and not you know see you continue to pour money into building the product that you haven't tested yet and so I like everybody's story is different and unique and you learn lessons every time you do it but with with commerce guys we sort of lived at this point of tension for a long time where you had two businesses that we raised money to build in one which meant that the services company needed to grow and scale but it also needed to supply money to the platform that sh team and company and see there's this this is real tension that that kind of came maybe from from a bit of premature premature like scaling like there was no real product yet at the time so I'm sure we can analyze it but but the big idea is that you know it was a longer path toward finding that product market fit and now we're going to have to separate on the tail end the two businesses and distinguish them so that we can scale them both on their own terms that so it's just you can either go I guess one way or the other or one of a hundred different ways but at the end of the day you're still having to follow the same basic pattern to grow and scale a product company and there are tools that help you do this I'm probably the best tool that we used just to help my friends sort of think about how to productize a data model or an algorithm was what's called a lean canvas and it just forces you to put down on one sheet of paper you know what is the problem that you're trying to solve what is your solution how do you evaluate your solutions effectiveness what's your unfair advantage who your customers how are you going to reach them what's your revenue model etc etc and it's all in one piece of paper so that you can really quickly you know one like like just make sure you understand what you're trying to do together as a business but also use that then to speak to potential investors if that's the route you're going and I think that you know Zac you've thrown some books on there that would be also helpful yeah so I just want to reiterate that so right when we were starting Pantheon we were well three of us for very good engineers one of us was a faker me and you know the impulse was let's start coding we know what to build let's start building it I love building things but instead we forced ourselves to go through this lean startup process we literally bought this workbook which is not a very well produced workbook which was really like do the lean you know product a customer development process step by step by step like paint by numbers and we did that and it was one of the best things we ever did because it saved us literally thousands of hours of lost effort building product that no one would have wanted it's it's just all about me you should never write code it before you do this process I'm such a believer in this at this point because the biggest mistakes you will make is just building stuff that people won't find valuable I think one of the things that really blew my mind about the lean startup and running lean and other books like that is that the MVP is like a wireframe you know it's not I've now built my Drupal distribution and I can go and install and demo it to somebody it's it's literally just well what if we did like something like this would that be interesting to you and that it's just enough to get you to the next iteration of testing your hypothesis until you finally know what you're gonna build yep all right so we're continuing our tour of business lectures we're an hour 29 okay management 101 so this is my little spiel and co-founder relationships and building co-founding teams but I really think applies to just building teams in general and specifically early teams so and I'm totally stealing this this is an old Steve Jobs quote where he you know it's it's the best model of building teams is the Beatles so here's why this example I love this example so the Beatles were you know the best band arguably the last whatever hundred years you can argue the point but phenomenal band but as individual solo acts not that fun I mean pretty good but not like you know earthshaking and it just turns out that you know these four gentlemen as individuals were you know okay musician like pretty good musicians but the things that they were individually really good at they were really good at and the things that they were not good at someone else in the band covered up and as a group they were able it was really an example of four individuals performing much better than one plus one plus one plus one they as a group were you know a phenomenal act and I think that you apply the same thing with co-founders like the best kind of co-founder relationships you would think would be like oh I like you you like me we're really good friends we're both awesome at the same thing which the problem with that is the jobs you need to do at a startup cover so many degrees of operation that what usually leads to is you know the things that you're best at you're both trying to do the same thing and then all those other stuff just gets kind of ignored I think the best kind of co-founder relationships are the ones where you're just totally different you like each other you work really well but you're just really good at different stuff so the things that you love to do you can love to do the things that you hate to do your co-founder is amazing at that's a great co-founder relationship and where the things that you're really are just kind of not good at someone else is covering your weakness and I think that's you know that that is my kind of mantra for team building and certainly applies in co-found relationships thanks and you know before I before I speak to this side of mine I actually add to the team the team side is that there's something to be said for like equal levels of motivation and like interest in the thing you're building and like if one person's interest really wanes like it's really time to kick them out of the band and replace them with some of that is interested in making these because we we just experienced this at commerce guys were my two original founders you know my contender no longer at the business and and it was really a case of you know what one person's interest just wasn't his heart wasn't in the business he didn't know what to do or how to contribute and ultimately just needed to needed to move on and then you know that the other partner like this maybe had as much to do with the distributed nature of our business is anything else but like just the relationship wasn't working in his interest again like you know I'm having to do sales I'm not really interested in just like doing sales maybe I'll just go and build a product somewhere else you know like like knowing ahead of time what your levels of interest are and keeping that keeping really close tabs on that and being able to like ask that like is your head still in the game if not like it's cool like we just need to plan for the health of the business not for you know dragging you along somewhere you don't want to be and I guess maybe part of the way to make sure that you all stay aligned is to have that like shared vision for what you're doing together and then also to approach it from like a shared set of values and one of the things that strikes me about Zach and his presentation of his businesses is that you know first with pantheon you know you know the mission of pantheon is to power the vision is to power 30 percent of the web and that's that's and they can really drive their business decisions now they can acquire a node squirrel because they know that that's going to get them further toward powering 30 percent of the web they can expand into WordPress because that's going to get them closer to powering 30 percent of the web and I really think you were the first Drupal like you know company like platform hosting company whatever to go that direction and it's because it does align perfectly with their vision and if there was something that wouldn't get them toward that vision I think they would say no to it because they have what you know this north star that's that calls it guiding them toward a specific point together and the other thing was you know values are really important and so with with mission bicycle the values that you guys shared were to have personal remarkable reliable city bikes you know the best ones in the world and you know that turned into what seems to be a really great business and fantastic looking bicycles that I assume are also personal and remarkable and reliable and so there's there's this real need if you're trying to set out to do something different and something new and something together with other people which I also recommend it's difficult so doing it with a team is kind of statistically proven to be more successful than doing it on your own but to talk up front about this this vision and values is really really critical to the long-term health and success of the business and you're not going to want to have to try to figure that out retroactively as you're already moving somewhere especially if you're doing it from within the context of like a services company and trying to bootstrap something and spin it out like like literally the only way to change the culture of a services company is to like change all the people in it and even then you're still the same person and so you're probably going to end up with the same culture similar to what you would create it before so having this set in advance is is really key to any kind of company but certainly to you know a product business that has a very long game in mind and then can be very stressful and involve fundraising and really weird incentives and perverse incentives anyways so that's that's my my management going to pick is really leading from values is the only way you're going to make it happen especially because there are so many distractions there's so many things that that we could do with this whole bellwether idea needs that we could meet that would just be a distraction of people we could partner with and we were discussing this earlier there was a business that wanted to partner with Bellwether to go and sell in like into power companies through maintenance departments and that wasn't really like the strength of the model and so if there was no like really really strong vision directing it toward now we're really more about the sales forecasting analysis like that would have been all here's something that wants to do something with us and help us make money sure you know he might be able to help this product really take off but it would have been the wrong decision for the business even if it did result in like some short-term revenue because it just was the wrong revenue it wasn't strategic and I think you know maybe one final example from commerce guys that all we can we can wrap it up and take questions and we have this this whole commerce kickstart and marketplace idea where we do have strategic marketplace partners that we integrate into Drupal commerce for the sake of growing their business and then you know reaping these reaping these sort of affiliate bonuses as a result and you know whenever you look at all of the people out there providing services to e-commerce companies there's there's hundreds of them and so that the the real temptation is to say well let's just integrate them all and chase them all down and get them all to the table and then put them all into commerce kickstart which then creates you know makes for a bloated commerce kickstart that's more difficult to maintain and doesn't actually have any long-term impact on your profitability but you have to have some some vision and then some rubric that allows you to say no to these 200 companies yes to these three and then you know actually find the relationships and then the path forward that works so vision values there's books about that as well but it's a very healthy and necessary exercise excellent thank you Ryan so I'm gonna yeah I'm gonna keep this slide up and then we're gonna take questions we have ten minutes left hi I did this presentation last year well something similar last year about Drupal and startups and one of the key questions that people asked me was like so but what module should I use and I thought a lot about that and I've actually I've started putting together a Udemy course that's going to answer that and a few other things just like Drupal for startups like prototyping with Drupal and I'm going to be handing out flyers for that so if you want something about that just thanks Chris and whilst on my mind I didn't mention earlier but if you don't have the kind of services company that can incubate and spin out a product there may actually be companies exhibiting in the hall that have programs to do that sort of thing so I know that we announced earlier this year that they're doing that that sort of a program within you know kind of juices octo sort of beast and then I then you can also look at the example of like a web form dot com which was essentially spun out of Lollabot through Nate how so that you know you know becoming a profit machine in your own strength is not the only path toward doing that what would you say about building a business for the sake of getting acquired like getting acquired by pantheon or aquia or Drupal commerce or the commerce guys like would you say like should you first start producing value or should you talk with those people that you might want to get acquired by to see what you actually should build I can take that real quick and this is so when people ask me questions like that I usually answer with actually the only way to answer that question is to answer what do you want to do with your life which we do not have time for but I think that's really what it comes down to it it comes down to you're back to this slide what is your vision for the company what is the what is the goal you have personally for for the business and then and then when you can answer that you can work backwards and there in terms of the right path to to build your business whether it's joining forces and being acquired eventually whether it's going public whether it's being independent forever as a as a kind of I don't mean this in a rocketry way but a lifestyle business lifestyle businesses are great mission bicycle is a lifestyle business I think when you know you have to start there to really answer that question but it but I don't think it's bad to have that goal in mind like yeah building a business to have an exit is actually like a pretty legitimate strategy absolutely thank you I didn't I didn't see a well-going avenger Verizon coming so building a product on an open-source framework like Drupal how do you think that changes the evaluation when you're talking to VCs and then does that have an effect on an exit so when you're trying to sell it because it does have sort of the open source framework as the kernel of the product so yeah there is a slight challenge in the sense that the software you're building everything on is not like privately owned you know intellectual property I guess I mean it's it's kind of public domain in a sense but at the end of the day you know like a business like ours is not usually valued I don't think you know for its you know for the license of its code you know if you can you can build a great business on open-source software that has fantastic revenue and that's what what really matters in long-term client relationships and so on you know with with commerce guys specifically we've never really had an issue you know of course our business is built around Drupal commerce and commerce kickstart but then you come into like a platform.sh and that's not open source the code behind that is proprietary and that intellectual property is valuable on its own but even so like just because that is like privately owned intellectual property like we couldn't necessarily just go sell it because it is something that we can sell it still has to be a business that makes sense for somebody to get and that's gonna come back to well how many customers do you have what's the lifetime value what's the acquisition cost and so on so I haven't seen it to be a problem but it will change the kind of business that you're building. And Note Scroll is a great example I mean it was just a GPL module that added value and then what was sold was that that value and that experience. So the automaker John DeLorean wrote about setting goals he envisioned a high jumper who claimed he would train to the point where he could jump 30 feet in the air and he works and works and works and he ends up jumping 20 feet and obtaining the world record but coming you know far short of his goal so you know was he a success or a failure you know and it's like when you talk about you know Pantheon and Pantheon said you know we want to host 1% of the world's websites that would sound like a very ambitious goal to me but obviously it's much smaller than your goals so how do you know how far to shoot when you're shooting for the moon. That's a very good question well so and I think this the same question applies to anyone doing a venture tech sorry venture backed startup because again it's back to like if you're gonna really do this you're really are gonna have to shoot for the moon that's the reason to raise venture capital and there's this kind of duality where on one side of your brain it be incredibly rational and not deluded and tactical and strategic and on the other side of your brain you have to you have to shoot for the moon and be crazy and how do you deal with that duality and I don't I don't have an answer other than you have to do it like you have to be able to flip between both sides of your brain which is what is most important to do now what is going to work now what is the strategy now what isn't working and and then you know back to well if we were to do this and this and this within three years five years ten years how are we going to position ourselves in this company to hit the 30-foot high jump and I think you need to you know you have to you can't lie to yourself right you have to actually believe that it's possible to go down a path where you could run 30 percent of web or hit a 30-foot high jump or whatever this goal is even if that the chances of achieving it are very small if it's right if it's believable and you believe it's possible then you know it's a viable goal I love the I love the example of the bellwether and and and bootstrapping a start up from from from nowhere you know and or from you know out of an existing you know an existing services company and I like the experience canvas and I've used that myself but I think you know I'm I'm always curious when I hear people talk about this you know about the experience canvas and you know because I feel that there's a gap in it you know and I mean I'm curious you know you you had an epiphany moment right with bellwether where you're in the middle of a services kind of or you're connected with somebody who's performing services for a type of a customer and you know that there's a need there you know that somebody's doing something wrong right but a lot of the great ideas and the great companies come out of an idea that just didn't exist before at all and there's nothing in lean that really covers that you know lean doesn't let you make Twitter because nobody needed tweets you know before Twitter so how do you you know when you're trying to think of like ideas in that vein what do you see is there something that fills that gap for you for like you know ideation I'm presently maybe a bit boring in that like I kind of feel like I need to make some money first before I can afford myself the luxury to create something new and it but it's really just a personal decision I I couldn't speak to that directly but there's a book called zero to one have you heard of it no I have not yeah so zero to one is specifically about that question how do you like like yeah like like there are already a hundred companies delivering analytics services to power companies and Bella there's just like another one that does it a little bit better but zero to one is about going from there being no Facebook to there being a Facebook or there being no Twitter to there being a Twitter and I can't was that Horowitz that wrote that or Peter teal Peter teal my bad awesome yeah so that's a good check that out and I don't know if you have a one more note I definitely think the lean customer development approach sorry the customer development approach is really about enterprise startups I don't know or I've never tried to apply it to a consumer startup for exactly that reason I think you could in parts but I think has a lot more applicability at that enterprise sort of cool thank you my question is around something I think you addressed a little bit already in talking about sort of like building an agency and working into the budget that new startup and like what your profit margins have to be to start that do you have any additional comments and sort of the wisdom or the folly of like trying to do both of these simultaneously launching a an agency at the same time trying to have a sort of side business so for you I have a special slide so this is as far as James Lindenbaum he's very near and dear to my heart he was our first advisor and investor at Pantheon first one really outside of the company really believed in us so he's also the founder co-founder of Heroku and a chief great like real success there and you know he was a very early advisor so I like sent him a cold email and got in touch with him and you know convinced him to go out to coffee with me and we got coffee and he gave me a really good advice and then I got Josh and Matt and David together we took out a really nice restaurant Delphina in San Francisco we got really great advice from James it was amazing and you know Heroku at the time was a pre-acquisition was doing really really well and we'll leave the restaurant and he turns to all of us and says and so the back story for him is he actually they spun Heroku out of consulting company called Bitscribe and had a very similar path so he turns to us and says are you guys going to start this Pantheon company or what because if you're going to start this Pantheon company you'd fire yourselves from chapter 3 and really do it and we're like like are kind of stunned and look each other's like he's totally right and so that's we ended up doing we actually decided we're really going to do this we're really going to do it and we didn't fire ourselves overnight but we set up a plan in place where we would extricate ourselves from responsibilities at chapter 3 and commensurately a management team at chapter 3 took over the business and so they run it today it's very hard it's it's it's very challenging