Hi Andrew! Who are you and what are you currently working on?

Hi, I’m Andrew Pierno. I “built” Cold Email Studio, the first product out of XOXO Capital (more on that later). I’m based in Santa Monica, CA. The ‘built’ is in quotes because as a developer, this is the only non-saas business I’ve ever launched.

Cold Email Studio (CES) does cold email as a service. We’re an outsourced BDR team for startups. We do everything from hunting leads, to writing copy, to the actual email sending (shoutout to Guillaume Moubeche for creating Lemlist! We’re happy customers.) as well as following up with prospects, handling objections with the ultimate objective of putting meetings on founders’ calendars. We charge a monthly fee starting at $2k per month (currently) though we’ve been steadily increasing prices up to market.

Today, I’m focused on building XOXO Capital, it’s a micro private equity firm that buys small, profitable SaaS businesses. We’ve done our first 3 acquisitions and I’m working on raising a fund.

I’m sure it sounds odd that a service business from an AI engineer is sitting under a micro private equity company. I hope it will make sense to you by the end of this article and to me in 5 ish years.

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What's your backstory and how did you come up with the idea?

After the first company I tried to start failed, I joined a venture studio as a developer, working my way up to Head of Development. We had 3 companies in our portfolio, and after one became apparent it was going to be the winner, I joined full time and eventually became CTO. It was a real-time security and surveillance application (VSaaS) and was the hardest product I’ve ever built.  After a grueling 4 years of raising $8M, winning a Gartner award, scaling up, and then scaling down (shrinking is much harder than growing IMO) I found myself faced with an interesting and exciting question. What do I want to do now?

Kidding. That was flippant. I needed cash! Fast! Not bail bond fast, but like... I have a mortgage you know? And Santa Monica ain’t cheap! The reality of not having a paycheck any longer settled on me while quarantining above a garage in Connecticut. My partner and I flew out there for a (small!) wedding. I was in a new environment, perhaps that’s why when I pulled out my list of a thousand some odd business ideas, I wanted to try something outside of my wheelhouse. Keep in mind, I had launched (and failed) at roughly 30 other SaaS products during my time at the venture studio. Some were half-baked, some were “Build it and they will come” kind of things, so don’t think I’m a total loser! I never intended to stay at the venture studio but got stuck in a cycle launching stuff that “didn’t work”. In retrospect, so many of those ideas would have worked, I just didn’t have the grit to stick with them and had not yet learned how to sell.

I knew I wanted to do a kind of studio, but this one was going to be different. During the last few months of the security company, I came across Andrew Wilkinson and Tiny Capital. He had started an agency that ended up being wildly successful and that cash flow eventually allowed him to start buying companies. I thought, ‘This is genius! Starting a company from scratch is hard! But if you just buy it, you skip the whole “will people pay for this?” phase and skip right to the making money phase!’ I put a small posting on Indie Hackers to see if anyone else was thinking along the same lines. Dozens of people got in a slack channel I put together but they all eventually faded away, except for two people, both named Michael, one of which would become the CEO of Cold Email Studio, only I didn’t know it yet.

So back to the little quarantine studio above the garage in Connecticut. As a side note, I had just finished my second book, an open-source sci-fi novel, and was working on marketing that through Facebook Ads. I popped open Notion, navigated to my business ideas list, and started reading. I was tired, jetlagged, and burnt out. I put my life into a product for 5 years and it didn’t work out. This is not exactly a great environment to get excited about writing code or enthusiastic about hopping back on the treadmill.

I remember spending very little time picking. I did not scroll endlessly through old ideas. The list itself is structured to have the newest ideas on top. I’m also an incessant builder so I have a rule that I’m not allowed to execute on an idea for at least two weeks. If after two weeks I haven’t lost interest, I’ll build it.

The real answer is that I picked this idea because I was burnt out. A hardcore, 2-years-of-3AM-support-calls kind of burnout. But this idea? This idea I don’t have to write any code for! LFG!

How did you go from idea to product?

Of course, the first thing I did was crack open my editor and started building a landing page. I realize the irony here. I did build the initial landing page myself using Tailwind UI but mostly because I was excited about Tailwind. It took about 2 hours and could have more quickly been done with Carrd or Webflow. Here it is in all its MVP glory. The only changes I made were the logos (which came later) but everything else was what the first few people I cold emailed saw when they went to the site, including a self quote because we didn’t have any testimonials yet.

Outside of the landing page, I loosely settled on what the offering was. Cold email as a service. I didn’t realize the power of this phrase at the time but I’m a huge fan of single sentence value propositions. It gives your customers clarity. There’s no confusion. They get it, and they can decide if they want it or not. The other benefit of that phrase was that for whatever reason, it felt novel to the initial group I reached out to.

For the devs out there: The tech stack was Tailwind with NextJS and I threw it in a docker container and put it up on my favorite service Google Cloud Run. It’s a scale to zero service that makes getting a docker container behind an SSL cert effortless. No, I did not get paid to say that. 

The next day I finished up the copy on the landing page and knew I was going to reach out to startup founders. It’s what I know, and I’d crafted the messaging just for them. I used YCDB to find the most recent batch of YC companies. I used WebScraper to get the list of companies and their domains, and one by one I looked the founders up on LinkedIn and used a combination of Hunter and Phantombuster to grab and validate email addresses of founders. I put together a list of about 100. 

The message was simple. We do cold email as a service, can I do a campaign of 100 people for free for you? The objective here wasn’t sales, it was logos. I knew that if I could reputably say we’d worked with a bunch of YC companies, then I could leverage the star power of the YC brand to sell other startups. I sorted the list of 100 people in a spreadsheet by alphabetical order and manually sent out 10 emails. Here’s what I sent. 

I sent 10 of these and within 30 minutes, I had booked 2 meetings. Interest! Interest, unlike anything I’d ever tried before. To be clear I’d done this same process dozens of times and seen it done many more. Very rarely do results come in this quick. Within the first week, I’d signed up the first few customers to do a pilot for free. I can imagine how frustrating this will be to read, but I promise you, I’ve taken these same steps many times before without any results. Not even any “F-you! Remove me or I’ll sue you” emails! It was by accident that I got the right message to the right person at the right time. The subject line “cold email as a service” was crisp and clear. I was offering to do a job that they didn’t want to do. The work is time-consuming and kind of sucks. They were thrilled to let me do it. The product found its audience very early and very quickly. It was all quite lucky if I’m honest.

Over the next few weeks, I continued emailing founders manually and had similar booking rates. After two weeks I had 7 YC companies I was doing the service for. With only one problem. I wasn’t charging anything yet. As far as execution on the service, I did everything myself. I wrote copy, I hunted the leads, and I set up the campaigns. It was a one-man show, and it was already starting to take up a lot of time. It took all of my willpower to finish out the month for those first few customers for free. Once I had some results from real customers and their permission to use their logos on the site, I continued reaching out to founders on the original list I put together with a similar message, tweaking it each time for clarity and transparency. Eventually, I got the confidence to ask for some money and got the first customer for $500 for the month. I was over the moon. Each time I got a few customers paying, I’d double the price. I did a few at $500, a few at $1000, a few at $1,500 and now we’re moving everyone to $2,000 a month.

As someone who was doing an AI startup for years, the dynamics of an agency-type business were foreign to me. One thing was immediately apparent though: service revenue grows a lot faster at the beginning than SaaS revenue does. Objectors will claim that service businesses have lower margins than pure SaaS, and that’s generally true, but my last companies’ margins looked a lot closer to a service business than a pure SaaS. AI companies have expensive infrastructure and generally, that means lower margins. A16Z has a great article on this. All that being said, I do think that most people should start with a service business. It gives you cash flow to play with. This game we’re playing is about the number of times at bat. Cashflow gives you more swings, and if you have a sustainable service business bringing new ideas and customers, you can be growing an audience to launch a do-it-yourself version of the service or other SaaS products.

The irony in all of this is that I’m not a marketing guy. I’m a dev. If you told me I’d be selling this cold email service (and loving it) a year ago I would have laughed at you. My pitch to these founders at the beginning was not that I’m an expert in this area, it was that I’m going to run data-driven experiments and together we’ll A/B test our way into a repeatable cold email playbook you can take with you. 

From sometime in October to mid-January, I was doing nearly everything myself. It was during this time I had been speaking to Mikey Howe (remember him from the micro acquisitions post I did on Indie Hackers?) about Cold Email Studio. Every so often I’d update him on the progress. He was CEO of a dev shop in the UK and was looking for something new. The timing worked out perfectly and we decided he’d come on board and be CEO. 

Reflecting on this now, it seems unbelievable that I’d struggle for so many years, finally get a fish on the line, and then pretty quickly hand over the reins to someone I met on the internet a few months before. What can I say… modern times. I also decided that we had to be 50/50 on it. I worried that an unfair equity split would cause issues further down the line and at the time my thinking was that this company is either going to die, or this question will be irrelevant in 6 months (because we will have grown). Truthfully, I wasn’t ready in the beginning, and doubted myself and unfairly doubted Mikey. As the transition was happening, I had hired a contractor that Mikey was struggling with. It all came to a head one day where it was Mikey or the contractor and though subconsciously I knew this was a likely outcome, it was still a gut-check moment for me. 

Needless to say, Mikey stayed and we had a rough week of pissed-off customers but pushed through it together. From that point on, I tried to step back and let Mikey do what he does best. I’m sure it wasn’t easy on him, but I’m very grateful he stuck with me. Since then, he’s made some amazing hires and has started turning this business from a job into a machine.

Which were your marketing strategies to grow your business?

We primarily use cold email as a sales channel. Every once in a while I get someone that goes deep on Twitter and stumbles across us. The other nice thing is that someone posted on BookFace (YC’s internal chat) about us and we got a bunch of customers from that. I also had another gentleman that posted on the Entrepreneurs First slack group about us and we’re still getting a few meetings coming in from there. But overall, we haven’t started marketing yet.

It is somewhat of a gestalt when we cold email our prospects. They open the cold email, read it, and think “Man, these guys must be good… I opened this cold email!” and they book a meeting. This is unlikely to change.

Another benefit of having outbound cold email as a strategy for a young service like this is that we can somewhat control demand. It would be very easy to get overwhelmed with interest that we couldn’t support. It seems like for each 10 net new customers we bring on, we need a new process (i.e. people, i.e. expense). Scaling people processes is not my wheelhouse, and I thank my lucky stars that Mikey is now CEO of Cold Email Studio.

How are you doing today and what are your goals for the future?

Cold Email Studio will do about $14k this month and is on track to hit $20k by April / May. We have 2 full-time people and 4 part-time people, not including myself. I still try to be helpful to Mikey and mostly do sales now. From this point forward the primary objective is going from a job for ourselves to a scalable, repeatable process. It’ll be a struggle and I know we’ll hit some kind of ceiling somewhere but I have no doubt in my mind this is going to be a sellable $1M ARR business in a year or two. Our 2021 goal is to be at $50k in MRR while keeping our margins consistent.

The acquisitions part of the business is my primary focus. What everyone forgets to mention when they talk about buying companies is that you’re buying a job. These companies do anywhere from $1k to $6k in MRR so not all of them can support full-time people yet. So far, we’ve grown the portfolio value by about 45% and now have some results to start showing to investors.

My goal for this year is to raise a $1M fund for XOXO so we can buy more companies. The strategy here is to treat small SaaS companies like real estate. We buy them, hold them, and distribute the excess cash flow each month to shareholders. I just love the idea of having a viable exit path for bootstrappers and can’t wait to see how this space evolves over the next couple of years.

I was working on my pilot’s license before Covid hit, and look forward to getting back up in the air.

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Since starting Cold Email Studio, what have been your main lessons?

• If you’re struggling with launching a SaaS business, try a service. It’s so much easier to spot a “job to be done” because as a service business, you generally perform a literal job function. There’s no guessing as to whether or not someone would find value because you should be able to go on LinkedIn and find people whose job it is to do your proposed service internally for the company. If you start thinking in this way you’ll quickly see that you can do nearly Anything As A Service.
• Don’t be a snob about SaaS vs service businesses. I was. If you’re looking to get out of having to work for someone else, the quickest way might be a service. Give it a shot!
• Service revenue comes faster than SaaS revenue and in higher dollar amounts. Yes, the margins can be lower, but not always and certainly not forever as you build out a brand and expand offerings.
• Scaling people processes (and building people processes) is a very different skill set than building engineering teams and software. It’s a skill set I need to improve upon.
• Upwork kind of sucks. 
• Great freelancers are hard to find, pay them well. 
• Building trust in a service business is hand-to-hand combat. It’s tactile and visceral because you’re face-to-face with customers (over zoom of course). This is one thing I’ll take with me into every new SaaS I build. The same level of trust needs to be there for SaaS, but for a self-serve product, you don’t always get the opportunity to speak with every customer before they sign up. This means you need to build the same amount of trust but generally have to do it through the product and brand.
• So many things have to go right for a business to get off the ground, and so few things have to go wrong to kill the whole thing.

What were the biggest obstacles you overcame? What were your worst mistakes?

The number one obstacle for me was pushing through burnout and cranking through another product launch. It’s still remarkable to me that functionally I didn’t do anything different than other ideas that failed to take off. Other than “Build something people want”, it’s hard to reconcile that you can do everything right and have a $0 outcome.

Another one was not trusting my co-founder Mikey completely. I’m an operator and so is he. I tend to take control and go do what I think is right, and that doesn’t leave much room for other people to be comfortable enough to do the same. It’s a strange thing to start something and quickly give up control to someone else, but it was the right move. Seeing the hunt for a great CEO play out poorly at the venture studio, I decided to do it early and it worked but was an uncomfortable process. Thanks for your patience, Mikey!

I made the mistake of being too flexible with customers. The cadence of this business is hard to manage. We took on several customers that would frequently “pause” campaigns. It made billing annoying and lumpy.

What tools & resources do you recommend?

We currently use:

• ClickUp for Project Management 
• Notion for knowledge base
• Slack
• Lemlist for email sending (used to use Mixmax)
• Webflow for website
• Stripe for payments 
• Upwork for freelancers
• Google Sheets and Google Docs for leads and copy 
• Zoom for meetings
• Mercury for banking
• Xero for accounting
• Stripe Atlas for company formation

Other favorite tools:

• Google Cloud Run whenever I can
• MicroAcquire for sourcing companies to buy
• n8n.io (workflow/automation builder)

For keeping your sanity:

• Meditations by Marcus Aurelius
• Pema Chodron for some guided meditation
• Shinrin Yoku - Forest Bathing. Get off your ass and go walk for a few minutes. For me, this is surfing and walking to the beach every afternoon.

Where can we go to learn more?

You can find me on Twitter. You can also check XOXO Capital for the acquisitions stuff. Happy to chat about the fund as well. Check this to read the open-source sci-fi novel.