Our SaaS Start-up’s Expenses, Equity Allocation, & Marketing Results After Seven Years

Exactly seven years ago today—on January 10, 2017—I published Outseta’s launch announcement, sharing what we were intending to build with the world for the first time. This post follows what’s now become an annual trend.

When we set out to build Outseta we said it would be at least a 15 year project—we’re now nearing mid-field. Here’s an in-depth review of our seventh year.

Equity Allocation

We continue to operate with our unique model, the highlights of which are:

• Our team can choose to work anywhere from 1 to 5 days per week
• A full-time salary for everyone at Outseta is $210,000
• Everyone can elect to work as much or as little as they like earning equity in the business on the same terms as our founders

This model continues to be one of our biggest assets—the extent to which everyone works for equity is up to them. Here’s how ownership of Outseta shakes out at the end of 2023. 

• Dave (30.62%)
• Dimitris (28.16%)
• Geoff (21.63%)
• Bernard (14.41%)
• James (4.29%)
• Benedicte (0.89%)

Benedicte is an illustrative example of our model in action from this past year—she’s currently working on Outseta two days per week. She earns cash compensation one day per week and equity in Outseta the other. In just 9 months, she built up an equity stake equivalent to what’s granted to VPs in most other tech companies after a 4 year vesting period.

The idea here remains simple—give ownership to our team rather than to investors.

Expenses

As we’ve seen in past years, Outseta’s expenses are almost all people related (salaries). We do very little paid marketing of any sort aside from attending MicroConf and WebflowConf each year—the remainder of the marketing expenditure that you see below is mostly payouts to Outseta affiliates.

We were able to grow revenue significantly in 2023 (more on that below) while our non-payroll related expenses actually decreased slightly; the business became more efficient.

Product Updates

Below you’ll find an overview of the more significant product updates that we released in 2023, along with a bit of commentary on a few of them. But without question the big one that we crossed off this year was integrating Outseta with Stripe Tax.

Offering our customers a solution to global sales tax compliance was easily our biggest product priority, and to say we conducted a thorough evaluation of every option on the market would be an understatement. 

Importantly, we also elected to integrate Stripe Tax by working directly with Stripe’s APIs (as opposed to integrating Stripe Billing). While this approach was significantly more work, it means Outseta customers save an additional .8% per transaction in payment processing fees compared to all of our major competitors.

While this isn’t immediately apparent to many buyers, it’s consistent with our long term strategy of always doing the hard work to pass the lowest possible payment processing fees onto our customers. As builders increasingly become aware of all the fees other providers are charging—increasingly in the range of 7% to 15% per transaction—the delta between our payment processing fees and those of our competitors continues to grow. We believe we are building a long term, sustainable advantage by doing so.

Here’s a roundup of what we released in 2023. 

• Stripe Tax
• Email analytics
• Status page
• Shareable reports
• Immediate downgrades
• Automatic Webflow Sync—Our initial submission to the Webflow Apps Marketplace.
• Improved checkout for add-on products—Users with an existing account can now buy additional products with a single click.
• Password strength requirements
• One-time onboarding screens
• Discord bot
• Auto-apply discounts
• Custom (plan specific) post login URLs
• Email subscription preferences
• Self-serve domain authentication—Outseta’s email deliverability rates are now an industry leading 99%.
• Hide individual page elements—This is the most granular means of content protection possible—allowing you to show or hide any individual element on a page.
• Rebuilt invoicing infrastructure—This was a huge infrastructure update that our customers won’t notice, but that will allow us to do some cool things in the future.

Dave and Bernard remain shadowy figures to most Outseta customers, but these two are busting their butts daily to deliver a product that’s performant and reliable. Thanks, guys.

Growth Updates

Outseta’s revenue grew 70% from fiscal year 2022 to 2023. While by no means hypergrowth, I consider this a healthy growth rate for a seven year old, bootstrapped business. We set new records for monthly recurring revenue (MRR) for 12 consecutive months in 2023.

What’s most exciting is that this growth was driven primarily by growth in our customers’ businesses rather than by a large increase in new customer acquisition. 

As our customers grow and organically move through our pricing tiers, we realize expansion revenue—in addition to our payment processing revenue growing as our customers grow their own revenue. These tailwinds now typically outpace the revenue that we lose via churn, despite selling largely to start-ups and small businesses.

When our customers grow, we grow.

Marketing Channels

I’ve written quite a bit in the past about the marketing channels that drive us customers, and the truth is not a whole lot has changed. We continue to have a mix of marketing channels that’s very typical of bootstrapped SaaS businesses. These include:

• Content marketing (mostly blogs and tutorials)
• Integration partnerships (particularly with Webflow and Stripe)
• Affiliates
• Participating in relevant online communities
• Social media

This past year we started making larger investments in helping our customers grow their own businesses. This included projects like:

• The First 500—A free course for Outseta customers teaching the tactics we used to land our first 500 customers. ‍
• Geoff’s Marketing Experiments—A membership site (also free for Outseta customers) where I showcase the work that I’m doing to grow Outseta today.‍
• Recommended Webflow freelancers and agencies—We now pass qualified leads off to a small number of Webflow agencies and freelancers to help them grow.‍
• Outseta Academy—Video tutorials teaching how to build with Outseta. This is part of an ongoing effort to better teach how to build Outseta projects in a scalable way.

The truth is marketing continued to feel way under-resourced throughout the year as our small team was needed in other areas of the business. We took some very deliberate steps to address that in the latter half of the year. That said, we still had some really cool moments worth mentioning.

Stripe wrote about us

The team at Stripe wrote a really nice case study on Outseta and our implementation of Stripe Tax just this past month. That always feels good!

WebflowConf highlight

The amazing team at Edgar Allan gave a presentation at WebflowConf highlighting how they built a full-fledged SaaS product using Webflow and Outseta. The result? One of our fastest growing customers to date. I snapped this picture during the presentation.

Framer

There’s no other way to put it—Framer came on strong in 2023. Framer builders need authentication, payments, and protected content features and Outseta is really well positioned to fill those needs. Framer designers from Traf (Framer.Training) to Nandi Muzsik (Framer.University) to Cedric Moore (CourseOS) used Outseta in their builds. Eli from Enframer also put together a particularly good 15-video series showing how to build membership sites with Framer and Outseta. 

Other Wins

Aside from the product updates and growth, Benedicte Raae officially joined our team back in April—she’s focusing primarily on Developer Relations. 

We also had the opportunity to work with Keegan Leary on our new Webflow app.

Our organizational model continues to be one of our biggest strategic advantages and we plan on working with more talented people in both project based and part-time capacities in 2024.

Challenges

Our challenges as a company remained mostly the same this year.

Our churn rate is relatively high as a result of selling to start-ups

This will always be the case and is something we just need to plan for. The churn rate for our customers that reach even $500 in MRR remains close to 0. 

We're primarily constrained by bootstrapping

As a small team, time spent on things like updating our backend infrastructure eats into our product velocity in a very real way. Likewise as our customer base has grown, so has our support volume. While these are natural growing pains, the realities of bootstrapping continue to be our biggest constraint.

While that’s the case, I’ve never had more clarity or confidence on our product roadmap and what’s to come—it’s always just a matter of how fast we can get there. 

We took a serious “L” at WebflowConf

Last spring Outseta was presented with the opportunity to be the software used for online registration for Webflow's annual conference—a big opportunity for us as a business. There was some miscommunication and we fumbled the opportunity. In retrospect I should have followed up with Webflow's team much more aggressively—I shoulder the responsibility for that.

A lesson learned the hard way—if a partner gives you an opportunity, be relentless in making it happen.

Our team culture needs some TLC after years of grinding

In so many ways working on Outseta is a dream—everyone has so much freedom and autonomy that it’s a real treat to contribute to our team. But I also realized that our culture needs some TLC more than ever this year.

In short, the early years of Outseta were a grind—and I don’t think I fully realized the repercussions of that grind until this year. We built up a very execution focused, there’s always more to do, just grind it out culture that isn’t as lively or fun as I’d like it to be. 

I’ve always said that with growth a healthy culture comes easily, and in many ways there’s benefit to our early years having been tough—we know what this team is made of. But nonetheless I think there’s more we can do to freshen up our day to day operations, beyond just having more fun because we’re now succeeding a lot more.

Unknowns

Last year I wrote about how our reliance on integrating with other technologies is of a factor outside of our control—that remains true, but there are a couple of other unknowns that I’ve been thinking about quite a bit this year.

Sales tax remittance and the MoR model

The Merchant of Record model grew in popularity in 2023—primarily because MoR vendors remit global sales tax for you. We made a very deliberate decision not to become a MoR. In short, I think this model will prove to be a good fit for creator marketplaces like Gumroad where users just want to throw up products for sale relatively quickly. I have serious doubts about the long term viability of this model for software companies and more broadly companies focused on building long term, sustainable businesses.

Part of my conviction comes from how Stripe has approached the MoR model—Stripe is the dominant player in payment processing for internet businesses. They have the resources, expertise, and a track record of tackling the biggest and most difficult problems in the payments space—Stripe Tax is an example of that.

Do you really think Stripe isn’t going to address global sales tax remittance?

Well, we now know that Stripe is planning to address the sales tax remittance and is looking to do so without the downsides of the MoR model. In fact, their tax team is hiring aggressively at the moment specifically to build remittance tools.

I suspect you’ll continue to see the MoR model grow in popularity in the short term, as when Stripe's remittance tools get to market remains something of an unknown. But I feel very confident now that we made a long term bet in the right direction.

Our 7-day trial model is a self-imposed constraint

I’ve talked a lot about how moving to a 7-day trial with a credit card required was such a positive move for Outseta—it brought sanity to our business that we didn’t have when we offered a freemium product, allowing us to instead spend our time with more committed customers.

That said, there’s no doubt this isn’t always the most popular with potential customers—and we know that a lot of people are not being exposed to Outseta who otherwise would be. So far, our mindset has primarily been “we care a lot more about providing great support than we do maximizing growth.” We've deliberately shrunk the size of our world and that's OK.

While I don’t think we intend to change this anytime soon, the thought is never far from my mind. How can we expose more people to the product, in a way that’s profitable and sustainable for us as a business but also works for the customer?

We’ve considered almost every alternative you could think of but each has its own downsides—I still wonder a lot about the downsides of this self-imposed restraint. Something we hear a lot is “once you see Outseta you can’t unsee it” and we’re routinely told that we’re still flying under the radar. The product has matured a lot since we last offered a freemium tier, so I wonder how much the floodgates would open if we found a sustainable approach to bringing freemium back.

That’s a pretty complete overview of our 7th year—one that I’ll end with this…

This tweet has always been eerily reflective of our own bootstrapped journey—and if you look back over everything that I’ve published in the past 7 years there’s one thing that you won’t find… I’ve never made a prediction about the growth of our business. 

Not one.

Based on what I’m seeing and feeling in our business I’ll say this…

I think 2024 is going to be our year.

In the 7 years that I’ve been working on this business, I’ve never been more excited about it than I am today.