Lessons for SaaS Entrepreneurs from a 3 time Founder, Hamid Shojaee CEO of Pure Chat

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It’s very important as an entrepreneur to remind yourself that you got to stick to one thing essentially and focus on doing that one thing exceptionally well as a company.  Just use the super successful companies and products as your fuel, if you will, to convince yourself that’s the way to go.

Hamid Shojaee, CEO of Pure Chat Inc, is on a mission to eliminate sucky software and crap marketing, so I hear.  There’s a lot of mediocrity in this world and after 20 years in technology and having built 3 companies, Hamid has learnt a lot about building great products that solve a real need in the marketplace.  Amongst his entrepreneurial achievements, Hamid bootstrapped a company called Axosoft and built it into a multi-million dollar business.

Most recently, Hamid launched and raised money for Pure Chat.  His philosophy is that if you don’t start a project with a, “Hell, yeah!” then just don’t do it at all.

Hamid joined me as a guest on The SaaS Revolution Show to talk about how to help SaaS Entrepreneurs be less sucky in 2016, as I put it. But really the output is a ton of lessons for SaaS Entrepreneurs from a 20 year tech veteran and 3 time software founder.

You can listen to the full podcast below, and read the transcript. Subscribe on iTunes or Stitcher and never miss an episode.

 

Lessons for SaaS Entrepreneurs from a 3 time Founder, Hamid Shojaee by The SaaS Revolution Show

Hamid Shojaee, CEO of Pure Chat Inc has founded 3 software companies and has a ton of experience to impart. After 20 years in technology and having built 3 companies, he’s learned a lot about building great products that solve a real need in the marketplace.

 

 

Alex Theuma: Pure Chat is your current SaaS startup.  Can you tell us a little bit about what it is, what stage you’re at?

Hamid Shojaee: Pure Chat fundamentally helps businesses close more deals, get more sales.  The way it does that is by enabling companies to be able to communicate with their website visitors through live chat, instant messaging essentially so that the visitors can have immediate answers to their questions.  Once they have immediate answers to their questions, they’re more likely to buy and have a great experience.  That’s what Pure Chat fundamentally does.

The company stage is, the product is about 3 years old.  We have 3,000 paying customers, over 200,000 accounts that have been created on Pure Chat.  So it’s been an extremely popular and very fast-growing product for us.

 

Alex Theuma: I believe this is your third or fourth startup?

Hamid Shojaee: Yeah.  I’ve been quite active in the software world.  Most of my time had been on building Axosoft, which is a software development tools player, and still going very strong.  I’m still the owner of that as well.  By my sort of day-to-day focus is on Pure Chat.

 

Alex Theuma:  Excellent. I was told that you’re in this mission to help eliminate sucky software and crap marketing.  So I’d like to talk about your views on how the output of this podcast could help SaaS entrepreneurs suck less, if they are sucking, that is.

 

Hamid Shojaee:  Sounds good.

 

Alex Theuma:  And then help them in 2016 really kick some ass.  Are you happy to go with that?

 

Hamid Shojaee:  Yeah, absolutely.  I’m happy to share advice.

 

Alex Theuma:  Okay.  That’s a better way of putting it.  Excellent.

First question, we’ll go straight into it.   Should SaaS entrepreneurs focus on creating workhorses and not unicorns and if so, why?

 

Hamid Shojaee:  That’s a great question.  Basically, I wrote an article about how Arizona’s tech community ends up creating these workhorse companies, software companies as opposed to unicorns.  Part of the reason is because of necessity.  Like in Arizona, there’s very limited Venture Capital and most of the companies that do get venture capital end up getting it from out of state.  So it’s not easy for them to do it.  They have to sort of travel, the investors have to travel to have more meetings and so on.

As a result, we have these solid companies that focus on revenues and profitability from very early stages.  As a result, we have workhorses in Arizona, as the angle of the article.

In general, I think that’s not a bad way to go for entrepreneurs of software companies is to create something that is very lean, efficient, focused on self-sustaining companies as opposed to trying to build the next multi-billion dollar software company, which requires a lot of capital and access to a lot of VC funding.

 

Alex Theuma:  I take it then in your pitch deck for Pure Chat, that you didn’t sell the dream about becoming a unicorn?

 

Hamid Shojaee:  Well, with Pure Chat, what I did do is we did raise $1.5 million in angel money.  To some degree, we did sell the dream, not necessarily of becoming a billion dollar company as sort of these unicorns are defined, but what I was pitching essentially is a product that had tremendous traction before I went down to raise money.  I thought that we could build and accelerate its growth by pumping a little bit of cash into it and accelerating our execution plans.

The investment community, the angel investors that I pitched it to in Arizona, they loved it and many of them wrote checks and we’re sort of off to the races but it’s still on a day-to-day basis.  What we’re trying to do is build a company that’s sustainable and long-lasting and not relying on us raising another $5 million within the next 8 months.  If we do that, great, but we’re not counting on being able to do that.  That sort of difference in mentality.

 

Alex Theuma:

I watched the youtube video, lessons learned building 3 software companies.  You posted it on the Slack channel that we’re on. A question borne from that is how can SaaS entrepreneurs really ensure that they’re creating great software and eliminate any of the pardon my French, crap from them?

 

Hamid Shojaee:  That’s a great question.  I’m not sure there’s a formula to try to make sure that you’re creating great software.  I think that the natural instincts of entrepreneurs is usually correct in trying to build something that there’s an interest for by others, obviously.  But then once you start with… once the product starts to shape, you need to be able to take in that feedback and be able to absorb that feedback in the appropriate way that then enhances the product.  That doesn’t necessarily mean do exactly what your customers are saying, do what they want but to take in their feedback and see what is the problem that they’re trying to solve and then solving for those problems.

The talk that you refer to I was giving that to a bunch of Arizona software entrepreneurs who are very active in helping make sure their Arizona SaaS ecosystem flourishes here.  But one of the things was there’s this animation that the person puts a glass of water in front of a user to see how they’re, for the first time, how they’re going to use this product.  The person is like looking at the glass of water from the bottom trying to suck water out of it or just tilting the glass over and ending up spilling the water.  It’s very frustrating when you put this product that you’ve created in front of users and watching them trying to discover how to use the product.  Something that is very, very educational and must be done in order to improve your product.  That would be one definitive way of making sure that you’re continually enhancing your product and making it suck less, if you will.

 

Alex Theuma:

You’re a technical founder, you’re writing code and you’re creating the software.  You’re also a founder getting involved in marketing and having a passion around creating great marketing for businesses.  What advice can you give to SaaS Entrepreneurs so they can stop wasting time by sucking at marketing?

 

Hamid Shojaee:  One of the cool things that happens with software founders, in particular software entrepreneurs, is that oftentimes they’re the ones who write the product.  They’re writing the product usually for themselves so they end up being sort of the first user for it because of an interest in something.  Whether that interest is in photography or in software development tools, which is what mine was, or some sort of business need that they’re trying to solve, they end up creating and first looking for a product out there to use and possibly sort of getting involved in forums and discussion things, discussion forums that there might be similar types of people on those things.  Then once they don’t find the tool they end up building it.  This is how a lot of software companies get founded by software entrepreneurs.

What happens is they’re often the best marketers to get the word out about their software in those same type of forums or answering questions on Quora or getting on Stack Overflow and answering questions about development if you’re making development tools.  Or there might be photography forums or designer forums and so on that you can talk about these products that you have built.  Those are essentially free marketing and end up being worth a tremendous amount of sort of replacing tremendous amount of financial marketing power.

If you were to spend this similar sort of cash, it might cost you hundreds of thousands of dollars to get the word out to similar types of audiences. That’s where entrepreneurs have this leverage of using their own time and influence within those communities to promote their products.

 

Alex Theuma:

Your philosophy, as I understand, is you shouldn’t start a project if you don’t have a, “Hell, yeah,”. What happens then if your project doesn’t have a, Hell, yeah”?  Should you do it at all?

 

Hamid Shojaee:  The answer of course, from my point of view, is that it always depends.  If you’re starting a project from scratch and you’re trying to figure out the next thing to do and there isn’t any financial incentive for you to do so, if you don’t have a, “Hell, yeah,” this is a product that makes a lot of sense, there’s a lot of demand for it or that you anticipate there would be if the product existed then if you don’t have that, “Hell, yeah,” then considering that most products and companies fail to begin with, then the probability of failure even increases if you don’t have that, “Hell, yeah” to sort of begin with.

So yeah, I think it’s very important to abandon ship if you’re not super excited about something. Especially if there’s a financial incentive to stick with it.

Now, if there is financial incentive, some company is willing to pay you a million dollars to develop something and you’re not, “Hell, yeah,” about it but the financial incentive is nice and it will help pay the bills until you find a, “Hell, yeah” project, then the answer might be, yeah, keep going with it.  But for me, everything is sort of it depends.

 

Alex Theuma:  Multitasking is something, I guess, by nature, that entrepreneurs need to do but also can result in a lack of focus because, certainly from my own experience, that coming up with what you believe to be great ideas or getting seduced by new ideas sometimes help make you lose track and lose focus.  Would you agree that maybe multitasking is a bad habit and that entrepreneurs should focus more?  If so, how has focus helped Pure Chat?

 

Hamid Shojaee:  Multitasking is not inherently a bad habit.  It’s just if you have something important to do, it’s probably important for that thing to be your entire focus in general.

Now, as an entrepreneur especially the first time that I started a company, one of the things that entrepreneurs are really good at doing is identifying opportunities and then trying to create products around those opportunities and they tend to be good at that even after they have found something and started to build the product.  So in my first startup, we identified an opportunity and started building a product around it but within 6 months we also identified like four other opportunities and started building products around those as well.  Within 6 months we were working on like 5 different products.  Part of the thought is that the more products that you have the better and you can address more people’s needs and, as a result, increase the probability of success.  That’s sort of an intuitive way of thinking about building a company.

But it turns out that it’s wrong.  The more products that you have and the more opportunities that you’re going after as a company the less likely you are to do a really good job at it.  As a result, each one of the products has a much lower probability of success and even the combination of all the products still doesn’t overcome.

It’s very important as an entrepreneur to remind yourself that you got to stick to one thing essentially and focus on doing that one thing exceptionally well as a company.  Just use the super successful companies and products as your fuel, if you will, to convince yourself that’s the way to go.

Slack does one thing and it does it exceptionally well.  It’s a multi-billion dollar success.  Google, when it first came out, it was just a search.  Even today, more than 70% of its revenues come from that search and it did one thing exceptionally well.  That one thing can still make you a million dollar, hundred million dollar, billion dollar company.  As long as you do a really good job at it, you don’t need to sort of expand the product line, if you will.

 

Alex Theuma:  Good advice and something I wholeheartedly believe in as well.

You mentioned Pure Chat raising angel money, $1.5 million.  Pure Chat had quite a bit of traction before you actually secured that funding.  Do you think getting traction is king for SaaS companies?  And what tactics did you use for Pure Chat to get that particular traction that you had in the early days?

 

Hamid Shojaee:  It’s hard to argue with traction.  If you are sort of pitching a product or an idea or a concept of a product or an idea to investors or to friends or whatever, basically what you’re doing is you’re describing something hoping that the person is imagining it in the way that you expect them to.  Then based on how they’re imagining it, you have to rely on their interpretation of whether or not the product will get traction or be successful. Traction is king in that like if you can build a prototype and get it into the hands of people to use even if you do that for free without having them paying for it, usage of it itself is a huge indicator of potential success.

What I have typically done in virtually all of my successful products and companies is that we’ve built out the product and put it out there for people to use freely just to see whether or not they would use it.  Once there’s lots of usage and, by the way, the vast majority of things I built there hasn’t been that much usage of it.  As a result, we sort of can the project.  But the ones that do get traction and people start using it and the numbers start to grow those are the ones that we start to pay a lot of attention to.  Then it’s very easy to convince others that, hey, there’s something here because look at these numbers growing.  That’s where traction is king.

 

Alex Theuma:  This year, I personally had a new motto.  It was  #JFDI, which stands for Just Fucking Do It.

I’ve always had entrepreneurial ideas but never really acted on them and then claim to friends that I had the idea for Netflix first.  But I guess many people could have said that and not acted on it.  Reed Hastings acted on it. But this year, I’ve adopted #JFDI.

Also recently I read this article in The Guardian newspaper about the Helsinki Bus Stop Theory.  The kind of motto or moral of the story from that was stay on the fucking bus, which it sort of meant that avoid all the noise and the distractions.  Just stay on the bus, stay focused and then you’ll hopefully get to your goals.

Do you believe in those particular mottos and what is your personal motto?

 

Hamid Shojaee:  Certainly the just-do-it motto is one that I certainly subscribe to.  I think that you can do a lot of research and trying to do ancillary stuff to try to make sure that you get something right before you start on it.  Then there’s people who sort of spend a lot of time in that phase, if you will, and end up sort of missing out on the opportunity.  There’s people who just sort of do it with very little data and adjust and correct as they go.

I am much more of the camp that does it and adjusts and corrects as they go.  So the just-do-it motto is definitely one that I subscribe to.

Then making sure that you stay on the bus part is something that I have heard before but I think that that goes similar in mind to staying focused physically, making sure that you’re focused on doing one thing and one thing exceptionally well.  And there’s so many, so many examples of companies that do one thing and do it exceptionally well that have become hundred-million dollar or billion dollar successes or multi-billion dollar successes.  You don’t have to do a bunch of different things in order to get there.

 

Alex Theuma:  And your motto in life?

 

Hamid Shojaee:  I’m not sure I live my life by a one-liners, but certainly “Just do it,” I think is a great pattern of behavior that I’m at.

 

Alex Theuma:  It’s worked out for Nike as well, right?

 

Hamid Shojaee:  Yeah.  I grew up being the target of those campaigns that may have worked even better than they had known.

 

Alex Theuma:

Now, coming to the kind of last two questions of the show, this next one. You’ve both bootstrapped companies with Axosoft as reference to multi-million dollar company.  Then you’ve also taken funding most recently with Pure Chat.  You can give advice,  on both sides of the coin there.  What is your advice for bootstrapping SaaS entrepreneurs?  The one piece of advice that you can give to them from your learnings.  And likewise theone piece of advice for those that have taken funding and are in their early stages of taking VC money.

 

Hamid Shojaee:  So for bootstrapped founders, I think that a big part of what I struggled with and what I think a lot of entrepreneurs struggle with is that when you start hiring additional people and how do you determine the financial flow as you start having revenues what do you spend it on?  Like when is it okay to take money for yourself and etc.?

One of the things that I did is I determined what my absolute minimum cost of living expenses would be.  That was X thousands of dollars per month.  I determined that the first that much of revenue that I have or profits that I have is going to me and then everything else would go back into the business until I was comfortable taking more.  Essentially, the first couple of years, I was not comfortable taking more.  I just took the minimum and reinvested the entire revenue back into the company hiring, advertising, spending on marketing, just doing more product development.

One of the things, the biggest sort of thing that moved the needle more than anything else that is improving the product.  I think investing in the product development portion of your business is extremely important.  So that would be my biggest advice to bootstrap founders who are trying to sort of get things off the ground.

Then for funded companies, I think one of the biggest mistakes that they make is that they tend to believe in the projections that they created to help them get funding.  That is probably one of the biggest mistakes you can make because those projections are never, never accurate.  By never accurate I don’t mean that they’re low despite your conservative nature even if you were conservative.  Your projections are always going to be way higher on revenue than the reality and things just take much longer than you expect them to take.

Make sure you’re super frugal with your spending because there might not be additional rounds of funding.  Even if you raise the million dollars or $10 million or whatever, it will take whatever you can raise plus some additional money to get to profitability.  And that’s universal.  I mean like whether you raise the hundred million dollars or hundred thousand dollars it will take more than that amount to get the profitability just because you end up sort of spending money in the way that you have projected and anticipated revenues to be.

Being much more conservative with your spending is my sort of biggest advice to funded entrepreneurs.

 

Alex Theuma:

Last question.  The book by Ben Horowitz, The Hard Thing About Hard Things, is one of the best books that you’ve read this year.  Is that correct?

 

Hamid Shojaee:  Yeah.  By far, that’s the best book I’ve read this year on business.  And part of the reason why it’s such a great book is, first of all, there’s a great story in there about Ben Horowitz’ and Marc Andreesen’s company.  I believe there was Cloud Nine that later changed to Opsware, or something like that.  So there’s a great story about how that company came to be and like the struggles they went through and their eventual success and exit and so on.

But then Ben has a whole lot of detailed information about how to do things as an entrepreneur that I found super useful including just little stuff.  Like if you have a really good friend who is also a CEO, like you guys are close, you probably shouldn’t hire from each other’s companies.  Just little things like that.  Or just from the standpoint of it’s very easy to lose your friendships in that way and entrepreneurs have very few friends to begin with.  Or describing the difference between sort of the war time CEO and a peace time CEO.  So there’s a lot of those type of information in there that I found very interesting and super helpful in some ways.

 

Alex Theuma:  Even as a three-time founder, getting something out of this book just goes to show that the learning is never done?

 

Hamid Shojaee:  Absolutely.  There’s a lot of things that you learn over time.  You try to apply them to your future endeavours but there’s so much more to learn.  You’re always in this learning mode as an entrepreneur.

 

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