Hello! Who are you and what business did you start?
I am the co-founder and CEO of Morningscore - an SEO tool built like a computer game. The tool gives you “missions'' that you have to complete. Once you do you level up your website. And as a bonus, you also grow your Google traffic in real life and make money for your business. We sell this software on a subscription basis. So we are a classic SAAS tool.
Some people find us a bit too much because we do this whole gamification of something very serious, ranking on Google. On top of that our company theme is space exploration which we have gone all-in on. Us running around in space suits and calling our customers “captain” is an example of that.
Luckily many customers seem to dig it. In roughly 3 years we managed to get +600 customers and reach an MRR of 40,000 USD. Nothing extraordinary but we did this without VC funding and still managed to do roughly 300% year over year growth on revenue the last 3 years.
What's your backstory and how did you come up with the idea?
I was born on a farm but was never really interested in that. Computers fascinated me. And since I was around 7 years old I knew I wanted to build something big one day. My first idea was a bridge from Denmark where I am from to England. I still think that idea is kinda cool. Who knows, maybe someday it will happen.
I got into SEO (the art of ranking no. 1 on Google) after failing my first business. I couldn’t accept the defeat of bankruptcy so I convinced my business partners who were mostly friends out of high school that we could build websites for people instead of our previous product idea that failed big time.
After having done SEO consultancy for many years I realized that customers had a lot of trouble investing in it. They simply did not have any clue about it and had to rely on their gut feeling and oftentimes sleazy consultants who just wanted their money.
So I got the idea for an SEO tool that would make everything easier. That idea was born in 2015 but I couldn’t convince my business partners to shift focus and work on that. They were probably right to keep the focus on the agency we had built.
We were still struggling a lot in those days. Our salaries were nothing to brag about. We first had to prove ourselves with the agency.
But finally, in late 2017 we decided to jump into it.
Take us through the process of designing, prototyping, and manufacturing your first product.
Our prototype was all born in my head around the summer of 2017. No validation at all with customers before developing it. You could say we made all the mistakes you could make when it comes to building products.
I started in Excel as I always do when I create the first mockup. People make fun of me for that, because I do know how to use tools like Photoshop, Figma, or Adobe XD but for some reason, a spreadsheet just works well for me in the very first mockup.
There was no magical moment where everything just came together perfectly. It was a lot of back-and-forth prototyping.
The worst part was that our initial estimates of development time were 8 times too low! This was embarrassing especially since we came out of an agency building complex apps for customers, often on time. We forgot how to do that as we built our software.
The best decision we made was working with a great designer from the beginning. The professional-looking design brought hype around our product before it was launched. It took around a month of full-time work to get the design files ready. In that process, I had to be very sharp and critical. The first design was pretty but didn’t make total sense. Giving designers critique in a way that still motivates them to do a great job is a secret skill.
Describe the process of launching the business.
We did do some of our twists though. For example how we designed our frontpage and beta flow to only allow a certain amount of seats:
So we started with a free beta in early 2018 to draw attention to us. It worked but the tool was not very good. We were far behind our plans for features and so on.
To fund this early work we found an angel investor and I also threw in some money myself. In total, we received 150k USD that should last for roughly a year of operations.
In hindsight, this is a very small amount of money to start a SAAS business. We eventually found out we needed 3 times that amount before we could get to a decent financial level with enough paying customers etc.
Since launch, what has worked to attract and retain customers?
This is how we got our first 30 customers:
We went live with a free beta of our product in early 2018. September the same year we went live and got the first 30 customers from the beta users. Therefore, the interesting question will probably also be more: how did we get a total of 4,000 beta users in less than 1 year?
Nothing was left to chance. The hype did not come by itself. We made an Excel sheet with all the aggressive strategies we could come up with to spread the message. The marketing ad budget was under $ 1000 a month. We were 1½ employees in marketing (I half-time and a hungry fresh growth marketer who wanted to prove his worth).
The Excel sheet has been lost - but I have this screenshot where we reached 1218 users in March 2018:
The "Cost" column includes salaries. "Users" is the number of beta users we reached. "CPA" is then the price of each beta signup.
Efforts to acquire beta users started already in October 2017. By obtaining emails via a landing page that pitched the upcoming beta of the product. So at this point, we had been going for approx. half a year.
The best channels were email outreach (which we later found out was on the edge of the law), LinkedIn outreach (where I wrote to EVERYONE in my network, a little spammy but effective), and then a sponsored newsletter for the small sum of $100 that went to +3000 Danish marketers which was the type of WILD investment you are just lucky to find once in a while.
This is how we got the first 30 customers. They all came from these activities.
Was it a success? I wouldn’t say so.
If you do the math, it costs an average of DKK 60 per free beta user x 4000 BETA users = DKK 240,000 / 30 customers = DKK 8,000 per new customer (roughly $1300). In other words, more or less a CAC of $1300. And please do not try to calculate the embarrassing conversion rate ;)
Today we are down to approx. $500 CAC. With an LTV (lifetime value of a customer) of $2000 that is a healthy ratio of CAC:LTV of 1:4.
$1300 is then far too high. But what many forget is that brand, social proof and "word-of-mouth" are close to non-existent in the beginning. And the product is rarely great in the first version.
That cocktail means that you have to expect that the first dozen customers are just expensive to get.
How are you doing today and what does the future look like?
In 2021 we received a loan of roughly $500k from a growth-enabling public fund in Denmark. That money was going to take us to $50k MRR (almost a triple) and cash flow-positive.
Explained in simple terms we should use this money to get to a point where we make more money than we spend.
Now more than halfway through 2021 I can say this did not happen. We are not super far off the goal, but with our kind of budget, a 15% deviation is enough to make that goal impossible.
We are in very good talks with potential investors and our current owners though. The case is still great because our metrics are healthy and our revenue growth rate is close to 3x for the third year in a row.
So for us, the future is all about scaling both the product and of course the customer base and the MRR.
Please do yourself a favor: Avoid those glamorous case stories or at least read them with the knowledge that they burned millions of dollars to get simple stuff done. After you see how much money it took to reach their goals you will no longer envy them that much.
We hope to land a bigger investment in mid-2022 and double our team size from around 10 to 20 in the next 24 months.
We launched Morningscore version 3 on October 12th. That led to a lot of hype. Maybe because we do launch videos a bit differently:
Through starting the business, have you learned anything particularly helpful or advantageous?
I have learned many crazy things even though I started this second company of mine with 7 years of entrepreneurial experience. 3 big lessons come to mind:
1. I would never be the only active partner again
When you make tough decisions alone it sucks out your energy. At least it did with me. Everything was on my shoulders in the first 2 years of the company. Plus it’s simply not fun to be only one founder on a team. So in 2020, I found an extra partner which is so awesome. And in 2021 we managed to get one of the sleeping partners active again. Now there are 3 of us plus co-workers who start taking more responsibility. This is how I like to run companies. Together.
2. You can launch a product too early
Our first launch where we started charging for the product was premature because we were running out of money. Instead of asking investors for more money I thought it was better to launch. I was wrong in hindsight. And to be fair at that time I kept hearing all the “experts” saying that launching too late is the biggest mistake you can make. I no longer agree with that. Launching too early in a “red ocean” market is a bigger mistake.
3. Without funding, it’s almost impossible to do hyper-growth
If you are in SAAS or another high-competition industry in 2021 you need money if you want to grow super fast. In 2010 when I started my first business there were still a lot of hacks to grow super fast with little money. Customers’ expectations for a software product were also much lower so you could make do with a smaller product team. But today I would say it’s close to impossible.
In my estimates, you need at least $500k in a Western country to get to the healthy revenue stage in SAAS and thrive from there. If on top of that you want hyper-growth and reach for example $10M ARR within 7 years of starting the company you need a lot more cash.
What platform/tools do you use for your business?
For the reasons that they are mature and with easy integrations (API):
- Hubspot for CRM
- Slack for communication
- ActiveCampaign for newsletters (we are not big fans though. Bad UX)
- Google Gsuite for productivity
- Jira for project management
- Stripe for customer subscriptions
For the reasons that they are cool and fits us well:
- Profitwell for revenue analyzing
- Pleo for all credit card purchases (automating receipts)
- Morningscore and Ahrefs for SEO
- Slides.com for cool and portable slideshows
- Twentythree for webinars and sales videos
- Loom for video will tell her then screencasts
- Firstpromoter for affiliate payments
What have been the most influential books, podcasts, or other resources?
“Utopia for Realists” by Rutger Bregman. Not a business book but a book that made me even more motivated to get up in the morning and contribute to building a better world.
Advice for other entrepreneurs who want to get started or are just starting out?
The biggest mistake I made was comparing our growth to companies with way bigger funding or experience than we had to start. For example, reading about how a company like Slack did their marketing in the early days makes no sense if you have nowhere near their funding or crazy big founder network. Then you just end up disappointed. So please do yourself a favor: Avoid those glamorous case stories or at least read them with the knowledge that they burned millions of dollars to get simple stuff done. After you see how much money it took to reach their goals you will no longer envy them that much.
Are you looking to hire for certain positions right now?
A marketing manager with SAAS scaling experience is our need these days.
Where can we go to learn more?
If you have any questions or comments, drop a comment below!
Want to start your own business?
Hey! 👋I'm Pat Walls, the founder of Starter Story.
We interview successful business owners and share the stories behind their business. By sharing these stories, we want to help you get started.
Interested in starting your own business? Join Starter Story Premium to get the greatest companion to starting and growing your business:
- Connect + get advice from successful entrepreneurs
- Step by step guides on how to start and grow
- Exclusive and early access to the best case studies on the web
- And much more!
Did you know that brands using Klaviyo average a 95x ROI?
Email, SMS, and more — Klaviyo brings your marketing all together, fueling growth without burning through time and resources.
Deliver more relevant email and text messages — powered by your data. Klaviyo helps you turn one-time buyers into repeat customers with all the power of an enterprise solution and none of the complexity.