Cryptocurrencies are currently valued at $2T collectively:
The Biden Administration is considering legislation that would require crypto investors to report earnings over $10,000, and would beef up Treasury Department oversight of cryptocurrencies.
A new QuickBooks report indicates that small businesses hit by the pandemic are starting to make a recovery. Dru Riley asserts that insights from productized services like QuickBooks are like a menu: Founders can choose what they need and leave the rest.
Founder Chris Bakke hit $2.5 million in annual revenue and sold for $50 million. His advice? Don't underestimate how much companies are willing to pay to solve an annoying problem.
Want to share something with over 75,000 indie hackers? Submit a section for us to include in a future newsletter. —Channing
🏛 President Biden Pushes for Crypto Regulation
from the Indie Economy newsletter by Bobby Burch
After years of ambivalence, the US government is inching toward regulating cryptocurrencies as part of a broader effort to address tax avoidance.
What’s going on: Bitcoin, Ethereum, and other cryptocurrencies, valued at more than $2T collectively, have swelled in popularity. The fact that crypto investors can remain anonymous has raised concerns in the US Treasury Department over tax evasion.
Tax Doge-ers: A person that receives more than $10K in cash, whether from selling a used car to winning the lottery, must file a currency transaction report. However, the same rules do not apply to crypto. This means that crypto income may go unreported and untaxed. And because investors can send or receive crypto without an exchange, it’s harder for the IRS to detect transactions (which is part of its allure to some investors).
The taxman: Under President Biden’s American Families Plan, crypto investors would have to report when they receive more than $10K. The plan would also provide an additional $80B to the IRS to beef up its oversight resources to address crypto assets, which the Treasury Department expects to continue growing over the next decade:
Crypto already poses a significant detection problem by facilitating illegal activity broadly including tax evasion… Although crypto is a small share of current business transactions, such comprehensive reporting is necessary to minimize the incentives and opportunity to shift income out of the new information reporting regime.
A broader challenge: President Biden’s crypto efforts are part of his administration’s strategy to close the “tax gap,” which is the difference between taxes owed and what’s actually paid. The Treasury Department reported that the tax gap totaled nearly $600B in 2019, and will rise to about $7T in the next decade. Meanwhile, the US government debt to gross domestic product (GDP) has soared above 100%.
Congress joins the action
Crypto congressional caucus: Congress is also taking steps toward crypto regulations. A bipartisan group of senators recently launched the Financial Innovation Caucus, which aims to support “responsible innovation” for the US financial system, including digital assets. One senator asserts that the US needs a more coordinated regulatory approach toward crypto, in part to compete with China:
Clearly, we need to bring our financial system into the 21st Century. That’s why we need the Financial Innovation Caucus. This caucus will educate senators of both parties about digital assets, blockchain, faster payments, and how the United States can surpass countries like China.
Stablecoins: The Treasury Department recently began allowing banks to use crypto stablecoins for payments, and to participate in independent blockchain networks. A stablecoin is a crypto that pegs the price to a crypto, fiat money, or to exchange-traded commodities. Stablecoins conflict with the decentralized nature of cryptos, and for that reason, face opposition from die-hard crypto enthusiasts.
Other pressures: Lawmakers and federal regulators are also increasingly worried about opaque crypto transactions that may fund criminal activity or terrorism. Blockchain data firm Chainalysis reports that crypto-related crimes fell in 2020, but that crypto-funded ransomware attacks are up 311% YoY.
Ransomware attack: JBS, the world’s largest meat processor, shut down nine of its US beef plants after a ransomware attack on June 1. The cyberattack has renewed calls for the government to better regulate cryptos, which are often used to pay hackers to commit ransomware and other cyberattacks.
What they’re saying: Dmitri Alperovitch, cofounder of the Silverado Policy Accelerator, told NPR that the White House must regulate cryptos and encourage financial reforms to help prevent more attacks:
There are two things that the Biden administration should do immediately. The first is to go after the crypto like Bitcoin...The second thing is we have to do some deterrence. The vast majority of these criminals are operating out of Russia. And while there's no evidence that the Russian government is involved in these attacks, they're certainly aware of many of these criminals. And we have to confront Putin and demand that these people be arrested and prosecuted right away.
What are are your thoughts on crypto regulations? Share in the comments below.
Discuss this story, or subscribe to Indie Economy for more.
📰 In the News
🥩 Meat producer JBS has made "significant progress" to restart global operations following cyberattack.
🏝 Employees are quitting instead of giving up remote work.
📺 Walmart accidentally revealed its Android-TV streaming stick.
🌳 Amazon will stop testing most employees for marijuana.
📈 Uber and Lyft fares surge by 40% amid driver shortage.
🛠 Productized Services Give Founders Space to Build
from the Trends.vc newsletter by Dru Riley
A new QuickBooks report indicates that small businesses hit by the pandemic are making a recovery. These insights illustrate the power of productized services in analyzing industry trends to help founders grow their businesses.
Why it matters
Productized services help you move from selling time to outcomes. You can build systems instead of billing hours.
Purchasing services is more complex than purchasing products.
Productized services offer services at a fixed price with a clear scope and timeline.
Freelancers are like personal chefs who cook everything for everyone.
Productized services are like restaurants with a menu.
- Software will eat services.
- SaaS companies will court productized services to build on their platforms. This deepens their moat without reducing leverage.
- Productized services will move upmarket. See Fiverr Pro. Testimonial Hero has an average order value of $9K and lifetime value of $50K. Very Bad Wizards does design sprints from $16.5K to $27.5K.
- Index into an existing market. Avoid unnecessary market risk. There are 20+ content marketing productized services. It's easier to capture demand than to create it.
- Whitelabel services. WPBuffs acts as your backend to help you focus on sales. Agencies help clients without hiring with white-labeled solutions. Own relationships to take a spread between what you quote clients and pay providers.
- Build a branded framework or methodology to gain pricing power. Scribe Media creates white space with the "The Scribe Method." Goodpatch does this with The Designathon®.
- Offer software with a service. See ConvertKit's concierge migrations. They weaken competitors' embedding effects by making it easier to switch.
- Build on an existing platform. Compete in walled gardens. Platforms have pre-built communities, certifications to signal trust and directories for discovery. See Shopify, Webflow, WordPress, Quickbooks, Coda and Carrd. HubSnacks builds on HubSpot.
- Productized services are more scalable and have shorter sales cycles than agencies.
- SaaS has lower marginal costs than productized services. Scaling servers is easier than scaling culture.
- Minimize market risk by indexing into markets. See Competitor Risk.
"Productized services don't scale like SaaS."
It's not the final step. Stop here or stair step like Brain Casel (Audience Ops => ProcessKit) and Craig Hewitt (Podcast Motor => Castos).
"Productized services have lower average order values than agencies."
Play a value game or a volume game. There are also high-ticket productized services.
"Indexing into markets is a race to the bottom."
Positioning matters. We discussed how to gain pricing power.
"Freelancers aren't going anywhere."
Agreed. Personal chefs, drivers, and pilots exist despite Uber, Uber Eats, and airlines.
"Building on platforms brings platform risk."
Software companies aren't eager to enter services.
"Taking market risk can work."
Sure. Winner-take-most markets may be worth it. Productized services exist in fragmented markets. First-mover advantage is overrated.
"Freelancers can sell outcomes too."
How many types of outcomes? To how many types of customers? Variability is inversely correlated to your ability to scale a service.
"Systems kill creativity."
"Discipline breeds freedom." Perhaps productized services aren't your game if you disagree.
The Pros and Cons of Productized Services: Rob Walling chats with Meryl Johnston of Bean Ninjas.
Clockwork: Build systems. Move from doing to deciding to delegating to designing.
Built to Sell: A business novel on transitioning from an agency to a productized service.
📈 More Reports
Go here to get the Trends Pro report. It contains 200% more insights. You also get access to the entire back catalog and the next 52 Pro Reports.
Discuss this story, or subscribe to Trends.vc for more.
📰 Title Tip: Promise a Great Story With an Open Ending
by Ivan Romanovich
We react deeply to stories because they communicate information in a primal, intuitive way. Plus, open endings spark curiosity.
Discuss this story.
💵 Founder Chris Bakke Hit $2.5M ARR and Sold for $50M
by Chris Bakke
Hey IH! I'm Chris Bakke, founder of Laskie, a platform where founders can hire great contractors and full-time employees.
I previously founded Interviewed, which I started in 2015. It was acquired by Indeed in 2017 for $50M. We scaled to $2M+ in founder-led sales, became profitable, and learned a lot along the way. Excited to share and learn from this group. AMA!
What was your top product management lesson?
My biggest product lesson is that most founders overthink the actual product. You don't need to make a 10x better experience. You need to make something 5-10% better to build a huge company. But there's a caveat: Ignore this advice if you're doing something actually innovative and you enjoy it. The world needs people like you. I'm just a simple B2B guy who is all about subtle, incremental changes.
How do you determine your direction after multiple exits?
In terms of direction, we wanted a big, tough market this time around. There's a lot of competition in hiring, but also a lot of money. Sometimes it's easier to do a hard thing in a massive market than an easy thing in a smaller market. I tell myself that every day, and I'll let you know in five years if that's actually true!
In terms of drive, after my last company was acquired, I watched our team buy their dream houses, relocate to new cities, and put their kids in better schools. Getting wealthy with your friends and coworkers is a lot of fun.
Today, I get to operate a business where I (hopefully) get to watch our own team learn a lot and have enough money to do the things they want in life. But the nature of being in the hiring business is that we also get to do that for hundreds of other people who are looking for new freelance and full-time opportunities.
Breaking into exceptional companies, whether as a freelancer or an employee, is tough. If we can help a bunch of people get those opportunities, then I'm happy!
How were you able to sell for $50M?
This was a strategic bet and purchase, which is how you often get high multiples. The first startup I was at did $550K ARR and was bought for $45M by a strategic buyer as well. It's not common, but it happens.
Many people are surprised at how often large companies will throw around $10-100M on a medium-sized strategic bet, or to solve an annoying problem.
Also, when you're thinking about selling, create a bidding war with multiple options. Talk to VCs to see where they would fund you, ping competitors in your space, etc. That's how you might go from 20x revenue to 25x revenue on the outcome.
What are your recommendations for validating?
Have you read The Mom Test?
It's a quick read with some decent frameworks on how to do customer development.
We started Laskie by interviewing 120 people over three months. We asked them about their biggest challenges at work, or some variation of "what's the hardest part of your job?"
From there, we narrowed down to people with specific hiring challenges and started digging in to spend as much time with them as possible. The book talks about this, but it's a huge mistake to "lead" people too early on to give direct feedback on your idea.
If you tell someone what you're working on and ask for feedback, no one wants to be mean, so they say nice things. Then founders are shocked when the market doesn't buy it.
If you start with an open conversation, you generally can find some pretty interesting problems. Then you can narrow in to see if there's an opportunity to talk about what you're building.
What was your biggest insight between starting company one and company two?
This is something I think about a lot.
My current belief is that it comes down to understanding what worked well for you the first time or two and not deviating from it too much.
We deliberately didn't raise $1 of outside investor capital into my current company until I had put $100K+ of my own money in, and spent months to prove out the concept.
I closed the first $1 and then the first $10K and then the first $100K+ of sales at this company before we started to hire salespeople. We're obsessed with costs, keep a low burn rate, and try not to get caught up in the investor hype cycles.
Although we're taking slightly bigger risks this time, I think of "going big" largely as running a company for 10-20+ years vs. 2-3 years spent on the last one.
Big companies take time, and it's difficult to hack that in the early days with silver bullets. Not sure those exist.
The first couple years are just pushing rocks uphill every day, whether you're worth $1B or $1.
Discuss this story.
🐦 The Tweetmaster's Pick
by Tweetmaster Flex
I post the tweets indie hackers share the most. Here's today's pick:
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Special thanks to Jay Avery for editing this issue, to Nathalie Zwimpfer for the illustrations, and to Bobby Burch, Dru Riley, Ivan Romanovich, and Chris Bakke for contributing posts. —Channing