An Agency Founder's Journey from $24K MRR to Zero

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

My name is Mat Sherman. I’m 29 years old, born and raised in Phoenix, Arizona. These days, I am working full-time on Seedscout, which is my 2nd “real” startup.

Seedscout aims to help individuals in the tech industry grow their professional networks. Through the platform, founders can enhance their outreach to investors, connect with other founders, and gain entry into Seedscout’s accelerator program.

Before Seedscout, I built my first startup, PubLoft. On a high level, it was a marketplace to connect writers with those who wanted their blogs managed. Our business model was a subscription. Companies could sign up for PubLoft, pay $2,000/m, and get four blog posts every month uploaded to their blog on autopilot.

The structure of PubLoft was built around having a network of writers we would hire whenever needed. When we signed a new startup on board as a client, we would designate 1-2 writers to work on their project and an Account Executive (AE) to oversee the account's needs.

I was the company's founder and served as CEO, but I think that’s a silly title so early in the game. My main job was getting new customers, maintaining investor relationships, and hiring new team members (which I did poorly).

Most notably, I pioneered an ultra-scalable cold emailing machine, which got us to $24,000 MRR in under a year with minimal CAC.

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What's your background and how did you come up with PubLoft's idea?

Before PubLoft, I had just graduated college. I was Ubering full time to make my 1st project work, and eventually stopped after six months and got my first post-college job.

I was a sales development rep at Endless Entertainment, an event production company based in Phoenix. I handled inbound leads for them and turned them into qualified leads to pass on to my AE.

Not even a month into the job, I hated it. I had an urge to work for myself and do my own thing. I just didn’t know what that thing exactly was.

After putting up with Endless for three months, I started feeling restless. So I wrote a blog post listing all my skills and shared it with my network. Little did I know I made a critical mistake by sharing it with one of my boss's close friends.

I assumed that he would inevitably pass it on to my boss, so in a somewhat impulsive move, I decided to quit before I could be fired. Yes, it's not the best plan, but sometimes things don’t have a plan. You just figure it out as you go. 

I then stumbled upon a writing opportunity. I began by writing blog posts for a startup, charging something like $20 per article. Things started falling into place - I got some other writing opportunities and kept growing. Nothing was super planned, it just happened.

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How did you go from idea to product?

As time went on, I secured more clients. I was charging around $100 per article and saw some okay growth in the 11 months I ran the company.

However, It's worth noting that the initial version of Publoft didn't succeed. Things took an unexpected turn when some health issues arose, making it nearly impossible for me to continue running the business. As a result, the company stopped in early 2018, and I got a job at another startup called Chassi.

Some months later, I decided to revive the company with one of my buddies, Jeremy. He took on operational responsibilities while I focused on sales. We implemented two important changes: he handled customer support, and we bumped up our article pricing to $500. This was a success, with people buying into the higher price point.

What were the strategies to grow your business?

The most significant factors contributing to our growth were cold emails, referrals, and my ability to sell our services. Back when Y Combinator didn't have its directory of startups, there was another platform called YCList, which listed all the startups from YC. I decided to send cold emails to about 300 of those startups.

Surprisingly, I managed to get about two customers from that outreach. So, in a way, I followed a path similar to what Y Combinator often advises: I engaged with users, sold the product directly, and wrote extensively about it.

However, the turning point was when Jeremy Cai, who co-founded Onboard IQ (now Fountain) and is currently the CEO of Italic, became my first big customer.

Through Jeremy, I was introduced to 500 startups. I realized the project was getting too big, so I hired more people.

Another strategy I employed at the start was using a tool called Mailshake. Mailshake is an email outreach and sales engagement software to generate leads. This, combined with my sales pitch, led us to establish strong connections with great startups. However, if I attempted cold emailing today or used the same strategy, I doubt it would yield similar results due to the changing landscape.

Throughout this journey, I kept Jason Calacanis in the loop through cold emails, updating him on our progress. Eventually, I was invited to his podcast, and I attended one of his events and even pitched our business on stage.

These moves led to securing $100K in funding from Jason in 2019 and getting the opportunity to join his accelerator program. If you want to read more about how I did that, check out this post.

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When did things start to take a different direction?

Following our success in securing funding from Jason and becoming a part of the accelerator, things started to take a different direction. We lost our biggest client, who had been acquired by another company, and dropped our services as a result of the acquisition. 

We also ended up utilizing the funds recklessly after we got them. For example, we spent $5K on LinkedIn automation and $4K a month on an apartment for three months straight (while we were at the accelerator), among other things. 

We then hired a sales guy on a full-time salary. After hiring him, I spent lots of time training this individual, but unfortunately, the efforts didn't yield positive results.

In short, we did all the things you're not supposed to do when you've just secured funding.

Which were the causes of PubLoft's setback?

Simply put, we lost sight of the core things that made us successful in the first place. 

This was partly due to the fact that both Jeremy and I shifted our focus towards fundraising efforts. Jason had mentioned that fundraising is a full-time thing. So, while we took care of that side of the business, we decided to hire a salesperson to take care of acquiring clients. Unfortunately, as I mentioned earlier, it didn’t yield positive results.

Throughout this period, Jeremy and I were also experiencing a lot of friction. We tried to work through it, but unfortunately, things didn't resolve smoothly between us.

We found ourselves consistently overspending during our three months in the accelerator program. We were overpaying writers, and even though we attempted to cut back, we found ourselves left with a fraction of the initial funding.

At one point, our salaries got to just $25K a year, which was far from substantial income. 

As money was running out, I had to make the difficult decision of letting go of most of the staff, and it was a challenging experience, especially since I had never been in that position before. 

In summary, overspending, veering away from our core strengths, and overly prioritizing fundraising were the key factors that led to our demise.

There is a funny story out of all of this I often think about: 

I remember when Jeremy came into the office saying, "Hey Matt, no more payroll." I was surprised and asked what he meant. He explained that our pay was ending and that in a week, we wouldn't have income at all.

At that moment, I decided to head to San Francisco and secure funds for us. Looking back, I realize it might not have been the wisest move, but I was determined. I informed my girlfriend (now wife), "Off to SF for a few days."

I told Jeremy I'd handle it. Reality, however, was more complex. I drove from Arizona to San Francisco, stayed in a less-than-ideal co-living space for a night, and realized I needed a job as soon as possible. Once back in Phoenix, I started seeking a job.

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Which were your expenses? Did you achieve any revenue? In the end, how much capital did you lose?

I did PubLoft more or less alone at the start. I did have a couple of writers that helped me out, but I didn't have a co-founder. I got it from zero to about $5K MRR in about 11 months.

After we bumped our article pricing to $500, this strategy got us from $0 to $24K in MRR within seven months. As for expenses, we had a team of writers to compensate, for which we paid a premium. We were paying them anywhere from $200 to $400 posts at times.

Throughout all of this, I couldn't help but feel that our unit of economics were flawed from the start. While achieving 24K MRR was huge, overspending and mismanaging finances can be severely detrimental to any company, regardless of its revenue.

As for capital lost, we ended up losing the $100K from Jason as it was spent recklessly.

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What was your motivation behind starting your new startup, Seedscout?

When I was building PubLoft, It didn’t matter how well it was doing. My ability to raise capital was capped not by my merit but by my network. And worst of all, this is a secret not shared broadly. The world tells founders to grow revenue and they will become more investable, and it’s just not true.

I wanted to start Seedscout to share the truth with millions of founders out there so they were optimizing for the right thing when seeking to build a generational company. And once they know the truth, I wanted to give them something to do with that knowledge. That’s why I started Seedscout. 

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Which entrepreneurial resources do you find most valuable?

Honestly, for VC backed startups, I think everything coming out of the YC universe is gold. Startupschool.com is a gem and their Youtube channel is second to none. There are few others resourced I recommend other than filling up your knowledge cup using YC’s content. 

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Where can we go to learn more about Seedscout?

You can find me on Twitter and Seedscout’s website.