I think a lot of people talk the unicorn talk but they don’t walk the unicorn walk, and nor should they. I think people need to be realistic about what they’re trying to achieve.
Duane Jackson is a Pioneer of SaaS in UK as the founder of KashFlow, an online accounting software company, founded in 2003, which has been one of, if not the most exciting and disruptive SaaS coming out of UK.
Kashflow was acquired by Iris in 2013, for a rumoured £20 million. Post acquisition, Duane has had 18 months off, during which time he published a book called Four thousand days, about his story from childhood, to being caught smuggling 6,500 ecstasy pills into the US, Going to prison on a 5 year sentence, and subsequently founding KashFlow.
Below is a lightly edited transcript of the podcast which is a must read for SaaS founders and fans of Duane Jackson.
Paul Graham, the founder of Y-Combinator, implores entrepreneurs to build something people want. It seems fairly obvious advice. With KashFlow you originally built this program for yourself. At what point did you realise this was something that people wanted?
I go beyond what people want because I actually build what people need rather than what they want. It’s something I’ve heard before about make sure you’re selling a pain killer instead of a vitamin. There’s lots of things that people want but actually if you can put out something that they need that’s even more useful.
And I was fortunate with KashFlow because it kind of landed on my lap as an obvious need at that time. I got started in the business at 2003. I think it’s 2004 that KashFlow started coming about and it was my own need.
At that time, your options for accounting were QuickBooks or Sage and they were all really clunky, designed for accountants. And the pricing, you’re looking at a minimum of 500 quid or about $700 dollars. It was out of reach for small businesses and it felt at that time that companies like Sage and Intuit weren’t that fussed about the small business market. I think it seemed like they had the view that these companies weren’t willing to pay that kind of money so therefore they didn’t really have a product that catered to their needs.
Hence KashFlow came around. I really designed it for myself to use as a stopgap solution really. To get invoices out there so I can get on with my work. I quickly threw this thing together and carried on asking other businesses that I knew, what are they using? Not because I wanted to flog them my solution. It wasn’t built to sell. But because I wanted a decent product.
Everyone I spoke to had gone back to spreadsheets and word documents and said it kind of worked but it wasn’t ideal. It took me a while to realise actually there’s a much wider need for this than just me. As soon as I got my little script and database, put a name on it, and made an interface where people could log in, it just took off from there because there was this pent-up need for easy-to-use accounting software.
One of the things I found quite entertaining in your book and actually I saw some parallels with Marc Benioff’s book Behind the Cloud, in that you’re both SaaS pioneers and you both used guerrilla marketing tactics against the incumbent. Marc Benioff brought the fight to Siebel Software and you, at a similar time, with KashFlow had this campaign against Sage. Can you tell us more about why you were doing that?
Yes. I saw the same parallels when I read the book and a few people that worked with me and friends that I knew were reading it pointed out the similarities as well. I wish I could have done that in the scale that he did.
I mean, it worked really well for us having this giant public company in our industry that was really struggling with their technology shift at that time to Software-As-A-Service. So we jumped on their back really and used their higher profile to get out our high profile. It’s almost like being this little mouse climbing on top of an elephant and you get seen. The great thing for us was that the analysts, whose job it was to write about Sage because they’re a public company, didn’t understand this SaaS stuff either. And because I was putting myself out there they’d come to me to understand what is SaaS, why is it different, why aren’t Sage doing it. Because of that, to repay the favour because I’d spent a good couple of hours with analysts from credit suisse, UBS, all over the place, explained this to them, they dropped our name in all of their whitepapers. So they’re writing about Sage and they’d always hold us up as the poster boy, if you like, for what these companies should be doing. That helped massively to raise our profile not just with potential customers but I think with potential acquirers as well.
Will you use a similar strategy with your new startup, Supdate this time?
I’m not sure I will. There’s not an obvious giant target, and you’ve got to be careful when you do that as well if you were to do that in a different industry. So let’s say you’re launching a help desk software today your obvious target would be Zendesk. But Zendesk is a much loved company now and if you tried to do that with a company like Zendesk it will backfire. Similarly if you’re doing mail marketing and tried to use MailChimp as your target.
So I don’t see an obvious incumbent in this space that is one that we could use that strategy with, I don’t think. Don’t get me wrong. If I spot the opportunity I’ll take it, but I don’t see it at the moment.
KashFlow was initially funded by the Prince’s Trust?
Yes. It’s £4,000 that I got help from them to start the business, but that was to set myself up as a one-man web developer. I was trading as that for at least a year or two and that grew into what became KashFlow.
You didn’t take VC money with KashFlow. Why was that?
A large part of me wanting to go into business was being in control of what I was doing and I felt that if I went down the VC route I’d have to answer to them, to their timetable and I don’t think i’d be as much in control of it.
Another large part of it as well, we had a lot of VCs very interested in this. SaaS was and still is a really hot place to be. I couldn’t work out where I would spend the money. If we were raising millions of dollars I can’t see where we could have spent it to good effect in the business. So for me, it was a fairly easy decision to not take VC money.
Your new startup Supdate, can you tell us what is it? What’s the origin story?
When I was running KashFlow, I had another shareholder, my chairman, Lord Young. I needed to keep him informed every month and it was a real chore. Every month I opened up a blank email, put in his email address, typed in “September Update” in the subject line and then for the body of the email it’s really hard to put together something that captured the last month, was useful for him and didn’t take up my entire day. It took a long time for us to eventually get a process in the company whereby I could turn those out every month in a way that wasn’t onerous for me and was useful for him.
Essentially what I’m trying to do with Supdate is recreate that process in software. Because what I’ve seen since exiting KashFlow, I’ve been around a lot of seed-invested companies, is seeing them doing, to put it politely, varying degrees of goodness in their update. Some of them don’t do it at all. Some of them do it sporadically. Some of them actually do it really well, but there’s not consistency there. I suspect that there would be a need or a want for a tool that actually makes that process a lot easier for everyone involved.
Are you bootstrapping this time as well? Any plans to go down the VC route?
No plans to at the moment. I’m not sure where we’ll head up in the future. And at the moment, the investors that I did end up having in KashFlow were private investors. I made a very good return in their investment and are keen to do something with me again. So if I need to, I’m in a fortunate position there. If I need to raise funds, I can do on good terms fairly easily and quickly.
But I’m taking a very slow and steady approach with this really. Even up to the point that I launched it, I wasn’t that convinced that there was going to be a huge demand for it. But with the number of signups we’ve had in the last 2 weeks since launching, I can see that the demand for it is much more than I thought. We’ve got a lot more to do on the products, make it much more useful to more people.
But something I see Jason Lemkin tweeting about a lot is actually everyone underestimates the size of their potential market and that seems to be the case here.
Can you share some insights into your launch strategy for Supdate?
We’re still in launch mode at the moment, to be honest. I was talking to one of the guys that’s helping me out a bit the other day and talked about commercial bits we could do with various people, but that’s really a bit further down the line as it’s still very much in launch mode. And the only PR we’ve really had so far was a TechCrunch article on the day we launched 2 weeks ago.
The plan today or over the next couple of days is push out our next release with a few other features, email everyone that was involved and signed up already, and let them know we’ve got these new features and ask them further feedback. But also we’re going to ask them to go and upvote some Product Hunt. I hope that we don’t get another surge of traffic from there. So I think we’re still very much in launch mode at the moment.
It’s very fashionable to talk about Unicorns, to talk about wanting to build a billion dollar company certainly with a lot of the entrepreneurs that I speak to or read about. That seems to be almost the de facto or cookie-cutter answer, and there’s nothing wrong with that. But have you got a goal for Supdate to be a billion dollar company or would you be happy with a $20 million exit?
I’ve not really thought too much about it but I would disagree with something you just said, which is that there’s nothing wrong with that. I mean, I see everyone out there saying they’re going to build a billion dollar company and I think a lot of them are saying that because they think that’s what they need to say to get VCs and investors interested.
Just to give you an example, there’s a company that I was helping last year. Very, very early stage. I mean, they just built the app and I was helping with some of the commercial stuff and particulary around raising a seed round. The founder, the CEO, quoted Paul Graham to me. I said, yeah, but what you’re talking about is a billion dollar business. That’s not what you’re doing here.
He said, “No, no, no. We are.” Two weeks later, he sold the company for a million quid.
I think a lot of people talk the unicorn talk but they don’t walk the unicorn walk, and nor should they. I think people need to be realistic about what they’re trying to achieve. To answer your question after all that waffle, no, I’m not looking to build a billion dollar business here at all. But I’m also not looking for an exit. I enjoy working with software, I enjoy working with startups and if I got this to a stage where it can pay the salaries of the people that need to work on it and make some money as well, that’s fine with me. I’ll happily coast along with it for however long as it takes.
In your book, Four thousand days, there were times there when you close to a much smaller exit for KashFlow. Around the million pounds mark. You obviously held out, carried on, and a bit of time down the line got the 20 million exit?
I’m not allowed to talk about the numbers, not disclosing terms. But yeah, the big difference, and again it goes back to not having raised VC money, by the time we sold I was still the majority stakeholder in the business whereas I think a lot of companies do multiple rounds of investment.
There’s a company I know that’s doing very well, three founders, but the amount of rounds they’ve had they own less than 20% each. I won’t be surprised if it’s nearer to 10%. They could exit for a much bigger number than I did but actually their personal proceeds from the sale will be considerably less than mine.
When you see these hundreds of million pounds exits on TechCrunch and whatever else, you never really get the full story of what’s behind the scenes and what the founders actually made from that.
Whilst everyone talks about they’re building their apps to change the world and make the world a better place. You know what? There is a vast majority of us who want to make some decent cash to put in our own pockets, and I think too few people are frank enough to say that.
But what have you learned from your first time at KashFlow that’s going to stand you in good stead for the second time round with Supdate?
I think the main thing is all the clichés that you hear about, are clichés for a reason. They’re true. You do end up in a situation and you read about it all the time.
Stuff like investors who want to buy your business keep you in due diligence for months and then want to know why your numbers have gone down. It’s because you’ve spent all your time with them rather than on the business. I mean, you read about that and then before you know it it actually happens to you.
But the problem is with all of those kinds of things, you can read about this stuff on TechCrunch and various blogs and hear it from other people, but I think you need to go through it yourself to actually learn the lessons of it. There’s nothing really, no substitute for experiencing it yourself.
The other one is that, again, it’s another cliché, that actually your main asset is your people. You can hear it time and time and time again but it’s not until you build a business that you realise how true that is that it’s the people that you’ve got around you in your business that really make or break you really.
Every single cliché you hear about startups and building a business they’re pretty much all true.
SaaS startups are quite sort of usually the first to appropriate other SaaS and build their companies using other SaaS tools. What SaaS tools are in Supdate’s toolbox?
A large part of these building blocks that we’re using… I mean, I talked to somebody earlier who also built a company sort of 10, 15 years ago web based company. And the contrast between now and then, back then you’re writing all your code from scratch. You didn’t have stuff like Bootstrap or jQuery or the MVC Models and templates that are out there. You’re building everything from scratch. You were co-locating your own service whereas now you just throw it at Azure or Amazon and it would do all of that for you.
So yeah, there’s this huge framework with tools you use to help you build the software, but not start it charging people yet or introduce a paid model. But when we do, we’ll be using something like Chargify, I suspect, rather than building our own billing model, billing platform and all the hassle that comes with it. We’ll be using whatever else we can that’s out there already.
For our email side of things we’ll be using MailChimp for that.
We’re using a lot and we’ll use more of the services already out there. And that was one of the things I learned again at KashFlow was you don’t build something if you can just use someone else’s product that’s already out there that does it for you.
I mentioned your book, Four Thousand Days, which I really enjoyed. It read like a movie. Perhaps between a cross between Blow with Johnny Depp and then maybe the Steve Jobs biopic.
That’s definitely a story of two halves… what with the drugs and the prison stuff and the DEA and the government fairly on, and then to business after that.
Absolutely. Goodfellas mixed with a business book. Why the name Four Thousand Days? What is it about? Why should people read it?
I got the book written and I had everything apart from the title for it. I really struggled with the title. Then before the book was finished, I put the first chapter on Medium and it went ballistic. I think 30,000 views in 24 hours or something like that. So I really rushed to get the book out.
The title I came up with, Four Thousand Days is the number of days between when I got out of prison and when I sold the business. I think it’s 3,968 but really why it’s not just 4,000 days. Given a bit more time, I probably would have come up with a better title. Someone suggested ‘ Breaking Good’ which I really liked.
The book is essentially my life story from growing up in a children’s homes, getting kicked out of school, and getting involved with drug trafficking and getting caught. There’s a lot of prison in both the U.S. and the U.K. Then really all the way through from starting a business, growing it, and getting through to a few aborted sales in there but then getting through to the final sale 2 years ago.
The main reason I wrote it really, well, there were two reasons. One was there were lots of funny stuff that happened either in prison or in business over the years that I didn’t want to forget as I got older. So I wanted to write them down. But also I’ve got three young daughters and I want them when they’re older to hear the full version and the truth from me rather that piece bits and pieces together.
I think if someone is looking for a book with lots of business insight, it’s not that. A few people told me they learned or they found useful nuggets in it to help them with their business, but really I guess it’s more entertainment value than anything else. I don’t think the book itself will ever be huge just because what I said earlier back, they’re two very different audiences for: one being the startups and one being those interested in the drugs-and-prison types of stories.
The reality of it is it’s a true story, and it probably fits more into an autobiography section books as opposed to your startup books or anything else.
When you get into the story of founding and running KashFlow, even before that when you’re doing the web development, itshows the reality that startup life is tough, that there were a lot of hard moments. You have to bring money to the table, feed the family, work really long hours sometimes not spending as much time with your kids as you’d like. But then ultimately the hard work paid off for you in the end.
I think it shows the reality of what it’s like building a business through to exit as opposed to the glossed PR-friendly site that you read about online. I mean, most founders when they’re out there they only want to show the positive side of it and you can understand why. I mean, it’s very rare that you go to a Meetup, ask the founder that you don’t know very well how things go and he tells you ‘Actually it’s shit. We are running out of money, the next round doesn’t look like it’s going to close.’
‘It always yeah it’s great, the funnels full and things are brilliant.’ And hopefully this brings a bit more reality to the conversation, what it can really be like.
What’s been the secret to your success?
It would be interesting what kind of answers you’ll get from other people. I don’t think there is a secret to it. It’s essentially persistence, I think. Hard work and you keep at it.
But if you were to chart KashFlow’s success over the years in terms of whether that be revenue, whether that be users, it’s just a nice smoothish, slopey line. There’s no big spikes but we discovered the secret and it all went brilliantly. It just takes a lot longer than you think. It’s much more work than you think. But if you’re determined and you’re passionate about what you’re doing and you stick with it, I think ultimately you’ll have a good outcome.
Duane’s book, Four Thousand Days: My Journey From Prison To Business Success, is available to buy now from Amazon