Acquisitions Anonymous - #1 for business buying, selling and operating - See-food but for plants? With special guest Xavier Helgesen - Acquisitions Anonymous episode 138

Episode Date: November 4, 2022

Want to receive this listing in your inbox? Signup for our weekly newsletter:https://www.getrevue.co/profile/acquanon-----Michael Girdley (@Girdley) and Xavier Helgesen (@XavierHelgesen) talk about a mobile app for scanning plants and trees. Before delving into details like the churn rate for this offer, we started with the fundamentals of how this app functions. We will also know how frequently our hosts have been using Image search. We get into how this deal can be effective in the market and what strategies can be applied for this business to succeed. We will also learn more about the power dynamics in this market.-----Thanks to our sponsors!CloudBookkeeping offers adaptable solutions to businesses that want to focus on growth with a “client service first” approach. They offer a full suite of accounting services, including sophisticated reporting, QuickBooks software solutions, and full-service payroll options.-----Show Notes:(00:00) - Introduction(00:41) - Our sponsor is CloudBookkeeping.com(02:08) - Quick catch-up with Xavier(02:44) - Deal & Financials: 1-person start-up: Profitable Mobile Plant and Tree Scanner App(03:12) - How does this deal work?(04:09) - What is the concept of “The Pain of Pain”?(05:55) - How sticky are these customers? What are they paying to get customers?(07:34) - What is the churn rate on this deal?(10:05) - What is Xavier’s prediction for this app? What’s the trend for iOS?(14:01) - Who would buy this Saas business?(16:08) - What is the possible bull case for this deal? What are the opportunities for this kind of business?(17:24) - How can gamification be an opportunity for this deal? What is the rabbit hole?(18:24) - What is the bear case in this scenario?(19:09) - How does Xavier think about customer retention in software?(22:24) - What is the effect of a recession in the market?(24:36) - Why are some software companies getting punished in the public markets? What are some of the power dynamics in this market?(28:45) - What is the best lesson we learned today?-----Additional episodes you might enjoy:#137 - A deal that is going UP!  #136 - Can we make bank with Cricket Wireless stores?#135 - Should we buy this warehouse software business?#133 - How to value and underwrite commercial Real Estate? With special Guest Chris PowersSubscribe to weekly our Newsletter and get curated deals in your inboxAdvertise with us by clicking here Do you love Acquanon and want to see our smiling faces? Subscribe to our Youtube channel. Do you enjoy our content? Rate our show! Follow us on Twitter @acquanon Learnings about small business acquisitions and operations. For inquiries or suggestions, email us at [e-mail]

Hey, welcome to Acquisition Anonymous. Amazing show today. Michael here. Me and my buddy Xavier, who is CEO of Enduring Ventures and another Holdco, bro. We recorded a cool episode talking about a software company for sale. It is basically what you see on Silicon Valley, the TV show, Hot Dog, not Hot Dog. It is that for plants. And it is available for sale.

And we dug in. And then we went to some cool places about how businesses are getting valued and all that kind of stuff now. Xavier's a really great thinker about business and super fun to wrap with him about it. And with no further ado, here is our episode after a quick word from our sponsor. Hey, Michael here. Want to talk to you about today's sponsor for the episode, which is cloudbookkeeping.com. So cloud bookkeeping is actually run by my neighbor, Charlie. So I've met him in person and can attest that he's a real human being and a good person.

And what cloud bookkeeping does is offer a full suite of bookkeeping services all in the cloud for you around QuickBooks and other technologies that you're using as a small business owner. So if you're interested in getting the bookkeeping part of running a business off of your plate and focusing on running your business, Charlie and his team are one to call. They can put together a bunch of other stuff in terms of helping you manage and grow your business besides just bookkeeping, sophisticated reporting, definitely helping you get your quickbooks online set up in the right way, and a number of things around payroll as well. So definitely know them and recommend them. If you want to find out more about cloud bookkeeping, you can go to their website at cloudbookkeeping.com, reach out to Charlie. I know many of you have and see if he can help you. make running your business easier and more fun by letting them help with a lot of the bookkeeping solutions. And when you call, mention this podcast, it would help us and help Charlie know

that we're supporting him as well. So thanks a bunch and cloudbookkeeping.com as the sponsor for today's episode. Xavier, thanks for being here, man. We've got a hell of a deal we'll talk about. Gurdley, I'm loving this. Thank you so much for having me on the pod after I put my hand up on Twitter because I guess you just got to ask me to do this. I will be here anytime on the show. So you go to hold cobras going to hang together. So, uh, cool. So I, we found a deal. We both love talking about this one. So I'll get right into it. First of all, anybody on YouTube can see that I'm not a platinum member on micro acquire. So yes. Anyone could see that I haven't shaved in a while. So yeah, that and the fact that I don't have a blue check mark means I'm a total loser. So anyway,

Okay, so here's the deal on Microacquire. Thank you again, MicroQuire, for being a sponsor. They're asking $4.5 million for this company, six and a half times the revenue multiple. And they, man, this is a new thing in MicroQuare. They give you an asking price reasoning. So I guess we can come back to that in a second. The company was founded in October 2020, and it's a one-person startup. Located in France, it is a subscription-based iOS app that lets user scan plans.

Here's what it is, a profitable mobile app. with $690,000 in trailing 12 months revenue that lets users scan every plant, flower, and tree in the world and get informations of it. There is another feature that the users add the plant as a favorite, and after that they can add tasks and notes. Currently, the app is available all over the world, but right now is only focusing on 29 countries. They spent a lot of money last year on marketing, and this year they get a ton of lifetime values. Now we have really good lifetime values problems to everything, so the next year's will have less spend on marketing. They did $690,000 in trailing 12 months revenue, lost $29,000 in trailing 12 months profit. They did $49,000 in revenue last

year in the same month, and they had an 82% increase year over year to 90,000. They've been losing money and they finally started to make money in what they're doing. They have some competitors called Picture This and More, and the business model is subscription-based. They mainly charge $5 per week to allow people to use an app to scan and take a picture of any photo or any plant and get it auto-recognized. $5 a week. Is this plant pornography, Michael? Is this what are we getting more than just plants behind the scenes?

That's my diligence question. So, I mean, that is, that is an absurd amount. Can you even imagine the churn rate? If you're charging, hitting someone $4.99 a week, it defies all laws of, of app gravity. You, like, you ever heard

this thing called the pain of pain? No. I think it's a conument thing. There's a psychological pain to any act of pain

for anything at any time. It's just like stressful to pay for anything. And it makes you ask, well, am I even making enough money? Am I the,

well, am I a person who makes enough money to pay $5 a week for a plant debt? And so when you're actually being charged like every single week,

that is like the maximum pain. You have 52 moments of pain of pain in this thing, which is why they always try to get you when you sign up for something to say, oh, well, it's $30 a month, but it's $60 for the whole year because they don't want you to think about the fact you're paying them for the thing. So, I mean, looking at the math, I mean, exactly what you're saying. So they're pinging somebody's credit card $5 every week to take pictures of plants. And I assume tell you exactly, auto-identify what the plant is.

which is kind of cool, technology, right? Which is useful. Yeah, no, that's it. Who has not been in the woods and said, what is that plant? Is that an oak? Is that a fern? I don't have to know. I have no idea what the fuck that plant is.

So, but this means, so they're paying, charging $5 a week. So the business model is $5 a week over 52 weeks a year. And so that means people are paying $260 a year to have a plant, scanning app. And then there's a lot of people doing this. I mean, if I don't have the, I can do the math, 690,000 divided by $260. That means there's 2,600 customers for this thing. Or if the turn rate is not through the roof. So the first question for me says, how do you lose money on $700,000 in revenue when you're a one person company? And you're probably not even counting your own salary. Well, you probably spend it on ads. And then,

you probably get people to sign up and the churn rate is probably, I bet there's like five German hikers that are like on the subscription and loving it. There's like a bunch of people who are like, I wonder what that plant is. I'll try this out for five bucks. And then they run away screaming as soon as they remember to cancel it. That would be my thought. Yeah, so that'd be the first thing like to take this business a bit more seriously, which I'm trying to because it's a plant scanning app, which I have no interest in.

Other than eating plants, they're not that interesting to me. But it seems like the first thing to dig in here is understand what are the kind of the SaaS metrics and what are they paying to get customers. And it does kind of worry me when I look at this thing. He talks about spending less on marketing year over year because that's got to be exactly what you're saying. Like all the money's going to Google ads, in-app ads, all that kind of stuff to try to just build up, build up the flywheel here. And that's, I mean, that's the only explanation for how you're

losing money. I mean, he has no other expenses, basically the guy that's built it. Well, and if there's no mention of churn, you know that the churn is generally a horrible story. Because if you imagine this thing was not churning at all, that would be the blinking headline. You would use the blink tag in HTML and you would put that around it. And you would say, you know, this thing doesn't churn at all. I have every single person who's signed up is still paying me five bucks a month because they love it so much. And so usually when you don't see any turn numbers, the exact opposite is true and it's an absolute bloodbath. I don't know how they get a million for this, to be honest. Like, I don't know who would pay a million bucks for this thing unless you were like, I don't know, Mary's Plant Shop, you know, the national chain of, I don't know,

fern dealers or something and you have a digital strategy that you're going to hook this to. It's all a bit speculative. So it looks like they do have some competitors as well. Coming back to your kind of this is a commoditized type type, you know, what you're talking about for this deal. PlantNet is another one. And here the wire cutter, wire cutter owned now and by New York Times has the, has a a site, a webpage about the best plant identification app. And they've, they've read more. Let's see what they, they like PlantNet, which is a plant identification app. And they liked it,

and you'll appreciate this. I read they like it because it has the fewest pop-ups and scammy-looking things of all the apps. That sounds exactly right. And maybe this one's, this one's virtue is it doesn't need any ads because it charges an astonishing $240 a year. So who needs ads? Maybe that's beneficial to someone. I also think that bizarrely AI is going to totally eat this space of identify thing apps. Yeah.

Because at some point in the not too distant future, AI is just going to be like, well, yeah, that's a fern. And, you know, and yeah, that song is by Abba. And, you know, yeah, that clip from the movie is from The Godfather, you know, and just sort of like no. Some all knowing AI feels like it's getting closer and closer, at least for that stuff, where it can just compare against the database. Yeah. Well, I don't have you switched to iOS? Are you on iOS?

Are you an Apple user? Oh, yeah. Yeah, an Apple user for long time. At least on mine, they figured out that I have Shazam on there, the music identification app. And there's like a they automatically added like a one-click like Shazam thing, right? I think you're exactly right. Like there's coming a time where iOS is going to have stuff like this built in where you just hold up your camera and it's like, you were at the Louvre. Like, did you know this is a fern right there in front?

Like it's going to all come there as part of it's the way, you know, Apple's going. Did you, have you searched your photos on your iPhone lately like for random stuff, like for a dog or for like a truck? Like it's pretty, it's somewhat impressive and creepy how how much metadata it is quietly building. in the background about like, you know, your exes. Like anybody who's, there are photos of, like you have, like, you can search for them and they have a database of all the photos. Yeah, well, I use Google photos. And what's super interesting is they are really good at like being able to, like, I look

at a baby picture of my kids and I'm like, oh, which kid is that, you know? And you got to figure it out. But they can like trace it all the way back to like the infant, like baby pictures. and they've got Google Photos has it all organized super well. I got to move to Google Photos. That's a good call. I don't know. It seems like eventually Apple always gets there with like Apple Maps or Google Photos or whatever,

but I don't want to wait three years every time for them to catch up. So I just do the Google version. The other nice thing about it is if you're like a Google Drive user, Google Photos counts towards that capacity. So it's like I don't have to pay for, extra capacity on Apple, for example, which is kind of annoying. You know what this, back to this app, you know what this totally reminds me of the seafood app from Silicon Valley?

Oh, what was that app? So, so Jen Yang, who was like the curmudgeon Chinese, I guess he's like, yeah, he wasn't Chinese America, he's just Chinese character living in the house, had everybody confused that he had built an app that. could basically be Shazam for food. So like you take a picture of food and it would tell you what it is. But it turned out it only did one food, which was hot dogs. Yeah, hot dog, not hot dog. Hot dog, not hot dog. So it kind of feels like that. It's like fern, not fern. Well, and let's recall, if for the Silicon Valley buffs out there, let's recall what that happened.

That was a strategic acquisition by a porn site, which was the one good, the one company that could use that technology. I mean, potentially this could be used the other way for not men. Exactly. This is a PG-rated podcast as far as I would get at that. I already swore on it, so I've already taken it off the rails. So I think there's like a bigger, I think there's a bigger thing that happens on Microacquire. And I love Microquire. And I think what happens is like people just take a flyer.

they got this thing like it's kind of working it's kind of not working and people go on microchire they're like I wonder if somebody will pay five million bucks for this who knows and I would have to think that like the conversion rate of listings like this is like awfully low but again you never know if if mary's farm store you know garden stores happens to dive in on this and maybe they don't pay four but they pay one and they say yeah this would be great this will be our digital strategy. I don't know. I mean, I just, any entrepreneur taking this on, like, if anybody came to me and was, like,

trying to raise equity for this acquisition, I'd be like, you're bonkers. Why would you ever, ever, ever, even if you're raising like $200,000 and that was all the equity you need? I'd be like, what are you doing? Like, there are profitable businesses out there that are already profitable, only going to get more profitable, and, like, you just need to buy them. Like, go find one of those. I'm totally with you.

Yeah, and I think, you know, Andrew who runs MicroQuire has heard that feedback where it's like, look, they're so, they're so, early on they had so, such little friction to post stuff on there. And you look at this guy who clearly didn't even bother to get the English in this, like the grammar fixed. You know, I left in. He thought his reverly, like that alone is like. So, you know, and I think that's good. I think Andrews heard that and they're like doing more to try to. to fix that because you end up with the biz by sell problem, right? Where it's just like there's just so much junk on there that eventually it just

overwhelms you, right? You just can't, you can't figure out how to get past it. And biz by sale doesn't seem to care as much as Andrew does because he's trying to build a real marketplace and have it keep going rather than just a listing site. But I totally hear you. It's like, I see 90% of these and I'm like, yeah, I would totally sell this business at $5 million. Especially because it's losing money.

Like, it's worth, it has a negative enterprise value. Totally. Totally. All right. It actually got me thinking what things I should sell on microacquire. Everything is for sale. Maybe my Twitter account is for sale in Microrequire. Let's see what it's worth.

Ten million bucks. Anybody out there want my Twitter account? You can, you can buy it from me. That's the, it's the funniest thing when people, and they've, it slowed down a lot, but there's a number of accounts who go on Twitter and they're like, I would not sell my Twitter account for $10 million. And I'm like, you are crazy. I'm like, I would totally delete.

You are crazy, sir. Yeah, totally. I'm like, honestly, you, you show up with a million bucks and a bag at my doorstep. Like, I'm probably handing you the keys to that account. I'll click the delete button right now. All right. So let me give you, let me give you the bull case for this if you could get it at a more reasonable price.

And I think the interesting thing about this is, like, there are more and more opportunities for niche communities to be monetized and create. And I think being in this particular business, like the initial thing I thought is, man, 3,500 people around the globe are so into plants that they'll pay $260 to be able to take pictures of plants and know what those are. And I think it's like that, like the birding community, all these folks, like I think those folks are dying for, you know, a paid community that they can be part of, where they can connect with other folks, where there's a gamification as part of it.

like, you know, I do see an opportunity where something like this could be like a gateway drug for them. Like, okay, hey, you're part of this like picture taking thing? Like, then later on it, that's just the, that's just the entree to the social media business. Now, does any of that, if I had $5 million, would I just bill that from scratch? Yes, probably. But like, I think if I own this and this, I was this guy, like I would definitely be thinking about how do I be more than just like a tool that's going to get consumed by iOS at some point? And the social aspect seems like the one that's just the total bullcase to me. Yeah, I think that's right. And I think like the gamification thing you mentioned is really interesting. It would be interesting to see who actually goes out and identifies the most different kinds of plants in their region, sort of mayor of San Francisco in terms of plant spotting. Because it is. It's a fascinating rabbit hole to go down. Like what are all these plants and what do they do? And what is the role in the ecosystem? I can see people getting into it. My son's in Boy Scouts. I can see him getting a merit badge for, for, for, for, what do they do? And what is the role in the ecosystem. I can see him getting a merit badge for, for, for, for, what do they do. I can see him get in a merit badge for, for, for, for, I can see. I can see. I can see him. I can see. plant identification. You know, I think that this, I think this is one where, like, if you could get the pricing structure right somehow, where it's like roughly in, you know, coordination with the usage, somehow, I don't know.

There's maybe there's a $50 a year sort of thing that you will generally pay for because you use it enough. And then, as you said, you build the community on top and that, and that gets it rolling. So this scares the crap out of me. Let's go back to the beer case. So, you know, I find here on Wirecutter, you look at these competitors. There's one called I Naturalist that is totally free. It is funded in the United States for the California Academy of Sciences,

the National Aged Act Society, and donations. Naturalist and I Naturalist does not rent or sell personal information to anyone. Like, if you're competing with somebody giving away a free app on a noisy ass, like, you know, App Store for Apple, like, that all ties back to your thesis. This guy is just having to spend crazy money on ads to grow the business at all. And that's why he's losing money. But, I mean, the other thing is, he, man, it's amazing to me he's charging $260 a year because his competitors appear to all be free, which is like, whoa.

Yep. And you always got to ask yourself, will my product go to either free or very cheap? You know, Doc, you sign as a public stock. is actually a good example of this. Like, at the end of the day, it's probably a good developer with $100,000. Wouldn't build something as good as DocuSign, but we'll let you append a signature to a PDF

and email it to you. And so you see this, right? There's a whole bunch of like cheaper docu signs out there. There's Hello Sign, which is basically DocuSign, but cheaper. And so I think that, you know, we recently got hit up by a DocuSign account rep. It's like, hey, I want to take 15 minutes and review your plan.

You guys are using a little more than like your lot of thing. And I was like, I'm not, there's no way I'm taking phone call with you. Like, sorry, like I'm not trying to be mean, but no. I tell me if you're going to raise my rate. And if you are, I'll go just sign up for hello sign because I don't want to deal. And the last thing I want to do is get on the phone with your sales rep and understand the enterprise features that I could buy that will make my signing experience, you know, so much more powerful and help grow my business.

Like no, no effing way. Am I wasting time on that? So I think that like software CRM, the same thing, right? Salesforce charges so much. And then we have all these cheaper CRMs that are sort of engineered at India and are actually pretty good. And I think you'll really, this is an assumption that like SaaS companies are worth so much because their customers are locked in, I think is really a false assumption.

And I think if your product can be built and sold, that'll cost half as much, businesses will absolutely look at their costs and migrate if, you know, know, if they see a justification to do so. Yeah. Well, I saw Limbitt, Jason Limpkin, who is, I think, Echo Sign, the one that sold to Adobe. That was him or he's a docusine. Yeah, yeah. One of the two, his argument was, you know, eventually the bottom into the market, I think,

or you and I would be for a docusign customer will get commoditized exactly like that. You know, and I'm sitting here telling you that I'm somebody who uses a version of Hello sign that's cheaper than Hello Sign. Gertley, hook me up. Why have you not told me about this? It's called Sign Easy. It's $12 a month. I like what you're doing there.

Yeah, there you go. Very girdly. Well, I mean, the stuff I'm using it for NDAs and stuff like that, it's like, I don't, you know, all the enterprise features that are going to come with doci sign. Like, I don't really need it to be that admissible accord. Like, I'm not going to be admitted to the Delaware bar like on the Twitter. on the Twitter on the Twitter suit against Elon or anything. So like, you know, it works just fine for my purposes.

But yeah, sign easy is the one I use it. And I'm sure there's one that's even cheaper than that that you can go find as well. And eventually you just have a race to the bottom. But I think Limpkin would tell you that in something like what's going to have a docu sign is, and you're seeing it from the sales rep calling. It's like, oh, hey, like, you know,

you're some high-end law firm or somebody that has to take this really seriously. a mortgage firm, you know, they want to have it integrated into their, their processes inside the company, their workflow, and then they want to have something that's not going to let the CIO get fired. And so they're going to pay up for some of that stuff. But the bottom is just exactly what you're saying, like totally going to fall out, you know, on the, on the lower end for a business like that or like this one. It's just like eventually like you're free and price sensitive and not very serious customer. They're just going to like, they're going to move on to the cheaper

a free thing that just just works. Yeah, agreed. Good enough, especially as we're heading into a recession. Everybody's going to start looking for what, what are those expenses that I might want to cut? For sure. I kind of like recessions. I've been through a few.

They're kind of fun because you don't have to work as hard. You know, you just get as not as much interesting stuff to work on. Like not spending money, it turns out it's not a lot of work. It's really not. Just waiting, just battening down the hatches and waiting. it out till the deal's come knocking. Oh, change the subject a little bit, and then we should come back to this deal. There's a funny, you know, there's this funny group of people on Twitter who, and I need to

pull it up. I have it on the screen here, but they like watch exactly like what the constellation and serial acquirers do, like software acquirers. And like, it is fascinating to me how they've all gotten this idea of, you know, of what the market is paying for a certain type of business. And they've never changed that worldview, right? Like, to them, they're all still talking about it's like 2014 and Constellation is acquiring software companies.

And it was super funny this morning. They're all like, yeah, here's all the companies, Constellation bought this past year and the last six months. And like, here's what they paid for all of them. And I'm like, no, they didn't pay that. Like, it's not 2014 anymore. You can't buy software companies for 0.5 times revenue that are doing pretty well. Like, it just doesn't work. But it's interesting, you know, and I thought it was

interesting to bring up with you because the, the investing community will get this meme in their head that that's the way the world is, and then they just keep it that way forever. And the folks that are Constellation bros or whatever, like I saw it, and I was like, wait, like, that's five years ago. It's not that way anymore, guys. So you can't do it. Anyway, that got my dander up this morning. So I thought you'd be interested in that, that girdly observation. Well, you know, I know that they, they had a public one that they took private a small public company in Canada because in Canada you can go public as a much smaller company than you can in the U.S. That was around that number, that 0.5x revenue.

And there's this certain class of software company or I've seen it where usually their engineer founded and run and they've just gotten entrenched at running with like a lot of people. they have like, you know, it's a senior VP of HR and they have like, you know, five people in the finance department. And they have, you know, full-time admin and expensive office lease and all that. And it just like eats their $10 million of software revenue, you know, it just like eats it up. And they're sort of stuck. They're not growing fast enough that they can, you know, get escape velocity. They're not strategic to anybody.

And so I think Constellation is still able to pick some of those office. especially outside the U.S. Just because, you know, it's, it's, you know, might be 0.5 times revenue, but it's like 10 times profits because they don't make any profits or infinity times profits. Yeah. Yeah. But also a testament to how bad, like, and this comes back to the deal, I think we're looking at how bad a revenue multiple for me is as a rule of thumb, right? It's just like, yeah.

It's irrelevant. Yeah. I understand. Yeah. I mean, I understand why they're doing it here on micro acquire for a specific class of high growth stuff. Yeah, if you're operating at 95% gross margin, like, it's an okay, it's an okay approximation of what you could potentially generate if you were to turn off all sales and marketing and just run it for cash, right? And like, and just hold it, hold it flat. But like, for everything else, it's just like, as exactly you're saying, it's totally irrelevant.

Like, it's just the worst kind of lens to look at it to use to try to figure out the value of a business. Well, it is, and it assumes that ARR is sort of infallible. And I think the other thing about revenue multiples is you look at public companies now that their valuations have compressed. And Jason Lemkin tweets about this. Like you have Twilio, which is growing like 40% a year with like $3 billion of ARR and is trading it like four times ARR. And so it's like, okay, what was your small enterprise SaaS software startup worth again? Like, let's be really generous and give you a Twilio comp. Like, you're worth like $8 million, not like 50 like you thought you were.

And so I think that like that just ripples through a lot of things. I think this whole revenue multiple thing has just been so dumb. It's been going on for so long. And hopefully the other thing about these kind of structurally unprofitable companies, right? The thing about Google is like it has always been really profitable. It has thrown off cash flow and reinvested that cash flow. But many of these SaaS companies just run so structurally unprofitably for years. And I'm zooming in on Twilio there, but yep.

So Twilio is still running really structurally unprofitably. And that's part of what the market is pricing into them is saying, look, you can't just spend a billion on R&D when your app seems to just send text messages and another billion on sales and marketing when everyone already knows about Twilio. And if you keep spending that much, then, like, you know, are you buying growth just like the plant app? Or are you actually generating growth because your product is so good? Well, and so I have, I saw that stuff about Twilio and I was like, wait, I think I know why

they're getting punished so bad is this cost of revenue is like super high. It's like a 50% which is not not software cogs, right? Because they're, and correct me if I'm wrong, but like a lot of their business is totally dependent upon they sell you, Mr. Customer, the ability to send text messages and that sort of thing. And then they have to turn around and they have to pay the carriers to send SMSes to people's phones, right? Yeah, exactly. And the carriers know they have some leverage in that.

And so, and obviously there's, there is price competition on Twilio too. I have a friend who runs a business that's basically just like Twilio but cheaper. And it does really, really well. Yeah, I think that's, if there's a takeaway from today's lesson, like don't get into a business where it's really easy for people to compete with you as you slightly cheaper. That's what this. Or start a business that I think the next generation, I want to see some free products out there. Like I think nobody has done a really good free CRM that then has upset. probably HubSpot is the closest to that where like, you know, there's a lot of free features

you can get. But like there should be like a free docu sign where it's just free. And it's pretty good. And then yeah, there's some things that upsell like maybe API access or something and whatever, five or 10 percent of people adopted. But you just build your business model differently. And you just don't spend anything on sales and marketing. You don't spend on sales reps. You don't even spend that much in R&D. You spend like some amount to build the product and make functional and basically stable. And then, you know, sort of like credit karma, right? Where it used to like, they used to have to pay for a credit report.

And then credit karma was like, no, your credit report is free. And we are a credit card leads business. We, you know, we read your credit report and then we pitch you on why you get an NMX platinum. And I think that there's more opportunity for those sort of models where people lead with otherwise paid product that's free. that is your home marketing, a bunch of people use it, and then you find some way to upsell it. And it's not a billion dollar revenue business, but it's a tens of millions of

dollar revenue business that's super profitable because you don't spend on sales marketing. Yeah. Well, and I think that was my case for where this guy should take this plant app, right? It's like, okay, become the online community for plant nerds. I can't believe I just use that phrase. They're really plant nerds out there. It's unbelievable. Yeah, herbologists. I don't know what they would be.

Herbies, the equivalent of furries, but for plants. Oh, God. Here we go again. That's why charge five bucks a month. It's been a long week. You dress up like a fern. Oh, man, there's some weird stuff. Yeah, there's some weird stuff out there.

There's some weird stuff. Cool. I think, man, awesome job today. This is a crazy business. Seafood for plants. I can't blame this guy for trying. Not hot dog. Not hot dog.

It's not hot dog. It's not hot dog. It's not plant. Plant, not plant. Fern, not fern. All right, we'll end it there. Thanks, man. Really good job.

It's good good dude. Good doing this with you.