Invest Like the Best with Patrick O'Shaughnessy - Jesse Pujji - A Primer on Performance Marketing - [Founder’s Field Guide, EP. 27]

Episode Date: April 1, 2021

My guest today is Jesse Pujji, the Founder & CEO of Gateway X, a holding company that builds, buys, and invests in companies that are driving the direct-to-consumer landscape. Prior to Gateway X, Jesse was the CEO and co-founder of Ampush, a performance marketing business helping power customer acquisition across some of the world's biggest brands. Jesse is my go-to person for all things performance marketing and customer acquisition, so we decided to record this episode to bring his incredible lessons to a wider audience. It also dovetails nicely into the series of episodes we are making called Primers, where we take our audience from a 0 to a 7 on just about any topic. In this Primer with Jesse, we dive into how revenue mechanics affect ad campaigns, why long sales funnels often offer the greatest opportunities for differentiation, and the various channels and strategies available for performance marketing. I hope you enjoy my conversation with Jesse Pujji.   For the full show notes, transcript, and links to mentioned content, check out the episode page here. ----- This episode is brought to you by Vanta. Vanta has built software that makes it easier to get and maintain your SOC 2 report at a fraction of the typical cost. Founder’s Field Guide listeners can redeem a $1k off coupon at vanta.com/patrick. ----- This episode is brought to you by LinkedIn Jobs. With LinkedIn, you get access to an active community of professionals with more than 722 million members worldwide. LinkedIn is the easiest place in the world to post a job and message qualified candidates. Getting started is easier than ever, and now you can do this all from your mobile device.   When your business is ready to make that next hire, find the right person with LinkedIn Jobs. And now, you can post a job for free. Just visit linkedin.com/fieldguide to post a job for free. Terms and conditions apply. ----- Founder's Field Guide is a property of Colossus, Inc. For more episodes of Founder's Field Guide, visit joincolossus.com/episodes.   Stay up to date on all our podcasts by signing up to Colossus Weekly, our quick dive every Sunday highlighting the top business and investing concepts from our podcasts and the best of what we read that week. Sign up here.   Follow us on Twitter: @patrick_oshag | @JoinColossus   Show Notes [00:03:58] - [First question] - Overview of Jesse’s career and starting Ampush [00:12:11] - Red Ventures [00:13:11] - The four components of performance marketing [00:17:47] - Time and other variables in between impressions and revenue events [00:23:12] - Understanding the dimensions of a business and their offering [00:25:32] - Common misunderstandings businesses have about their marketing [00:27:17] - Major changes in the Facebook and Google digital marketing ecosystems [00:29:27] - Direct response marketing vs brand marketing[00:35:08] - The importance and impact of effective messaging [00:37:28] - The differences between good and bad conversions [00:40:56] - Does alpha still exist, is it worth looking for, and does beta have a place [00:43:25] - Fundamentals of a high performing marketing organization [00:50:04] - Attention aggregators of marketing agencies[00:50:18] - Nerdwallet - Thumbtack  [00:51:22] - Product channel fit [00:52:11] - PebblePost[00:53:58] - Lessons learned from working with Uber [00:55:42] - Retention marketing [00:57:31] - Upcoming frontiers of performance marketing [01:01:15] - Overview of Nerdwallet [01:03:36] - How Jesse’s time at Ampush has shaped his investment lens[01:07:20] - Lessons from bootstrapping a business vs venture capital funding [01:17:05] - The entrepreneurial execution loop and operating cadence  [01:29:20] - Kindest thing anyone has ever done for him

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Hello and welcome, everyone. I'm Patrick O'Shaughnessy, and this is Founders Field Guide. Founders Field Guide is a series of conversations with founders, CEOs, and operators building great businesses. I believe we are all builders in our own way, and this series is dedicated to stories and lessons from builders of all types. Founders Field Guide is part of the Colossus family of podcasts, and you can access all of our podcasts, including edited transcripts, show notes, and resources to keep learning at join colossus.com. Patrick O'Sonnessy is the CEO. of O'Shaughnessy asset management.

All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of O'Shaunacy asset management. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of O'Shaunosie asset management may maintain positions and the securities discussed in this podcast. My guest today is Jesse Poogee, the founder and CEO of Gateway X, a holding company that builds, buys, and invests in companies that are driving the,

direct-to-consumer landscape. Prior to Gateway Acts, Jesse was the CEO and co-founder of Ampush, a performance marketing business helping power customer acquisition across some of the world's biggest brands. Jesse's my go-to-person for all things performance marketing and customer acquisition, so we decided to record this episode to bring his incredible lessons to a wider audience. It also dovetails nicely into the series of episodes we are making called primers, where we take our audience from a zero to seven on just about any topic. In this primer with Jesse, we dive into how revenue mechanics affect ad campaigns, why long sales funnels often offer the greatest opportunities for differentiation, and the various channels and strategies available for

performance marketing. I hope you enjoy my conversation with Jesse Pucci. Our mission with these episodes is to provide access to the best ideas and people in business and investing. We will soon be significantly expanding the scope of this effort. To make it possible, at Colossus, we're expanding the team in hiring two critical early roles. The first position will be our lead mobile software developer. This person will lead the development of our mobile applications, which will change how people learn together. The second position will be our lead designer. Because the existing team lacks UX and UI design experience, this person will have a blank slate to creatively design new applications from the ground up. To learn more about both roles, visit join colossus.com

forward slash careers. Now, on to the show. So, Jesse, the first part of this conversation is going to be what I'll call the definitive conversation on performance marketing, and I guess really just marketing, generally speaking, to set the stage as to why you were the right person to be having this conversation with. Just tell us the short history thumbnail version of Ampush, how it got started and what you've been doing since it's founding. Yeah, sure. I was not born a performance marketer. Frankly, I wouldn't have expected myself to end up here. Ten years ago, I was working at Goldman Sachs. And I went to Wharton, and if you go to Wharton, Goldman Sachs is the goal of every Wharton kid. I got that ring. And my dad was an entrepreneur,

came from India. I grew up around that. Entrepreneurship was what I thought I was going to do, but kind of said, man, I want to see what it's like to be an investor and learn about that. And, you know, I liked it, but I didn't love it. And I said, I want to love what I do. And so pretty much on a whim moved out west and said, hey, I'm going to start a business. And it was as in love with the idea of starting a business as I was about, and I, you know, specifically wanted to build something, build an organization, a culture. And so I said, you know what, let's bootstrap this thing. We don't want to raise an angel around and then have a gun on our head and burn money. We want to get something that can make money from early on.

And we went around and talked to a lot of mentors and friends. And they said, oh, you're good with numbers and data. Go look at performance marketing that you'll figure something out there. And we started calling it sandbox entrepreneurship, which was we're not going to come up with an idea sitting at Goldman Sachs. But if we get in the sandbox of something, we'll figure something out. And so we kind of did it like nerdy finance people would pick a business idea. So we said, okay, we got it. Numbers trade. Okay, online marketing. That works. Well, we don't have any relationships. with anyone. We're 25. What year is this? This is late 2009, early 2010. Don't know anyone, don't have any relationships. So how do we get into digital marketing? Well, there's this thing

called performance marketing. Netflix invented it and they'll just pay you kind of like a bounty. They'll pay you $50 or $100 every time you get them a customer. You take all the risk and you make the margin. And we go, oh, arbitrage. That sounds familiar. Like, let's go do that. Right. And let's go figure that out. We started to poke around and we said, well, and they'll always give you a shot. You don't need to have a relationship because it's just, they just say, hey, if you can get any customers, great, I'll pay you. And so we went around and did that. And then the last funny part was we said, well, what's a good sector to do this? And we don't know. And at that time, if you remember, online for profit universities were the big thing. Because University of Phoenix, Kaplan, they were the

largest digital marketing spenders at that time because of financial crisis, all these things were happening that the government was basically paying for it. So they said, oh, those guys will buy leads from you for $50 for a prospective graduate student. And we did not realize that CD that industry was until we got into it. But at the time, we just said, okay, cool, like, we're going to find leads. And we went to our first conference because you had to go get these allocations from people of leads for tests. And we find this guy named Alamed, he was the head of marketing at Kaplan University. And we give him this crazy pitch. We're like, we're Wall Street guys. We're using algorithms. We're doing all this fancy stuff in marketing. And he's like,

okay, you're brown. I'm brown. Like here's a, here's a 50,000 dollar contract. Get me a thousand leads next month. That's kind of how the business started. And we started doing that on search marketing. We had built all these fancy keyword structures and using natural language processing and we thought we were super smart. We'd work at Goldman Sachs. And we launched our first Google campaign. And by 200 keywords, we thought we'd found all these unique keywords and when I'd figured out. And we spend 10 grand. And remember, we're getting $50 per lead and we get 10 leads. So $50 revenue per lead and $1,000 cost per lead. And like the floor just dropped out from underneath us.

I mean, we were shit scared. And the funny thing was my dad as an entrepreneur's whole life. But when you heard about the kind of money people make at Goldman Sachs, my boss was in her early 30s making millions of dollars, he couldn't understand. Why on earth would you ever leave that? It makes no sense to him. And he's a triathlete, incidentally, and he runs an eight-minute mile.

I'm living at his house, by the way. We're bootstrapping. I'm living at his house. He takes me on a jog. And I run a 10-minute mile, right? I'm probably like in that young 20s, a little overweight phase. and we're running at a nine minute pace, he's like just yelling at me.

He's like, how did you not think of this? Like, what made you think you could just get into this industry and do whatever you wanted? And he just couldn't believe it. And I can't breathe, so I can't even respond to him. I'm just like trying to run and keep up. We went through a ton of iteration. And honestly, the way we ultimately figured it out

was it was the week of my birthday in 2010. We literally got one keyword. We copied a competitor's landing page. And we just said, okay, we're going to do exactly what that person is doing and see if the economics can work. they did. I mean, it took us that was like three months in between the $1,000 leads and that of trying different landing things. We tried really fancy landing pages that we thought were things. And it turns out

this demographic didn't want fancy. They wanted to, you know, we just learned very firsthand. You don't know anything. You just have to keep testing. That was like one of our first big lessons. And the business was okay at that point. It was P&L positive, not really cash flow positive. And we had bootstrap everything. This was like three Wall Street kids took 33K each of their bonuses and put it into a thing and I had 100K to start with a bunch of credit cards. That was how the business started. And then right around that summer, Facebook launched their self-serve ad platform. And we were sort of the generation of Facebook. We said, oh, let's give this Facebook thing a try.

And I like made the first ads. And literally I could tell you this minute what they were. It was for a master's in teaching for USC. And the headline was sick of being a sub question mark. And I put a little clip art of like a mean woman with like a stick like this looking a mean teacher. And it said, go back to USC and get your master's in teaching. Click here.

And I kid you not. I mean, this was maybe a few weeks into trying on Facebook. I came up with that idea. We were making 5% margins on Google. So $50 leads we were costing us $45. We started getting $10 leads on Facebook. And it's like one of those moments where you pinch yourself, you look at it. You're like, all right, this is real.

And then the next week we get a call, the USC person, we thought we're in trouble or something. She goes, these are like the best leads we've ever worked in our life. Like, can you get us more? And we're like, how many do you want? And literally like that euphoric entrepreneurial, we had one of six months. phase of five guys in India, we're sending them spreadsheets. There's no automation. There's no upload. There's no APIs. You have to put every ad one on one into Facebook. So we're these guys uploading the ads. And we're just going crazy, realizing that we're so early to this Facebook

thing generating massive margins. And as we looked at the end of 2010, we're run rating in the millions of EBITDA, like 15 months in. And we get a call from Facebook. And actually, it's even more specific than that. We had gotten a woman who was our account manager. She had worked in performance marketing and Facebook had hired her. And she literally got her assignment changed at Facebook from account manager for random companies like Ampush to one of the first two or three people on the partnerships API team. So she calls us, she goes, guys, why are you doing this lead gen stuff? Facebook is going to be big. I can help you guys get one of the first companies to get the access to our API. Take all this manual stuff you've done and build a software and go build software

and help people run Facebook ads anywhere. And so we had to go through this whole application process. and pitched our product and how we would automate it and audiences and all this stuff. And then ultimately got that approval in early 2011. I went to work building that software. And just to fast forward the story a little bit, we built software. We tried to sell the software. And everyone is like, what do you want me to do with this software? Like I don't know how to run Facebook marketing.

And so they said, can you do services? And we said, oh, yeah, sure, services. And then keep in mind, we had no intention of being an ad agency or getting into that world. But our customers wanted services. We're bootstrapped, right? Our customers are investors. So, sure, you want services. We'll get services.

And then we look at each other. how do we build services? And we go, well, we, Goldman Sachs services, like, let's do what they do. Like, remember how we used to do recruiting? We went and just recruited from the top schools. Wherever we could get top talent, it's funny because our talent's been kind of a secret weapon for us, but we've recruited an amazing talent. We'll train them on how to do this from the ground up. We taught ourselves, so we don't need an expertise in this. And that kind of set the wheels in motion to going from whatever that scale was to by 2015, having probably three, 400 million in ad spend. And a lot of it was luck, a lot of the right place, right time.

But our clients ended up being in 2011, our vintage was like Uber, Dollar Shave Club, Supercell, which makes Clash of Clans, one of the most downloaded apps, Peloton, Blue Apron. I mean, just the who's who. Because all of those guys at that same time were looking for customer acquisition help, and Facebook became the first thing they did. So we just scaled this kind of massive thing. And then in 2015, we sold a minority investment to this awesome company called Red Ventures, who really taught us to expand our thinking.

And if we were really great at this performance marketing thing, maybe we should be getting equity shares in the businesses, Rev shares. Like, how do we use this platform to start to build and scale businesses? And so from there, we've done some M&A. We continue to have a big marketing services business and also invest in buying different things. Well, it's a perfect setup because you've been doing this for 10 years now. And not only have you been doing it a long time, but it happens to be the period of time that this has become an enormous thing. A couple years ago, I think it was Chumat that said some X percentage of venture dollars are just going to be spent on customer acquisition through Facebook and Google. And this is just a key place to win and get customers these days. And I've never had a conversation on the podcast about performance marketing. So if we put

ourselves in today's lens, and then we'll probably want to talk about some of the history because it's important to know how we got to hear. I'm going to pretend that I'm a new company coming to you, let's say a prospective client. I've got something to sell and really have you walk us through how you would approach a new client, educate them on whether or not this kind of advertising. marketing is for them. So when you and I first met, you talked me through this really interesting framing that before we get to any of that, the channels, the spend, the paybacks, the LTVs, all this kind of stuff, you really have to start at a far more basic level with the who, what, where, when, why of the business, the revenue event itself. So maybe you could begin there. When you're

talking to a new company, how should they be thinking about this as a way to grow their business at the most basic level? Yeah, absolutely. And I think there's probably three or four categories to start with and then I'm going to dive into each of them. But there's this concept of we call it the revenue event or the economics of the marketing that I always say you've got to start there. And part of that is because most of the biggest mistake I see most companies make is start talking about spending money on Facebook or marketing before they've understood the economics of their business itself. Yeah, I'll come back to that. The second one is kind of the strategy which is the who, what, what, what, what, what, what, what, what, what is the who, what,

testing, all those things, they tie together. And then the last one is people, the actual organizational discipline, which as you mentioned, is a relatively new discipline in the world. But backing up, we always say start with the revenue event. And what you find is that every business theoretically has a revenue event, right? They have a time when the cash register rings, as we like to say. That is the point. When you go backwards, you start to think about marketing strategy. And when you go forward, you think about retention and upsell and all these other things. And so let's think about a couple examples, right? If you're a super sell, Clash of Clans, the revenue event is the first time someone gets to the point where they're like, I want some gold coins because I want to go faster

in the game, right? If you're University of Phoenix, the revenue event is when someone writes their first tuition check. And then a typical e-commerce or subscription transaction, someone comes to a website, they put their credit card in, and then they start paying you every month for that. So there's three different examples with different revenue events, but they all have different velocities and connection to the marketing cycle of it. So in the case of Clash of Clash, you look at a Facebook ad, you click install. I mean, the funnel is very short, right? And then a lot of it is you get into the game and then how do the mechanics work to get you to pay something? If you don't let them play enough, they won't buy it. But if you get them play just enough, but the mechanics of tying that impression then to that monetization event, for example, something we found would be when you actually talked about the level or you prepped to the customer for how they're going to get to the gold coin opportunity, that actually improved the entirety of that funnel. So entire economic, shifted up in that funnel versus the traditional, which is like, play now, play free, gets you a lot of people in the front, but then maybe not, doesn't monetize so much on the back.

That's a very short funnel and you can do a lot of testing throughout it and very fast. Contrastive with University of Phoenix or mortgage businesses or any of these other things, someone sees an ad and it's usually a very soft ad. Like, do you want to have a higher income or do you want to think about buying a new house, thinking about refinancing, okay, click here, you click, then you go to a website where you maybe read and do some stuff. Then you fill out a lead form. Then that lead form gets routed to a call center.

then somebody calls you from anywhere from a week to 90 days. I mean, typically a maturation of leads is like 90 day process. And then you enroll. And then by the way, there's even a funnel event between enrollment and start because they lose 20% of the people who enroll. They don't ever start. So the revenue event there is a totally different animal,

one that has to be optimized considerably throughout different phases. And then e-commerce, it's slightly different. It's like in between those two. And that to me is the starting point because if you don't understand the economics and oftentimes a good example of, hey, I want to figure out my Facebook strategy. I'll go, oh, so tell me about how does your funnel convert? What?

No, I just had Facebook strategy, Jesse. And I said, yeah, but Facebook will happily spend your money. And if you go back, maybe originally back to my story, I just told, we didn't understand the funnel was an issue. We just said, let's buy some ad words. Everyone says arbitrage keywords. And then we started spending money and realize it had nothing to do with the keywords we were buying it, everything to do with that landing page we were sending people to.

And so that's a small example, but generally understanding that. And then, of course, the next step of any of these things is retention. and understanding the economics of when someone does pay you the revenue event, how often do they pay you? And I oftentimes will tell early startups, be highly conservative with your payback periods. And the best pro tip I give is like try to actually get a negative working capital model. So try to actually charge enough money on the acquisition that you'll make a profit.

Because that's the other place we see people blow themselves up all the time. We've seen a legitimately a billion dollar gaming company go out of business because they're misprojecting their lifetime value. And then it actually came to roost in the income statement and they didn't have money. like they literally ran out of money. And so we say be very conservative, focus more on payback than lifetime value has a place. But generally when you're doing this early on, it's all about payback period. Just to clarify a couple of things on the revenue event before we go to the next level down. So you've introduced one variable, which is really interesting, the sort of time between

original impression and the revenue event itself. So my first question is, what does that cause you to do differently in your job, whether that's creative or a number of times you touch somebody? or like, what does that variable do downstream for the strategy of marketing? And then once we answer that, I also am curious, are there other variables other than time between impression and revenue event that you think are especially important? Yes. The second one, you know, there's really a bunch of a variety of different ways it impacts the business. I mean, one thing is just knowing it.

That's a funny one, right? Like some people go, no, hey, I just ran Facebook and I don't have any customers. And you're like, well, you know, buying a mattress is we work with a mattress company. it's very different. Someone takes their time to figure that out versus downloading a mobile app. The cycles are just important to understand and run your business on a cadence as it relates to that. The second thing that's most important is and relates to that is data feedback loop. Realistically, you can't optimize a campaign in a 90-day velocity period in a week or two. So the timing matters a lot. The other variables that are related to that, there's a bunch of

So number of steps, right? Again, in the example, this is less about time and more about how many things have to happen, how much friction occurs before I make money. And the fewer number of steps, the easier it is to connect and optimize them. You think about the long funnel of an online education or mortgage. I mean, we've seen situations where, gosh, the leads are good. They're coming in. But the sales team takes a week to call them.

And guess what? It's too late. Those people have already made that spontaneous decision. and they decided and they enrolled with another school that called them faster. And if you ever want to experience this, go to mortgage or go to an online education, fill out your information. And we joke that by the time your hand moves from the time you've hit center, your phone will be ringing.

And because the most optimized companies know that that matters a lot because in that moment, you have that intention. So the more steps you have in the funnel, the more points of failure, the more points of optimization, it goes both ways, by the way, just to be clear. Like a gaming company can only be so much better than another gaming company. a long funnel can get significantly better, right? I mean, they can build massive advantage. And when you think about differentiation, building unfair differentiation, we tell people like Ampush is

one of the best Facebook marketing firms in the world. And we're probably 10 to 15% better, right? And at times we've been 40, 50% better. And over time, it's gotten less because Facebook's gotten easier. But if you get really good at the funnel and the economics and everything that happens after that, you can become 100% better, 200% better. Length allows for that. Let me try to summarize this back to you because it's really interesting.

So on the one hand, the value of performance marketing, especially where you can attribute success or not, is highest when you can iterate a lot, which means low payback or negative working capital. So instant payback, short time between impression and revenue event and relatively few steps. So that's all great. But the cost of that is that it's more competitive and less room for optimization. So there's pros and cons to both. It's not like a spectrum from good to bad. The last variable, by the way, related to this, kind of we talked about time, we talk about number of events to optimize is, I would say, is economics of the revenue event.

So remember, when someone pays for an online education, a USC teaching, that's like a $60,000 purchase. When someone buys gold in Clash of Clans, it's like a $10 purchase. Although one funny story aside is, this is a little inside baseball, there was a guy in the UAE who was spending a million dollars a month on Clash of Clans. True story. So that guy aside, like generally speaking, these are smaller dollar amounts. And so the economics are what then allow you in the marketing front. Well, I'll talk to companies and say, you know, I sell $10 makeup. My average order value is $15. I'm going to start buying on Facebook. And I cringe and I go, eh, I don't know. Because Facebook especially as a marketplace, and this is an interesting split between Facebook and Google. Facebook as a marketplace is ultimately a cost per impression game that you're competing with everyone. And so lower AOV, lower economics, unless they make up for it. with volume and velocity, they end up having a tough time competing in that marketplace

against people selling mattresses or leads or universities or anything else. Google, on the other hand, every single marketplace of Google with keywords is elegant. You could plot it on a chart, right, where you say, well, what's the cost of the product? What's the cost of the click? And it's pretty linear. So an auto keyword or the one everyone else talks about is that form of cancer. Mesothelioma is $100 or $200 cost per click because one good customer there is worth millions of dollars, whereas, again, mascara is probably 25 cents a click. And you're only competing with

other people selling mascara. But the idea there is understanding the economics of within that revenue event tells you how much you can obviously put into it and how much waste you can occur and take. And so to add to your model, if I could find something fast with short funnel iterations, but very expensive or, you know, a high value to the customer, that's where things become really, you know, you get a really interesting business. And like the reason Clash of Clans is class of clans is their games were so compelling and addictive or whatever and they monetized so well that when we worked with them, we had other gaming companies and we would just go, man, their economics are just, this is the easiest company to do marketing for, right?

It's just, they make so much more money for every install that we generate that it's just easy to do marketing for them. I think it's a good bridge into the second stage of this. We've got the defined revenue event, those really interesting variables to understand exactly what's going on around that revenue event and how that might impact. you think about marketing, what then is the importance of the understanding that the dimensions will call it of the business and the offering, the who, what, where, when, why? And as you walk new companies that you're meeting through this framework, what are you trying to accomplish?

Yeah. You know what I like about it is that it's super simple and super intuitive. Who are you selling to? What are you selling to them? Where do you want to reach them? When do you want to reach them? How do you want to? But then it can actually like a fractal, it can actually get very, very nuanced. And it can literally be the way you do like a detailed Facebook ad campaign. So it layers all the way to who I'm going to target moms between the ages of 30 and 32. Oh, wow. Or I'm going to, who, the people who search this keyword. So you can bring it all the way down to this highly granular level. What can effectively be a conversation around creative strategy? What are you saying to these people? Are you telling this will save you money? Are you telling them it will be make their

life better? Are you going to show them a video of jumping cats? Like what exactly are you doing? What are you showing, what message are you showing to them? Where is like a channel strategy or what channels you want to use? When could be, there's some businesses when, whether it's bad, they pick up or weekends. There's always these jokes like dating customer acquisition campaigns do terrible on Fridays and Saturdays because you think you're going to get lucky and then they crush on Sundays and Mondays. By the way, the other category that falls into that is jobs, right? And Friday, Saturday, you're like, I'm not thinking about my job. And Sunday and Monday, you have to go to this job. And that's when the customer acquisition campaigns. And there's all kinds of different little when nuances

of understanding your business and how a customer buys in your business. The biggest mistake people make is they try to do everything at once. And so the other reason it's important to do this is because you say, okay, yes, we can identify all the keywords you could ever buy. But we got to start with one thing. We got to make one thing work. Make sure one thing works economically sound. And it's almost like any investment strategy anyone wanted to write, which is like, I got

to put some capital in and some capital has to come out. And if I can get that producing regularly without a lot of energy and effort, then I can go on to another channel or another set of strategies or another. thing. I'll see a lot of companies I'll come in and they're going, well, I've got this much SEO going. I've got a little bit of search. I've got some Facebook. The whole thing is really small and none of it's really working all that well. And that's a very common thing that we'll run into in the market. If that's a mistake of action, what are the most common mistakes of understanding, meaning when you visit with new companies, what do they tend to understand the least well about

themselves as you walk them through this list of questions? You'll meet a lot of business people and entrepreneurs who they spent a year developing their product. I've developed the fanciest mattress. It has AI built into it. It can do all of these various things. Hey, can you give me an agency? And I'm just going to hand them this thing to do the marketing with it. And I kind of go, hold on a second.

You spend a year plus developing this product and you're going to hand it to some seven-person company where you're going to be their smallest client to start. They're going to give it to the intern's intern. And you think they're going to crack your marketing for you. It's like an incentive's problem. And what I tell them is I say, I want you to spend at least half as much time as you spent developing your product on developing your unique marketing strategy. And to me in the beginning, it's a founder level thing. It doesn't mean the founder has to execute every little campaign.

And my little rule of thumb is, and somebody taught me this too, is 90 days with more than 50% of your time in focus for the founder to crack any channel. One channel. One channel. So if you want to get Facebook working 90 days, 50% of your time and that energy until, again, just like any business, you can dial up the spend every week if you want and you continue to get the returns that you expect you'll get and consistently get that. And then typically I tell people, again, then someone spends, you know, 50 or 100K a month on Facebook and they go, Jesse, I got to diversify. And I'm like, no, you don't need to diversify. I tell people until you're spending a million dollars a month on Facebook, then talk about diversification. There are ceilings like anything,

like there are various ceilings and plateaus you run into in the path from spending 100 grand a month on Facebook to a million dollars a month. And oftentimes people will unknowingly plateau themselves because, again, they get freed in their focus. We've mentioned Facebook and Google a lot, and obviously Ampush itself in many ways was like at the right time to be learning from and riding the rise of these two ad platforms, which now dominate performance marketing. I don't know what their combined market share is, but it's crazy high. Like 80%.

80%. And so before we come back to the present again, I just want to understand a couple chapters of the 2010 to 2020 period, maybe by asking, what have been the major change? changes to this ecosystem. Maybe it could be defined as like Ampush starts doing things differently in a new chapter. Help us understand that evolution. What are the major changes that have happened? Walk us through those. Yeah, sure. Let me actually, I'll back up a little bit even further. I think most people don't even understand the history of marketing and advertising. And I didn't either, by the way, many, many years in before I actually asked myself that question

and tried to understand it. There's some famous quote, I don't know who said it, where it's like, the only way to make money is to sell something or help somebody else sell something. Right. And the marketing and advertising business is one where you're helping people sell something. And it's an interesting trade where the platforms, you think about even back to newspapers, maybe that's, you know, start there, then radio, then television, they had attention, and they were trying to sell attention and units of attention. They're the sellers of attention. And their buyers are trying to buy revenue effectively.

They're trying to buy, you know, they're trying to buy sales in some capacity. And so, you know, you had newspapers, which classifieds were pretty direct response. People would open them up and look at things. Oh, I'm going to call in and that. Even White Pages was a form of advertising that was pretty direct response oriented. And television, you know, early on, there's actually a funny story about P&G where they would launch television in cities and they would just see their local stores have massive sales. And so even television started more DR radio. But over time, they say when DR gets big enough, it just becomes brand marketing.

This is you're sending you to enough people. And so over time, we saw these things to really develop as two separate disciplines for the most part. Brand marketing was tell your story, do it big. It has to be millions of dollars. And up until the internet, essentially, most of marketing was either huge dollars, massive brand, or even if you wanted to do direct response, it was like infomercials or it was like call centers. It was still stuff that cost you a lot of money to do something. Do you have a very simple definition for direct response versus brand is as simple as like direct

responses. They go buy it right then. And brand is just like they learn about the company or become aware of it. Typically, if you think about the marketing funnel, right, there's the IAIDA's awareness, interest, desire action. There's like 10 different versions of that, right? Theoretically, you can't sell something until someone's aware of it. You can't sell something until someone has interest. And so typically brand marketing is thought of this top of the funnel. I'm going to drive broad awareness and believe that if enough people know Coca-Cola exists or have a

high affinity for it, they go to the grocery store and they'll go buy it when they buy it. Direct response typically, you could either think of it as cutting through the funnel. So in one moment you become aware and desire, like you see this, you know, little, contraption that goes into your orange juice so you don't have to open it and rip open the thing, like that classic friends example or some random thing on an infomercial. Or you could think of it as they just circumvent the top parts of the funnel and they immediately drive to action. So the marketing is built and I think of it as revenue-based marketing, which is the way I measure in it is does it generate revenue for me? Whereas I think of it is, at least in the short term,

do I get more awareness? And again, the disciplines are quite different. Brand marketing tends to be it's bigger. They measure it's, I would call it softer metrics. They might say something different about that, but like softer things, they're not, there's less accountability in that world. It's a little bit more like madmen. And direct marketing is this like more hardcore thing. But direct marketing used to be pretty hard before the internet came along. And the first step of online marketing was display marketing. So it was like banners and someone went along and they sold all the brand markers. I can get your thing in front of tons of eyeballs and that's kind of started iterating. And there's a little bit of direct response pre-Google, but not much. Right. And then Google launches

is the idea that I'm going to search a keyword and then you're going to show me a relevant ad. And that was the first sort of game changer in direct marketing. And the biggest game changer was I could put a credit card up similar to like AWS now and all these other things. I can put a small credit card up. I don't have to talk to a person and I can start getting highly relevant customers to my product. And that was, you know, from 2000, whatever, three or four till even we start in 2010.

I mean, Google, there was no Facebook. There was nothing else. Right. And it was incredibly dominant. and it affected almost every vertical, and it was just this amazing kind of form of marketing, but it was very different than anything that existed before it. And then Facebook came along,

and honestly, Facebook in the early days, with the exception of people like us who were really kind of gaming their systems by targeting things very specifically like substitute teachers and showing the ad to 40,000 substitute teachers, the early days of Facebook were kind of challenging. And people thought,

hey, this may or may not work. The ads were on that right rail. They weren't in the news feed. And what really changed the game for, Facebook was, not surprisingly, a bunch of who, what, when warehouse stuff, right? So the what, first of all, one of the most important things was they started putting ads in the news feed. The double what was they started putting ads on mobile in the news feed, because remember, they didn't launch their mobile app until I think right around the time they went public.

And then the who became less about their targeting tools and more about their news feed algorithm, figuring out what a person wants and serving it up to them. To go back to your original question, like, what's the last 10 years look like? It started with Facebook being kind of this little offshoot of Google, it could get you some DR for certain categories, daily deals, stuff like the education stuff we were doing, gaming, it worked for a few categories. News feed, ads got into the news feed,

mobile launched, and then you started having, like, sometimes people call them custom audiences, but really it's the Facebook algorithm starting to use the data they had about a person to serve them a much more relevant experience. And that just led to this dynamic where almost any marketer could make it work on Facebook and make it work at scale.

And then the most crazy thing about Facebook is it somehow has become a brand and a DR vehicle. So you can still spend the 50 bucks to get going. But in order to make it work, what Google does not do, Google doesn't get you a lot of impressions. You search, mascara, you're going to see a few ads, you're going to buy it. It cuts that funnel, right? Just go to the bottom of it. Facebook, a good campaign on Facebook, let's just say, is 10 million ad impressions, of which 1% of the people click. So that's 100,000 people.

of which 2% of those people buy. So you sell 2,000 subscriptions or whatever you're selling. That's like a great campaign. But what you get is the benefit of the customers and the 10 million impressions. And that I think is one of the many factors that has led to this rise of D to C and all these other things. Now, other channels have come about and they've kind of drafted off of Facebook. You've got Snapchat.

You've got Pinterest. Amazon is an interesting one for e-commerce in particular. Amazon will probably be the third biggest because of scale. And the big reason for that, the other ones, the reason Pinterest and Snapchat aren't quite there yet. is we call it the Holy Triangle of Performance Marketing. The Holy Triangle is scale, so volume of customers, right? Cost and quality or revenue.

And the reason that's important, and this was a really important nuance that we learned early on, is in most industries, you have a volume discount. I buy a thousand desks. You're going to give me a cheaper desk each time. In media, because there's space and there's less space as more people buy, that's one reason for it. there's a volume premium. The other reason for it is because people aren't optimizing to unit margin. They're optimizing the total profit. So in other words, if I came to you and I said, I can get you

a thousand customers at a 50% margin, or I can get you 2,000 at a 40% margin, which will you take? You'll take the second one because your total profit goes up. So everyone is optimizing for those three variables. And the scale of Facebook and Google and certain other channels like television are so much larger than these other ones that oftentimes we will do it with partners where we say it's better to figure out a new way of fishing inside of Facebook than to spend any time on Pinterest as an example. Zuming back forward to today, it's a really interesting history lesson and progression. What you think is the most important way for a new advertiser, someone that's doing this for the first time, to think about the message itself. So we really haven't talked

about that. We've talked about lots of other aspects of this, but just around the actual message, the substitute teacher example is the one that you gave, of what your service. up. What have you learned about that? And I loved your quote that you don't get outspent. You just get out tested in this field. So talk us through the role of data and creative and iteration and experimentation when it comes to what you're actually telling prospective customers. There's definitely room for what does your brand stand for? Is it an irreverent brand? Is it a serious brand? It makes sense to think about who you want to be at a high level. And then as you go into direct response marketing, again, because it's cheap, because it's fast,

because of all those things, you often have also say, I don't really know. And again, it's another form of customer centricity. Like, I don't know what's going to resonate with people. And that mattress example is like, do they care that it's cheap? Do they care that it's fancy? And so the role of testing experimentation is everything. The actual answer to continually compounding better economics and any marketing campaign is a continued form of iteration. It's like the volume of tests you can actually run meaningfully in any given time period. And then obviously, it's not just running a bunch of tests. It's learning every time. time you run a test. And so you start to learn very quickly what affects what the most. So you'll

see stuff like does ad copy have a major effect, not as major. Does the creative and the format, like video versus non-video has a major impact on Facebook in particular, the headlines matter a lot more. So first you learn these different pieces of it. And then they each become individual variables that you're constantly testing and iterating against. A lot of this goes back to human psychology. There's urgency. There's that famous book, influence. And I kid you not, we have people read it. When you get to a certain level at Amput, we say, read this book. Do you have urgency? Do you have scarcity? Is there some kind of a deal you're getting from someone? And how does that flow into the ad copy that you're writing and the messaging that you're sending to a customer? And then there'll be different

strategies people have against those specific influence variables or other types of variables, what competitors are doing. And then it becomes kind of like a product management thing. You just have like a backlog of things you want to test. How big do you think they're going to be? And you just run through them and start testing them on a frequent basis. This may be too specific a question, but I'm just interested in what you've learned about conversion in general. First of all, I don't even know what the expected conversion would be on serving someone to Facebook ad or maybe even going all the way back to the closer to the revenue event on a good website. Like let's say you get someone to the website. On a good website,

like what does really good conversion mean? What does really bad conversion mean? And then ditto for serving them some piece of performance marketing in one of these channels. What's really good? What's really bad? Give us some guardrails there. I think the first thing you have to think about is what is the person, what action are they taking, right? So let me. me give you a huge range. Really bad is probably sub 1%. Really good is like above 10%. Now, it depends on what you're asking to do. If you're asking me to fill out a form that I'm going to get paid on because I'm selling a lead to a university or mortgage business or something, then like those conversion rates tend to be in the like five to six percent range. But the

ultimate conversion, right, which is to the revenue event is far lower than that. Because on the other side, I'm selling that and somebody else looks at that as media they're buying. They look at those. I'm going to buy a thousand leads from all these lead people. and then 2% of them are going to become students for me. And a typical e-commerce business, you know, we would say, depending on the average order value and all that stuff, it's like one and a half to three percent. So if you're better than three percent,

that's pretty good in conversion. The other thing relating back to the revenue event and the funneling was like this metric that we talk about called APM, which is acquisitions or sales per thousand impressions you're serving on various channels. And what that does is it collapses the clicks and the conversions into one metric. And in some ways you want to manage it that way, right? because I'll tell you another funny ad I ran when I was 25 and building the business was go to class naked and online universities, right? And it was a woman holding herself. There was no nudity,

but she was naked clearly and, you know, she was like protecting. And dude, best click through rate in the history of Facebook, 40% click through rate, zero conversions, right? And Facebook banned it after like I spent $5,500 on it. They banned it that this doesn't fit within our content guidelines or whatever. It was like the early days of clickbait. I didn't even know. what I was doing. But that's why you want to manage click-through and conversion together. Because part of your question of what makes good conversion is, is it a consistent experience? Do I get what I expect when I click on the ad? Is there something driving me to actually purchase this? Is it clear as to what I'm buying? And so you can be really, you can sell really hard

up front with the ad. And if someone lands on the conversion page and the product's $500 to buy, you're going to lose everyone. Right. And so you actually have to mix those things together and then measure them together. And that ultimately, again, this is kind of a little bit of our playbook and secrets. But if you think about Facebook as a competitive auction of CPMs, when the price goes up of CPM, that's not Facebook. That's the market saying that the impressions are more valuable. And what that means is they're getting more ROI for every impression they're serving because they're willing to pay more for them. So if you're not able to consistently outbeat that market, your CAC is going to go up because the baseline cost is going to go up. And so a common thing we'll

see with companies that are a little bit further along is they'll go, my CAC was 25 bucks for the last six months. And now it's 40 bucks. and it's all CPMs. Facebook's getting more expensive. And we go, show us the creative distribution between now and then. You're spending 40% of your money on the same creative for the last six months. I go, yeah, but that's our winner. That's the thing that led us to the promise land.

And you go, yeah, of course. Like, if you're not getting better yield out of that real estate, another analogy I'll give us the farmland analogy. It's like it's a piece. It's an acre of land. And if you don't get better at farming it to get more crop out of it consistently, eventually your yield and your margins are going to get the exact same thing on Facebook. It's fascinating that there's sort of a

an interplay between arbitrage back to your Goldman days, what I'll call alpha and beta. I'd love you to walk us through that idea. So the way I would think about alpha here is like being early to Facebook and you're getting that moment where you had, you know, it was $10 and you couldn't even believe it. And that sort of is like an alpha. So one is, does alpha still exist? I guess it probably always does to some extent. Is it worth looking for is another interesting question?

And what does beta mean? Because obviously people wouldn't keep spending in these channels if it wasn't working. like, you know, in aggregate, it has to produce results. Yeah, I think of it as a little different. We love doing all these finance analogies to this stuff. Like, I actually think what we did in the early days of Facebook was arbitrage. I think we were early to an asset class that was like illiquid. People didn't realize the value of it.

We did earlier. And gosh, dude, we made tons of money doing it. Right. And then the beta of the market is like, oh, well, everyone does a certain things in a certain way. They all target in a certain way. And if you just look at the beta margin, I can spend $20 on an impression. I can get this many clicks, as many conversions.

I can tell you the averages. The beta is like 0.7% on average across all of our stuff. And let's say a percent and a half conversion rate. You could probably build a business. It's probably going to be pretty commoditized, low margin. You'll still make money, right? I mean, there's people doing that. It's the average.

And then we think of alpha as anything you can do to beat those two numbers. Because it means that your tractor on the same plot of land is able to pull out way more crop than anybody else's. and you've got to keep tuning that thing to make it better and better over time. And it kind of goes back to, again, just to tie up some loose ends, like, if your funnel is massive and long and has tons of endpoints, dude, you can develop, you can get a lot of alpha out of that thing. The story of quicken loans and Dan Gilbert is all hearsay.

But like what I've heard is the guy practically invented digital direct marketing, but is a mortgage business. And he was going to the point where he would figure out where you were calling from. You were from Kentucky, and he would route your call to a broker who was a guy from Kentucky. right to talk about alpha and like now you're going to go you're going to get your mortgage from that guide it's like your guy down the street even though he's sitting in detroit in the call center so when you just think about the size of those funnels there's significantly more alpha creation abilities where it's essentially outperforming the market in the same function in the case

of quick and loans i mean legitimately probably built it into one of the largest i mean it's a crazy business right it's super profitable it's fundamentally a commodity business and yet they're just so much better at this and it's all that point from serving ad impressions to the time someone signs at the revenue event. You've set me up perfectly for the third category, which is the people. People plus the way that organizations manage this function. Pure outsourcing is the example you gave earlier of build a mattress for a year and then just hire someone else to solve this problem.

I think your observation is, and correct me if I'm wrong, that the best companies don't do that. They use firms like Ampush as fuel, not as the source of the fire. And so I'd love to hear what you've learned about the best marketing organizations. What does the leadership look like? When is it installed in the company's life cycle? What are the best groups look like? What are the best performing teams and people inside of the companies that you've worked with? Yeah, it's a great question.

You know, there's stages that we see that different things tend to happen at that I think makes sense. And in kind of our point of view, I think there's this is zero to five million in revenue businesses. And typically one of the founders has to own this. And they have to get intimate enough to understand the economics of it. and why it's working, why it's not. And we tend to recommend that either you find a former Goldman person or someone from finance,

teach them how to do this or find a consultant. But like you have to ingest that DNA early on in the organization to understand and build out. And you kind of mentioned as we say third parties, they're good at pouring kerosene on the fire. They're not very good at rubbing sticks together. Right. And the entrepreneur has to rub those sticks together.

And then once you're at a place where you're kind of consistently spending, say, you know, $100, $200,000 a month, so maybe you're $5, $10 million in revenue, and you're looking to scale that. And what you're running into is issues with, I don't have enough creative production. And you know what those issues are. It's not like, I don't know how to scale from here. It's like if I just had more creative testing, if I just had more people, fingers to keys, building more ads, I could do this. That's when oftentimes we'll say, hey, that's a good time to take a third party. And you'll typically see people go from spending a million dollars a year to like $5 to $10 million a year in the second phase. And it's still typically pretty,

hustly. You know, that's when like they'll have 40% still going to one asset and they're just trying to get growing and scaling. And then they go into the like 10 million, say a year, or they're 25, 30 million dollar business. And that's typically when an ambush will come in and we'll say, hey, you can take your 10 to 30 to 40 or 50, right? But you can't do it the way you're doing it. You have to be rigorous about your testing. You have to analyze every single ad all the way to the end, even think about retention as it relates to specific ads, tie out that entire kind of data a loop. You want to be very methodical about your testing and experimenting. You want to have a roadmap. You want to build all these things. You need full time creative, full time this, full time that.

And then scale the business to 30, 40 million in performance marketing and maybe a hundred million dollar business. And then I think oftentimes what we'll see. And I'll circle back and talk about the team and stuff in a second. But we'll say, oh, now you're like a real brand. Now actually you need scale. And now you go find yourself the CMO of blah, blah, blah. And yeah, maybe you should have a feel good billboard. And, you know, you should do these things that are going to really, get you on the map in a more serious way and your marketing budget's going to head to 100 and your top line's going to head to 300 or more and you want to be thinking about stuff like attribution, brand messaging and really going to the next level with a strong performance marketing engine at the

core of it and a strong funnel and analytics and all the things we've talked about already today at the most core around what you're doing. So that's progression that we would say, you know, I think around that 30 or 40 million, if you're serious about building your own performance marketing organization, I think throughout that entire journey, having a really strong kind of head of growth type person, even with third parties or not. I think if you're serious about building a performance marketing organization, I think you start building it, you know, and you're sort of at the end of an Ampush life cycle of 20 or 30 million and spend.

Often I say serious because we, there's a little bit of our own biases, but we see a lot of organizations that do it because their investors want them to do it or because they want to tell a story. And then literally in two years they'll call us back and say, oh gosh, like this isn't working. I need more help. And I think the ones, the Amazon's of the world, some of the best companies build these organizations like

critical functions in their thing, and those are really strong, but there's a lot of businesses that sort of do it to check the box. What does it look like? I think early days, it's ahead of growth and maybe some consultants, someone to analyze numbers and data, someone who can do the creative stuff, and maybe a web developer who can make the experimentation faster. One thing that we always recommend is like engineering and product, you have to create some kind of a sidecar for marketing.

Otherwise, their stuff gets deprioritized underneath the core product stuff and you're not able to make marketing go as fast. So an early team could just be like a head of growth, 50% designer, 50% analyst type person. At scale, what we think a great organization is like, you've got a CMO, ideally who is strategic, who can look forward, who can tell the story, you can do all those things, but also is pretty analytical and can think about numbers. And if they're not, they certainly have surrounded themselves with another person who's highly analytical at a senior level who can drive those things. The leadership then breaks down into There might be stuff like PR comms or other things that,

but really the head of growth is this person who we think of them as they look like a VPN investment bank or an engagement manager at a McKinsey type place. They're very strategic. They're very rigorous. They're very comfortable with numbers. And they really can understand how the pieces fit together to be able to build and scale this thing. And they have a system and a paradigm that they built. And then underneath them, it depends a little bit on the business.

Sometimes people do it by the major product line. Sometimes they do it by channels. but there's some form of like the actual marketing output that's going out. And then surrounding those groups is like designers, web developers, the doers of the actual marketing. So there's like these centers of, we call them marketing leads or whatever growth marketing leads, but they're really doing the day to day of that stuff. But they're surrounded by the people who are helping them execute those things,

and have a scaled organization. We've talked about how this is a new discipline. And I think that's just an important thing for people to recognize. I think what you tend to see in the world as you see, there's a lot of, I'll call them hand wavy brand marketing. And it is not meant to be negative towards them. It's just they're not the people who are going to run rigorous analytical Facebook campaigns. They're the ones you think of great, you know, big ideas.

There's a lot of hustlers in this space, which again, I don't mean negatively. I just mean they're freaking creative people who come up with good ideas, but they're not particularly rigorous. And now there's like we'd call them the Ampush breed that every phase of growth at DoorDash is run by a former Ampush person to give you a perspective, right? And they're the people who combine a little bit of hustle, but really they're analytically rigorous people who get into this experimenting and testing orientation. And that's kind of what we think to look for. But just for the founders and everyone out there, those people are not, that's not like

an engineer or even a product manager. The world is not as developed yet in that talent orientation so that those things exist. And so part of us you'd have to be willing to create that or just recognize that that's what's out there today and that people need to learn to get there. Is there anything else that we haven't covered on, I'll call it like the present state of opportunities for marketing that you find interesting. Obviously, I know you focus on direct response, maybe Facebook even more specifically. What else is interesting? We haven't talked about aggregators like a nerd wallet or a thumbtack. I don't know much about them. I'd be curious what you think about places like that. Or you mentioned the original stuff, newspapers,

radio, television. There's lots of places that we haven't talked about that aggregate attention. Walk us through the rest of this sort of like succeed by selling something for somebody else. What are the other attention aggregators? How do you think about them? How do you advise companies? A couple of interesting trends I'd highlight. One is always experiment with everything. people always go, oh, I tried that. Hey, have you ever tried this? I tried that. It didn't work. We try to train people to say, last time I tried that when I did it, it didn't work. It's back in the bottom of the pipeline. I'm going to try it. And I'll give you a very specific example, which is kind of crazy. Snapchat when it first came out was not great in terms of their marketing. And then Instagram stole stories.

Instagram made stories creative work and made that thing work. Now, someone this year literally inside of Ampush, I heard this is like a bullet point somewhere. Hey, we took what we were doing on Instagram. We tried it on Snapchat. stories and it's crushing it. And you go, wow, Snapchat, it's the fastest growing channel for us right now as an organization, right? And so constantly test and experiment everything. And there's also, you know, we didn't talk about product channel fit, which I think is another important thing, which is some products and some things are just better for certain channels than others. Gaming tends to work on the Snapchats and even Facebook in the early days. They tend to be a leading platform. Online education and search or insurance and search is amazing. I'm looking for auto insurance. I want to buy it. And so

thinking about product channel fit is a really important concept broadly. Are there any other general lessons there that you think people should ask themselves about that or even channel by channel? What sorts of things you think about? Yeah, I think the easiest hack for it, honestly, is just look at what people are doing where and what's working. And by the way, that could be a reason to do it there. It could also be a reason to not try to sell auto insurance on Google today. You're going to get crushed. So maybe you've got to figure out a different who, what, one where for Facebook. The other big thing that you'll see is there's a techification of old world channels. So there's this company called

PebblePost. And they let you run a direct mail campaign like it's a Facebook campaign. So you can log in, you can make your creative, you can decide what kind of addresses you want to send it to. They'll ship it out for you on your behalf and you'll start to get customers from it. And they'll track it and they'll tell you what's going on with it. And that's happening everywhere. It's happening in television, with DR TV. So the techification, if you can learn how to run a campaign on Facebook or Google, you can probably port that capability and mindset, over to a lot of these new channels as it goes. And then, you know, the other thing that we've heard and seen a lot in the marketplace

is combining channels in smart ways. So we had a, we had a partner who they ran, they took the country and they split it into thirds. And for one third, they ran radio. One third, they ran direct mail. And the third third, they ran both. And individually, the economics did not make sense for either of the first two. When they combined them, the economics were like a six-ax, right?

And you just, maybe it's, you know, it's a slightly older demo they're going after. it's like, oh, they heard on the radio. Then it's like, how many impressions did you serve to the person before they did it? But I think the biggest underpinning of all this stuff is be very open-minded, be very curious, and constantly experiment. And never tell yourself, that did not work. Again, we would change the language to say, we were not able to make that work. It didn't work for us, right?

Because the thing works. Somebody is spending money on it and doing it. And so I think for all those other channels, I think DRTV is going to be compelling. Again, the big things that matter are like reach. Can you get to a lot of people at scale? you measure effectively. One reason DRTV is compelling is because of that vanity URL. So the fact that you can say, you know, same thing with podcast. Like you can really get to the specifics of that. And then can you build this kind of an analytical and testing framework on top of it. And from those

things, then honestly, any channel can work like many things, right? Everything can't work for everyone all of the time. Do you have a single company example from somebody that you've worked with across Ampush's history that you think was the most interesting sort of end-to-end experience, whether that be because of how they did it that led to success or failure or you picked the reason why. Was there an end-to-end customer of yours that you learned a tremendous amount from? We worked with Uber for a long time and did a lot of driver acquisition for them. And that was a fascinating one. It made me realize how much of our business was the bottom of the funnel in activation versus traditional marketing. They were a huge customer of ours.

It was a huge badge of honor to work with them. And I'd get into every Uber I got into. I'd go, I'd hear about Uber. And they go, my cousin, my nephew. you, my uncle, my breath friend. And I was like, we're spending like tens of millions of dollars on this. Like, what way? And then I realized I was asking the wrong question. Then I started asking same question. Where did you hear about us?

I said, the same answer. And I said, where'd you sign up for Uber? Oh, Facebook. Oh, I did that on Facebook. And I was like, yes, like that's an ad from us. And I think what they did that was really well was Uber because of the immense talent and rigor there. We talk about a long funnel and building an advantage in that funnel. They would test and measure in every little piece of it.

you know, where did that person come from? What city was running in it? Is it better to text message them once they sign up or better to call them? Okay, how do we, and you think about the funnel for a driver's insane, right? First you have to sign up. Then they contact you. Then they like run a background check on you. Then you have to get your car checked. Then you have to actually start driving and then they have to keep you driving. And so I think the level of rigor and experimentation at every little piece of that kind of blew our minds, right? We were able to connect things like, you know, amount of driving the person did or even amount of effective customer demand they drove because of incremental supply to the specific ad creatives that we are running. And that kind of rigor,

you don't see it that often. It brings up an area that we haven't talked about that I want to make sure to touch on, which is retention marketing. So we've talked mostly, I think, about the ultimate revenue yield on per thousand impressions or whatever, this combined metric that you think is important at the front end. What about after you have a customer? So what have you learned there about driving retention, about continuing to market to people even after they're a customer. What are the best practices from your seat and that you see companies do in this area? I think my depth is much lower in retention. I think what we've seen there learned, some of it is the old adage of great products, great services, people stick around and that

matters a lot. I think the best companies think a lot about the natural orientation of a customer. Everything we've talked about goes back to customer centricity in some way or the other, but they go if you email someone every day and that's not the natural cadence they need your product or service, it's spam. If you never email them, they're going to forget you exist. If you're never interacting with them. So I think the best companies think about what's the natural interaction that happens with the customer? And they put a little bit of extra pizzazz or fuel against that to keep the person engaged and keep them going. The other thing is, and this goes a little back again, I'm a hammer here looking at a nail,

but like people who segment their customers to understand, there are some customers who never leave you or keep spending more with you every month. How did you acquire those? Who are they? Let's actually, you know, one of the funny examples in the market we see is, what's your cack? And one telltale sign of, again, if someone who's not yet sophisticated enough, they'll go, oh, it's 50 bucks. Well, hold on. The sophisticated answer will go, well, we have five. We know our highest quality people. The people who say for remittance business, we work with, well, the people who have family everywhere and they send money every week, we'll pay $300 for those guys, right? And then the next down level, we pay $200 for these types of these other people we only pay $15 for because they use us once for a transatlantic. actually never come back. You mentioned Snapchat as the fastest growing of the platforms. What are the other, I'll call it pure frontiers in performance marketing, even if you're not there active yet, you have your eye on it as something worth watching and interesting that's emerging. TikTok is an obvious one. It reminds me of Facebook in the early days. I mean, there's going to be something big there. There's almost no question of my mind about that. They're very early. And so it's going to take some time. And there's a little bit in this space. We learned it the hard way a few

times of that adage of pioneers get slaughtered and settlers get rich. So there's no reason to be the first oftentimes. It's actually better to be second or third and let somebody else go through all that rigmarole and then come in and just build a better mouse trap and these specific channels. The CCTV or DRTV, I think is going to be a beast. Like it's going to be a big, big thing. Can you just say more about what those are? I think a lot of people won't be familiar. Yeah. So that's when, you know, you're on Hulu. Hulu has a self-serve ad platform now. And so if you have the ad version of Hulu in between your random episodes of Seinfeld or whatever, you'll have ads that'll pop up for D to C brands or for others. And you can actually upload a video creative,

serve it there, and pay the way you would run a Facebook or Google campaign. And because the vanity URL will say Poogee.com forward slash Hulu, there's actually a really easy ability to tie it back to what you're spending there. And we've heard like lots of positive things about it in the marketplace. That's a very meaningful frontier. We actually do a lot with this and it's growing fast and it's big. It's not a channel so much as a how, I guess I would call it in my little thing is influencer stuff. And I think influencers is in the top of the first inning. Give us the quick overview there. So both size, scope, how you would attack it, are there interesting businesses like self or platforms being built? So Influencer 101 was I'm going to pay someone a fixed fee. They're going to

write an Instagram post and they're going to say buy my product. 201 for influencer was, hey, influencer record a bunch of different ads for me. And I'm going to run. ads from my handle. Influencer 301 is I want to take your handle and I'm going to run media from you. So I actually have a separate voice in the marketplace. It's beyond my own brand. I have some woman from The Bachelor or whatever. And she's going to have our own creative talking about how great my product is. We apply the prowess of Ampush's media, rigor and all that to like an ad campaign coming from whoever, whatever, Kelly's so-and-so's name. And we're able to get massive scale. They're incremental to what we're doing with the brands and stuff like that. But the 401 and the 501 is like,

we've seen some of this in the past with the Kylie Jenner stuff. I think China is the only place I go to look when I try to understand this. Like in China, there's literally entire firms that they recruit influencers. Influencers have their own product lines. And it's all just orchestrated by third companies that are doing this. But it's like Shopify meets some of the 301 influencer stuff where these people are launching their own stores or even temporary stores, right? Or this live TV shopping stuff. Part of your question is like, what exists out there?

Well, there's SaaS companies that are powering the recruiting, almost like a, applicant tracking system, how are the recruiting of them, the payment of them. So that's a whole segment. There's probably three or four really good companies doing SaaS stuff there. There's services businesses that will help you recruit it there. There's talent agencies that are now involved in this. So there's an entire ecosystem coming up in and around this. They're all mostly micro-influencers. One of the crazy things we learned early on was that there isn't a correlation necessarily with scale and size and ability to actually convert economically. And in some ways, there's like money ball, where you go, I don't want to pay Snoop Dog's fee or whatever to run a campaign from his thing.

It's just too expensive and it doesn't back out. But some niche person who you and I have never heard of, but 50,000 people have heard of them, they actually are the best economic tradeoff. And by the way, this is all happening on Facebook, Instagram, Snap. So it's not like these are channels per se, but they're almost a tactic inside of the channel. You asked about NerdWall, the NerdWalls. That's a massive business. It's a really, I mean, a lot of what Red Ventures does is buying those businesses.

How does it work? Can you just describe how it works? Sure. So generally speaking, those businesses are trying to help a customer navigate a purchase decision. If I'm at what credit card do I get for this or if I want to maximize my points? And typically, most of the source of their traffic is nonpaid, partly because of the way the economics work. They want to write really good content, build calculators, all these tools so that you can come on the site and get value and you're getting picked up through SEO, through organic search, which is sort of a fixed investment, but no incremental cost every time you come on. and then I'll go in a nerd wallet. I'll read a bunch of different articles. And then I'll go, oh, yeah, this credit card.

Based on, I have two kids. I live in the Midwest, whatever. That's the right credit card for me. Click through and buy it. And then the credit card company, say American Express, will pay NerdWallet a bounty every time they attribute the customer back. So it's a form of performance marketing where they start as a source. And it exists in almost every vertical.

And so those businesses, I think, if you're a brand in one of those spaces, especially early on because they're fixed price and because they already get volume of customers, they're a really good place to start because there's no variable cost. There's almost no risk as long as your economics work on your side of the revenue event. I think in every vertical, you're going to see versions of that. Let me help the consumer make a decision and then I'll get paid by the company. And Google's pretty good about managing that. And even customers are pretty smart. Like if they go to something and they've got, this is so biased, it doesn't make any sense versus the people who keep it puritan to do better in that realm. And aggregators take all kinds

of flavors. Like you'll see some that they really are just editorial articles and they make money on the back end of that. You'll see you mentioned thumbtack, where they really want to help the customer from end to end. There's a lot of creativity in that world. At the end of the day, there's a customer who wants or needs something and has some challenge and there's like businesses who provide it. Yes, Facebook is this massive, non-verticalized, but has this ability to show the person the right message, right place, the right time. But then there's so many different onion layers of what other ways can I serve that customer trying to make a purchase decision to allow them to get that. That's a win for everybody, by the way. The customer gets a better experience, aggregator gets

paid and the person gets a customer. Generally, this category is called affiliate. Affiliate has some negative connotations associated with it, but generally affiliate will be anywhere from 15 to 25% of the mix of a scaled marketing direct response campaign. I'd love to now take your collective experience and apply it in sort of a different way, which is, I always say I love people that get just an insane amount of reps looking at other businesses through some unique lens. You have a very unique lens. You've walked us through that the way in which on the paid side, tons of different businesses, got into so many businesses, Ampush, has worked with over the years,

acquired their customers. With all of that learning, I'd now like to ask you questions as an investor. So let's say tomorrow, everything Ampush related was gone, and you set up a new fund to just be an arm's length investor in businesses. And I'm not even going to specify the kind of business. Early stage, late stage doesn't matter. With everything you've learned, what would be that lens? Like, walk me through that lens of how you, and I'm sure,

done this too. Think about businesses as you consider investing in them. The place I typically would start would be maybe not surprisingly understanding the economics of the business. And by that, I mean, what's the revenue? What's the gross margins? What's the cycle of selling this thing? How challenging is it? It's all these things that kind of happen after the click, if you will, to try to understand how big of a problem is this for people and what do the economics look like when you get it right. And there's some of the common lenses of what's the actual value prop? Is it a big market, the standard stuff. But then the next step is, okay, what are the economics of this business? And, you know, how much does it recur? What are the gross margins associated with it?

And kind of go through that economic thing to understand how challenging will it be for them to get from a person looking at this all the way to actually purchasing this. And then what does it look like with if they're successful? And if you believe that someone can be successful in doing that, an example of business I did invest in, it's like competitor, Smile Direct Club called Candid. It's one of the first angel investments I made in the Amphish journey. And I was like, oh, so this is like, everyone knows if they have this problem. Like, I know my teeth are a little crooked. Ooh, I like that a lot, right?

I can build very engaging, creative that's going to catch people's attention to drive up interest. You know, in this dynamic, I talked about the numbers in a campaign. 10 million people, 1% of them click. It's oftentimes very driven by the psychology of impulse. And, oh, okay, yeah, I've been meaning to get that done. You don't need to convince me that I have that problem. Okay, I'm going to click on that. oh, there's a funnel. Well, I got to like go either go into a center or actually do a home kit.

If you get really great at that, there's a lot of alpha ability in building that out. And then the product is like two Gs, which is much cheaper than the competitor in Visaline. All in economics of customer acquisition can be 15, 20 percent. And it's very believable that that's the case. And then I'm like, yes, I get this and it makes sense. And then the APM, I think over time can get better and better in those businesses. It can be in every different channel. The other thing I'll look for that kind of, it's a little bit talent, a little bit economics,

is have they already built some of these unique modes? And typically, by the way that shows up, by the way, is in some insane LTV to KAC, right? Or some max Drake where you're like, wow, they're getting five to one economics or six to one.

And you go and they go, oh, wow, they've got this huge little SEO community of like 200,000 people that are constantly coming in. And yes, they can blend down their Facebook cost dramatically. Or wow,

their email is really compelling. Oftentimes that stuff will show up economically, but you want to make sure it's consistent. It's not just they're really good at Facebook ad buying, because as those things scale, you're going to want to see the ability to have multiple things that blend to superior economics over time. It plays well in two directions. One, you can spend more on marketing and scale.

The other one is you can actually put more into your product and actually improve. If you're selling medication or whatever, you can get the formula even better. You can do other things with it? So I'll spend a lot of time on, is this the best their economics will ever get? Or do I actually think they're already pretty good at this? And they haven't even tried it's like the base VC playbook, standard big market, whatever. and then believing that there's a lot of marketing alpha in their business. Part of this, too, is understanding, obviously, the teams and how they're going to execute.

And I think you have a really unique viewpoint. Sort of everything that I've ever talked to you about, I think is because in many ways you, yourself were a bootstrapped business that never had the luxury of millions of dollars in the bank before you produced revenue, sometimes for a long time, a lot of cash burning. I want to talk through what that bootstrapping experience has taught you and sort of have you evaluate when it's appropriate to do that building versus the more traditional funded variety where you might not make money for a decade or longer, as is the case with a lot of the biggest financial outcomes for investments, at least in the last 10 years. So just give us the basics of

lessons from bootstrapping, maybe what it requires, the good, bad, and the ugly. And I want to weave in this concept that you have of the entrepreneurial execution loop. I think this is a really powerful concept that I want to walk through the steps of and I'll let you decide how to introduce those steps. But bootstrapping and the execution loop, I'd love to spend some time on. One last thing to add on for the previous thing. And it kind of relates to this question of the way we had a point of view and around businesses and executives. There's a certain type of executive and there's kind of this funny Buffettism, right, where he says, I want to invest in a business. Any idiot can run because eventually an idiot will run it. And there's these incredible franchise,

like Visa, right? Like, man, I don't know anyone at Visa. I'm not saying they're bad executives, but like that is a fantastic business. And there's a lot of command and control and like my reports. I'm going to make sure my reports do this. And that's sort of a traditional kind of what you think of as big corporate businesses. And then there's this other one which is like I can go to the bone anytime I want because I can dive in deep businesses like Amazon. Like the senior people there could get into the innards of these things you and I are talking about any day of the week if they wanted to.

I met the president of Disney Plus. And I kid you not, the guy has 1,300 people responding to him. He went toe to toe with me in a conversation about Facebook attribution. How does a guy who has 1,300 reports, it's just a certain way of thinking and playing that they all have decided they're going to do. And to me, that's the mode of executive that I get excited about to from an entrepreneurial perspective and think about investing. And because it's someone who can talk about, like a CEO of a company who I asked them, CAC, maybe they know it. Is your CAC driven by click-through rate or, and they don't,

they start to show that they lack the ability to go into that. I'm like, hold on a second. I'm not sure I'm going to invest in you because I want someone who can, they don't live in the bone. But if they need to get to the bone, they can quickly get there and they quickly understand it. So let's switch gears to talk about bootstrapping. I think a lot of it starts with what you want. I think there's at least two reasons people start businesses. One is like you have this idea and you just want it to exist in the world.

And it's the only thing you care about is this idea and some version of it existing. And then there's others that are really like the idea of starting a business is very exciting. You're just excited by business and entrepreneurs. But the first thing is like bootstrapping is to me a very personal choice. and I think it has to be like what's driving you and what are you solving for? For me, it was like, I want to do this for a long time. I don't know exactly what business I'm going to be in. And I don't care.

I want to live every day. I want to solve problems. I want to work with great people. And I want to do it as long as I can. And for me, that was the motivating thing of like, I'm going to bootstrap. Why would I go raise money? Yes, I'm sure I could put together a deck and pitch someone and they would give me money. But why am I going to go do that when I don't want to go on that path.

And I think that path starts, I always tell founders, it starts probably after your angel round. You could probably raise money from a bunch of individuals. and still go bootstrapped. Once you start taking institutional money, their job, not in a bad way, is to get a return on that capital for their investors. You've got to stay on that trajectory to go to an outcome and do an exit. And I don't think, by the way, there's anything wrong with them. In fact, I think VCs are amazing at building businesses.

I think they can get you faster, better. But typically that ends with some kind of an outcome for everybody, including yourself. And that has to be something you want. It might be public. You might be a public CEO. And so I think it's not just ownership in the equity sense, but there's ownership in like, whose show is this and how is it going to run that I think as early as you can try to figure it out. And sometimes you can start a whole business and go down that path. And the second one,

you go, okay, this one I want to own. I want to be the person running the show and in charge. But I think people who bootstrap for like to maintain more of the cap table or vice versa, that's not the reason. It has to be something that you truly want and you're willing to go through that orientation. So for us, it was we want to do this a long time. If you make one dollar of profit a month or cash flow in the case of like Bezos's orientation, you can exist forever. And that for us was important. We want to exist forever.

We don't want the pressure of burning tons of cash and being dependent on the kindness of strangers for the next round of our funding. That was just very important to us. And then, you know, we put up whatever money we had and let our credit scores drop down to 800, from 800 to like $650 or whatever. And we charged up a lot on our credit cards.

And part of it, you know, one thing I also want to talk about bootstrapping, which is very personal. We had set ourselves up with the cushiest cushions of life if this didn't go well. And so I don't want to be the like hustle porn. You got to go moving it. We went to Wharton. I worked at McKinsey.

Then I worked at Goldman Sachs. And then I said, you know what? The worst case scenario is I'm going to apply to business school in a few years if this doesn't go anywhere. And I'll probably get some insane, very high paying job that I'll be lucky and grateful to have. So yes, I'm okay charging $50,000 on some American Express. It would be inconvenient if that happens, but it wasn't a life and death thing for us. Another version of that I say that is like, I think most people who want to be entrepreneurs, they start thinking about it 10 years before they become an entrepreneur.

In my case, I had my dad, I was 15, right? And so by the time I was 25, I was ready, and people go, man, Jesse, you're such a natural event. No, I just started thinking about it when I was 15. You might start thinking about when you're 25. And by the time you're 35, you'll have enough savings, you'll have whatever, and then that'll be the right time for you. We've shifted a lot of the math and the thinking here. So one is we say, your customers are your investors.

Very simple. They're the people paying and let's solve for exactly what they need, which I think all these things have to be taken in the middle. If you go too hard on that, you become too much of a service as business. If you go too far in the other direction, you're just building random stuff they don't want. You have to find that happy medium between them. And there are some compromises you would make. I think that's a really important one. The other one that we do is my favorite one is the unit sold. I call the unit sold math. And with the unit sold math is you come to me and you say, to get the basic operation running, I probably need about $50,000 a month. And let's assume you're

not raising any money. How many of whatever you're doing do you need to sell? minus the gross profit to get to 50,000. Oh, okay, you're hawking supplements for strength training or whatever or 50 bucks a bottle and you make $40 every bottle and you need $50,000. Okay, now by hook or by crook, by any way you can, right, figure out a way to sell 12,000 of those. And to us, that's a big part of the culture early on, which is like, man, you learn the innards of all of these things very quickly to understand

instead of talking to me about your investor deck and how many investors you're going to talk to, because that's the metrics everyone typically talks about. I go, talk to me about your unit sold math. What's your plan to get to 12,000 a month? And I'm that passionate about this, not because I think there's anything wrong with venture funding, but I think it gets a lot of airtime relative to this other path that I think there's a lot of potential for.

And so a lot of entrepreneurs will go, yeah, I had my whole pipeline of 100 investors and this and that. And I go, just do that. Just apply that same energy to do 12,000 units a month, math. They'll come back and go, wow, I did that. And, dude, I have a path. I don't need, you know, investor money. I'm going to go do it this way.

The age old cash is king mindset. And I think, being creative and thoughtful about that, whether it's using credit cards because that's a deferred cash liability. I have talked earlier about negative working capital, like things that can provide you cash today, asking your customers to pay up front, just things that can keep you alive in the cash flow concept and learning it very early is super, super important and being able to figure those things out. And I think the nice thing about it is if you can make a dollar a month and profit or cash flow, if you can hire a certain number of people, if you can hit the units you want, you get to build

the way you want it and you get to this really deep execution ability and problem solving orientation that can take you a very far away. It's your show. You get to do whatever you want and you get to take the business in the direction you want it. And if you want to try something different, you can try something different. And it's fun. I do think there's meaningful tradeoffs, right? I think there are certain businesses like Uber or maybe a biotech business where there is a true value in the capital getting you to a point of either like a marketplace that get that scale is going to be the ultimate outcome winner. Or there's just something so capital intense that there's just no way you could bootstri. You just need that money. You need that cash to do

it. I think one thing we struggled with, I think we made a lot of mistakes early on. We've been every type of incorporation type. We've been a C-Corp. We've been an LLC. We've been an S-corp. Like, just silly things like that, that I think having VCs, having people who've built businesses many times over would have saved us from making those mistakes. The amount of reps of those people have seen about building businesses, like they're very valuable. Another one that was a negative is it's really nice to be running your own show. It's kind of sad sometimes that nobody else cares about your business except for you. Literally no one else is like matter. It doesn't matter to them if anything happens to that or not. Maybe your customers, but you have no investors. You have no

person who's going, hey, how's it going, guys? Like, let me figure out what's happening with your business. I think the other thing I think about with more of my pure investor hat on is, again, there's just a lot of businesses being capitalized that don't have sustainable moats, especially in these direct to consumer segments where at scale, you look at the business and you go, man, you're going to raise two, three hundred, four hundred, $400 million dollars. Uber, I get. I get that it creates, an immense amount of value that could only be built in one wave through speed and scale and all that stuff. But how does a business that sells generic medicine to people maintain that advantage in a 10-year horizon? I don't think it's possible. So I think the ways a lot of these businesses are

capitalized don't match the ultimate kind of economics. They're much more built for the venture returns that they could generate by getting big fast, which is all great in today's economy and today's world. But in a more challenging world, I think it becomes very tough on those businesses. Can you walk us through this idea of the loop, the execution loop, and maybe it's specifically, I don't think it is specifically just suited to bootstrapped founders or businesses. I think it's very generally applicable. It's interesting combination of rigor, quantitative rigor, and acknowledging that you don't know what the future holds.

Maybe there's some over the horizon vision or goal or whatever, but that you have to be very flexible along the way, but also be very rigorous. So not Lucy Goosey along the way. Like hold yourself to hard standards and that there's this happy medium for the best operating cadence within a business. Can you walk us through this loop? Let me talk a little bit about why we built it because I think that's a very important piece of backdrop.

So we started the business when we were 25 in the first few years, like most businesses, it was really fun. And then the business actually had real revenues in EBITDA. And then we realized we were waking up more often than not shit scared that somehow the golden goose was going to go away. And then we said, you know what? We thought we wanted to build something. long-term in cash flow, but like, let's just sell it.

Like, let's just, let's get this thing in an exit. We grew it really fast. Glass door started popping up with very negative things about the culture. My wife was like, what's up, dude? You don't seem that happy doing this anymore. And we really got to the point where we said, man, we're not enjoying this. And our culture is not great. People don't like the culture.

And it is a very common entrepreneur or fan, especially in the first business. And so we started working with a coach. And we got very, we said, what's going on here? And there was a few things. We started doing this thing in the Conscious Leadership Program. This is book, The 15 Commitments of Conscious Leadership, which has been pretty life-changing for me. And I'll just share a couple of the concepts, and then I can talk about the loop. So the first concept was types of motivation.

And there's these five types of motivation, according to this paradigm. And it's fear, extrinsic, intrinsic, intrusic, play or genius, and then, like, empathy or love. And that's more about the human experience, not about a person individually. And these are all, again, these are a fractal. So we might feel these, all five of them in any given day, for giving different things that are going on. And in general, we're motivated by them, right? And you think about fear motivation as like a chip on someone's shoulder.

I'm not great enough. I'm going to go conquer the world. And you think of empathy love as like, my mother Teresa, I'm going to make everyone's life a little easier. Extrinsic is money titles. Intrinsic is my own thing. Play and genius. I think of like Buffett, where it's like,

oh, I just love what I'm doing. I'm enjoying it. And they talk about fear. They're all effective forms of motivation, by the way. And there's not better than worse. fear tends to leave a negative residue on yourself and other people, and it tends to run out. It's not a non-renewable resource. It's the common thing where someone goes, I got my number, then you get to your number,

and you go, no, now I want that other number because I was scared, now I'm here, and I sort of run out of motivation. And, you know, love and empathy and play in genius tend to be renewable, and they tend not to leave a negative. They tend to lift people up as you do them. And so we started learning about this and kind of had this moment where we were like, oh my God, we've been more or less totally fear motivated for a very long time. And no wonder the culture, no wonder everyone feels negatively. And the other concept I tie into this is a concept of context

versus content. And this is another paradigm, which is like oftentimes really bright people, especially go, oh, do I like healthcare? Do I like marketing services? Do I like? And I got to this point personally where I was like, I don't like marketing services. Why did I start a business like this? And I'm not motivated to keep doing it. And with my help of my coach, You were fear motivated. You made some money. You sold a part of your company. And now you're just, you don't feel scared anymore. And so you're struggling with what motivates you and kind of went through this whole process. And the context versus content idea is it's sort of like from where are you doing it. And there's people who are mission driven cancer curing companies. But if they wake up every morning and

they're coming from a place of fear or they're worried about how they show up in the trades or how much money they're going to make, you'll hear that they're not happy. Their cultures are not happy. On the flip of that, you'll hear of like insurance brokerage or some random commodity business isn't sexy, doesn't have a great mission, but the people doing it, the founder especially is coming from a place of wanting to make his employees' lives great and wanting to help people get better in their careers or truly wanting to help his customers. And those businesses are flourishing cultures and all the great things. And so that's the concept of context versus content from where are you coming.

And a lot of the paradigm of conscious leadership is just starting to first notice in one moment you're feeling fear and one moment you're feeling like you want to help an empathy. And we looked at OKRs, which we'd been using. And we said, you know, gosh, these things, there's two issues with them we didn't like in particular. And most of the goal setting processes and systems, we said, they seem very fear oriented. They just felt like you got to set this arbitrary goal out there and you're going to rush, rush to hit it. And it's got to be a big jump up. And if I don't hit it, oh gosh, you know, that's not a good thing. And the other thing we didn't like about it was it tends to, to us at least it seemed like way better for a business you understand and know to go.

I can improve conversion by 20 percent. But entrepreneurial ventures, you use. don't exactly know what's going to happen. And so, so the motivation behind the loop is, can you build an organization and a culture that gets all the benefits of entrepreneurial thinking and approach? Speed, ambition, creativity, problem solving, tenacity, all these amazing things, and mitigates the things that tend to make humans' lives not fun, the fear of fundraising, the failure, the someone getting reamed in a conference room. And by the way, I don't know that it's possible to be clear. Bill Gates talks about himself as being a terror when he was building

the biggest company in the world, right? Uber, we've heard stories. Like, there are other stories like Red Ventures where I think they're truly, they have accomplished versions of this. But that's what I'm most motivated by personally is an organization that teaches people, brings them up, but also is ambitious and exciting. And they're doing that for the purpose of learning and growth of the people. And that people sometimes refer to them as deliberately developmental organizations that the businesses are there actually to serve the people's growth and learning, not the other way around. And that's like, I'd call it very aspirational, but that's my aspiration for what I do with my career forward from here.

And so our loop is the first version of like, okay, well, if you're going to have an operating, if you want that, you have to have an operating system that supports that. And so it starts with this idea of what's our desired future state. What do we want in the future? And that's not uncommon. And we have this example of JFK saying, we want to put a man on the moon.

It's like this motivating, exciting thing that people want. But it's not a thing you have to do or you should do. And you often hear the words entrepreneurs and business, oh, we should really get this launched, or we should really become the highest market share. No, no, no, it's not a thing you have to do or you should do or you must do or the world ends. It's something you really want. It's coming from desire and it's ideally coming from a play place or actually helping people in some way.

So that's what it starts with. That's the desired future state. And that part most people get, but it's disconnected from today's reality. It doesn't have to be what today sits. And then the next point is there's this idea of current reality. And this is a really hard one. This is actually one of my biggest personal development challenges. I'm the guy who can do desired future state all day.

And then I just did it. I just got you excited about my vision of an organization. And then current reality, you're like, Jesse, you're not, you know, you didn't do reviews for people. You're five people are waiting on their reviews. What the hell, right? And part of current reality, the challenge of it is, first of all, seeing it clearly. And not with rose color glasses or not seeing what you want to see, but what's actually

there, which I struggle with. And then the other part, and this is a really interesting one, is accepting the current reality. And so what acceptance means, what do we do? okay, man, our numbers, desired future state was 50% revenue growth or whatever, and now it's 25%. We try to explain it. We try to blame. We go to these negative places, which is very common. Oh, it must have been because of these three things happen. And you know what? Honestly, if you just think about it and this gets very sort of meditation, whatever, mindful, it's just what reality is in this

moment. This is the number. This is actually what happened. And oftentimes we don't think you can do the desired future day until you're accepting what is here and just fully, okay, this is where we are. And all of us kind of go through that sometimes where we have a bad situation. We didn't get into college we want to. Eventually, then we get, okay, we're going to accept this. And now what? Now what do we do? Right?

So it's kind of like trying to make that a real system or process. That's sort of the basics. Okay, here's where we are today. Here's where we'd like to be. And then we have this thing that we call waypoints. And it's a sailing analogy. I'm not a sailor. Somebody taught this to me.

And it's the idea, this is where it's like a little different than OKR's is when you're sailing apparently, I'm not a sailor. You don't just say I'm going to go from here to India. you go like to get to India first I need to like figure out how to get to Hawaii and so I'm going to actually my waypoint is next I'm going to put my degrees in this thing I'm going to get to Hawaii then from Hawaii I'm going to look at where the best place to go is I'm not necessarily going to go to Japan I might go down to the Tahiti or whatever you're sailing around the world and that's we think that's more similar to the process of the process of the process of the process of building a business than okay ours are kind of like getting into business school there's a checklist do your GMAT write your score whatever go through this whole process essays get your recommendations and then you get into business. school or not. This is much more of a, I don't know exactly what's going to happen. So then the way you set goals is much more about either hypotheses you have, doubts you have, which is an interesting one. Like, I'm not sure that people will buy this product. Let me launch an ad campaign to see if people will buy it. Or I'm not sure that the content's going to get that. Let me launch five of these things to get

content. And it tries to really engender that beginner's mind, right? Sometimes we call it learning leverage as goals. So learning leverage means what can teach me the most in this moment about what I'm trying to figure out. There's some prioritization against them, but generally you're operating less from a, I must hit this metric or point seven of this metric and more of where do I need to get to the next step and what's the progress that I'm going to get as it relates to that. Then what do you do? So, you set that all up. Then you do what we call entrepreneurial rigor. And this was like a learning we had after a long time, which people would say, I'm either really rigorous and analytical and I analyze everything and I come to or I'm like, I just cussle. I just get it done. And neither of those quite

satisfied us and we said, okay, there's a two by two here. And there's like hustle on one vector. Yes, no. And then there's rigor like, you know, are you being analytical? Yes, no. And it's, we actually use it as a coaching technique internally, which is like, hey, you're really good at analyzing, but when it comes to getting stuff done, you need some work, or you're really good at hustling, but we need you to be a little bit more analytical. And we think that the best entrepreneurs do both of those together, right? So they're looking at numbers, they're reacting. They're constantly going through their own version of this. And that's the way you execute. And you try to accomplish those. waypoints. And then the last part of the loop is accounting and response. And so accounting,

there are a couple of interesting things we learned. Accounting is separate from response. Because think about what typically happens in an organization is I ran my waypoints. I didn't prove the thing out. I thought I would prove out. Or the numbers didn't come the way they would want them to. Immediately if you're an executive or your person, the narrative starts to shape around that. Why did that happen? What's next? And we said, you know what? Let's pull all the emotion out of accounting. Accounting is just what happened. Tell me the facts. Tell me exactly. And the facts could be, we missed this number by this. We beat this by this. Accounting, we realized and we started doing it in meetings, it's like a five to 10 minute process. Because there's just no story. There's no

narrative. There's no nothing attached to it. You just go, we thought this, this, this would happen. And then the response is a much more interesting conversation. Okay, what can we learn from this? Oh, you know what? We're like pretty bad at setting goals as it relates to how many creative we can build in this much time. We're pretty bad at setting goals around X or Y. Maybe we didn't actually miss the mark. We're just not good at actually setting the goals, right? Or, you know what? I don't think we have the right people who can do this. So the response is a separate activity where you start to think about it. And the response can range can tie you back into any of the three buckets. So you can say, you know what? I think our desired future state was off. I don't think people want to buy

direct to consumer rubber gloves. I just don't think it's a thing. Because my waypoints taught me that nobody clicked on the ads I ran. It could be, you know, I was testing the wrong. long things in my waypoints. It could be my execution wasn't where I'd like to be. But then based on the response, you kind of start that cycle over. And again, I'm not sure that any of this is super original. The idea behind it is language matters, the approach matters, the words matter. And it's about learning and growth of the people and of the process and not about must hit this goal at all costs. And we're trying to make it fun and enjoyable in a play orientation for building businesses and entrepreneurship and not a, not like life at all costs has to be put in this direction.

You know, I always leave our conversations thinking about this. You ended it in the right spot, which is this combination of rigor and hustle, rigor and curiosity, qualitative and quantitative meaning and execution. There's this kind of middle way that is powerful in business. And I think your career has taught you that. You know my closing traditional question for everyone. So I'll ask you now, what is the kindest thing that anyone's ever done for you? What I'll talk about is the founder of Adventurers, Rick Elias, is a mentor and an inspiration to me. And I was telling you about the culture and how the culture got really negative at Ampush. He's the only person who's ever put money into the company other than me and Nick Chris is 100K. And he did this deal. We flew out to Charlotte to meet with him. And we took our whole management team with us. And he's like this fancy dinner. And he comes in and he's like, how's the temperature of the company right now? Like, how are people feeling? How are people doing this? And it was a very innocent question. There was something about the way that conversation went down. We didn't say anything. If our management team started being like, people are tired. The culture's gotten really rough. And he was incredibly kind in that moment. And it's like a testament to who he is

as a person and a business person, which is he's operated businesses. He's seen these cycles before. But in my mind, I literally was like, oh my God, this guy just like gave us $15 million. And if I was him, I would ream me, I'd be like, what the hell did I just get myself involved in? And his response, he kind of took me aside later after the dinner. And he was just like, I know building a business is hard. I understand how this is. And I'm here to support you. And I'm like here to be a part of this with you. And can you imagine in that moment, getting that kind of grace from someone. And even me as a developing leader just showed me.

Like it was one of the first things that, man, there's a different way to do this. There's a different way to lead a different culture. Fantastic. Well, this has been so much fun. I could do this with you every day. You've taught me basically everything I know about this part of the business world. So I'm glad we got to do it on the record finally. Thanks so much for your time.

Thanks, Patrick. This episode was brought to you by Vanta. In this five-part mini-series, I sit down with Vanta CEO, Christina, Kachopo, to hear about the origins of Vanta, how Vanta is automating security, and when companies should look to partner with Vanta. In this week's episode, Christina and I discuss how she encountered the problem of SOC2 compliance and why the traditional model for getting SOC2 compliant just doesn't make sense.

So, Christina, I think a good place to begin the story of Vanta is how you first encountered the problem itself. It's not exactly a problem that a lot of people wake up even aware of or knowing how to solve, but it's an increasingly critical one in the world of software. How did you first alight upon the idea itself? What was sort of the founding insight? Absolutely. So two ways to tell this story. One worked at a Dropbox and worked on a new product at the time, Dropbox Paper. It's a collaborative document editor. We were a small team of about 10 people trying to take paper to market for the first time and sort of got sideways with Dropbox itself because we realized we couldn't take paper to existing Dropbox customers because paper wasn't SOC2 compliant. It wasn't pen tested. It wasn't vulnerability monitored, etc. And so we were this 10 person team that

had this kind of terrible choice of either pause all product work for a year and a half to go get Sok 2 compliant, or skip that. But then again, take this to market, but you're not allowed to give it to any Dropbox user. I mean, it's sort of this terrible choice. So at that time, just talk us through literally what SOC2 is, what it means, how it's risen to prominence. And before you started building Vanta, how one acquired a SOC2 seal of approval. Today in the market, I think the way we explain it to customers or talk about it, it's just, It's the de facto default way to tell your customer that you take security seriously and you have good practices in place. And so what it specifically means is this host of 100 specific tasks that you complete on a regular basis.

But sort of higher level, it just gives your customer assurance that if they put data in your tool, you'll keep it safe and you won't leak it on the internet. I think it's a really important service forever and increases trust between vendors and buyers, makes the sales process go faster, gets more software bought from innovative companies. So that's sort of how we think about kind of what a sock two does in the market today. And then in terms of how you used to get one, it was this sort of bespoke arcane consulting process where you'd sort of start by calling up someone who'd done it before of sort of like taking a company public at the CFO. You can't do it until you've done it. So similar here, you can't go through a sock two until you've gone through a sock two.

So you can find one of those people. They'd kind of charge you a bunch of money to tell you about all the tasks you needed to do. and then you were sort of left on your own to do them. And then at some point, an auditor would come in and ask for proof that you did what you said you did and sort of rinse and repeat every year. If we'd done it with paper at Dropbox at the time, it would have taken us about a year and a half to go do all of that. And that's kind of full team working on it.

And so it's a ton of time and energy. If you enjoy this episode, check out join colossus.com. There you'll find every episode of this podcast complete with transcripts, show notes, and resources to keep learning. You can also sign up for our newsletter, Colossus Weekly, where we condense episodes to the big ideas, quotations, and more, as well as share the best content we find on the internet every week.