Cold Email Studio is a business that offers cold email as a service for a monthly charge. Its goal is to generate $50,000 in MRR while keeping stable margins. Andrew Pierno is currently focused on growing XOXO Capital, a micro-private equity company that buys tiny, successful SaaS businesses. He is actively soliciting money to buy the service company of an AI engineer.
Cold Email Studio is a business that Andrew Pierno started that offers cold email as a service for a monthly charge. They handle everything, including setting up appointments with founders and generating prospects. Their goal for 2021 is to generate $50,000 in MRR while keeping stable margins. They are now making $14,000 per month.
What are you currently working on and who are you?
My name is Andrew Pierno. Cold Email Studio, the first item offered by XOXO Capital (more on this later), was “built” by me. I have only “built” one non-SaaS business in my capacity as a developer.
Chilli Email Studio (CES) offers cold email services. We are a BDR team that is outsourced to business owners. With the ultimate objective of setting up meetings with business owners, we handle everything from locating leads to writing text to sending emails (shoutout to Guillaume Moubeche for establishing Lemlist; we’re happy clients), as well as following up with prospects and overcoming obstacles. We have been steadily raising our pricing to reflect the market, with a monthly cost presently starting at $2,000 per month.
Today, my focus is on growing XOXO Capital, a micro-private equity company that buys tiny, successful SaaS businesses. Our first three purchases are already complete, and I’m actively soliciting money.
It may sound unusual, but a micro private equity firm owns the service company of an AI engineer. By the time this piece is finished, I hope that you and I will both comprehend it.
What is your background, and how did you come up with this idea?
I joined a venture studio as a developer and eventually rose to the position of Head of Development after failing to launch my first business. I joined the business full-time and eventually rose to the position of CTO once we had three firms in our portfolio and it became evident that only one would prevail. The real-time security and surveillance program (VSaaS) I was working on was the hardest thing I’ve ever created. I was presented with an unusual issue following four grueling years of raising $8 million, receiving a Gartner award, scaling up, and then scaling down (in my perspective, decreasing is significantly more difficult than increasing). Now, what do I want to do?
Kidding. That was inappropriate. I needed money! Fast! Not soon with a surety bond, but… You are aware that I have a mortgage. Santa Monica is also not cheap! In Connecticut, I was isolated above a garage when I realized I would no longer be getting paid. I made the trip there with a friend for a (small!) wedding. When I pulled out my list of a thousand and some odd company ideas, I may have felt the need to try something new since I was in a strange place. I launched over 30 additional SaaS applications while working at the venture studio, all of which failed. Don’t think I’m a total failure; some were half-baked and others were of the “Build it and they will come” sort. I never meant to stay at the venture studio, but a sequence of “failed” product releases eventually had me there. In retrospect, so many of those ideas would have been profitable, but I lacked the perseverance to carry them through and did not yet understand sales techniques.
I was certain that I wanted to open a studio, but this one would be special. I met Tiny Capital and Andrew Wilkinson in the last several months of the firm. He had started a very successful agency, and the money flow that resulted from it allowed him to start buying companies. Starting a business from scratch is challenging, so I thought, “This is brilliant!” However, if you just buy it, you skip the entire “will people pay for this?” stage and get right to the earning stage!In order to see whether anyone else had the same thought, I put a small remark on Indie Hackers. All of the people that joined the Slack channel I started eventually left, save for two Michaels, one of whom would go on to become the CEO of Cold Email Studio without my knowledge.
We then go back to the little Connecticut quarantine studio that is located over the garage. As a side note, I was advertising my second book, an open-source science fiction novel, using Facebook Ads. I launched Notion, went to my list of potential business ventures, and started reading. I was spent, jet tired, and weak. I spent five years of my life developing a bad product. It’s not exactly a setting that encourages enthusiasm for coding or going back to the treadmill.
I just remember briefly selecting. I refrained from endlessly scrolling through out-of-date ideas. The order of the list places the newest concepts at the top. I have a constraint that prevents me from putting a concept into action for at least two weeks since I am a compulsive constructor. After two weeks, if I’m still interested, I’ll construct it.
In actuality, I picked this idea because I was worn out. A extreme fatigue, like two years’ worth of 3 AM support calls. But this idea? No coding is needed for this idea! LFG!
How did you turn a concept into a finished product?
Naturally, I opened my editor and started building a landing page right away. I understand this situation’s hypocrisy. I used Tailwind UI to design the original landing page, although I did it mostly out of enthusiasm for Tailwind. It took around two hours, however Carrd or Webflow may have made it happen faster. Here it is in all of its MVP glory. Everything else on the website, including a self-quote because we lacked testimonials at the time, was precisely what the first few people I cold-emailed saw when they visited it. The only changes I made were to the logos (which came later).
I was familiar with the offering outside of the landing page. service that offers cold email. At the time, I was unaware of the impact of this statement, but I have since come to appreciate one-sentence value statements much. It brings clarity to your clients. There is no room for doubt. They get it and have the option of keeping it or not. The second benefit of this term was that, for some reason, it struck the first group I spoke with as being unusual.
The technical architecture was Tailwind with NextJS, and I hosted it on my chosen provider, Google Cloud Run, in a Docker container for all you devs out there. It is a scale-to-zero service that simplifies the process of getting an SSL certificate for a Docker container. No, I didn’t get paid to say that.
The copy for the landing page was finished the next day, and I contacted company founders. It’s what I know, and I tailored the message just for them. I used YCDB to find the most recent group of YC businesses. I used WebScraper to compile a list of businesses and their domain names, after which I looked up each company’s founder on LinkedIn and used Hunter and Phantombuster to collect and verify their email addresses. I made an inventory of about 100 things.
The message was straightforward. We provide unsolicited email as a service; may I run a 100-person campaign on your behalf for free? Not commerce, but logos, was the goal here. I came to the realization that I could utilize the fame of the Y Combinator brand to sell additional businesses if I could honestly say that we have worked with a lot of Y Combinator firms. I created a spreadsheet with the 100 names alphabetized and manually sent 10 emails. I sent this as my message.
After emailing five of them, I set up two appointments within thirty minutes. Interest! Unlike anything I’d ever tried before, it piqued my interest. To be clear, I had both participated in and watched innumerable instances of this procedure. Results seldom come in this fast. Within the first week, I had signed up the first few customers for a free pilot. I know this may be frustrating to read, but I can guarantee you that I have tried these methods many times without success. I sent the right message to the right person at the right time by accident. The subject line “cold email as a service” was clear and unambiguous. I offered to perform a task that they did not desire. The work is time-consuming and somewhat unpleasant. They were delighted to allow me to do it. The product found its target market very quickly and very early on. It was all very fortunate, and not even a single “F-you!” Remove me or I’ll prosecute you” communication.
In the subsequent weeks, I continued to manually email founders and had comparable booking rates. After two weeks, I was providing service for seven YC organizations. With only one difficulty. I was not yet charging for anything. Regarding the execution of the service, I was solely responsible. I composed copy, sourced leads, and established campaigns. It was a one-man show that was already consuming a great deal of time. It took all of my fortitude to complete the month free of charge for the first few customers. Once I had some results from actual customers and their permission to use their logos on the site, I continued to reach out to the founders on the initial list I compiled with a similar message, modifying it each time for greater clarity and transparency. Eventually, I gained the confidence to request payment and secured my first $500-per-month client. I was extremely happy. Every time I had a few paying consumers, I would double the price. I’ve done a few for $500, a few for $1,000, a few for $1,500, and now we’re moving everyone up to $2,000 per month.
Objectors will argue that service businesses have lower margins than pure SaaS, which is generally true; however, my previous companies’ margins resembled service businesses much more than pure SaaS. As someone who worked for years in an AI startup, I was unfamiliar with the dynamics of an agency, but it was immediately apparent that service revenue increases much faster than SaaS revenue in the beginning.
My initial proposal to these founders was not that I am an expert in this field, but rather that I will conduct data-driven experiments and together we will A/B test our way to a reusable cold email playbook. The irony of the situation is that I am not a marketing expert; I’m an engineer. If you had told me a year ago that I would be selling this cold email service (and adoring it), I would have scoffed in your face.
I worked on Cold Email Studio by myself from October to the middle of January, periodically updating Mikey Howe (remember him from my post on micro acquisitions for Indie Hackers?) on the status. He was the CEO of a development company in the UK and was looking for new opportunities, and the timing was perfect, so we decided that he would become the CEO.
I also decided that we needed a 50/50 split because I was concerned that an unfair equity split would cause problems in the future and at the time I believed that either the company would fail or this matter would be immaterial in six months (because we would have expanded). What can I say about the contemporary era that I struggled for so many years, finally caught a fish, and then handed over the reigns to someone I’d met online a few months earlier?
From that point on, I tried to take a back seat and let Mikey focus on his strengths. I’m confident it wasn’t easy for him, but I’m very grateful that he stayed by my side. Since then, he has made some remarkable appointments and started turning this company into a machine. Obviously, Mikey remained, and we had a difficult week with angry consumers, but we persevered together.
What marketing techniques did you use to grow your company?
In general, we haven’t started marketing yet. Our main sales channel is unsolicited email, occasionally someone who is very active on Twitter stumbles upon us, someone posted about us on BookFace (YC’s internal messaging), and as a result, we gained a large number of customers, and another man posted about us on the Entrepreneurs First slack group, and we continue to receive meetings from there.
They open the email, read it, and come to the conclusion that “Man, these guys must be good, because I opened this cold email!” It’s kind of like a gestalt when we send unsolicited emails to our prospects.”” they arrange a rendezvous. This won’t likely change.
Another benefit of employing outbound cold email as a marketing approach for a new service like this is that we can somewhat manage demand. We might very quickly become overrun by interest that we are unable to support. It seems like we require a new procedure (i.e., manpower and expense) for every 10 net new customers we gain. I am happy that Mikey is now the CEO of Cold Email Studio because scaling human operations is not my strong suit.
What are you doing right now? What are your long-term goals?
The revenue for Cold Email Studio is expected to be around $14,000 this month and to reach $20,000 by April or May. With the exception of me, we have two full-time and four part-time staff. I’m still helpful to Mikey, but now my main priority is sales. The main goal is to change from a task for ourselves to a repeatable, scalable process going forward. I have no doubt that this business will generate $1 million in annual revenue within two years, even though it will be a challenge and I’m sure we’ll hit a limit someplace. Our goal for 2021 is to achieve $50,000 in MRR while keeping steady margins.
My main area of attention is the company’s acquisitions. Everyone fails to realize that when you buy a business, you are also buying a job. Not every one of these enterprises can yet sustain full-time employees, with MRR ranging from $1,000 to $6,000. We’ve boosted the portfolio’s worth by around 45% up to this point, and we can now start showing investors results.
I want to raise $1 million for XOXO this year so that we can buy more companies. This method compares small SaaS companies to real estate. We buy them, keep them, and return the excess cash flow to stockholders each month. I like the idea of a practical exit strategy for bootstrappers, and I can’t wait to watch this area grow over the coming several years.
I was working toward getting my pilot’s license before Covid, and I am eager to go back in the skies.
What have you discovered to be your most significant lessons since establishing Cold Email Studio?
If you are having trouble starting a SaaS firm, try a service. As a service provider, you often carry out a literal job function, making it much easier to define a “job to be done”. There is no need to guess whether or not someone would find it useful because you should be able to discover people on LinkedIn whose job it is to carry out your suggested service internally for the firm. If you start thinking in this way, you’ll quickly understand that practically everything may be offered as a service.
Regarding SaaS versus service businesses, don’t be arrogant. I was. Offering a service can be the easiest way to avoid having to work for someone else. Test it out!
SaaS revenue comes in slower and in smaller amounts than service income. Margin reduction is possible, but it’s not always the case and it won’t last when a brand develops and product lines are broadened.
Scaling people processes (and creating people processes) calls for a significantly different skill set than software development and engineering teams. I need to continue honing this skill set.
It kind of sucks, Upwork.
Paying excellent freelancers properly is important since finding them is challenging.
A service organization must fight tooth and nail to earn people’s confidence. It is physical and visceral since you are face-to-face with the customers (through magnification, of course). Every new SaaS I develop will include this, I promise. The same degree of trust is required for SaaS, but it is often difficult to get in touch with every customer before they sign up for self-serve goods. This suggests that you need to build the same amount of trust, usually through the brand and product.
A business needs a lot of things to go well and a small number of things to go wrong in order for it to be successful.
What were the toughest obstacles you overcame? What were your biggest mistakes?
The hardest thing I had to do was launch yet another product while battling exhaustion. I’m still in awe of the fact that I didn’t act any differently from previous failed notions in terms of functionality. With the exception of “Build something people want,” it is challenging to explain how anything that was done perfectly may nonetheless result in a negative net worth.
Mistrusting my co-founder Mikey was another error. He is an operator, and so am I. I often take the lead and act in accordance with my moral principles, which leaves little room for others to feel confident acting in the same manner. It is uncommon to take the lead on something before quickly handing it off to someone else, but this was the right move. I chose to do the search myself even though it was a painful procedure after observing that the venture studio’s hunt for a brilliant CEO was fruitless. Mikey, I appreciate your persistence.
I erred by being overly friendly to customers. It’s hard to control the rhythm of this industry. Numerous consumers who often “paused” advertising came to us. It made billing tedious and lumpy.
What equipment and sources would you recommend?
At the moment, we use:
ClickUp for Project Management
foundational knowledge idea
Slack
Lemlist was used in place of Mixmax to send emails.
Website design with Webflow
For transactions, use Stripe
For independents, use Upwork
For leads and copy, Google Sheets and Google Docs are used.
Sessions with Zoom
Finance with Uranus
Accounting software Xero
Stripe Atlas for registering businesses
Additional suggested gear:
Run Google Cloud as frequently as possible
MicroAcquire for organizations involved in procurement
N8n.io, “(workflow/automation constructor)”
For keeping yourself sane:
Meditations by Marcus Aurelius
Pema Chodron to teach meditation
Shinrin-yoku is the art of taking a bath in the forest. Get up off your bum and go for a quick stroll. In my perfect afternoon, I would go surfing and stroll to the beach.
For further information:
You may find me on Twitter. For more information on acquisitions, go to XO Capital.
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