SaaS Interviews with CEOs, Startups, Founders
1110 Why His $1.2m ARR SaaS Company Shut Down
08 Aug 2018
Chapter 1: What is the main topic discussed in this episode?
Go hard in your 20s. During your pre, we'll call it your pre-responsibility decade. Go hard then. Anyways, he launched Vitamin Group to about $1.2 million in ARR back in May 2016. Twitter changed their algorithm, specifically their threshold for basically automation or API calls, I imagine, and it basically killed their business.
Chapter 2: What were the challenges faced by Hank's $1.2 million ARR SaaS company?
He shut it down even though they'd raised $650,000 and had about nine employees. They shut that down. He launched an agency that did well, grew it to about a million bucks, then sold that to another LA firm. Now, VP of Business Development at Cardboard,
Chapter 3: How did changes to Twitter's algorithm impact Hank's business?
Circle. We'll watch them closely. They're helping with ICOs, their most recent one, most successful one, Unicoin Gold, 31 million raised. This is the Top Entrepreneurs Podcast, where founders share how they started their companies and got filthy rich or crash and burn. Each episode features revenue numbers, customer counts, and other insider information that creates business news headlines.
We went from a couple hundred thousand dollars to 2.7 million.
I had no money when I started the company.
Chapter 4: What led to the decision to shut down the Vitamin Group?
It was $160 million, which is the size of many IPOs.
We're a bit strapped. We have like 22,000 customers. With over 5 million downloads in a very short amount of time, major outlets like Inc.
Chapter 5: How did Hank pivot from shutting down his SaaS company to launching an agency?
are calling us the fastest growing business show on iTunes. I'm your host, Nathan Latka, and here's today's episode. Hello everyone, my guest today is Hank Leber. He's an internet marketer who has built both B2B and B2C companies.
Chapter 6: What were the key successes of Hank's growth agency after the shutdown?
He grew his marketing service, Vitamin, to 105 grand per month in revenue in a little over a year's time, only to be killed by changes to Twitter's platform. We'll talk about that. His next company, Growth Agency XQ.LA, was acquired by Hawk Media in January of 2018. He's now VP of Business Development at a company called CoinCircle, a SaaS platform for ICOs and token sales.
Chapter 7: What is CoinCircle and how does it operate in the ICO space?
Hank, are you ready to take us to the top? Absolutely, Nathan. Happy to be here. Yeah, so you're a fan of the show, right? You listen. Yeah, big time. And the reason that we got connected is I was putting together my LATCA 100, the fastest growing SaaS companies. And I said, I should touch base with Hank, see how Vitamins is doing. And you wrote back and said, actually, it's dead.
And I said, what? You were doing like $1.2 million in revenue back in, what was it, January, February, March, May 2016 when I had you on. What the hell happened? So let's start there. What happened?
Yeah. Sure. So we had a really fast run. We found that what we were doing with automation on social was really helping drive web traffic for small businesses and early stage companies. A lot of likes, favorites, follows, retweets, comments, mostly on Twitter, but it could work on like Pinterest and
tumblr but twitter was really working well for us and you know we're charging a thousand dollars a month for the service uh we were bringing really high quality traffic to our clients and customers and uh the growth is really happening rapidly like you mentioned we got to a May 29th, 2015, I believe it was, we lost all of our Twitter accounts that we were running. It was thousands at the time.
Was it 15 or 16? I thought I had you on in May 2016 when you were doing that amount.
So... Oh, that's right. It was 2016. We've had a whole other year since then, 2017. It's been a blur. Yeah. So May 29th, 2016, we literally had zeros across our dashboard on the back end looking at all the accounts. And I thought... man, something must be wrong with the dashboard because there's just no way. There's just no way we could have lost thousands of accounts overnight.
And it turns out we did. They were all suspended and it took us a few weeks to figure out why. And it turns out that Twitter in particular had made changes to its platform to curtail automation across the board. It wasn't really our company that they were trying to battle against.
In my opinion, they threw the baby out with the bathwater on that one because we were running a really good solid business for early stage companies. However, Twitter is trying to clean up its act and reduce the amount of automation that could be tolerated on its platform.
Did the SMBs that were using you come back and sue you and say, you're why we got shut down?
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Chapter 8: What lessons did Hank learn from building a business on another platform?
Same fate, building on the back of Google or YouTube or whatever. And I think that that's just an automatic trigger to say, let's cut this and do something else because the odds are coming back.
It's high risk, high reward though, right? Matt Rissell with TSheets built his whole company inside the Intuit AppExchange. He banked on it, he was ranked number one and then Intuit acquired him for 340 million bucks, right? So it's high risk.
Yes, and I believe with the angel investors looking for their 100X or 1,000X, they're willing to play that game. But once you have that loss, it's not a stumble. It's an absolute explosion.
Okay, so you shut it down. You launched an agency in between. What did you grow the agency to, and then what did you sell it for?
Yeah, so the agency was partnered up with Amplify. the startup accelerator in Los Angeles. They have a really high quality program, writing check size about 200,000, and they'll do 10 companies a year right now.
So it was a really high quality group of companies that we knew needed growth marketing and could use agency style service like what we did with Vitamin, only human instead of machine, so we weren't violating any sort of policies. So grew that company to pretty close to a million run rate as well in the first year. And it's an agency. So we're not talking about SaaS here.
We're talking about, you know, having a dozen or so clients and, you know, they're all paying, you know, five to 10K a month. You quickly can get to that run rate. But with the human capital on there, the margins were different. It was a very different kind of business. And, you know, we saw that it wouldn't scale the same as a SaaS business. And
What if we could automate, I don't know, half to two thirds of the processes so that we could kind of crank through a lot of clients? And the learning there about six months in was early stage companies are so needy that that's not really a thing. It has to be a custom build every time across the entire spectrum because they don't know their early stage company.
You think about 500K to a million customers. in funding, you probably don't have your full market product figured out. You don't have your message.
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