Practical Founders Podcast

#27: Bootstrapped to over $3M ARR with software for SaaS product managers – Sarah Hum

Sarah Hum studied graphic design in university before she discovered she loved to help software startups create new products. She moved to Silicon Valley to work at Facebook as a product designer, but a side project helped her find a problem she wanted to solve. So she quit her job and built an initial software product called Canny with her technical cofounder while traveling the world together as nomading entrepreneurs. Within a year, Canny created enough revenue for them to live and travel frugally. 

Canny is a customer feedback management software for product managers at SaaS companies to collect useful product feedback inside their products, prioritize requests, and communicate with customers about their requested features. The Canny product has evolved quickly using its own product to engage with customers and make decisions about the next product feature improvements.

Canny is growing steadily with over $3 million in annual recurring revenue and 13 remote employees. They continue to experiment with substantial pricing experiments for different customer segments. Sarah openly blogs about the ups and downs of their startup journey and their unique approaches to hiring, designing and testing new tactics.

Best quote from Sarah:

You can say product management is an art. It’s not like I can look at the numbers and bada boom, bada bing, here’s exactly what we should work on. There’s a balance of different things that you should look at. 

Feedback is one of the big ones for us, but we look at it through the right lens. What are our highest-paying customers saying? What they want might be different from what the customer base as a whole wants.

Also, for us, team happiness is also important. What do we want to work on? We don’t have investors to please; we want to build something great. We want this feature for ourselves or this would be fun to work on. 

Edited transcript of Practical Founder Podcast #27 interview with Sarah Hum, cofounder and CEO of Canny

Greg Head: And we’re live with Sara Hum of Canny at canny.io. Welcome to the Practical Founders podcast, Sarah.

Sarah Hum: Hi Greg. Thanks for having me! 

Greg Head: You’re a pretty practical person with your, I would say, pretty fast-growing bootstrapped company. Canny. Well, just start with where your company is right now. Tell us about Canny what is it? And then we’ll dig into how many employees and revenues and then we’ll go back and hear about your journey.

Sarah Hum: I am Sarah, I’m the founder of Canny and my background is in design, which is interesting. And my co-founder, Andrew, is a software engineer and we built Canny, which is a feedback management tool. Primarily. We help other software companies collect, manage their feedback, and then really understand it so that they can use that information to build the most impactful things. All of our resources are limited. We don’t have unlimited engineering strength, all of that stuff, so how can we best use our time? How do we make sure we’re building the things that our customers want? We’ve been around for almost six years now, which is. Wow.

Greg Head: Congratulations. Yes, right.

Sarah Hum: Thank you. And we are a team of 13 and we’re fully remote and it’s super fun. Yeah, I hope I am a pretty practical person. I would like to think of myself that way. And yeah, we’ve just been doing it our own way and kind of loving it. So, yeah.

Greg Head: Well, that’s my first part of the definition of practical, is that we get to do it our way, whatever works for us. So And you’re in Toronto, Are you from Toronto, Sarah?

Sarah Hum: Yeah. So born and raised in Toronto, but I definitely did my stint in Silicon Valley, so very familiar with what’s going on over there and how different the VC landscape is. And so I did that for a few years, ended up leaving my job to start Canny, and then realizing, you know, I’m in one of the most expensive cities in the world, let me get out of here. And so Andrew and I took off. We ended up doing the nomad thing for around two years.

Greg Head: And then was that pre-COVID pandemic?

Sarah Hum: Yes, Right. So right before the pandemic, we realized that well, Andrew realized that he would like to slow down a little bit and have more stability and build more routine. And so we ended up choosing Toronto to come back to I am born and raised here, but Andrew’s from Seattle, but he went to study engineering at the University of Waterloo, so he’s familiar with some people over here. And so we both had, you know, some community over here. So it was a good choice for us.

Greg Head: So Andrew, the co-founder, who is technical, is also your partner, is that right?

Sarah Hum: Yes. Well, you know, pros and cons, I mean, it’s I don’t think I can really imagine doing it any other way. But yeah, it’s a lot about making sure you have the right boundaries in place so your life isn’t all your startup. So, yeah, we’ve been figuring that out along the way and I think we’ve gotten to a good place where we have that. We have a good work-life balance.

Greg Head: Oh my gosh. You said the words. I can’t believe that. You’ve built software. You worked in Silicon Valley and lived out there so expensively. You did a stint at Facebook working on designing products inside Facebook. When you say you have a design background, what was your focus?

Sarah Hum: My degree is actually in graphic design. Okay. I was you know, I’m a visual person. I like being creative and stuff like that. And so after high school, I asked what careers are out there that are practical, but while I could still use those creative muscles and so I got into, OK, graphic design, let’s see what’s going on over here. And the nice thing about my program was that I was able to get a lot of foundational skills like typography and visual design and balance and all that stuff and really understanding how to make things look good. And then from graphic design, there are definitely many avenues you could go down. Even when I was in university, the product design, the UX design, that side of things was a lot less than what it is today. There weren’t really many courses.

Greg Head: Did you even study some of that?

Sarah Hum: We had an “interactivity” course. That’s what they called it. But it was so basic. It was very, very limited. It was definitely behind the times, I feel like, a little bit. But you know, I got that foundation side of things and then for third year, one of the things that we had to do was do an internship. And so I actually ended up deferring for a year in order to do internships because I found them so much more, again, practical and being able to like put those practices into place. And then that’s where I discovered San Francisco and the tech world and realized, Wait, this is actually where I belong.

Greg Head: Awesome. And Toronto has a tech scene as well. It’s not the Bay Area. It’s not Silicon Valley but does have the largest tech scene in Canada. Toronto has people from all over the world creating companies there.

Sarah Hum: Absolutely. And I feel like it’s only getting bigger because of, you know, the residual effects of the pandemic. People are being more and more remote, which enables us to live in cities that are less expensive, even though Toronto is kind of crazy now. And startup companies in their hometowns and stuff like that. I think Toronto’s only going to go up.

Greg Head: Awesome. So you have product feedback software? Let’s say a B2B SaaS company for the vertical of software companies. Where is Canny now? I know you openly talk about revenues and customer your progress and your trials and tribulations, so you can learn a lot about this reading and hearing from me. Where is Canny now? Did you say six years into the journey?

Sarah Hum: Yeah, we’re almost six years. So we launched in March 2017. We are 13 people and we’re around $3.5 million in ARR. It’s interesting. We’re at an interesting time because yeah, we just change our pricing, we change our pricing model. It was long overdue. It was long overdue. I think with SAS, it’s just like continuing iterating because you’re iterating on your product. Why should you not iterate on your pricing? It’s becoming more and more valuable in theory. Why is the pricing not reflecting that? And so we had held off for probably four years. I’m writing a blog post about this right now, actually, just to talk about like the learning lessons and stuff that we’ve gathered from this most recent product pricing change. We used to be at over 1000 customers and we recently launched a free plan. So in April earlier this year, we launched a free plan, which means a lot of people go down to the free plan, but we also doubled the price of what we call our growth plan. A lot of people moved up and down. We’re now down to around 600, I don’t remember 600-something paying customers, but these paying customers are paying a lot more than they used to. And so the numbers still work out in the end, but it’s definitely a different kind of business and we’re still trying to figure out how that works. It’s not like you just change your numbers and that’s it. It’s like there’s a lot of reaction. You’re changing your funnel, you’re changing your customer journey. And so how do you, now with freemium, get people to pay?

Greg Head: So you’re in the middle of that right now, or could you say you’ve got to the other side of that pretty big shift? It is great that small companies can do this. Big companies have a hard time with these shifts, but. Would you say it’s working?

Sarah Hum: Honestly, I feel like we’re still adapting to it. I think one of the interesting things is we kind of released this plan as the world is going through this crazy economic phase, shall we say, where, you know, you’re seeing layoffs left and right. You’re seeing companies cut costs left and right. And with cutting costs, often that means the software that we’re using. What can we let go of? That makes it difficult for us because it’s like, is our problem because of the pricing change or because of the state of the world? It’s probably a mix of both. But you know, where is it? So it’s really hard to see and understand. The impacts of this change that we made. But we are working on looking at our funnel and really trying to analyze the different steps and where we can tweak things to make that flow better.

Greg Head: And you’ve led this company from start-up to over 3 million in revenues. First of all, congratulations. That’s, more than an up-and-running company here, as you know, with product and business models and everything, the bigger you get, the harder it is to make changes and move things around. You lived through the COVID lockdowns. You lived through the tech boom of COVID. Now we’re living through the tech bust and some say, in some areas, a tech recession, the tech contraction that’s happening. And your companies are mostly tech companies. When recession comes and this has always been there in software, we see what’s a must-have and a nice to have. So maybe the people who are paying you the most are it’s a must-have and they need it. And the ones who were nice to have, they could go down to the free plan and you’re not confusing people. So you raised your prices on your best customers, Right? And they said, thank you, it’s valuable, and the rest. And the other people said We were trying this, but I’ll just do the free plan, something like that. We’ll play around. What other learnings could you say you’ve discovered here? Do people use it better if they pay more, for example?

Sarah Hum: With the paid plan, you also get a lot more features. You do use it better, I guess you can say. But also one of the interesting things that you didn’t mention is some people are reacting, Oh, I really like this product and I would pay, but I can get by with a free plan and it’s totally fine. You know, there’s money that is up for grabs that we are not collecting on. And so now it’s kind of like looking at our customers, looking at the features that they’re using, looking at how high their usage is in terms of seats, for example, or different measures in our product, and trying to understand how we can basically ship a V2 version of our pricing, our free plan, to make it a little less generous. I think we were pretty overboard with how generous it was. And therefore a lot of people could get by with it. We’ll have to see. We’ll have to see how that goes. But I’m optimistic that we’re thinking on the right levels and we can ship something that will tilt a little bit in our favor, but also still be a generous enough free plan. Because what’s the point of a free plan if it’s not good enough for anybody to use, Right? Well, that’s all about striking the right balance.

Greg Head: From a paid plan to a free plan. That’s one of the mistakes, is that we’ll just give them some stuff to play with, but actually, at every level, there has to be a useful use for people to use it and stay. Otherwise, it’s you’re faking them out and it puts a bad impression. So you’re seeing data about your pricing, you’re getting feedback about your pricing comments, and maybe through your own feedback platform. How do you as an entrepreneur manage this? Do you just say, I see the data, I have an intuition, and I’m thinking about this, we have a discussion and we go? Or can you get the feedback and think it through and be right? You know, this is a product management problem, right? When you’re making complex decisions with feedback and different segments and so forth. But what’s your style with this? You don’t just take feedback and have a voting machine and have people vote, right? You follow that, right? What’s your style?

Sarah Hum: Yeah, first of all, it’s different if you compare this pricing thing that we’re doing versus like product development. I think the pricing thing, it’s such a delicate balance that it’s almost like trying certain things and seeing what changes. The most vocal people, the people who are affected by pricing are going to be those low-end customers that aren’t going to pay you, maybe ever. You want to tone those down and look at those customers that have the money and have that problem that you’re really solving and listen to them. I guess that kind of reflects a little bit also in product development as well, when it comes to canning, the canning mechanism for collecting feedback is basically upvotes, but a vote is not the same as another vote, right? Somebody might be paying you $10,000 a month, somebody might be a free plan user. Which one do you prioritize? I think is pretty obvious. And so really trying to like you get that data, but then you really need to like slice it and look at it from different angles to understand where is our priority? Probably our paying customers.

Sarah Hum: Maybe we want to prioritize North American customers because they’re just better. Whatever it is, maybe you want to prioritize a specific vertical, or maybe you want to prioritize a specific persona. You know, right now we serve product managers. That’s a primary role that we sell into. But because of this economic situation, we’re kind of looking at different verticals. Maybe there’s a different role that we can sell into that has a similar problem. It looks at it in a different way, you know, And so we’re trying to approach this in different ways. And then when you prioritize, you really look at it through the lens of what’s important. And so with Canny, for example, you can say, Hey, show me all the feedback from people who are paying us more than $1,000 a month. I understand you’re a free customer. Your feedback is still useful at scale. However, when we really need to prioritize and understand where we should put our very limited resources, we need to be really conscious about where we put, where we prioritize and how we prioritize segmentation.

Greg Head: Knowing where to focus is a decision on the other side to make that lens for sure. So let’s talk about your product because we’re talking to software founders out there. You do some listening, you collect more feedback, and then you help them process it, right? And everybody’s got a little ear to the ground of customers and a spreadsheet with feature requests and the queue for the developers and so forth. Can you walk us through briefly how your product works? Maybe it’s for a little bit bigger company that has product management and enough chatter and enough complexity. But take us through a little bit of the workflow, what it might look like if somebody were to use it.

Sarah Hum: Yeah, absolutely. I mean, to your point, a lot of people that come and seek out a product like Canny come from using spreadsheets, you know, it’s like, here’s, here’s what I got. I got a spreadsheet of individual customers who ask for specific features. I have no idea if there’s a lot of overlap between people’s requests I have, it’s just a crazy crazy mess. And yes, I think this is a product where it comes more handy when you’re at a certain scale and you’re starting to feel those pains about, Hey, I’m hearing a lot of things, but I don’t at the end, I still don’t know what’s most pressing for our customers. You can set up something like Canny you can even import that spreadsheet if you want to start to have a feedback portal or whatever you want to call it that has feedback in it already, and then your customers can then go and post new ideas or vote on existing ones. And that helps with the duplication, right? Instead of 100 different lines on your spreadsheet asking for the same thing, it’s one, what we call post in Canny, with 100 votes. And then from the company side, from our customers’ side, they can go in and see who are those votes from. That’s one of the most important things for us that we believe in is like the vote is useless if I don’t know who it’s from, you know, and I don’t have any idea, are you a paying customer or have you been with us for a year?

Greg Head: Do you do identity matching with your system and the voting? So or they’re integrated somehow?

Sarah Hum: Yeah, it’s integrated. It’s integrated so that it makes up a better end-user experience as well. So for our customers’ customers, when they go to their Canny portal, they should not have to log in. They’re already logged in to our customer’s website and app. And so it’s integrated so that it almost doesn’t feel like a third-party tool. It shouldn’t really feel like a third-party tool. It’s the same profile picture, it’s the same name. I can just go ahead and start typing my idea. And that also reduces the friction, right, to giving feedback if they have to sign in. Oh, you know, I’m not bothered.

Greg Head: Actually. It will skew the feedback. Only the people that want to sign in and are technical will give you the feedback.

Sarah Hum: Exactly. Exactly. And so we’re trying to make that friction as little as possible. Really type your idea and describe it. That’s it. Yeah. If it exists already, add a vote, that’s it. And then for the end user, it’s also really nice to feel like the tools that you’re using are actually listening to you and your ideas.

Greg Head: Is there a little response? Thanks, Sarah, for that comment. So a little chiming in and all that. Yeah.

Sarah Hum: So it doesn’t follow up with you right away like it won’t say thanks for the feedback and anything like that. However, I think the magic moment for me is I use Canny with some of our customer’s products and I’ll request something, and when I get an email saying, Hey, this is in progress, I’m like, amazing!

You made a difference.

Sarah Hum: Yeah, exactly. And like, something is coming. I’m excited about the tool that I’m using because they’re working on something that I’ve wanted. And so that’s the kind of end user magic moment. And for me, honestly, like that’s partly why I started Canny in the first place. Because, as a user, you feel like you’re always talking into a black hole. Nothing ever happens, you know? Oh, I’ll pass your feedback on to the team. Will you, though? Are you going to do that? Creating this kind of appeals to that that that want of mine.

Greg Head: Well, and you had experimented with that with Andrew with Product Pains. A website for people to come and express a problem that they were having with a modern tech product just to communicate it. It was an experiment and people had opinions and they were expressing them. So you had a little community and it started to grow. Was that the genesis or the predecessor of Canny? You felt there was something there. People’s views weren’t being heard and being managed.

Sarah Hum: Yeah, right. At the end of the day it was the same problem that we’re trying to solve with Product Pains versus Canny, but solving it at different angles. Because with Product Pains users were there first and then we were like, you know, Hey Uber, look at all these people giving you feedback. Why don’t you why don’t you come over here? And that was a really hard sell because for these big companies, it’s like there needs to be so I think so much volume that they have to listen.

Greg Head: Whereas on a reviews site, it wasn’t just high fives, it was, Hey, fix this problem. It doesn’t work that way.

Sarah Hum: Versus on the flip side with Canny, we’re selling to the business and so it’s the business saying, Hey, we’re committing to listen to you, so come here and give us your feedback. Which made a lot more sense in the long run. I understand that now. But like, you know, this is my first startup. At the end of the day, I am learning every day. And so it’s like, I don’t know why we did Product Pains, but it was a part of our journey.

Greg Head: No, you did it to try something and hear something. You always an entrepreneurial type? A designer who works inside Facebook for a spell isn’t always doesn’t have the crazy gene to go off and play.

Sarah Hum: Yeah, honestly, the first one of my first 1-1 with my manager at Facebook. I told I told him that eventually I want to start a company. And so whatever you can do to help me gain the skills that I need to be an entrepreneur, I want those things. In hindsight, that’s not how this works. You shouldn’t go to a company like Facebook in order to gain entrepreneurial skills. But after a year and a half, I ended up leaving that job and saying, Let’s just like dive in, and just like learn as we go. And I think that’s how I learned best anyway. I think I always felt that. When I was in university, I did a lot of hackathons and that’s just about like building products from the ground up really, really quickly and getting ideas out there. So I had that itch and I and I really, I really like this fast-paced feeling and we’re doing things really quickly, shipping things. Whereas Facebook takes me three months to ship a feature.

Greg Head: This little feature in this little corner.

Sarah Hum: Yeah. And so I think I had that itch a little bit. But I also think I wonder, you know, my, my, my dad, he owned an optical, so he’s technically an entrepreneur. My grandparents had a restaurant, so technically they were entrepreneurs, very different kinds. But, you know, I wonder I wonder if that played a part in my interest in entrepreneurship.

Greg Head: Well, and I’m sure at Facebook, any big company, you show up and you go into this corner of a corner and you’re a specialist that works on just this thing and just that thing. And now you’re a generalist where you work on everything. We go from paid ads to hiring to contracts to whatever. So you had this Product Pains website that gave you clues about feedback and you said, Let’s do a different way to do that. How did you get this started? You didn’t raise money. Did you do this in your spare time while you were still working, or did you do set off a little bit of savings? How did you get started?

Sarah Hum: Yeah. So the nice thing for us is that I’m a designer and Andrew’s an engineer, so we can build product. That’s the like the one thing that we’re good at is building product. And so we didn’t need capital to start a software company because we could build it. Both of us actually have come from Facebook, so we had both come off decent salaries and so we had a decent salary to live off of or decent savings to live off of.

Greg Head: As long as you weren’t in Silicon Valley.

Sarah Hum: Exactly. Yes. And so we were able to build the product. Product paints a done kind of during our Facebook stint, but then pretty much a month, maybe two months after I left Facebook, we were like, we’re changing this. We’re going to change this into a SaaS tool. We’re going to rename it Canny. And it just started from there. We, of course, started making $0, as we all do. We didn’t hire until we made enough money to hire.

Greg Head: There you go.

Sarah Hum: So yeah, it’s just like I think for me it’s like you want to prove your business. And so if you’re able to be profitable, that shows you that you should continue with this thing.

Greg Head: That’s a very un-Silicon Valley-like thing. Usually, you go to Silicon Valley, you join the cult of we don’t say profitable. I didn’t learn what EBITDA you’re 20 years of the software business including a stint in Silicon Valley like profits were not part of the game here did you just look around saying this is not my native language? I can’t connect with this. You know, Facebook started bootstrapped. They got all these users before they had any funding for Peter Thiel. Like, they got traction before they got on the funding drugs.

Sarah Hum: Yeah, I don’t know. I just see people raising money off an idea. I just it just doesn’t make sense in my brain. It’s like if you’re making money, your customers are paying you money because they believe you solve their problem or you are solving their problem. Right? And so that just feeds in back to itself saying, okay, you know, this is validation, This is a sign that you should continue with what you’re doing. Versus like, Oh, let’s just raise a bunch of money, throw money at all the problems that we have and then see what sticks. I don’t know. It just seems a little bit backward to me, even though, you know, amazing companies have come out funding, as we know. But for me personally, I like being my own boss. I like the fact that the only people who own Canny are people who work on Canny. That’s the only way that actually makes sense to me.

Greg Head: I totally see that, and it looks like it’s making sense. You’ve built a valuable company already, Sarah. How did you get your first paid customer? You worked on this thing and shipped it. Did you just throw it out into the ether and then somebody paid you, or did you have customers lined up before you started? How did you get revenues started, that flywheel?

Sarah Hum: So with product pains, we built it to, I think it was around 5000 people who were just giving back on the platform. These are just random users like, Hey, Uber, I want this. Hey Yelp, I want this. There were also a few people that started like added their own product profile on Product Pains and we’re saying, Hey, like I’m using product pains, a terrible name in hindsight and we’re asking their users to give them feedback on product panes. A few of them asked if they could have a widget, basically like a product page, a widget that they could put on their website in order to get feedback directly without sending people to product. So we’re like, Okay, that’s interesting. Is that something you would pay for? Yeah? Great. We built it. We charge $19 a month. That’s where we started, maybe even from day one. You know, it’s like asking for feedback, really listening to your users, understanding what they want, what they would use, what their pain points are. And then if it’s valuable enough, they would pay for it, right? Because if it’s not valuable, you got nothing. You’ve got no business. Y

Greg Head: You got nothing. How long did it take to for you to get those first customers and listen and iterate? And how long did it take you to get until you felt like you were ramen profitable?

Sarah Hum: Yeah. I can’t even imagine I can’t even believe where we’ve gone to today. It blows my mind. Whenever any new people join the team, it’s like, it’s crazy. But actually, we do have a blog post about ramen profitability, and I believe our ramen profitable number was like $3500 MRR. I remember Andrew and I were both in Spain at the time. We had to go find ramen to eat in this Spanish city. So we went out and found ramen. I mean, it wasn’t, you know, traditional Japanese ramen or anything like that, it was such a highlight for us, like we got to this point where we could live, not fabulous lives, but we could live off the software product that we built.

Greg Head: You were nomadic. You were traveling the world and working from wherever you were in Spain. That sounds pretty exciting. What did it feel like when you hit that?

Sarah Hum: It was definitely a milestone. Everyone talks about raw and profitability. You get to this point where, like, you’re your default alive, right? Yes. And so it’s like, Yay! But then there’s always tomorrow. There’s always the next day. And so what are our next steps? And I feel like for us, since this was our first company, it’s not like we could say, Hey, I remember when our last product we did this and that wasn’t a good idea, so let’s do this other thing. We didn’t have this experience to rely on, which was tough. But I think we were really lucky and we worked on the right things and we just continued chugging along. We still hadn’t hired anyone by this point. Of course, we were ramen profitable for us to just kept going until, How many months later? A long time since we could hire first our first person. I’m looking at the blog post now and it looks like we achieve ramen profitability seven months after launch.

Greg Head: Okay, that’s great. I’ll put a link to that post in the show notes. You’ve been talking about this and this isn’t the first product feedback solution out there. There’s UserVoice for bigger companies. So you were selling to generally smaller companies that came to your website, checked it out, and put in their credit card, and it wasn’t a sales process and outbound process. How did you get the flywheel going with getting more attention for your website, getting traffic, getting conversions?

Sarah Hum: Yeah. So I mean, we knew marketing is important, right? Like you build it and they will come like, that’s not a thing. We didn’t have marketing bones in our body, but we knew, you know, blog posting, evergreen content. You know, it’s these buzzwords that we hear around SaaS especially. So we did our best to write articles, not really with the approach of SEO, but to tell our story. And so now that I look back on it’s very much more like brand-building than SEO and the SEO kind of focus.

Greg Head: Interesting. So it wasn’t about product feedback, prioritization, No ten tips, or whatever? No, nothing like that. Here we’re doing this really interesting thing which people love to hear.

Sarah Hum: Yeah, it’s interesting because, you know, we just didn’t know. We didn’t know we should write this SEO stuff. We’re also not writers, right? And so the easiest thing to write about was just what we were experiencing and like stuff where we’re learning. And so this profitability blog post is like it was exactly one of those. How did we, how did we find the problem? How did we get our first customer, how did we get to where we are today? And so a lot of our blog posts are actually written in that kind of format, where it’s like, Here’s what we did, here’s what we learned. Multiple of these posts actually ended up on the front page of Hacker News.

Greg Head: Oh my goodness, huge.

Sarah Hum: I remember watching our Google Analytics and the numbers were just like flying. And we’re two people in our little Airbnb in Spain or wherever we are. And it’s just like the numbers are climbing and climbing. And so just stuff like that where, of course, that’s not sustainable. It’s not like you can just live off these spikes in traffic and hope that you hit the front page of anything but those things definitely helped. And that got our name kind of flying around. We tried our best to be marketers. We tried to really tell stories from within versus trying to sound like, Oh, I’m a product management expert, here’s what you should do, you know? And I was never what we claimed to be and try to do. And so if we tell a story, you can’t really argue with my story like, Hey, your story is wrong! You know this is my story, this is authentic. This is not, AI cannot write this article. And I think that’s what worked really well for us. And honestly, that’s the stuff that’s fun writing about because. It’s writing about your own success and your own experience.

Greg Head: And you had challenges, which I know you talked about. So did you have a viral aspect to this? Meaning your customer plugs in your software and there’s a feedback portal somewhere in the product or access to that. Give us feedback, right? And then you have a brand that says, Here’s the Canny portal, right? Is your brand getting advertised to all the end users? And then they say, What is this thing? I want that. Is that a big part of your growth model or is that nice to have, just like the old Hotmail email story?

Sarah Hum: 100% right. You know, the nice thing about this is that it’s free. I did not pay to put this ad anywhere. Actually, they’re paying us to use our tool.

Greg Head: Not just an ad, it’s an endorsement.

Sarah Hum: Exactly. It’s small and subtle, but if people want to find out what is powering this thing, they can. And so absolutely. Especially if it’s like a bigger name if it’s one of our bigger customers and they’re like, Hey, this company trusts Canny? I should trust Canny. And so there’s definitely that loop, and that’s really helpful because, it’s free, we don’t have to do anything!

Greg Head: So you don’t have salespeople in your business or do you?

Sarah Hum: Well, so in the very early days, we played to our strengths, right? Our strength was the product. We’re going to build a self-service feedback tool. Marketing-only. As time has passed, we’ve added new features and started selling to bigger and bigger customers. With that, it means a little bit more hand-holding, and a little bit longer of a sales process. They’re going to pay more money at the end of the day. That’s great. They’re less churny, they’re more serious. That’s great. I wouldn’t say that we are sales experts still. We have one salesperson right now that pretty much handles the not-self-service, the sales part of our business. Everything else is still self-service. So we have a little bit of a mix of both. But when people need more hand-holding, we have that.

Greg Head: So what is an average-sized annual customer these days for you? And I know there are barbells of this. All your free over on one side and your big guys on the other but do they pay $500 a month?

Sarah Hum: I mean, our growth plan starts at $400. That’s pretty much the baseline. I mean, yeah, we’re not dividing it by all our free customers. That doesn’t make sense. That’s where we’re at.

So some are paying more than $1,000 a month and some are free.

Oh, totally, yeah.

Greg Head: Is it variable? Meaning you pay a base price and then depending on how many users you have, you pay more. If you’ve got a million users, you pay a lot more. And if you have ten users, you don’t pay that much.

Sarah Hum: So it’s interesting because we initially had that model where it’s based on tracked users. And what tracked users were was the number of people giving feedback. And so we tried to pin it to how much value are you getting, how much feedback are you getting, how big of a company are you? That didn’t work out super well because a user for one customer is not the same as a user for another. If you’re B2C, we do have some B2C customers. Your customers are way less valuable versus a B2B business where, you know, you’re you’re one customer will pay you %10,000. And so it made a lot less sense down the line to charge based on tracked users. So we recently, with our pricing change changed that to a seat model. And so now depending on how many seats, depending on how many admins you have, the more you pay. I’m not sure if this is right. You know, it’s another experiment. It’s something to try and keep an eye on and monitor. But it’s still expansion at the end of the day is something you need. And so trying to figure out where that comes from is still in the works.

Greg Head: So you kept growing, right? You added your first employee, maybe it was that a developer engineer?

Sarah Hum: No, it was a customer support person.

Greg Head: All right. Okay. The thing you guys didn’t want to do, right?

Sarah Hum: Yeah, well, it’s like a maker-manager schedule, right? We were trying to build this thing, and then. Ding, ding, ding, ding, ding, ding. Every five, 10 minutes, something comes in and we’re like, okay, let me drop everything that I was just doing and talk to this user, which is, you know, important at the very beginning, especially because people are giving you valuable feedback all the time. But it was very distracting. And at the end of the day, they’re not as expensive as an engineer is. And so it’s something where we could protect our time by having somebody focused on our customers. So that was our first one.

Greg Head: Yeah. So and you kept growing and so a little bit more virality, a little bit more exposure, a little bit more conversion. And you didn’t have a free plan when you started, is that right?

Sarah Hum: Oh, no. This is the first time we’ve had a free plan.

Greg Head: Could you say that you went from ramen profitable to $3.5 million a year and growing because you listen to the right customers and you focused on the right segments then you heard them in the right way and prioritized the features: because product is the biggest lever in a software business. Would you say that you guys were extraordinary in your decision-making and design? That was a big lever? Because most bootstrapped founders are like, we just made something up and we started selling it and we just went to town. But like you were very savvy about this. Was this true product design-led growth?

Sarah Hum: Yeah, Honestly, you can say product management is an art, right? It’s not like I can look at these numbers and bada boom, bada bing, here’s exactly what I should work on. Right? There’s a mixture. There’s a balance of different things that you should look at. And feedback is one of the big ones for us, like looking at feedback, as I was saying earlier, through the lens that is most important. And so looking at our highest paying customers, what are they? What do they want that might be different from what the customer base as a whole wants?

Sarah Hum: And then also, I think for us, team happiness is also important, right? And so for us, what do we want to work on? Like, right? We don’t have investors. We don’t have to say, Hey, you know, we’re working on this because of that. Like, honestly, we just want to build this. We want this for ourselves or this would be a fun feature to have or something like that. We can still do that and not have to suffer because our metrics don’t look so good that quarter. Whatever it is, we are on bosses, that’s a nice thing. And so we also balance like team happiness. What do we want to do? And sometimes I use our own product for ourselves and I’m like, Hey, I would like this. Can we just do this real quick?

Greg Head: The founder card. Ha ha!

Sarah Hum: Yeah, I mean, there’s savviness, right? There’s being savvy with your business, but also have a good time while you’re doing it right. Business can be so heavy and there are lows. There are definitely lows with highs. How can we have an enjoyable experience? I think is also important. I think we also were very savvy. I think absolutely we were listening to our customers from day one because we dogfood our own product. Yeah, I definitely think that plays a big part.

Greg Head: So then dot, dot, dot…Did it just kind of grow a little bit every month and then every once in a while you said we have enough to cover a new employee and what’s the next best important thing? And you kept going. Made a couple of moves about pricing. Has the product moved? It sounds like it was listening-oriented in the beginning. Is that still very listening oriented or is it more about prioritization and closing the loop, which is also part of the feedback life cycle?

Sarah Hum: Yeah, it’s a good question. I think getting feedback and managing it is our bread and butter. We’re at a pretty good stage with that in terms of the product. We’re trying to keep that end-user experience as simple as possible, so let’s not complicate it, let’s not dive into it, and then try to try to add new things or anything like that. A lot of the stuff that we work on now is on that back end. How do we help you analyze your feedback? So you have all of this feedback in your Canny right now? Now what? How do we help you and give you the tools that you need to understand it to get reporting on it and to be able to pull those insights from it? Because if our customers don’t want to use the data, then they’re not going to go and go anywhere with it. And then at the end of the day, they’ll say, Well, we don’t use the feedback anyway, so let’s just chop Canny. And so how do we help them say actually, Canny really helps us determine what we should spend our resources on? Especially these days when people are being tighter on their budgets, people are being very cautious about what they spend money on. They should be thinking about product development as we have this many engineers. How do we make sure that every one of them is doing something that has a positive impact on the business and not just, Oh, we think this is good.

Greg Head: Right? A product manager has a tough challenge. They’re not the CEO-founder. Someday you’ll have a product manager and you’ll walk in and say, I just need this feature. I know better than you. You have a tough problem with the founder sitting up there and VPs all around, and then they look at the engineering team and the product manager says, Well, there are 100 things we could do, but the next sprint we’re going to do these two things, and here’s how I want it to be done. Because of this, they have to make a case to the company and to the engineering team, and everybody else that this is the priority. Do you help them make that case that says, Yeah, given the feedback and all the other data that comes in that you, you take in?

Sarah Hum: Yeah. 100%. I mean, as a product manager I should be able to do that. I should be able to say, I think this is the most important thing because of X, Y and Z. And so some of those things that we surface in Canny, one is MRR, so we show how much of your existing revenue are you impacting by building this feature. Based on all the people that have asked for this it’s going to improve the sentiment or help a $2 million of revenue, whatever that is. On the flip side of that, we also show opportunity revenue. And so salespeople might come into Canny and say, hey, this prospect will sign if we can build X, Y, Z features.

Greg Head: The old sales guy running down the hall saying we need this and there’s real money. That’s a pretty good argument. By the way, I’ll get this deal if we get this feature.

Sarah Hum: Yes, I think the workflow now is like, Hey, Bob, this customer asked me for this and it’s like a Slack conversation. And then PMs are like, OK, and then nothing happens because there’s nothing keeping track of it. There’s nothing really consolidating all the information so you can understand adding these all together, this feature has $1,000,000 in opportunity revenue. Or NPS is really bad this month. Like if we build this, these are what all of our detractors are saying. Whatever lens you want to look at. And then we also have a road mapping tool. At the end of the day, it’s also about how much effort something’s going to take. And so even if something is like it looks like it’d be a really good idea if that’s going to take us six months to build, maybe we want to question whether or not we want to build that.

Greg Head: Do you help the engineers vote on what they want to work on? It’s a bit like your team, right? Engineers want to do that, of course.

Sarah Hum: Yeah. It’s interesting. I think we don’t have this built out well in committee, but how we do it internally is we have a roadmap for different quarters. And so we’ll say, Hey, here are the top 30 ish things that we want to work on. Pick something that looks interesting to you from the top and it doesn’t have to be number one. It doesn’t have to be number two. Like if somebody is more inclined to do back-end work, you don’t do that one as long as it’s near the top, as long as it’s one of our top 20, it’s fair game. Like also have a good time while doing it. And then our engineers tend to work to their strengths too. So if they want to, if they’re a lot stronger in the back end, they’ll pick a more backend-oriented feature or, you know, maybe it’s like, Hey, I’m really strong in the back end and I want to try something that’s a little more front end, go do that. And so I don’t know how other companies do this, but that’s how we do it. And it works for us. It just it’s just…for happiness.

Greg Head: You think, oh gosh, that’s not very productive. But when you actually have way better data, you’ve already created the leverage. That said, there are 100 things, and here are the ten things. Take your pick. You’ve already created the leverage there that’s going to be way more productive and create the impact from creating those features. And there you can have some flexibility fishing in a smaller pond, something like that

Sarah Hum: Exactly, Exactly. Yeah. We’re not fishing in like 200 different features. We’re looking at 20. 10.

Greg Head: The problem I would say is that they see the 200 things and they’re all over the field with that and they haven’t thoughtfully collected it, prioritized it, There’s no fidelity to the listening and the prioritization. It’s all, Yeah, it’s just this long list, and then it’s arm wrestling. I was a product manager a long, long time ago. I was one of the first 50 product managers in software in the early nineties if you could believe it.

Sarah Hum: That is crazy.

Greg Head: Because there were only so many companies that are big enough to have middle management.

Sarah Hum: Oh, totally. Oh totally.

Greg Head: So you’re not selling to startups? Sarah Is that right? Like startups, the entrepreneur as product manager?

Sarah Hum: We don’t focus on them.

Greg Head: Because there’s a lot more of them and they’re, they’re probably pretty. Vocal, but they can’t get the value from what you’re doing and they won’t pay.

Sarah Hum: I mean, a lot of the smaller companies, 1) don’t have funds and so we don’t want to put our energy if you’re gonna be able to pay us. But also 2) like people who are really, really in the early days, like you should probably just be listening to your customers to talk to them directly. Where Canny comes in is when you say, “I’m losing track of things./ Spreadsheet feedback channels. That’s where Kenny can really come in and help you with that and you’re still engaging with them at the end of the day, because we do have comments and it’s just like instead of a 1-1 conversation, it’s 1-many. So I can say, Hey, you 50 people who ask for this feature, like, here’s a mock-up, what do you think? Versus like, Hey, Greg, I have this mock-up. What do you think? Then manage the responses and, and it’s like, oh, there’s all this. It’s this whole, this whole mission now.

Canny also enables Yeah. Like having one too many conversations, which is nice if you want to do like a beta test. I have 200 people who voted on this feature who have shown explicit interest in this feature. Let me just add them all to the beta, you know? So there’s like definitely side benefits, which is really cool to see people use.

Greg Head: Well, you’re a growing company and profitable. Congratulations. You must be turning down investors every single day. I heard you on the This Weekend Startups podcast brushing off Jason Calacanis who said, Just when you’re ready and you’re like, Nope, I got it. I got it taken care of right here in Silicon Valley. Yeah, it’s very exciting. What’s your vision from here? Some people have a number in mind. We’ll get it to this. Some people have a change-the-world goal. Some people just take it quarter by quarter and do their best, just keep improving or something. How do you think about the future from here? Funding and growth. And someday you’ll add a product manager who will. You will hand the keys to the drivers, you know, the steering wheel?

Sarah Hum: Yeah, in terms of funding, I feel like I don’t need, first of all, the money. I wouldn’t know what to do if you gave me even $2 million, I wouldn’t know what to do with it. And so I’m totally fine from a funding perspective. I also don’t want a board telling us what to do. Doesn’t sound fun, but at the end of the day, I do also want Canny to have been a good financial decision for anybody who has joined the team. And it’s not like if we’re if somebody comes up to me and says, you know, we’ll give you a $10 million exit, I’m not going to be like, Nope. I’m going to entertain these things that would be beneficial to our team. At the end of the day for me I want to build a cool company with cool people. I want to learn a lot. I want to enjoy what we do. I want to be successful. If the right offer came down, I would entertain it. I think for now like when it comes to investors, that takes a lot of time. You want to build relationships and all that stuff and I don’t need the funds at the end of the day. If all of a sudden we had a maybe grand idea and wanted and needed capital, we were probably raised debt, you know, something like something where nobody gets a share of the company and that’s fine. You know, so far, smooth sailing. We have more money in the bank than we know what to do with. From the money perspective we’re doing fine.

Greg Head: We’re no tech recession here. I’m serious.

Sarah Hum: I mean, we haven’t had to do layoffs, which I’m so blessed to be able to say because I just can’t imagine having to do that. And that seems really, really tough. We’re actually still hiring. So.

Greg Head: So let’s talk about that. In hiring, you’ve got an up-and-running company that isn’t just two people in the crazy next person who says, sure, I’ll answer the phones or whatever. So you pay them well and they get to work with fun stuff and a fun team and be anywhere in the world. And so you’ve got an enticing opportunity. And your business isn’t going down so it’s not up and down and thrashing about and engineers probably join because they know you’ve been very thoughtful about what you work on, meaning it’s not just some random sales guy saying screw it, I need this done by next week. That’s very Silicon Valley.

Do the new employees get a little bit of we would say stock options in the company or a little bit of ownership potential?

Sarah Hum: Yes!

So that kind of says the trigger that someday will grow this and someday somebody will buy it.

Sarah Hum: Right!

Greg Head: As opposed to profit-sharing, which is another way with longevity that practical founders are playing the game. The prize gets won every quarter or every year.

Sarah Hum: Yeah, we want you to have a piece of the pie of the thing that you’re working on. And we’ve actually bought back shares from people who are no longer with the company. There is a value to the ownership that you have. I don’t know what that’s going to look like in the future, but I want anybody on the team to be able to look back at their experience here and be like, Yep, that was a smart move for me.

Greg Head: Unlike your grandparents with a restaurant and your dad the Optical. Business, small business. This isn’t Silicon Valley, big funding, big drugs, unicorn. This is a profitable business that’s growing fast. SaaS businesses have an unusual multiplier these days. It’s quite amazing compared to our regular small business. You know, you could sell an optical business, but it’s not four, five times or ten times revenue.

Sarah Hum: No, no, no, no, no. And multiples are changing, so we’ll see.

Greg Head: Sure. Is there anything else that you’d like to say to practical founders out there who are getting in the market and growing up and staying off the funding drugs and doing all this? About product leverage or just the journey of the game?

Sarah Hum: Yeah, I think honestly, something that’s top of my mind these days is this world “thing” that’s happening. And I’m sure, like me, along with a lot of them, are feeling anxiety. It’s something that’s not in our control. I feel like a lot of times it’s like I can build a feature, and boom, something happens. But this world situation is something that most of us haven’t lived through. We haven’t experienced running a business through times like this. I’m still learning and I’m still trying to figure out what that looks like. But for me, I think how we’re approaching is to look at our strengths, look at what we’re good at, for us it’s product. Look at how we can maybe switch things up and do things a little differently than we’ve done in the past. Take some risks, take some swings. Maybe you miss it, but that’s okay. You know, you learn along the way. And so not being afraid to try things as long as you’re monitoring it and keeping track of how things are doing, I think spending effort in those in those places isn’t a waste at the end of the day. So for us, what that looks like is what are other verticals that we can sell into? You mentioned schools and stuff, not really using candy, however, schools and this is not something that we’re specifically going into.

Sarah Hum: But just as an example, schools use software, and schools have software They could use feedback. Don’t know what that looks like and don’t know if that will be successful. But that’s like one way of thinking, right, is, you know, I’ve sold to software like, like core SaaS. Software in the past, but there are more traditional businesses in the industries that are a little more stable. Like a school is not going to shut down probably. What kind of software are they using in hospitals too? Like you were saying, you know, they all are powered by software in some way. And so how do we look at these other places? How do we see where we fit? How do we decide what to work on? How do we decide where our energy is best spent? I think it’s just being critical about what you’re good at, doubling down on that, and trying not to let all external factors stress you out because that’s not easy, but easier said than done. But yeah, that’s going to be a tough 2023, but we’re in it to win it.

Greg Head: Well, I’m old enough to have lived through a couple of these big ups and downs and there were bigger ups and downs downs in the dotcom and the financial crisis. This is a moderate one. And there so it’ll be back and the hype will be back as well.

Sarah Hum: So when?!! That’s the scary part. It’s like when! Tell me when Greg when can I it’s probably not back to that.

Greg Head: Companies need things that work and yeah you guys are building things that work. It struck me that you started off as kind of an artsy creative designer, right? Graphic designer. But you’re actually a creator: a creator of products, a creator of companies, a creator of categories, a creator in the world. You’re building. You’re a builder.

Sarah Hum: I love it!

Greg Head: Yeah. Yeah. It’s really exciting. I appreciate you sharing your story and some of these insights here on the Practical Founders Podcast, Sarah. It was great talking to you.

Sarah Hum: So happy to share.. You as well, Greg! Thank you so much for having me! I love sharing stuff that we learn. If I can help anybody, if one person along the way, I think that’s huge. I learned from a lot of similar founders in a similar spot as me as I was growing up. So always, always happy to share.

Greg Head: Well, we’ll include your information in the show notes, including some of the articles you’ve written about your journey and other stories that you’ve shared. Really appreciate it.

Sarah Hum: Thank you so much, Greg. Thank you. Thank you!

In this episode, Sarah explains:

  • Why she quit her job working as a product designer for Facebook in Silicon Valley to bootstrap a SaaS startup while nomading around the world
  • How they grew profitably to $3M ARR with no outside funding
  • How they found a target customer and prioritized customer feedback to improve the product
  • Why her team is excited to work at a bootstrapped company
  • What’s working and not working with their latest product experiments
  • How she thinks about expanding outside the software company vertical to serve other types of businesses

Canny Company Facts

  • Founded: 2015
  • Description: Canny helps small to large businesses collect, analyze, prioritize and track user feedback to make informed product decisions. Feedback is captured and organized in one place so it’s easy to pull insights. 
  • Number of Employees: 15
  • Funding: Self-funded to “ramen profitable” in less than a year and has been profitably funding growth with revenues since 2016
  • Location: Toronto, Ontario, Canada

Links

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Greg Head recorded this on episode on January 6, 2023 for the Practical Founders Podcast see all of the episodes.

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