The Bootstrapped Founder

Hey. It's Arvid. Welcome to the Bootstrap founder. We SaaS founders find ourselves in a peculiar position. We simultaneously are tenants and landlords.

So we're renting the tools that we need while also offering our own services for subscription fees. It's a world where true ownership seems increasingly elusive, but I think it's very important to understand its nature to be able to build lasting value as a founder. Nearly every component of our businesses is eventually rented from virtual servers to error tracking software, which is constantly paying for access to tools and infrastructure that we don't truly own. We don't own at all. Like, even our domain names are essentially leased from ICANN.

You may think only you have access to that domain, but that really only ever happens if you keep paying money to that organization. The rental model is about risk delegation, which is why we rent. Right? When a podcast summarization tool builds on top of PodScan, my business, they're offloading the complexities of podcast ingestion and transcription and data extraction onto me. And many of my customers chose PodScan because of this.

They only wanna observe 10 or 20 or sometimes even 100 of niche podcasts and get the relevant information from there, then sell it to their customers in various professional fields, but they don't wanna do it themselves. And guess what? I do the same thing. I don't wanna manage physical servers or worry about power supplies and fireproof housing, so I rent those services from somebody else. I think most of SaaS really is a chain of risk delegation, and each link passes some of the burden to the next.

This reality raises a challenging question. In a world where with both renters and landlords, what then constitutes true value? What can we, as software business owners, actually sell, and I mean sell in a sense of being acquired, handing over the value of our business to somebody else when so much of what we use is rented? The answer lies in what can't be easily replicated or rented itself, and those are relationships and expertise. Consider the current state of AI.

That's a field that I'm deeply involved in with PodScan. The quality of rentable AI systems has become so high, and they are also similar between major players that it's hard to argue any one company there has a significant edge. And I've seen this firsthand in the AI space. I've been there from the start. And after OpenAI came to the forefront in the beginning, many companies started taking over their playbook.

They acted the same way. They kind of built the same models. They were aiming at the same kind of customers, and the secret sauce of any of these companies is more about, like, specific configuration and experimentation than some great intellectual breakthrough. And what is not easily replicable here is brand perception, the trust that customers place in a company, the relationships that are built over years of service. And that's why so many of us founders still use OpenAI over these other things that are out there because they've been there from the start, and we've been exposed to how well they acted towards developers and how much they supported us.

So that's kind of why their brand sticks out in a field of pretty similar competitors. And when you look at your own software business, when you think about the value of it, the intrinsic value, the thing that you can sell if you ever were to exit, It's not just code or infrastructure. You're selling existing customer relationships. Right? If OpenAI were to exit to somebody else, which I I don't know who that would be, but if if they that would happen, they wouldn't sell the tech.

People are replicating the tech today, but they would be selling the relationships with all those developers that have been with them from day 1. So you are also selling not just tech, you're selling revenue streams that come from trust built over time among your customers. And the relationships that I have built with customers who use our platform for their data needs, those are my real assets. They trust us to handle the complex world of podcast data so they can focus on their core business and know that we have reliable data to give them every single day. And in our current digital landscape, anyone can present themselves however they want.

There are no more gatekeepers to say, hey. This is a product you can trust. You should use this. I mean, we still have influencers, but it's still a very individualistic thing. And as a result, trust becomes rare and hard to establish.

There are no corporate gatekeepers. We don't trust them anymore, so there are none. And I've experienced this firsthand myself as well. In the early days of PodScan, convincing potential customers to just trust us with their podcast data ingestion was a significant challenge. I had to prove that not just through the quality of the product that they would be able to get something out of it, but through consistent communication, transparency, and reliability.

I had to be there every single day if there was a customer service email. I had to be there in public on Twitter helping people out, getting people interested, helping people understand what the business is, what their solutions could be. I had to be very present. I had to communicate all the time. So while we may rent servers and software and services, what we must own are the means of communication.

Can you reach your customers? Will they listen when you have something to say? Will prospects give you the benefit of the doubt because they have heard good things about your business from other people that they trust? My most valuable asset is not our AI algorithm stuff or data processing capabilities. That stuff is valuable too, but in a different way.

The valuable thing is our ability to understand and communicate with the customers that we have and the customers that we will have in the future. When we launch a new feature or we need to address an issue, the strength of our customer relationships determines how well we can navigate those situations and how much damage we can prevent to the reputation of the business, to the financials, and all of that. That trust is at the core of our approach to building a business. And I think particularly when it comes to renting components and giving work to other people, delegating, these priorities shift as a business matures. Take for example the recent moves by companies like Basecamp, the bigger players and older players in the field.

Many of these companies have chosen to move off the cloud and onto their own infrastructure, running their own servers. They stop renting. And when you stop renting and start owning, particularly physical infrastructure, you're also taking on new risks and responsibilities that before you were paying somebody else to take care of. And for most of us starting out in the SaaS world, this level of ownership isn't feasible or even desirable. We can't afford to buy 1,000 of dollars worth of hardware just to run a software business with no customers.

Doesn't make sense. So we all start on other people's rented land. And speaking of rented land, I wanna take a moment to highlight a crucial service provider in my own SaaS world, paddle.com, the sponsor of this episode. As a payment provider that I personally use, not just for PodScan, but many other of my projects, Paddle is, in a way, another piece of rented land in my business ecosystem. But it's a rental that I'm genuinely glad to have set up because Paddle bears a tremendous amount of risk on my behalf.

They handle one of the most sensitive and complex aspects of running a SaaS business and probably of almost the most critical one, payments and compliance. The stuff that you need to be able to pay for the things that you rent and the stuff that you need to have in order so that people don't stop you from being able to receive money. And I don't wanna know my customer's credit card numbers, let alone be responsible for security storing that information that would just put a big target on my back. I want somebody else to be able to do this and do it well. And more importantly than this, I certainly don't wanna navigate the labyrinth of tax regulations in each of the my customers' countries of origin.

I have customers all over the world. I don't wanna know about this. I wanna deal with this. I wanna build software, and Paddle takes care of all of this, which allows me to focus on what I do best, building and improving PodScan. And this is a perfect example of how strategic renting actually does enhance your business' value by offloading these very significant risks and complexities onto somebody else.

So check them out at paddle.com, highly recommended if you're looking for a payment system or are unhappy with the one that you're currently running. Let's talk about AI here for a second. The AI revolution over the last couple years, it's not even a decade, really. It's just, like, 2, 3 years now, I think has been dramatically reshaping our understanding of ownership and value in the SaaS world. I've had a front row seat to this transformation too.

We use AI extensively for podcast transcription analysis, data extraction, all of this. Some of it, very few things on other platforms and a lot of it on local LLMs, like local AI that I keep running. And I've seen this technology become rapidly commoditized, particularly when it comes to the platform stuff. Right? We're looking at GPT, we're looking at Claude, we're looking at Perplexity.

Those things, the platforms that you can kinda hook into your systems, highly commoditized. And this commoditization has led to intense price pressure. I've seen the cost of using GPT models drop by 95% in just 2 years. Like, it started a couple years ago and was quite pricey, and now I'm paying 5% of the money I would have paid for the same amount of computation, and the models are better. They're faster and more reliable.

And this trend really shows no sign of stopping because prices get updated downwards almost every couple weeks. And this extreme price pressure, that really happens for all the companies with similarly well trained models. They're all competing for really the bottom of the barrel, people who wanna look at every single cent and see if it's worth it for them. And I've taken this lesson to heart. While I do use cloud services, I make absolutely sure that our core AI systems are set up in a way that can easily move between providers if needed or are on providers that I can reliably use myself.

Like, I host my local AI models kind of in in a containerized form so I can just easily spin up and spin down machines as I needed on different platforms. And this approach gives me more control and reduces the platform risk of PodScan in general. So it's very important to think about, like, what the platforms do on which you rent, right, and how you can quickly switch from one to the other if you ever need to. It's kind of an abstraction. In coding, you have a lot of abstractions.

Right? If you implement a payment provider or an authentication provider or anything, you usually wrap that in a class that just is an authentication class or a payment class. And then if you ever need to switch out the system behind the scenes, the abstraction stays there, and you just do a different implementation for each of these things. And kind of the same should happen on a business level. You should be able to switch between these things, and for that, you need a certain kind of infrastructure in place that allows you to make a switch between platforms.

So as we navigate this world of digital rentals and subscriptions, I think we need to shift our understanding of ownership and value in a software business in particular. True ownership and entrepreneurship today has less to do with the means of production, like where the server is and what specific kind of capabilities it has, and has more to do with the means of communication. I've learned that the true value of our business is not in the code that we write or the service that we rent. It's in the trust that our customers place in us to be able to handle their data and their podcast ingestion reliably and efficiently. It's in the relationships that we've built with podcast people, with podcast agencies, with people building businesses on top of the database that I provide and anybody else that relies on our infrastructure.

They know that we will keep building, and we keep supplying the information that they need. That is the trust I'm talking about. So as you build your SaaS business, focus on owning what really, really matters. Not a server, not even a piece of code or a certain framework or whatever, but build strong trust based relationships with the customers. Those are the valuable things.

Cultivate a brand that stands for reliability and expertise in your niche, and I mean a brand in the sense of the business, obviously, but also yourself, the person building the business. Show that you're an expert by sharing what you know about your industry, and do it in front of people. Build in public really, that's what it is. Create content, foster conversations that demonstrate your value, and then people will find the value of your business by following these kind of little tracks that you put out there. The bread crumbs that you left for people to find you and what you're offering.

And in the end, while we may rent the tools to build our digital kingdoms, the true value lies in the trust and connections we forge with our customers. That's the real estate of the digital age, and it's something worth owning. And that's it for today. Thank you for listening to the Bootstrap Founder. You can find me on Twitter at arvid kahl, a r v I d k a h l, and you can find my books and my Twitter course there too.

And if you wanna support me in this show, please tell everybody you know about PodScan.fm, and leave a rating and a review by going to ratethispodcast.com/founder. Makes a massive difference if you show up there, because then the podcast will show up in other people's feeds. Any of this truly helps the show. Thank you so much for listening. Have a wonderful day, and bye bye.