Proposify’s Kyle Racki on perseverance and putting in the work.
Kyle Racki, in his own words, was “raised in a cult”.
As the son of devout Jehovah’s Witnesses, he was indoctrinated—and expected to indoctrinate others—from an early age.
By age four, I was accompanying my parents as we went door-to-door handing out pamphlets to strangers.
By age seven, I was giving 5-minute prepared sermons to the entire congregation.
By the time I was in my early twenties, I was giving hour-long sermons every month.
Leaving ended up driving a wedge between Kyle and his family that contributed to a devastating year that threatened to take his business and his life. We’ll get to that later.
But the important thing to understand here is that from an early age, Kyle learned the art of hearing the word “no” and moving on, from legions of annoyed homeowners slamming doors in his face.
He learned perseverance. And he’d need it, as his journey threw curveball after curveball his way.
Today, Kyle is the CEO of Proposify, a healthy, profitable and rapidly growing business that makes it easy to create beautiful proposals.
But to get here, Kyle took a tough road.
For many of us, things never seem to be ideal. We don’t have the right experience or education to start a business, or we don’t have enough money, or we’re not in the right city.
Kyle’s circumstances were never ideal, and we can all learn from his approach. We talked to Kyle about that journey, and how he’s built a successful business from almost nothing.
How One Entrepreneur Escaped a Cult and Built a 7-Figure Business in the Worst Years of His Life
When Kyle graduated high school in Halifax, Nova Scotia, he didn’t have all that many options.
I couldn’t afford any of the fancy private colleges, so I went to a community college here in Canada and took graphic design for two years.
After that, he got a job at a local agency to support his (very) young family.
Because of my religious upbringing, I was only 20 when I got married. I had a stepdaughter, and all I wanted to do was get a job. I had no aspirations at all to be an entrepreneur… in fact, the idea scared the shit out of me.
But it wasn’t long before being employed started to wear Kyle out, and he began to take on freelance work in his spare time.
After a couple of years, I got dissatisfied with the idea of going to work and making somebody else money, especially when I had some bosses whose leadership I didn’t quite trust.
I always thought things like “if this were my agency, I would do it this way,” but they didn’t listen to me because I was just a little kid to them.
And so I started to hustle on the side a bit, and spent a year freelancing.
That’s when Kyle met his future business partner, Kevin Springer.
Kevin was a sales guy. We got along really well, and because he had come from a business background, he coached me to be an entrepreneur. He taught me to get sales for my freelance business.
With Kevin’s help, Kyle grew his side hustle, and soon things got very, very busy.
I’d come home from work and try to spend a little time with my family, and then I’d just go to work [on freelance design projects] at midnight, and on the weekends, and in any free time I had. It was a pretty crazy year.
I remember Kevin always said there’s no reward without taking some risk or putting in the time, and so then eventually I was just at the point where I had to shit or get off the pot, so I quit my job.
I didn’t have enough freelance income to cover my entire salary, but I had one website project that was $3,500, which for me was one month salary after tax.
That put the pressure on me to go out and sell and get clients, and I hustled really hard in that first month to get my name out there as a freelance designer and developer, and then after that, I didn’t really have to do much sales anymore because I just had a lot of referral clients and a lot of repeat business.
I actually doubled my salary that year from what I was making at the agency, so that was sort of the point where I thought, “yeah, I think this entrepreneurship thing might be for me.”
Building His First Business
After several months as a freelancer, Kyle found himself wanting to take a step forward. And as luck would have it, so did Kevin.
I enjoyed doing it, but I found that I missed having a team, and I missed collaborating with people.
Plus I was so young, and I was still very shy about the business side of things.
I knew I could get small clients here and there, but if I ever wanted to up my game and get bigger clients and have staff, I don’t feel like I had the confidence then to do that.
Kevin, on the other hand, was really good at bringing in business, and he was really good at connecting people and he was older and more experienced and had run businesses before.
So when Kevin told me, “I’m going to go out on my own, maybe start a consultancy or something,” I immediately thought: that’s the guy I want working with me.
I didn’t want him to be an independent consultant or start his own business, I wanted him to work with me. I remember driving with him and just saying, “why don’t you join me?”
A few conversations later, we started an agency together.
Kyle and Kevin grew their agency, Headspace, to a ten-person business over the next five years.
Things were okay, but they never really got as good as the partners wanted them to be.
There are people that I think are just born to be entrepreneurs, they just have the right personality and the right mindset for it. And on an even more granular level, there are people who are born or made to be agency owners, and we just weren’t that.
Some people have a really good head when it comes to getting the right clients, managing them properly, managing scope creep, operationally they’re making sure they’re keeping a certain billable utilization rate, they’re just really good at running an agency and making it profitable, but we sucked at it.
Our projects ran over budget and we didn’t ever charge the clients for it. We let the sales cycles go too long, we took too long to get paid, we were always wrestling with cash flow and never had enough money. It was bad.
That’s when they began to experiment with building their own products.
In 2011, three years after Kevin and I joined forces, the business was just kind of going along.
Sometimes it was profitable, and sometimes it wasn’t, but we were always talking about products and how much we wanted to build a product company, because we looked at Basecamp, and we were just like “this is kind of what we want to be. We don’t want to be in the agency business, but how do we get out of doing it?”
We just started talking about building some products in-house ,and actually built two products before we even started Proposify.
We built a website builder before Squarespace was out, which went nowhere.
And then when Radian6 (a local social media monitoring company) got acquired by SalesForce [ed. Note: for $326 million], social media analysis was something everybody was talking about and clients wanted it, so we just jumped on the bandwagon and said we’d build our own simpler social media analytics tool.
Those miserable failures, though, taught Kyle a lot about how not to build a product.
We didn’t do much customer development. We just started building once we had an idea.
We might’ve talked to maybe one or two people about it, but we were just excited about the idea and started assigning agency resources to it.
We didn’t do what you should do, which is go and talk to 50 people and do it in a way such that you’re not feeding them the answers you want to hear.
That was one mistake, and the other one is that when you’re running an agency, and when bills are hard to pay, your billable client projects will always take priority over internal work, so these product projects just get shelved. Without people dedicated to it, we were just never going to get it off the ground.
In the end, Social Gopher ended up growing to roughly $500 per month in recurring revenue when the team was forced to shut it down, unable to justify paying the costs for additional Twitter API calls.
But even more than the lack of resources or customer development, Kyle attributes the early product failures to trying to work on something he had no interest in.
I wasn’t passionate about social media analytics. In fact, there are few things in this space more boring to me than social media management software.
I really wanted to solve my own problems.
Scratching His Own Itch
The idea for Proposify had started long before the team began building it.
Even in his early agency days, Kyle was frustrated by the proposal process, with proposal creation being assigned to junior designers and taking long hours to complete.
He began working on wireframes back then, and would occasionally pull them out of a desk drawer in his basement to revisit them.
Finally, after two failed products, he thought that maybe it was time to give his proposal software idea another go.
Because of those failures, we thought “let’s try to build this really ugly and dirty for now, because to really make it live up to the vision is going to require somebody really, really good. It was a pretty intense software build, but we couldn’t afford that at the time.
And so we ended up doing an exchange with a client whose son was a developer. I offered to design his application myself so that it didn’t pull from any of our agency resources, and in exchange, he’d build version one of what we were calling Proposify.
He agreed, and after a couple of months, we looked at it, and it was just god awful.
There was a pitch competition going on in Halifax that we were told about the day before the event, and when we heard about it, we decided to go.
I ended up pitching it at this demo day, and to my surprise, there were investors in the audience that later came up to me saying things like “holy shit, this is awesome.”
There was also somebody in the audience from the local government. We’re blessed up here in Canada to have things like the Atlantic Canada Opportunity Agency (ACOA). They’re federally funded, and basically they can give grants to businesses they believe in. Somebody from ACOA came up to me and they said, “hey this looks like something we could help you with.”
Amazingly, they ended up giving us a grant to hire a specialized developer to work on our software for a year. So we put up a job posting, and we were very specific about what we asked for.
Later we found out that he had never done that before, and he had no idea how to do it, but he figured it out.
Building a Real Product
With Jonathan on board, the team got to work turning their prototype into a real product that customers could actually use.
We hired Jonathan in January, and he took four months to build version one. He basically threw out everything we had before, started from scratch and built it out.
So four months later, we released it.
I had started blogging a little while before then, had put up a landing page and drove a little bit of AdWords to start collecting email addresses and doing a bit of pre-marketing for it.
So by the time we launched the first version in April, we had a small email list of around 100 people to send it to.
That’s when we started getting super-specific feedback about the product, and it’s one of the reasons I always tell people that customer development is so important.
When I was envisioning the tool, I had never thought anybody would want things like proposal templates or online signatures or even metrics to be able to view how long people looked at certain sections. It was very foreign, as that wasn’t something I had ever really needed or done with RFP’s; I thought the pain I was really solving was making it faster to build proposals, but then after enough customer development, it just became clear that people wanted all of these things.
As Jonathan fine-tuned the product, Kyle worked on the design himself.
It was my little baby passion project, and I didn’t want to tie up any other internal resources; we couldn’t afford to, we needed them working on client stuff.
While the initial marketing work began to drive a few signups, Proposify was far from building anything resembling traction.
Kyle’s hopeful efforts to court the local agency community were going especially poorly.
I knew a lot of the agencies here, and I went and showed them the product. Most of them would sit down with me and look at the tool, a lot of them wouldn’t use it because we were still running an agency, and they’re saying things like “I’m not giving you my proposal data you guys are gonna steal my pricing, or see who we’re pitching.
It was then that Kyle and Kevin decided that to win, they’d have to sell the agency.
Things Go South
While Kyle and Kevin eventually found a buyer in a former client, things got very, very ugly.
For a very long time, they kept delaying the deal to crush our leverage, but making sure that we kept all of the staff. We really should have laid off people, as we just didn’t have the funds for them, but we kind of kept the façade in place in order to get this deal to come through.
Obviously [the buyers] knew this, and they kept pushing things back to make us more and more desperate.
While this was happening, we also owed money to the bank ,and the bank wouldn’t release the assets on the business in order to sell it. They said that they had a claim on our assets and that we couldn’t sell it without their permission, so we said “well if we sell the company, we can actually pay you back,”, and they basically just said “no, you can’t sell the assets because you owe us money.”
It was just a massive pain and distraction with the buyers, bankers, lawyers, and meanwhile we’re just dying, and we need to make this sale happen.
Eventually, the sale did happen, though it left Kyle and Kevin with nothing but freedom from the distraction of trying to sell the agency.
With that freedom came the opportunity to focus 100% of their time on building Proposify.
And to help things along, the pair received news that they had been accepted to the Canadian Technology Accelerator in Boston, a three-month program for tech startups.
But the acceptance came with challenges.
It meant that we would have to be there for three months, so the way Kevin and I sorted it out, I would go the first month, and he would go the second, and I would go the third. It was just hard with kids and family to be away for that long, and I was absolutely terrified going down there.
Still, the pair decided to go. The accelerator period would end up becoming a huge turning point in Proposify’s history, but before things got better, they’d get much, much worse.
Things Get Worse
While all of this was happening on the business front, things were getting bad in Kyle’s personal life.
All in the same year, he got divorced, broke his foot, and decided to leave the Jehovah’s Witnesses, the “cult” he had grown up in.
My family and friends shunned me, so I had all this personal stuff going on with the stress of trying to sell the business and get Proposify going.
I had no idea what the future held.
His personal life had fallen apart, and his business was in shambles.
In an interview with Time, Kyle recounted a particularly low point:
Racki was driving across a bridge to Halifax and realized he didn’t have enough money to pay the toll.
“You often hear the difference between success and failure is a matter of who gives up first,” he says.
But give up, he did not.
It was absolutely my lowest point, and I was just thinking that I need to get out there and do something… maybe go to an event or reconnect with people.
The Event That Changed Everything
There’s this start-up community called Volta here in Halifax, and they were having a pitch competition, so I signed up just to get out there and talk to people.
It was in January 2013, it was snowy and miserable here, and I just showed the room what we had been working on over the last year.
We actually ended up winning the pitch competition, which was cool, but even better was that an early-stage VC firm (who looked at us a year ago and turned us down) came up to us afterward and said, “you’re at a point where we could potentially do a deal with you.”
They were also impressed that we were going to be going to the accelerator in Boston.
So while we were down in Boston, we heard that this group wanted us to leave to come to Halifax and pitch the board.
Now, mind you, this isn’t a massive amount of money ($250,000), but for us where we were at the time—with me not having enough money to get across the bridge—this was absolutely huge.
Even as the pair started the accelerator program, Kyle was doing small design projects on the side to pay his bills, so this new funding made a world of difference.
Finally, things began to look up.
The cash hit our account in May 2014, and that was when the purchase and sales agreement was signed for the agency, too. That just changed everything, and it was the moment where we both finally thought, “holy shit we’re not going to die.”
Turning Proposify Into a Real Business
Even with the newly-carved runway, Kyle and Kevin ran lean, paying themselves a modest salary and choosing to hire more development resources.
We got the money, and we basically calculated that it would last us until next March.
We were going to pay ourselves a small salary just to pay our bills, and we needed to hire another developer because that’s what was really holding us back.
A lot of businesses struggle with having a great product but being unable to find the right market, but we had the opposite problem. We had the market figured out, but our product was shit.
We needed to add features, fix bugs, improve the UI; roadmap stuff that we needed more developers for.
We could pretty much attribute all the churn we had in those days to things breaking, being difficult to use, or simply missing features that our competitors had.
Our advisors were telling us, “hey what you have is solid, you just need to spend some money on marketing or use this money to hire a sales team and just get it out there,” and we ignored them and said “we appreciate that, thank you, but we’re not going to do that.”
Two features in particular—pre-made proposal templates and the ability to legally sign proposals online, along with an improved onboarding process—directly resulted in the biggest revenue increase the team had seen to date.
Once the dev team rolled it out, we saw a big bump. You can see there on our chart, it doesn’t look like a big blip now, but on September 30th we had done $958 MRR, which wasn’t a huge jump from the month prior, but then on October 31 we did almost $1500.
All of a sudden, the feedback started getting more positive.
Instead of people Tweeting things like “your product sucks, you should go work at McDonald’s,” it was like “Wow, Proposify really saved me a lot of time and I closed a deal.”
Let me tell ya, I’ve never seen this kind of personable support in a long time. These guys are taking over the ‘proposal’ world! @proposify
— Patrick Neve (@patrickneve_web)
We thought, OK, maybe this is an anomaly, but then in November our MRR jumped to almost $2,500, and I think in December it was almost at $4,000 so it started climbing really quickly.
The Power of Perseverance
It was a long, slow haul to the rapid shift in fortune for Proposify, and Kyle attributes their success to the team’s willingness to stick it out.
It was a very tempting thing to change the direction of the product, or change markets or do what others told us to do, which was to hire a sales team.
I think that’s one of the things we did right, because if you look at that big flat graph for 18 months, I think that the only reason that we survived and are now thriving is just because we just wouldn’t stop working on making the product better during that time.
Proposify’s Key to Marketing Success
If you’re looking for a silver bullet, you won’t find one here. Kyle’s approach to marketing is the same unsatisfying-yet-dependable one practiced by most who succeed in this field: just put in the work.
I read QuickSprout and a bunch of blogs to keep up on like SEO best practices and content strategy and stuff, but it was really just putting in the work, it wasn’t anything majorly strategic.
Once I knew we had a product that people would buy, it was all about me just reading Groove and other blogs, and just ripping off tactics. Trying out things, running A/B tests, content marketing; it wasn’t anything revolutionary, it was just putting in the effort.
Growing Up and Out
As Proposify has grown to $130,000 MRR in monthly recurring revenue (as of Oct 1st 2016), so too has Kyle’s role as CEO evolved.
His biggest challenge these days? Taking himself completely out of the equation.
I think it’s the job of every founder to basically do everything to the best of their ability, and then gradually hire people to take those hats away from them until you get to a point where you’re not even really needed in the business.
In the agency world, the question would be something like “should I really have been the one installing WordPress for this client?” Probably not. I probably should have hired someone to do that. Or should I have been the one leading a UX product with a client? No, I should’ve hired somebody to do that.
I should’ve been working on big picture “where is the company going” kind of stuff, and that’s one thing I’ve been working hard on trying to be better at for Proposify.
When asked about his big picture vision for Proposify’s future, Kyle shows a candidness that’s unusual in the startup community:
I don’t think it would be honest for us to say that a future acquisition isn’t on our minds.
It’s not the immediate goal of what we want, but I think we want to build a great business, a profitable business, one that people are actually happy to work at.
If nobody comes in and buys us and makes us all millionaires, then at least we’ve got a really happy profitable business, and that’s a very good thing.
Your Turn: Ask Kyle Anything
Kyle has (very) generously agreed to answer your questions in the comments of this interview. We’re going to be watching closely and trying to learn as much as we can ourselves, so don’t be shy.
Post your questions for Kyle in the comments below.