Over the last 5+ years Daniel Vassallo has made a career out of community. What started as a popular Twitter account has now grown into Small Bets, an active, 6,000+ person paid community. He and I sat down for an hour long conversation and below is the edited transcript:

In late 2020 Daniel took his large Twitter following and the initial success he'd had from a couple of popular courses, and transitioned it into his first community, Profit and Loss, which he hosted on Circle.so.

Adam: "How did you transition from your Twitter following to a community?"

Daniel: "Yeah, let's start at the very beginning. November 2020 I had this idea of creating a private community. The most interesting people that I met on Twitter. Basically, I just wanted to have some conversations in private, centered around business."

"So I started this private community on Circle.so. I was charging $5 a month or $45 a year. So on the inexpensive side to start. It was called Profit and Loss.

"Taxes, legal stuff, rights of incorporation, all those things. Which was already something that at the time, in particular, I was talking quite a lot on Twitter and I noticed there was some interest.

"And initially it went really well. I got over a thousand members. I announced it on Twitter. I got some very favorable tweets. The launch site got half a million views. So it was a successful launch, very visible.

"It immediately started with 1,000 members and it continued to grow. I think it grew to 1,800 members by the end of December.

"And the first day or two, there were over a hundred posts. And I was answering as much as I could and trying to keep the conversation going and so on and so forth. People were leaving great reviews.

"Initially, I thought this is going great, but very quickly, unfortunately, I realized that the fire that started very early was dying very quickly. The activity rates started plummeting immediately. From hundreds of messages per day the first week down to, a few weeks later, one or two messages per day. And then three weeks after that, to almost nobody posting anything. It happened very quickly.

"And I started experimenting with Circle a lot. I don't know if Circle changed a bit because I gave them this feedback. But it felt like to post something there was was very formal."

Adam: "Because Circle centers around old school forum functionality."

Daniel: "Right, it was forum based. It required a subject and a body. And by default it emailed everyone in the community. So if you posted something it felt like a big deal. Like you were writing an essay. It didn't feel like texting my friends on the group chat. So I think that was a part of it."

"Now, it's very hard to to sort of put your finger on what actually keeps the energy going and to be completely honest with you even with Discord and Campfire and Small Bets now, it's hard for me to tell you exactly what it is making it work. So I could speculate but I do believe the platform was a main factor. It certainly didn't help.

"So, I continued posting updates to the Profit and Loss community for awhile, but it was dead. And I decided to shut it down about a week before a bunch of the annual subscriptions were about to renew. So that was my experience with my first community, which wasn't great."

"And then I started Small Bets, which not everyone knows this, didn't start as a community at all but actually just started as a course.

"It was a six session, two week course. I had all these ideas that I had sort of figured were helpful to me to tame uncertainty in business and find ideas and decide what to work on and sort of these somewhat random strategies grouped around self employment. That's how it started.

"And in October of 2021 I initially started the Discord server almost on a whim. I was barely checking it. I really only started the Discord initially because I thought I want a place where I just upload my notes, my slides, my recordings and people just get them like this instead of using email.

"So I started this course. 25 seats. I ran it once and then basically I kept repeating it. So that was the strategy. I was doing it back to where I'm pretty much finishing a cohort and starting another one immediately afterwards.

"And the demand for that was really good. I was filling 25 seats quickly back then immediately running the next one and the next. So I started this Discord server for the first cohort and the funny thing is I expected everyone after the cohort finished to forget about the Discord like most do. But some people, a lot of the initial 25 stayed around and they were bringing things like, "Oh, I started this project," "Do you guys have any feedback?" or "Here's this tweet that I found? What do you all think?" And sort of bringing in things from the outside in."

"So then I brought in the second cohort a week later and they already found some activity. And this built on top of that because same thing happened now a few more people came in again. Very small chunks of people like 25 or so. And of course not everyone is active, but enough were. And I repeated this 12 times.

"And without really changing anything else. My landing page back then, there was no mention of communities or Discord. Nothing. This was just six sessions over Zoom, start date and end date. That's it.

"So, soon, a lot of people were telling me I joined for the course, but this Discord server is where the true value is.

"And I was noticing that too, right? At the beginning I was almost neglecting it. There was only one channel for a long time, just General. It was completely careless! The growth happened on its own. No structure, nothing. But it was growing!

"And, back then, users couldn't create their own channels. But eventually they were asking me and I started creating them. People started saying let's have a Feedback channel, let's have a Software channel. And again, it's funny looking back on, in the beginning I wanted to resist creating lots of channels because I didn't want to have like a long list of empty channels. So I didn't create many channels back then but I did create some.

"So, and after the 12th cohort, I started to notice, you know, the reality with cohort courses, that it starts to become increasingly harder to fill the next group. I still felt like I could do more, but the first one I booked in 24 hours, the second one took two days, the third cohort took like a week."

"I started to realize I was starting to squeeze the last few drops out of the funnel for attracting another batch of 25 people. So in an attempt to try to reposition things, I thought, well everyone is already calling it the Small Bets community. I wasn't even calling it that! But they were and they were telling me they really enjoyed the discord.

"People were telling me "I found a business partner there", "We started a podcast together." And there was all these value ads. So I, I decided to do a little bit of repositioning and I renamed the project from the Small Bets Course to the Small Bets Community.

"I changed just the name and the pricing was the same. $375 once. Because it was a cohort course, you pay $375, you join, and it's over. Now I'm going to call it the Small Bets Community and I changed the landing page copy, where instead of saying this is a course, now you get access to the Discord server immediately.

"Because in the beginning, I wasn't letting people in automatically. If a cohort started on September 10th, that's when they would join Discord. So people were paying and just waiting until their time comes and they join.

"But, I realized, let me just let people join in immediately. And then the cohorts, I will still do it, but instead of people booking a particular cohort and they have to attend this one between September 10 to September 20, I would just be running it once a month and they would join whenever they wanted.

"Everyone who is a member can just attend. Which was a bit of a risky move back then because I didn't know whether it was going to cannibalize sales. Whether people would take it more or less seriously was uncertain. But I was noticing that people wanted the sense of belonging in the community. And that's what I started leaning into.

"And I immediately noticed Discourse, a chat community, brought the casualness that Circle lacked. You come in, you immediately get instant gratification. You can scroll through the past chats and see there's activity here.

"And this was still just me doing all the courses. I didn't yet have guest courses. So I announced that this is now the Small Bets Community and can now access it immediately and it had a big, big impact.

"Where before I was adding 50 people a month because I was doing two cohorts of 25 per month. Suddenly I got something like 300 members in a a few days after I announced it. And this would generate lots of activity on Discord, lots of buzz online, revenue shot up.

"I felt like it was easier to sell a community than to sell a course. So I started running it like this for a couple of months. But in the back of my mind I felt like I was under delivering a little bit, because I was pumping up the Discord, how amazing it is."

"They would pay, they would join, and then it would be just lots of clutter for them. And I was noticing because when I was inviting people in small batches, everyone was coming in and saying hello, introducing themselves. They mingle around a little bit. Whereas now, 200 people were coming in all at once, and there was activity, but many of them never said anything.

"It was all of a sudden a very different thing now. And I kept observing the same behavior. I was enrolling say six people a day, but where were these six people? What happened to them? I would see them pay, but hear nothing from them. Nobody introduced themselves. 

And so I started thinking maybe I needed a bit more structure. So I started doing the things everyone does. I created a welcome channel. I sent an onboarding email automatically. I could even had a short five minute video of introducing them to to the community and showing them how to use Discord, and what the channels are, and so on. I was making sales, but reading between the lines I just felt like the satisfaction wasn't there.

"The reviews were still good. But I could feel that out of every 10 members, only one was really benefiting. The vibe changed when too many people came in. And while they weren't asking for their money back, they also just weren't participating.

"And so I felt like this might not be very sustainable. Financially it was still doing really well, but I wasn't totally happy with it."

"First of all, it was very much centered around me back then. It’s my community, my course. This was the only content. And I felt like I was reaching the limits of my audience and people interested in me.  So, to try and fix it, I started inviting other speakers.

"I had all these connections with people who are experts in certain topics. Setting up YouTube. Doing e-commerce. SEO. Ads. Whatever.

"So I decided to invite a guest to do this one hour interview. Live classes to members of the community for free. Whoever is a member can attend these classes. And it was a bit of a difficult experiment at the beginning, because I was paying these hosts $1,000 per session. But I could afford to experiment because I was making $30,000-35,000 a month."

"So I realized if I reserve $5,000 a month and I invite four or five people to give classes around once a week, I think I can afford it, and we'll see how it goes.

"And I started doing these, and they started doing really well as well. And fairly quickly I realized, maybe my really honest value proposition shouldn't be to hype up the Discord, but instead hype up these classes. Because these were actual concrete value adds.

"People join. They're there. They're with an expert. They can ask questions. It's a tangible thing. You join and you see it and you're live. Whereas Discord was a bit more fuzzy.

"You have to keep adapting in the community space, so I did another reposition after starting the outside guest speakers experiment, and soon the Small Bet's landing page looked more like it does today."

"The main thing that you're paying for now is you get access to today's stream of live events and every month we'll have few and you can even watch the recordings of the past ones. The Discord was buried in the footnotes as a side dish. Like "Oh, by the way, there's also this Discord where we can group chat and hang out.

"That was around July of 2022, and it's stayed more or less the same I would say until now. It's basically the same value proposition.

"At that time around 200 people a day were checking the Discord at least once a day. But the number of messages per day wasn't super high. Like 15 to 20 messages a day. Which actually still made it look like there was activity. I would post about the events there. People would talk about it. They would come in for it.

"But mostly it was giving me an excuse to remind people that Small Bets still exists. And when many of the classes finished up, you could say, "Hey, if you like this class, you can find me on Discord and I can answer questions there." And some people would come back to ask questions.

"So the classes were a great reminder to check in. If the classes hadn't been there for content, it would have been much harder to grow. But, even with a steady stream of new classes, the Discord always had a flat level of activity of around 15 to 20 messages a day. It would be different people chatting month to month, but always around the same number of messages.

"And personally, I felt like it wasn't particularly fun. Even for me, whose job it was to see what people are posting. But I wasn't pulled towards it, and I believe one of the two reasons for that was the clutter of the Discord interface."

Adam: "Default dark theme. Crypto ads. Lots of movement."

Daniel: "Yeah, you know, sometimes you get some Minecraft pop up and you're like, what is this? And nitros and emojis, crypto ads, whatever. It just isn't necessarily a friendly interface for discussion."

"But I also think the more insidious problem was that it focused on anonymity. And many people had basically just their username there and there was no way to see who they really are.

"Like many people didn't have their social links and you might be having an interesting conversation with someone. And you see some cryptic ad1473 username, you click on them, and there's no information in their profile. And that's, I think the vibe there, that vibe of anonymity just made it look like this is a bunch of strangers."

Adam: "Which is something that a lot of people don't think about, because people already have Discord usernames and they're just coming in and adding it as another channel, and they're not coming just for you."

Daniel: "Right. And it doesn't help that, when you first join a server, Discord doesn't make you set up your profile. And many people don't know that if you set your profile for one server It doesn't  apply to the others unless you go to some advanced setting."

"And they enjoy Small Bets and now it's the default cryptic username and there with no profile picture or whatever This was probably the biggest drawback. I would say, even more than just the interface and the distractions and so on, the anonymity. That you can't link the name to a real person, so that maybe you could follow them elsewhere.

"But, unlike before with Circle where the community just collapsed overnight, it's not really bothering me as much this time around with Discord because it wasn't really hurting activity. Activity wasn't amazing but it was stable. And it wasn't hurting financially. And the main positioning we're doing now is the classes, not just the community.

"We're still of averaging 300 or 400 signups a month on the regular days. And then having outlier days on black Friday. In 2022 the community made $430,000 and in 2023 $460,000. So quite good. With 75 percent profit margin when you factor in payments to guest speakers, which my main expense. I wasn't complaining!

"Out of the blue, the Campfire Beta shows up, and I've been following 37signals for a while, so I say, "Hey Jason and David, let me know if you'd like me to take a look?"

"And David DM'd me and said, "Hey, would you want to give it a shot for your community? We're probably not ready yet for thousands of people, but we want to test it out. You're a great candidate."

Adam: "Oh I didn't know that. I assumed since the marketing material focused on small private company communities they weren't thinking of communities in the beginning."

Daniel: "Yeah they wanted it to be something that could be used for communities. Absolutely."

"So this is end of January 2024. And within minutes I spun up a Digital Ocean server and set it up. Super simple. And I went on our Discord in the General channel and just said, "Hey everyone, setting up a new group chat whoever is here".

"I didn't tag everyone, I just shot off a casual message on Discord and about a hundred people joined the Campfire community and at first I didn't even know how Campfire worked.

"But at first I thought – and this is a crazy idea in hindsight – that I was going to make it back to a single channel, because I felt it was a bit annoying always clicking on different channels just to keep up with what's happening.

"But since I was still learning the software, I didn't know that Campfire allowed anyone to create their own channels. So, I remember the first message that I posted in Campfire, "Hey, everyone, thanks for joining this little experiment. We're going to try this as a single feed. It's like Twitter."

"And that was going to be the idea. Let me see if this works better. Because I imagined you could consume it a bit like Twitter. Open your feed and scroll and be in and out in 5 minutes.

"And then what immediately happens instead? People start creating these silly rooms that I would have never have authorized on Discord! A food channel. Cat photos. A Fatherhood channel, which turned out to be one of the most popular ones we have!

"I can't imagine, on Discord someone telling me I want to open a Fatherhood channel because, first of all, I felt like it was off topic. But also I would have been like, but what about Motherhood, you know?

"You overthink these things when you're the dictator of what goes but people started doing this. And at first I thought, "Oh man, okay, let's see how it goes." Because I, of course, didn't want to delete their rooms.

"But I learned something very important very quickly: these silly rooms were actually bringing more people to the group chat  and engaging them!

"Because they'd see, say, the Breakfast channel. And the next they're making breakfast. And they'd say you know it'd be fun to share this on that small little Breakfast channel inside Small bets."

Adam: "Because they would never share a picture of breakfast to the main channel."

Daniel: "Exactly. It would be so random. They would never do it on Discord. And it was just it was a very fun casual thing. And now we have, like, an outdoor Channel. And a few people go out for a walk in the morning and they just take a photo and they come and post it. And we have the Cat photos channel and they see their cat laying around in a funny way. They say, "Oh, this would be a great post."

"And that was incredibly fascinating. Wow. I would have never imagined that this would be something beneficial.

"But then there were two other important things I think that's helped with Campfire. First of all, credit to Jason Freed, like it's a little bit of the less is more, right?

"The vibe felt friendly. To me, it felt a little bit like the iOS messenger and the messaging when I'm group chatting with my family. It just feels very friendly. There's just bubbles of text between people. There's the photo. I know who I'm communicating with. Lots of white space. In fact, we tweaked it a little bit because sometimes it almost felt like too friendly.

Adam: "Yeah, it's great, almost to the point of not enough. Like the discoverability of the notification features is certainly the most contentious thing that I've found so far with normal users."

Daniel: "Yeah we tweaked a few things in terms of density of information because it felt like there was too much white space at one point. Which felt like almost too much of a toy. But I think everyone – well I can't say everyone because there are some people who said Discord is better – but I think it's like 95 percent said Campfire is so much friendlier. So much more enjoyable. I could feel it myself."

"I know it's very subjective and maybe I have my own biases, but it's become the thing that I open up every morning. I see something in Fatherhood and I go take a look. I like that there's like these mini communities that are forming under each channel.

"There's maybe 5 guys who regularly hang out on the Fatherhood channel. Another 10 who hang out on the fitness channel. And again, remember that this is supposedly a business community, right? But it's also a bit business and lifestyle. So actually they still fit, but on the tangents. And it would have been very hard for me to be top down designing it like this. It had to emerge on its own.

Adam: "And the great thing of course about custom Campfire is that you can tweak it. Whenever you do think that there's too much white space you can customize it if you want – something you never could do with Discord, you can't make Discord less busy."

Daniel: "That was something that really helped a lot then because all these things that were slightly annoying we could improve."

"For example, we allowed people to add their social links. And we were able to use the SmallBets authentication everyone already had and we made it single sign on. Because this was another a support pain point with Circle and Discord. People would say "Oh my invite is not working," "Discord is telling me I can't log in", or "I forgot where to even go".

"Now with Campfire it's very much single sign on. You click on a button, you're automatically logged in, you don't have to upload another profile, maybe another password, whatever. 

"And now with social links profiles, which helps a lot for something like this, because you want to follow people. I see you, Adam, on here. You have your LinkedIn account, You have your site, I can go there, right. It just helps the community.

"And we have people who don't log in every day, right? They log in, you know, whenever they remember You And it was becoming a common concern, like how do I know who mentioned me since I wasn't here? So we created this inbox feature, that's where you can see your mentions in chronological order. You can even see all your notifications or all the messages. And even if you want to see everything in one feed, chronological order, regardless of the room, there's a place where you can just scroll to it like this.

"Another one is it's good to see how many people that are. It's sort of a social signal that you're somewhere important. 

"So being able to add our own tweaks has been huge for us.

"Now with Campfire we're seeing 500 to 550 messages a day. And it's growing. With Discord, it was like 15 to 20, so that's like orders of magnitude better. But you notice also subjectively, the activity and the quality of the messages is better.

"And, interestingly, even though the community is growing, the overall growth of Small Bets has started to stall a bit.

"The last two months have been the lowest new membership months. Back in the double digits of total monthly signups, and it had been since December of 2022,. It hadn't been in the double digits previously. It was always 150, 160 members a month.

"And again, I tend to speculate what it really is, but I think if I make a better case for the group chats, because the feeling of wanting to belong into a group chat of like minded people still exists. I think before, two years ago, with Discord I was overselling it.

"But now I think I have the means to not oversell it. So I just have to sell it and deliver.

Adam: "Yeah, especially as people are moving more from the Twitters and the public spaces to more private spaces and communities. How big do you think would be too big for the Small Bets Community to still function?"

Daniel: "It's hard to tell. I think there's still a lot of space until that happens. There seems to be such organic engagement, especially with channels that it's very interesting. People are just active in the Fitness and the Small Projects or Side Projects and whatever channels, and they don't care about the others. So I think there's a lot of room left to grow and learn and tweak. And I'm excited to see where it goes."

The landscape of online communities has undergone a remarkable transformation over the past few decades. From the early days of text-based forums to today's real-time chat platforms, the way we connect and communicate online has evolved significantly.

In the 1990s and early 2000s, online forums were the primary hubs for community interaction. These text-based platforms allowed users to post topics, reply to threads, and engage in asynchronous discussions. Forums like phpBB and vBulletin dominated this era, fostering niche communities around shared interests.

Some companies were able to leverage these old school platforms to build communities around their products and mission, but it wasn't easy, and now a lot of that work has been lost inside these old, antiquated ghost towns.

The mid-2000s saw the rise of social media giants like MySpace and Facebook. These platforms revolutionized online interaction by introducing personal profiles, friend networks, and more visual forms of communication. They expanded the concept of online communities from interest-based to personal connections.

Companies started being active on these platforms to build communities, but the social networks owned the users and the data.

As internet speeds increased and smartphones became ubiquitous, real-time communication apps gained popularity. Platforms like WhatsApp, Telegram, and Discord blurred the lines between personal messaging and community engagement, offering instant, multimedia-rich interactions.

During the pandemic especially, companies started shifting to these more private spaces to build communities because they could no longer rely just on the chaotic social networks. But just like with the social networks, these chat platforms owned the users and the data.

Recent years have seen a resurgence of dedicated community platforms. Sites like Reddit combine elements of traditional forums with modern social media features. Meanwhile, platforms like Slack and Microsoft Teams have brought community-style interactions into professional settings.

But companies, by this time, have learned that they can't rely on these centralized platforms to build their communities. They need to own their own data and users, and be able to keep them forever without per user pricing and monthly subscription lock-in.

The latest evolution in online community platforms is marked by a shift away from the Software as a Service (SaaS) model, championed by companies like 37signals with their Once.com initiative. This approach represents a return to software ownership rather than rental, challenging the dominant subscription-based model of recent years.

Once.com introduces a new line of software products that users pay for once and own forever. This model allows businesses to regain control over their software, data, and infrastructure. Campfire, one of Once.com's products, exemplifies this philosophy by offering a simple, self-hosted group chat system similar to Slack or Microsoft Teams, but without recurring charges. It provides basic functionality like rooms, @mentions, and direct messages, while giving users full ownership of their data and the ability to customize the software.

Keep Community builds upon Campfire's foundation, addressing the needs of growing online communities. It adds crucial features such as email notifications, OAuth signup and login, closed signup options, subscription and payment integration, a members page, public marketing pages, and content moderation tools. Keep Community positions itself as an alternative to platforms like Slack and Discord, which have limitations on message history or are designed primarily for specific user groups like gamers.

This shift towards owned, self-hosted community platforms reflects a growing desire for data ownership, privacy, and customization in online interactions. It challenges the notion that perpetual subscriptions are necessary for quality software and community management. By offering one-time payment options and providing access to the source code, these platforms empower users to have greater control over their online communities.

The future of online communities may see a balance between cloud-based services and self-hosted solutions, with an increased emphasis on data ownership and privacy. As businesses and communities become more aware of the long-term costs and limitations of subscription-based services, we may see a resurgence of self-hosted, customizable platforms that prioritize user control and data ownership while still offering robust features for community engagement and management.