How I Turned My Side Hustle Into A Profitable SaaS [97% Gross Margin]
Hello! Who are you and what business did you start?
Hello, I’m Abhilash Chowdhary, co-founder of Crustdata. Crustdata is a SaaS tool to identify private businesses and startups by their real-time growth metrics and traction.
Private investors use Crustdata to identify and track growing startups. The GTM teams at fast-growing startups use Crustdata to identify businesses that may use their product. We track millions of businesses by indexing the public web using proprietary machine learning algorithms.
We launched our product in March 2022 and since then have onboarded more than 10 paying users. Our total revenue since launch has been more than $20,000.
In November 2022, we did more than $5,000 in sales.
What's your backstory and how did you come up with the idea?
Crustdata is my first company. Crustdata started as a side project in 2020. I started working on it nights and weekends while working full-time as a software engineer. My co-founder, Manmohit Grewal, joined me full-time in the middle of 2021. Since then, we have been shipping and iterating on the product.
Before working on Crustdata, I did my bachelor’s in Computer Science from India, moved to the US in 2015 for my master’s, and worked in the industry for 6 years building software at different companies, ranging from big tech like Yahoo! and Adobe to pre-seed stage startups.
I find joy in working on my side projects as an engineer, and after completing my master’s in 2017, rather than joining big tech, I joined early-stage startups to learn how to bring my ideas to fruition. Over the next 3-4 years, two important things happened.
First, I saw that you don’t need a large team to build products that solve a problem. This was a big un-learning experience, having only worked in big tech before.
Second, I was lucky to be a part of 2 different exit events for the startups I worked for. These experiences made me believe that there are only two main ingredients needed to build a successful product in the beginning:
a) choosing a problem that excites you and b) not quitting.
I implemented these learnings into the next side-project I worked on, which eventually became Crustdata.
The idea for Crustdata came from my first job in the US, where I helped build a data intelligence platform for US public investors by mining the activities of companies on the public web in real time. This data about the activities of companies not shared in their quarterly reports are called alternative data. I wanted to build something similar for the Indian public market.
That was in 2017. In the next 2 years, I changed my job, moved into robotics, built self-driving trucks, and got married while this idea still sat in my head. In 2019, during my trip to India, I saw the digital reform taking place there. This excited me to start building a data intelligence platform for public investors in India.
After talking to about 20 prospective users, we realized that Indian public sector investors weren’t ready to use alternative data for their investment decisions. Then iterated on our pitch and started targeting private sector investors who gave us more positive responses. This finally led to our first customer which made it clear to us who was our next target customers.
Take us through the process of building the first version of your product.
The initial product was inspired by the product I built at my first job in the US at Thinknum. The learnings from the job helped me scrape hundreds of public web sources and build the backend data engine of the product.
I was comfortable building the backend as I had only developed the backend systems in my past jobs. Working on UI and front-end layers was laborious for me.
During that time, I was mentoring Manmohit while he was transitioning to software engineering after completing his bachelor’s in Law. He had developed a bunch of react-based apps in his final years of law school and liked developing front-end.
Seeing this, I asked if he would like to help me develop the front end as an intern. Bringing in Manmohit was very helpful in increasing the project’s development speed, as I could only devote nights and weekends to the project with my day job.
After that, we spent about 3 more months building out the app's essential features before we launched and started talking to the users.
For building the first version of the app, we used the technologies which we were most comfortable with rather than using something popular. The backend was written in Python, we used React framework for frontend and Postgres for our database.
As we both were working remotely, we needed to use the right communication mode and tools. We used Slack and GitHub issues extensively to make sure we are aligned during development.
Describe the process of launching the business.
Starting, we made many mistakes with our launch strategy for Crustdata. Using our collected data, we first attempted to gain traction by sharing interactive stories on our website about company activities and macroeconomic topics. We created four articles and shared them on social media, hoping that users would come to us. But that didn’t happen.
If we had focused on our customers rather than our competitors, we could have saved ourselves at least 6 months
Feeling discouraged, we switched gears and tried to sell directly to customers. After a year of building and waiting for users to come to us, I started reaching out to potential customers through cold emailing.
My initial target was public institutional investors in India. I sent out 1000+ emails over the next three months, but only 20 people responded, and none of them were interested in our product. At this point, it felt like we had been working on a passion project for nearly a year and a half with no customers.
But we didn’t give up! I decided to try reaching out to private investors instead, and within a month and after sending less than 100 emails, we finally found our first customer. This was a huge turning point for us, as they helped shape our product into what it is today.
Around the same time, I realized that sales would take more time and effort than I had anticipated, so my co-founder, Manmohit, joined the team full-time to take over the engineering side.
Luckily, I could finance the business while still having a day job. We also saved on server costs thanks to AWS credits from YCombinator’s Startup School. And other than that, we were spending less than $100 per month for various SaaS subscriptions like Github, Apollo, and DocuSign.
Since launch, what has worked to attract and retain customers?
Our gross margins for the past year were an impressive 97%
Attracting new customers:
We learned that shaking things up by constantly revamping our cold-email pitch based on feedback from similar users and constantly seeking out new market segments for our product, has been the key to finding new customers.
A cold-email is a great way to validate if the problem you are trying to solve is a real pain-point for the recipient. But the catch is to get the right pitch that resonates with the current pain-point of the recipient. Below I quickly go over how we iterate over the pitch
Write your first cold-email with a specific hypothesized problem of the recipient which your product can solve. It is important to note that any product can be used to solve multiple problems. It is okay if the product cannot solve it completely as of today.
Hypothesize a problem that you think the recipient is facing. For example, let's assume the problem we have hypothesized is: “Writing personalized cold email at scale”
Subject - short, less than 6-7 words, and tells that there is a solution to the problem. For the example problem above, it would be “Quickly write 1000+ personalized cold emails”
Body (Opening line) - Why are you reaching out to them? Use the recipient's persona, what their company does, and who their customer is to make this line personalized. If you are sending emails to CMOs of companies building payment gateway solutions for eCommerce brands, we could say “Reaching out because you help eCommerce brands with online sales enablement.”
Body (Second/Third line) - Expand and empathize on the hypothesized problem and the pain. For the problem above, you could say “I’m sure you have struggled with finding a way to personalize emails at scale … “
Body (Fourth line) - Tell who you are and what your company does. For the problem above, it would be “I’m the founder of xyz company - we help marketing and sales teams of growing startups close more deals using our AI-powered personalized email copy. …”
Body (Fifth line) - Mention recent customers in the same segment you may have closed
Body (Last line) - Add a call to action here. Ask if they are available to set up a 15-20 min call. Share the link to your calendly to reduce friction.
Send this to about 100 people with similar persona/title and currently with companies building products for similar end users.
Check your open rates and response rates. If open rates are less than 30%, it is possible that you have issues with your mailbox and your emails are going to spam. Use tools like mail-tester.com and warmupinbox.com to validate your mailbox configuration and warm up your inbox so that your emails hit the inbox.
If you have at least one response and a follow-up call, use that meeting to understand the current problem of the user. Ask them why they got on the call and how they solved this problem in the past. Use the answers to re-iterate steps from 1. for another pitch.
Here are a few stats from one of our recent “successful” pitches. We were able to convert 3% of our target audience.
Although it took time to learn the above strategy, this has helped us sell our product to a diverse range of customers, like GTM teams of growth-stage startups looking to identify their target audience.
Retaining customers:
We’ve found that keeping our customers happy is about being quick on our feet and solving any issues they have ASAP. With a small team of two, this can be a bit of a balancing act.
On one hand, we can understand and address problems quickly because the person building, selling, and resolving the issue is usually one of us. But on the other hand, when multiple customer issues pop up simultaneously, it can take a bit longer to resolve them all, impacting customer satisfaction.
How are you doing today and what does the future look like?
Right now, we're doing okay! Our gross margins for the past year were an impressive 97% (after accounting for SaaS subscriptions). AWS credits have helped here.
We offer our services through yearly subscription plans on our web app and/or APIs. Currently, we have 11 paying enterprise customers, though not all of them are on our standard yearly plans. We had to customize plans for a handful of them.
When we first launched about a year ago, we mainly targeted institutional private investors. But now, we’ve expanded our target customer base to include growth-stage startups focusing on smaller digital businesses.
With our experience from last year and new market segments, we aim to grow our revenue to $100k this year.
Through starting the business, have you learned anything particularly helpful or advantageous?
Starting this business has been a wild ride. We’ve learned so much along the way. One thing that’s been particularly helpful for us is learning from our mistakes. For the first year, my co-founder and I kept building the product without talking to our users. We had a few shortcomings that led to this:
- We loved coding, and it was easier for us to code than to try to talk to prospective users and sell.
- We kept thinking that a user wouldn’t use our product if we didn’t build all the 50 functionalities we had in our minds.
- We tried copying our competitors, who were 5-6 years ahead of us. This meant we were building complex, time-consuming features without knowing if users want them
- None of us had sales experience and, for some reason, believed that content marketing was the right distribution strategy over direct sales. We built our content marketing blog website, where we shared exciting stories from the data we tracked. This only gave us a few upvotes on Reddit but no users.
If we had focused on our customers rather than our competitors, we could have saved ourselves at least 6 months by not trying to build features that our customers didn’t want. And if we had gotten out of our comfort zone sooner and talked to our prospective customers from day one, it would have saved us a lot of time.
As an engineer, it took me time to realize the potential of a cold email and the fact that you are just one email away from talking to someone face-to-face who is looking for a solution similar to what you are building.
What platform/tools do you use for your business?
Apollo.io is my favorite CRM tool. It helps me identify and qualify leads easily, build an automated email sequence for each category of lead, and lets me add the personalization I want.
What have been the most influential books, podcasts, or other resources?
I have found Shoe Dog by Phill Knight, founder of Nike, very inspiring and relatable. The book goes over how Phill founded Nike and his journey through time while making Nike one of the most loved brands across the world.
In the book, he shares the importance of taking risks and not giving up for entrepreneurs with a quote that I can never forget - “The cowards never started, and the weak died along the way.”
Tweets and newsletters from Jellyfish founder Jen Abel have also been very enlightening while dabbling with early-stage sales. A couple of times, she has tweeted learning which experienced a few days later when talking to our prospective clients a few days later.
Advice for other entrepreneurs who want to get started or are just starting out?
Focus on the customer and not the competitors. And get out of our comfort zone as early as possible. Follow up with your qualified lead now, reach out to your customer you have not heard back from in more than a month, and write personalized cold emails to the new prospects you just found now.
Where can we go to learn more?
If you have any questions or comments, drop a comment below!
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