Hiya, I’m Patrick McKenzie. I grew up in the US and moved to Japan right after college. I worked for Japanese companies for six years. Concurrently with doing so, I founded a small software company and it took over my life. I eventually went full-time on that, ran a succession of small software companies, and after about ten years took at job working at Stripe.
I had a friend growing up from Puerto Rico. He didn’t love the hard “k” in Patrick, I didn’t love getting called “pato” followed by uproarious laughter, so we split the difference and settled on Patio. I used my favorite number to disambiguate from the other Patios when signing up for CompuServe back in, hmm, 1996.
Enough of my professional life has happened online (particularly on Hacker News, though I’m patio11 practically everywhere on the Internet) that it stuck.
Bingo Card Creator was the first program produced by my mISV (“micro-independent software vendor”). It makes custom printable bingo cards for teachers.
What? Why did you pick that?: Once upon a time I taught English, primarily to ESL students, and learned the joy of playing bingo. I no longer teach but I try to support the local ESL community. Once a teacher asked me if I knew of any program to make bingo cards, since bingo was listed as a fun activity to try in the Big Book of ESL Activities (its actually called Planet Eigo these days and if you teach in Japan you should really buy yourself a copy). She had tried making them for herself with MS Word but quit after spending 30 minutes and only getting through about 10 cards. Then she tried searching the Internet and nothing really worked. So I searched through the Internet, and found the same: the free programs in this space are missing critical features for teachers, and the paid programs are overpriced and underpromoted. So I cobbled together a solution (on company time — helping teachers is part of the job, and I was free that day) and released after about four hours.
Wow, you can sell a program you made in four hours?: No. That program, aside from being by rights the property of my employer if anything, lacked bunches of critical features, was incredibly painful to use (you had to go outside the program to print, for example), and didn’t actually run on half the computers it was installed on because of JRE issues. And yet it still got me 25 thank you notes within a week, after being distributed to a mailing list of 60 teachers.
So, where is Bingo Card Creator from then?: During the last week of June, 2006, I was inspired to take on an independent project. I decided to do a bootstrapped software company after goofing off at work reading about them and Google AdWords, payment processing, and the other things it would take to make them happen (yes, my employers are extremely generous in allowing me to goof off so long as I make my deadlines). I told my parents about my plan that evening during my weekly telephone call home, which (as a public commitment) made sure this wouldn’t end up like most of my projects — sketched out on paper and quickly forgotten. And I remembered “Hey, teachers still need a good bingo card program”. So I set out working.
Why did you start writing?: Partially vanity, partially writing practice (working primarily in Japanese was giving me few opportunities to keep up skill in English), partially as a signpost for other people wondering about starting a small software company.
Were you profitable? I was profitable as of one month, to the day, from launch.
Were you profitable enough to quit your day job? As of April 2010, my software business was my day job. This remained true until either joining Starfighter in 2015 or joining Stripe in late 2016, depending on how you reckon things.
What are your big takeaways from BCC? Don’t sell to teachers. Don’t do B2C generally in software, unless you have a significant fraction of a billion dollars to burn in getting distribution. Good businesses take the same amount of work as bad businesses. Most software companies hilariously underinvest in writing software to solve marketing problems. Recurring revenue is the best kind of revenue.
I fell in love with Twilio at first sight and set out to create a business using its API. That business turned into Appointment Reminder, which makes appointment reminder phone calls, text messages, and emails to the clients of professional services businesses.
I ran AR from 2010 through 2016, when I sold it. Think “comfortably supported a small team” for a sense of scale.
What are your big takeaways from AR? SaaS is the best business model ever for software. HIPAA is a pain in the keister but tractable for a small team. Prefer running a business on behalf of customers you would enjoy serving to one where you don’t particularly care about their success; it will make it easier to spend 5+ years solving the scheduling problems of dentist offices doing something you love. Software businesses gain substantial leverage with code written against sales processes in addition to marketing automation.
I got fairly decent at making software companies money in the course of building my own. It turns out that this skill is valuable at larger software companies, too. I consulted for a few years on meat-and-potatoes marketing/sales for B2B SaaS companies. It was a really fun learning experience; I haven’t done it actively since roughly 2013.
I occasionally created or co-created products as a way to get that quality of advice without paying my full consulting rate. Representative examples:
What are your big takeaways from consulting? Charge more. If your professional skillset adds N% to the enterprise value of a software business, it is worth more on larger software businesses. (It sounds obvious when you put it that way. Hat tip to many conversations with Thomas Ptacek and for Paul Graham’s essay ; Ctrl-F for “Measurement and Leverage”.) Virtually no software business, inclusive of $10 ~ $50 million a year companies run by very smart people, is at the efficient frontier for investment in marketing or sales.
I was the CEO of Starfighter, a company which made games to identify talented programmers. We planned on introducing them to firms wanting to hire developers. The game was the coolest thing I ever built (the final level had you hack a stock exchange to catch an insider trader); the business didn’t quite jell in time. My co-founders Erin and Thomas Ptacek went on to create Latacora, which helps startups get serious about security.
What are your big takeaways from Starfighter? Hiring engineers remains decisively broken. Market microstructure is fun and fascinating.
I work at Stripe working on growing the GDP of the Internet, mostly through helping startups succeed. If I can help you with that, feel free to drop me a line.
I am thinking of starting my own software business. Any advice? Scads. I’d recommend reading this site and sending me an email (address here) if you have specific questions.
My name is Patrick McKenzie (better known as patio11 on the Internets.)
I also write a Bits about Money, a weekly newsletter on the intersection of tech and finance.