The Pomp Podcast - 306: Andrew Wilkinson On Building Profitable Businesses With No Funding

Episode Date: June 2, 2020

Andrew Wilkinson is the Co-founder and Managing Partner at Tiny. He previously founded MetaLab, one of the world's top design agencies. He has gone from working out of his apartment a little over a decade ago, to today overseeing a group of companies with over 300 employees and tens of millions in revenue. In this conversation, we discussed the no code movement, subscription business models, how to hire executives, lessons learned from acquiring so many businesses, and what the internal narratives Andrew is telling himself right now. You can learn more about Tiny at www.tinycapital.com ===============================  Blockset by BRD is your hosted blockchain infrastructure. Blockset enables enterprises and developers around the globe to deliver high-quality blockchain-based applications in a fraction of the time, at a fraction of the cost. Using the services provided by Blockset, businesses can build professional custody solutions, accurate and near real-time portfolio management solutions, auditing platforms, commercial block explorers, and much more: blockset.com  ===============================  Crypto.com is the only all-in-one platform that allows you to BUY / SELL / STORE / EARN / LOAN / INVEST crypto all from one place. Join over 1 million users currently using the Crypto.com app. Download and earn $50 USD using my code ‘pomp2020’, or use the link https://platinum.crypto.com/r/pomp2020 when you sign up for one of their metal cards today.  =============================== Pomp writes a daily letter to over 50,000 investors about business, technology, and finance. He breaks down complex topics into easy to understand language, while sharing opinions on various aspects of each industry. You can subscribe at pompletter.com

What's up, everyone? This is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Let's kick this thing off. Andrew Wilkinson is the co-founder and managing partner at Tiny Capital. He previously founded Metalab, one of the world's top design agencies. He has gone from working out of his apartment a little over a decade ago to today overseeing a group of companies with over 300 employees and tens of millions in revenue. In this conversation, we discuss the no-code movement, subscription business models, how to hire executives, lessons learned from acquiring so many businesses, and what the internal narratives Andrew is telling himself right now are. I really enjoyed this conversation, and I hope you do as well.

Before we get into the episode, I want to quickly talk about our sponsors. The first is Blockset by BRD. You've got to know them if you're building in the blockchain space. They're a hosted blockchain infrastructure company, similar to what Amazon AWS does in the non-blockchain world. Blockset enables enterprises and developers around the globe to deliver high-quality blockchain-based applications in a fraction of the time at a fraction of the cost. Using the services provided by Blockset, businesses can build professional custody solutions,

accurate and near real-time portfolio management solutions, auditing platforms, commercial block explorers, and much more. Go check them out at blockset.com. Again, Blockset.com. Our second sponsor is Crypto.com. They've been a longtime supporter of the podcast, and they've got a cool product that's an all-in-one platform that allows you to buy, sell, store, earn, loan, or invest crypto all from one place. That's right, Crypto.com. They've got over 1 million users currently using the Crypto.com mobile app.

That's a huge audience for this space. So go ahead and download it and you can use the code POMP2020 or use the link in the description to sign up and get 50 US dollars. Crypto.com. Not only do they have a cool URL, but it's the place where mass adoption is happening. And then lastly, don't forget that I write a daily letter to over 50,000 investors about business technology and finance. I break down complex topics into easy to understand language while sharing opinions on various aspects of each industry. You can subscribe at pompletter.com or go in the description and click the link there. All right, that's it for today. I hope you guys enjoyed this episode with Andrew. Anthony Pompliano is a partner at Morgan

Creek Digital. All opinions expressed by Pomp or his guests on this podcast are solely their opinions and do not reflect the opinions of Morgan Creek Digital or Morgan Creek Capital Management. You should not treat any opinion expressed by Pomp as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. This podcast is for informational purposes only. All right, guys. Bang, bang. I've got Andrew here with me. Super excited to do this. So thanks so much for doing it. Yeah. Thanks so much for having me. All right. Let's start with your background. You've covered it in a number of other podcasts.

Maybe just give us kind of the two minutes for those that don't know you or Tiny, kind of what you did in the past and what Tiny is. Yeah. So I'm kind of a accidental entrepreneur and then accidental investor. So I started a design agency about 15 years ago. And I realized that if I pretended to be an agency instead of what I really was, which is some schmo kid in his parents' basement, I could probably charge more and look a little more legit. And so I came up with the name Metalab. And I started calling founders of startups back in 2006. And to my surprise, I ended up landing a whole bunch of work. And so that ended up growing like crazy. I got a network in Silicon Valley. I started working with companies and ended up working

with companies like Slack and Coinbase and Shopify and all sorts of amazing businesses early on. And because I was based in Canada, you know, I had pretty good margins and usually agencies don't. And so suddenly I'd look in my bank account and I'd see cash piling up and I didn't really know what to do with it. And so initially I looked at like Basecamp and all these amazing SaaS businesses that are getting built. And I went, well, I want to do that. I want to make money while I sleep and I want recurring revenue. And so I built a couple of SaaS software businesses and got hooked on this idea of recurring revenue and waking up every morning and having made money overnight. And I kept doing that. And so I built some SaaS software businesses, and then I ended up partnering with Shopify and being their first major partner in their theme store and app store. and ended up building, I think, the largest or one of the largest partner businesses in that ecosystem. And so I just kept starting more and more businesses, all sorts of dumb stuff that failed that we don't need to talk about. But by about 2013, I owned about five businesses. They were all profitable and cash flowing and growing, but I hadn't really scaled out my executive team. I was still running all of them as CEO. And it was a nightmare. I'd wake up every day

and I'd have five companies to think about. And I think at that point I had over a hundred employees and I really wasn't very happy, even though I was making more money than I ever thought I would. And so I went to a mentor of mine and I said, look, I'm not enjoying this very much. What should I do?

And he said, look, why don't you sell one of the businesses? And so I ended up selling the Shopify partner business and suddenly I had a balance sheet. I had money in the bank and I realized that I couldn't just keep starting businesses and that I probably had to figure out this whole investing thing. And to me, like stocks for these boring, weird things in the newspaper with charts and wasn't really something I was that interested in.

But I picked up a book about Warren Buffett. And when I read about Buffett, I was like, holy crap, this is mind blowing. You know, he's the fourth wealthiest man in the world. And yet he and he owns like 70 companies. And yet he just sits on his butt reading all day and doesn't have a calendar. And I thought, wow, if he can do it. I'm sure I can probably copycat that. That sounds pretty cool. And so I learned everything I could about Berkshire Hathaway. And I decided I wanted to build the Berkshire Hathaway of tech. And so

I started putting that money to work. And I started buying tech businesses. And usually they were founder led. Founders were, you know, eight, 10 years in, and they were a little exhausted. They were kind of tapped out, wanted to move on and do something else. And they didn't want to all the private equity because private equity was going to flip their business and ruin their culture and take the thing that they'd built and probably mess with it. And so we would do these super quick, simple deals and promise to hold the business for long-term, keep the culture intact and not mess with it. And because I was a founder and I had been through conversations with private equity, we knew all the things we could do to make it more interesting. And so I've been doing

that for about seven years now. Uh, we're up to about 25 businesses. Um, and it's pretty cool. I mean, I get to wake up every day and really focus my energy on acquiring new businesses and doing deals and then just overseeing our portfolio of businesses and working with our CEOs. But I actually don't have a job like day to day. I don't have any one thing I have to do. And I get to be very broad and kind of play with lots of interesting businesses and problems. So it's awesome. And I get to do it all from Victoria, Canada in the middle of nowhere, where I can dress like a schmo and nobody knows what I do. So that's nice. So obviously, there's a lot of people who look at what you've built, and they're one fascinated by it. But two, they want to

understand kind of the operational details. And what I mean by that is, I really look at it as two components. One is how you spend your time every day. And you alluded to some of that, but maybe we can go deeper on that in a second. The second thing is when you go in and you buy these companies, how much integration is happening with kind of the family of companies you already own? And then what does that kind of first 90 days post-acquisition look like? And I'm assuming that once you get up to 20, 25 companies, you guys have some sort of process or structure in place that kind of helps facilitate that and make it as seamless as possible. But maybe talk a little bit about what that transition and integration looks like. So I mean, our goal is that when we

buy a business, the day after the deal closes, the employees wake up and they don't even know or care that there's literally no difference whatsoever. And, you know, typically, it's a founder who wants to sell and usually not always, but usually the founder wants to transition out. And so what we typically do is for a month or two beforehand, we're kind of identifying the opportunities, we're learning business and how it works and stuff. And then we're identifying a new leader to come in and transition in as CEO. And so, you know, that's the big thing. But the commitment is that the culture of the business doesn't change. We're not going to radically change anything day to day for the employees, and really just try and kind of grow sustainably and organically. The biggest thing that changes for our businesses is we become the bank. So we basically say like, okay, you have a million bucks of working capital in your bank account. And if you have two, we're going to take that extra million bucks and it's going to go up to head office and get utilized in another acquisition or something, unless there's some reason to keep the money there. But other than that, all the businesses run fully independently. We don't force any kind of integration, any kind of group conversation. Every business, if it was to separate from Tiny Tomorrow, would be able to operate fully. So they have their own accounting team, their own CFO if they're big enough, all their own, you know, hiring and stuff. We don't synergize at all. And that's a learning from Berkshire. um it's you know the decentralized model works really well for them because ceos want to work for them and they're not slamming these businesses together unnecessarily

i think if you look at like there are synergized conglomerates that have worked but for the most part the world is littered with our corpses right yeah and so how do you have those conversations with the management team so you gave the example of anything over a million dollars uh and operating capital is kind of get pulled up to the parent company. Is that something that you guys are unilaterally deciding and kind of running some math on? Is that a shared conversation, but you guys have the final say? Just talk to me a little bit about that relationship for what I would consider some of the more sensitive conversations with the actual teams that are operating the business on a day-to-day basis. Yeah. I mean, generally it's based on

historical working capital. So if the business only needs two months of operating runway at any given time. And that covers any fluctuations in revenue or whatever. That's what we'll do. And let's say the CEO comes to us and they say, look, if I spend a million dollars on customer acquisition or advertising or something, we're going to make way more money in three months. We'll obviously keep the money in and keep compounding it. It's more for capital that just can't be utilized by the business. We send it back up to head office. And we basically say, look, we're your bank. We're going to take care of you. You need money in 24 hours. We're going to inject it. You want to do an acquisition. We're going to inject it. Um, so in a lot of ways,

it's really nice because the management team doesn't have to think about their runway as much. And they know that they have a partner who can always, you know, do whatever they need to do and grow them as big as they need to grow. Yeah, that's awesome. And then you mentioned that a lot of times when you buy these companies, the founders are looking to go do something else. Either they've just been at it a long time or they have other interests. How do you think about identifying and recruiting new leadership talent, right? So the actual CEOs are going to come in and kind of replace those founders. Obviously, a lot of companies, the culture is set by the founder, the vision is set by

the founder. And so that would be, in many people's eyes, kind of a risk if they're going to walk out the door. you know, and even if it's on good terms, how do you kind of think through the risks associated with replacing them right after an acquisition or during an acquisition? And then how do you find that talent? Yeah, I mean, the way we find them is generally through our existing CEOs. So that's our best source. We basically go to our existing CEOs and say, hey, we're about to buy a business. This is what it looks like. And who's the smartest person you know in this space? And

then from there, we're looking for people who have done it before. Like I always say, if you're going to build a deck in your backyard, you're going to hire a red silk carpenter, you're not going to hire some kid from down the street. And so we are really looking for people who have already done it, and they've done it bigger. So if we're buying a business that has 30 million of revenue, I'm actually looking for the person who's run a $60 million business and scaled it. In terms of the risk, you know, I think hiring a new CEO is brain surgery, right? And you don't want to do it too many times. Otherwise, you know, the patient will not do well. So we're very cautious about who's going to be aligned culture for example like when we bought dribble

um it was like a i think it was maybe like a six or seven person team um and everyone there had this culture of like incredible product and design and you know really giving a damn about that kind of stuff we knew that there was opportunities to grow the business but we also needed somebody who understood the unique culture so if we brought in some douchey growth marketer yeah he probably could have pulled a bunch of levers and grown it a bunch but we would have ruined the culture and so when we recruited for that business we recruited this guy Zach Anisco who'd run Creative Market which is a very similar business for the big design community and we're very cautious about making sure that we're aligned on the goals and the high level and that he

understood the culture and that we could protect the kind of the things that made the business special but then remove some of the restraints that would allow it to grow more quickly and give them extra resources. Got it. And then I'm assuming just given how many times you guys have done it, there's got to be a mistake that you've made at some point, just the law of numbers. Don't mention who it is or what company, but maybe give us just some kind of details on how you evaluated, hey, look, this may not have been the right hire. And then how you dealt with that situation, given there had been a transaction of changing hands, then you bring in a new CEO and kind of dealing with repercussions of just naturally you're going to get not all

Well, there's really three buckets. There's mental health, right? As a challenge of just, you know, people suffer from burnout or something like that. And then there's skill set. So putting the wrong person into the wrong seat. And then, you know, the third is just bad people, right? People who are dishonest or are, you know, sociopathic or whatever. And we've been really, really lucky. I mean, we've hired probably 15 plus senior leaders and GMs and all that kind of stuff. And the lion's share of them have been phenomenal. There was one person that we hired where they were not truthful on their claims about prior success. And they ended up being very dishonest. Then we had to part ways with them. That's one exception where I look at it and go, there's somebody who's actually a bad

actor. Every other kind of challenging hire has been more that we shuffled someone who is maybe too operational into a leadership role where they had to be strategic and creative, and it just wasn't the right fit, and we had to make a change there. And then we've had a few situations where people get a little burnt out and they need to take time off or transition out or whatever, but we've been very lucky for the most part. Got it. That's awesome. And then, so for you personally, you obviously have the benefit of the curse of spending your time as you see fit. And for people who have done that before, they know that it's really rewarding, but also you can waste a bunch of time and not be super productive as well. So how do you think about breaking down your time on a day-to-day basis and any sort of

productivity hacks or things that you do to kind of ensure that you're making progress with that freedom that you have? Yeah, I mean, I'm like laser focused on a problem for a very short period of time. I burn bright, but for like, you know, 15 days, right? So I'm very, very good at starting, right? So I can take an idea from zero to one and very aggressively push it forward. And I'm incredibly impatient. Like if I come up with a business idea, I want action on it within 24 hours. I'm buying a domain, I'm designing a site, I'm pulling together a team. But after about 15 to 20 days, I'm on to the next thing. And so I used to beat myself up when I was running companies. I was a horrible CEO in many ways because I'd start an initiative and then I'd lose focus and I'd move on to the next thing. And so what I've realized about myself is instead of whipping myself and trying to become a CEO that I'm not, I'm much better suited to having hyper focus when we have a critical problem. Like if one of our CEOs calls me up, I can get on the phone and I can help them figure out a problem. Or if we're starting a new initiative, I can push that forward, but I need to be kind of an inch deep and a mile wide. And so I love having 25 different businesses with interesting problems where I can jump in and help solve them. But at the end of the day, I'm not responsible for follow through and execution and day to day details. And so I need to have that incredible group of CEOs and executors to help me achieve those things. yeah and i saw um speaking of kind of the problems and that velocity of action if you will um i saw you tweeting one time about uh the furniture business that you guys started right

you had a friend who basically created some pretty cool furniture and it sounds like you guys had a a meeting or some sort of meal together and you said hey you should do this at scale and it was like within weeks there was a business started and out and selling maybe one tell us some of the details in there and then two that can lead us into talking about kind of this no code movement and how that empowers some of that speed to actually launching things? Yeah, so I've really moved away from starting businesses. I used to be the guy who, whatever I'd become interested in, I'd start a business. So if I got into DJ, I actually, I used to DJ and I started an online DJ school.

Like if I got into gardening, I'd start a gardening business, whatever it is, I love that. And I really, over the last seven years, since I started buying businesses, I realized that I'm a lot better at buying something that's already good and making it even better versus starting something from zero and then having to scale it up. I get frustrated. I want to get, I want to skip ahead to year five or whatever. And so I really have tried my best to not start any new businesses. And this year I started a couple mostly kind of by accident, right?

So the, the, the one you're thinking of was a furniture business. I was playing tennis with this guy who was a furniture designer. He showed me what he was doing. He wasn't selling it online. I was just like, oh my God, we should totally do this. And because I own a couple of agencies, I was able to just send one email and say, hey, let's do a brand and a Shopify site and let's build this. And before I knew it, we had an accidental business that I was a partner in. So that's not really my MO. It's not really my goal, but occasionally I will accidentally start businesses here and there, but I try not to. um the other the other business that i started this year was a podcasting business called supercast

and that was one where we were helping a podcaster friend build some software to help him monetize his podcast and we ended up kind of building this software and going hey more people should use this and this is a huge opportunity so we ended up raising money for it um but again like it's not my goal to start businesses i want to be buying businesses yeah and it feels like uh if we were talking about doing this 10 or 15 years ago, that would be a really arduous process to actually get the business started, get it launched and start testing whether it works or not. Today with the no code kind of movement, a lot of the businesses that are getting created there, that's much easier. And I know you've talked a little bit about the no code stuff before, but maybe kind

of just give us your perspective on kind of where we are today and how you see that specific vertical developing over the next couple of years? Yeah. So, I mean, my, I said earlier, I was, I'm super high pace and I love seeing stuff happen quickly. And so I used to get really frustrated. I'm originally a designer. I would design something in Photoshop and I'd hand it off to a front end developer to do it in HTML or start building a web app or whatever. And I get so frustrated because it would always take a day or two to do it. And I didn't know enough. I didn't know javascript i couldn't get in there and tweak it and stuff and so when i started using webflow about four or five years ago i was like holy crap this is amazing i don't have to worry about hosting

or coding i can just myself design something and build it and so i ended up building the original tiny capital website and it was such an awesome experience because i had the idea and executed it within 24 hours. And so, you know, no code since then has obviously grown a lot. Webflow is just for websites. But this idea that with very, very simple tools, you can basically clone something like Airbnb, or you could build, you know, a complex form or something like that, where you're piecing together all these different services and basically making a web app without coding, I think is very powerful because you can test an idea. You can come up with an idea for an MVP and you can see if you can get revenue and validate the idea before you go out and raise

money and hire a whole bunch of people and go through that. And so it shortens the cycle to get to product market fit and to get to a point where you have a basic MVP. And I don't think that we're not going to be running, Airbnb should not be running on no code platforms, right? Like, it's not about that. It's about creating the really simple version of it. It's like, if you look at Axios, Axios has all these newsletters, they could have and they probably do use MailChimp or Aweber or something like that to start. But then as they get bigger, yeah, maybe they build their own custom code, but it enables people to get started and move quickly. And so you see that same effect, the Squarespace effect of you're a restaurant, you don't need a web developer. I think the same thing is going to happen with web apps and pretty soon mobile apps. And I'm super excited about that from just the idea of testing MVPs. What I'm really interested in is the idea of, you know, right now, it's not worth anyone owning a business that requires developers and coding that does say $100,000 or $200,000 a year, simply because there's no way to employ the people you need and still make a profit. With no code, I think there's a potential to have a $200,000 a year business that is actually profitable and makes someone $100,000. And while I'm not interested in that scale, I think it's going to empower a lot of people to have the freedom to run their own businesses and have a nice life and then use that capital to do more interesting things instead of being a developer at Facebook or something. Yeah. And I think part of what at least fascinates me from what I understand about the businesses you guys own, there's a lot of venture capitalists and private equity folks who would look and say, you know, what is the moat? I only invest in infrastructure businesses. And they kind of have this cookie cutter approach to what they'll invest in or buy.

With you, you actually appear to be willing to go kind of the full stack. So everything from marketplaces, like the dribbles of the world, et cetera, all the way to a furniture business, which is really just an e-commerce store, right? And you're selling any widget through that, but it happens to be a really nicely done piece of furniture. And so it feels to me like the no-code movement really empowers some of the things that are actually outside of the sweet spot of most venture capitalists and private equity folks. you mentioned it based on scale, but also it almost seems like the types of businesses as well, right? I don't know how many of them are going out looking for kind of, I want to invest in a furniture manufacturer, right, that sells online, maybe at some, you know, huge scale that, you know, and kind of blitz scale it, if you will. But what you guys are really building there,

it seems like that would be outside their wheelhouse, something like no code empowers that to be done quickly, though. Is that fair to say? Yeah, I mean, I think no code empowers both venture businesses and normal, you know, just run-of-the-mill sustainability, simple $200,000 a year lifestyle businesses. What is interesting is there's a company we invested in called Flightographer, which is a global network of travel photographers. So the idea is, let's say you're in Italy and Venice and you want to, you know, remember that trip forever. And so you schedule a travel photographer to show up in a square at a certain time and take photos of you and your family. And it's super pro. So instead of having crappy photos by dad, you get this

beautiful photo album. And it was really interesting. The founder, she originally for the first two years of the business, just had a Squarespace website, a very well-designed Squarespace website. You wouldn't know if you looked at it and it was a form. And so you basically would click through and then there'd be a series of questions of where are you and you know you want a book and what city are you in and all this kind of stuff and she actually got to hundreds of thousands or maybe even millions of dollars of revenue off of the squarespace site before then going out raising money and hiring a bunch of people and what it enabled her to do was validate the idea but also she could delay raising money and by delaying raising money she increased

her potential valuation for her first raise so she owns way more of the business than she would of if she'd gone out, raised an angel round and a seed round before getting revenue. So I think stuff like that is super interesting. And that's a very old school version of that. That's just a Squarespace site. Think about like somebody who does like a marketplace or, you know, Airbnb style website, they could get pretty far on no code. Yeah. It's really interesting to me because I think that the no code movement is like a technical trend that is now matching people who are on this almost ethos trend of we're seeing many, many people who previously may have raised venture capital not raise money now and go further earlier in the days. Some of them

then eventually raise capital, but two specifically that I'm interested in, and I know that one of them you've written about, is the Kylie Jenners and the Joe Rogans of the world. People who end up building these tens of millions, hundreds of millions of dollars in revenue never raised a right and actually have pretty small teams and it's all because uh either one they didn't know that that was a thing that you do or two they could just self-fund it right and it just took many years to grow in rogan's case and so maybe talk a little bit about um how you see uh entrepreneurs themselves and like their relationship with venture capital uh as no code becomes more popular etc do you think that there will be a material change in the way that

these companies are funded at the earliest stages? Or do you think that's a lot of speculation that's out there and instead people will continue to go seek venture capital and we'll kind of have a lot of the same moving forward? Well, I think the problem is that there's so much venture money out there now. Then there's this kind of story perpetuated by a lot of, I mean, you look at like how I built this or some of these shows, it almost always starts with, you know, oh, I went out and I raised money from a venture capitalist. Maybe not everyone. There's lots of great stories of people who didn't. But typically, the story is either I couldn't get venture capital and I tried or I did and that's how I got started. And the problem with venture capital is the only people you hear from

are the Jeff Bezoses of the world, not the Jeff Bozoses who lost all their money and failed. And so it's a little bit like if you have a gazelle, if a thousand gazelles cross a crocodile infested stream and one gets across, right? The rest of them all get eaten by crocodiles. That one gazelle is going to go, you know what? I should go interview on how I built this and I should write a business book. I'm a genius. And in reality, many of these people got very lucky or were very, very, very talented and were able to pull it off. But the big thing about Venture is that it has a 95% failure rate. So when you sign up for Venture, what you're doing is you're putting a gun to your head, right? And, you know, it makes perfect sense based on the venture

incentives. They're making many, many bets. They're making 20 bets, hoping that one turns into a billion dollar business. But suddenly you're signing up for that. You're saying, I'm going to take a dollar and I'm going to turn it into 10 or $20 at a minimum. And in order to do that, you have to grow at all costs. And so even if you build a sustainable business, that's good for you personally. If you have venture on your cap table, you have a crazy incentive and your investors have an incentive to push you like crazy. And my fundamental belief is that there's not that many businesses that are well-suited to venture. I think a lot of these business models that have been funded are perfectly good businesses that could have compounded their own capital

and grown to a good sustainable scale, but they've been overfunded. And you can see that. I mean, if you look at all these businesses funded by SoftBank, half of them are going bankrupt now. I mean, Zoom Pizza, it's insane. They got $200 million or something. And somehow, you know, now they're laying people off and it didn't work. And I always wonder, like, if they just kept working and slowly evolving that over time with some, you know, a lesser amount of money, what would have happened there? So I always think, like, capital creates a lack of discipline often. And so it can be really bad. I mean, there's no doubt that if you're going out and you're starting a consumer social network, yeah, you got to go raise venture because it's winner take all. You have to build a network effect. But if you're building a business that is simple and sustainable, I see no reason to raise venture. And I don't think people understand that it's a high interest credit card, right? At the end of the day, that's what you're getting. And it's much better to get boring 3% bank loans. Yeah, it's really interesting, too, I think, because when you take that money, given their return expectations, you're actually probably decreasing the probability of success because you're signing up to do something that's much harder than just build a sustainable business.

But with that kind of increased difficulty comes the potential for increased return as well, right? So you kind of have the possibility of bigger return, it's just harder to get there. and I think that that kind of gets lost because we've almost celebritized the venture capital. I think the problem is people forget that people who are CEOs

of now public billion dollar companies, many of them have been diluted. They own 10% or 5% or whatever and so even if you have a billion dollar business, maybe you're worth 50, 100, 200 million dollars. It's a lot of money but what they forget is that

if you just had a good profitable business that if you can get to a million dollars a year earnings, and you keep compounding at 15% or 20% a year, which I think is realistic for a reasonable business on the internet, you can become worth hundreds of millions of dollars in a very conservative, boring way. And so I think if you look at Buffett's example of the snowball, where he slowly is compounding his capital, it's very different from trying to go out and do something massive and take crazy risk and be that one gazelle. Yeah. One of the things that you've written a bunch about and I've actually talked to the Supercaster team about is a subscription

podcast. And obviously with the Joe Rogan deal just coming across, maybe let's talk a little bit about the piece that you wrote and just we can dig into some of the nuance. You've obviously spent a lot of time thinking about subscription podcast and you recently wrote a piece about how Joe Rogan basically could be making more money through subscription rather than ads or the deal he did. You had originally made the analysis on Howard Stern and the serious deal. So maybe give us just kind of a one minute summary of the math that you're using there and the logic behind why Rogan or somebody else going subscription versus ads makes more sense. Yeah, so I think, you know, I've described it as podcasters are a bunch of farmers, and they own fertile land, right? They

their only way of making money off the land is to grow vegetables, which is a lot of work. It's backbreaking labor, right? And that's advertising. So they do the advertising. It's a pain in the ass to sell. They have to have some douchey salesperson who does all the ad sales. They're negotiating. And a lot of podcasters, they're often public intellectuals or non-business people. So to them, often they're kind of allergic to that idea and they don't want to deal with that. So when someone like Spotify comes along and says, look, you're making $20 million a year, we'll give you $25, $30, and come over and we'll deal with all your ad sales, I think that's very, very attractive to them. What I've been making the case for is that there's actually a lot of oil beneath the farmland, and that's the real value. And the oil is recurring membership subscription.

So when Howard Stern went to Sirius, he had this huge public radio, or not public radio, but private, you know, FM radio listenership of, you know, I think it was like 5, 10, 15 million people every day tuned in to listen to Howard. And when he went to Sirius, they fully gated him. So they said, pay us 19 bucks a month, and you can listen to Howard Stern. Otherwise, you can't, right? And in doing so, that drove massive revenue. We kind of did some napkin math. We estimate probably between $300 and $400 million a year of serious revenue is just people who want to listen to Howard Stern, right? When he did that deal, he could not have gone out and started his own radio station and bought satellites and done all this stuff and cut out the middleman. There had to be a middleman. Either it was FM radio and a network, or it was satellite radio. They made him the best deal. My argument with Howard Stern is that Stern should just cut out the middleman, that all the technology that has been developed over the last decade in podcasting makes all of their satellites and distribution completely irrelevant. My argument is that Stern should leave Sirius. He should start a podcast and he should basically have the podcast cut off after 30 minutes, similar to what Sam Harris does, or 10 minutes, or maybe it's only for subscribers. And he should rebuild his audience there via subscription and charge the same amount Sirius was charging, except he gets 100% of it. And if you look at his business, he needs a microphone, needs an internet connection, maybe needs a talent booker, and maybe an assistant or something. So he can make 98, 99% net margins. So that was about six or seven months ago. And in that same article, I basically said, look, Joe Rogan is 10 times bigger than the current audience of Sirius and Howard Stern. It's insane that he's probably a billionaire, and he just doesn't know it yet. He's got billions of dollars of oil under his farm. and so rogan you know he could go subscription just like howard stern and do his own deal he could just say now you got to pay to listen to me let's do that that doesn't seem like his vibe

so what i'm basically estimating is if he simply just said one episode a week or the last 20 minutes of every episode is subscriber only there's still going to be ads and if you subscribe uh you get an ad-free streams. So the ads are edited out and you get the extra 20 minutes at the end of every episode or one extra episode a week or something. And maybe some kind of exclusive content for true fans, maybe streaming video or something like that. And if you just assume a 5% conversion rate, which is maybe his most loyal fans, the numbers are staggering, right? So I estimate he could do somewhere between 60 to a hundred million dollars a year at a minimum with that hybrid approach, maybe more than that, if he was a little more aggressive. And so, you know,

as a business person, I look at this and I go, this is very, very easy to execute. This does not require advanced technology. It doesn't require crazy business management. It doesn't require a big team. He could easily do that tomorrow. And yet he ended up opting to go to Spotify. And while I don't know the exact terms of his deal from what's been reported in the Wall Street Journal and stuff, it's somewhere in the range of $50 to $100 million. And it's unclear of exactly how it's structured, whether that's an annual thing or whatever. Now, everybody's saying, well, he just licensed it. So he just gave them three years exclusive to go to Spotify. The reason why I think that's a bad deal, even let's say lifestyle wise, he just hates selling

ads. He doesn't want to deal with it. He doesn't want to think about this stuff. I think it's a bad deal because at the end of the day, these guys want impact. They want to be heard by as many people as possible. And they have this loudspeaker and I think they like that. What he's doing is giving over his direct line of communication to his listeners, his podcast feed and the direct relationship where he can put anything he wants in that feed and it goes directly to the subscribers. He's now given that to Spotify and Spotify is in the middle of that. And what it means is that over the next three years, if his audience doubles, when he leaves Spotify, he loses all those new subscribers. And yeah, maybe they'll go find him once he leaves, but he loses that direct relationship. And so to me, you never want to lose your direct relationship with your customer when you're an influencer. To me, it's like, imagine if Kylie Jenner or someone that's huge on Twitter went out and said,

hey guys, I've sold my Twitter rights to, I don't know, CNN. And now CNN is going to tweet on my behalf. So you're losing all those subscribers and all those followers. So while objectively, Joe Rogan is killing it and Howard Stern is killing it too. These guys made $500 million or whatever. I'm not criticizing that. As a business strategist, I think it's insane. I think it's totally the wrong move. And I think that Rogan, he was just sitting on oil and he didn't know how to drill it and he wasn't even aware of it. And so my argument is that he should just do it himself, but it's too late for that. Yeah. And I think part of this, like Howard Stern, I actually went deep after I read your piece and went back and it's hard to remember. Howard Stern

signed that original $100 million a year for five year deal in 2004. And so I said, what's he been getting paid since then. And he basically signed a 12 year deal. And the other data point I found is they estimate that he made about $90 million last year. So there's a good chance he's been getting paid, you know, 80 to 100 million bucks a year for over a decade now, right? And so a lot of people would say, hey, that's not that big of a deal. But to your point, I think that the numbers are like close to only a million people or so are listening to the show now versus you see a Rogan who maybe it's not directly competitive in terms of the content, but it's very similar. And he's got five or 10 or 15 times the size of the audience. And so what that then leads to is

this idea of the creator used to be very similar to an actor, right? Hey, you select me, I participate in your movie, you pay me a fee, and I move on. And that's basically what they were doing with advertisers. But now we're seeing across platforms, whether it's TikTok stars, YouTube, podcasters, whatever, they're building real businesses, right? And they're looking at this as I need diversified revenue streams and they understand that the value is in that audience. And so Kylie is probably the best example where she built a billion dollar business off the back of having that audience. But are you seeing other creators, maybe people who are using kind of paid podcasts and then they have other tools or just people who haven't gotten into paid podcasts yet, but they're

building these multiple revenue streams? And can you talk a little bit about how you see that playing out over time? Yeah, I mean, I think, you know, if you look at like 1998, the model used to be, okay, I'm gonna start a dumb, you know, yo mama joke website on Yahoo. And I'm gonna put a bunch of ugly banners on it, right? I think that's the era of podcasting we're in right now. And I think that people will realize that not only is it better to have subscriber support, because you get more buy-in. People are more loyal. And you don't really owe anyone anything. You can talk about any brand. You can say anything you want. There's no advertisers to pull their advertising. As long as your audience likes you, they'll keep paying you. But that it's recurring and it's higher

margin because you're not going through ad sales or anything like that. And I think for a lot of podcasters, they're anxious because they have all these ads on, but they don't know. Maybe the CPM rates drop like crazy in six months. Maybe all the startups go away and they're not going to fund podcast advertising. Maybe Squarespace lowers the budget. Maybe Audible lowers the budget, right? So I think that it's just a better model. And we're seeing this across all media that ultimately subscription for software, newsletters, podcasting, et cetera, it's just better in so many ways. So I think that over time, that realization is going to hit. And if you think about it, all these models already exist in plain sight, right? You look at Ben Thompson at Stratechery

has been writing a subscription newsletter that's pay only with a few pieces of content previewed for free publicly since 2014. I think, I don't know anything. I think he's making millions of dollars doing that. And now it wasn't until 2019 that Substack popped up and all these writers started going, hey, I can go direct to consumer. I don't need to go work for New York Times. I can write my own newsletter. And as long as I have 1000 true fans, I can make a living. And over time, I can compound those fans and grow it significantly. You know, in the podcasting world, Sam Harris has been doing this since 2013. Right? And he doesn't have any advertising. I have no idea what he's doing revenue wise, but I would assume he's doing well if it's still working. And

he just doubled down on his subscription stuff. Now, after 30 minutes, it just cuts off. And it says, Hey, if you want to keep listening on every single episode, you've got to pay. So I think there's people that are doing it very successfully. And we've helped people with supercast and with our, our podcast agency double up, we've helped all sorts of people find the oil underneath their plot of land. You know, we've, I can't name names, but there's multiple people who are like influencers with huge audiences, and they were making so little money off it because they're not business people. And so we were able to help them build a sustainable business. And that's such a cool thing for us to show people, hey, you're a farmer, but now we're worth $10 million.

Yeah. And I think that this brings up a really interesting point around the creators versus the business people. There are some people who obviously are great business people and great creators, but there is definitely a number of creators that they just either aren't intellectually interested in it. They, uh, had no experience, whatever it is. Uh, but it's pretty simple, uh, mechanism to say, Hey, I create something and you pay me for it. Right? Like that's not rocket science that the challenge is just how do you actually do that? And part of, um, what I think you guys have built with, um, uh, the paid podcast platform is, uh, the technology previously wasn't there. Right. Because part of what I think Sam Harris and others had to do is they had to

build almost these like custom platforms that again, going back to there's no, no code for it. right? You actually had to get a developer and there was just a very big, heavy lift. And so now that there's the reduction in friction, I'm assuming that we will see many more people go do this, but obviously time will tell. Yeah. I mean, I think if you talk to someone who writes a newsletter, nobody says, oh my God, how do I use MailChimp, right? Or how do I do a Squarespace website? What they don't realize is that doing the subscription podcast thing is just as easy. like there's no major development required. It's as simple as signing up for Supercast or Glow or one of the services and putting a link in your show notes. And then you have the second feed

for subscribers and you just start once in a while doing an AMA. And then on the other feed, the public feed, you might tease it. Hey, we did an AMA today. Here's the first 15 minutes. If you want to listen to the whole thing, subscribe. And I'm just going crazy. Like I feel like I'm in the upside down and stranger things. And I'm just like screaming at all these people saying like, you're rich, like go and do this. It's so much better. And it appears that people are catching on. Right. But you know, you look at, there's been stuff like Tim Ferriss came out and did an experiment with his and, you know, kudos to Tim for trying it. And he decided it's not for him and that's fine. He has a great business regardless, but I think like his pricing and the

value proposition just wasn't there. I think he was charging significantly more than most other podcasts and he wasn't really offering too much in response. He wasn't saying, I'm going to give you a bunch of exclusive content or anything. So stuff like that has set this back a little bit, which is fine because there's a lot of oil for us to go slurp up, right? So we're thinking about how can we go out and do deals with podcasters where we say, look, we'll give you, if the audience is big enough, we'll give you millions of dollars and we'll do a revenue share on whatever your revenue is or something like that. Um, so I think everyone's going to catch on over the next couple of years though. We just need, we need a Joe Rogan or someone like that to do this.

Yeah. It's funny how, uh, once you hear that, Oh, it worked for somebody that everyone wants to do it. Right. And, and, uh, um, I think Ben Thompson's a great example on the, on the newsletter side, uh, but it also works against you. Right. And when you bring up Ferris with, uh, kind of, he tried it and I've definitely heard a lot of people say, Oh, well he tried, it didn't work. Right. And so kind of the nuance matters there. Um, I want to talk a little bit about, uh, kind of note taking and, and, um, the organization of information. I know that you've been talking a lot about room research, uh, and kind of this product where, uh, you can essentially download your brain. Um, maybe talk a little bit just about like where the intellectual curiosity

for you comes from, uh, around that type of software or use case. And then we can talk about Roam Research itself? Yeah. So I'm not really big into note-taking. I've always been, I use Apple Notes. I'll write down a simple to-do list or something like that. But I'm a big to-do list person. So I've been using the getting things done framework and OmniFocus and nerding out on that for years and years and years. But note-taking was always this thing that I kind of went like, why do people do this? They're writing all their ideas down and then there's no way to resurface them. So I've tried journaling and all that kind of stuff. And it always just felt like, okay, well, I got it out of my head, but I'm never going to look at this again. And when

am I ever going to go back and go, what was I thinking on April 24th of 2018? So then I started seeing everybody posting about Roam, which is this new, hot, buzzy note-taking software. And it's quite interesting. It's kind of like Wikipedia, like a personal Wikipedia, right? So like any other app, you would go in and you'd write a daily note or whatever you're thinking about, but you can tag or link different ideas together. So an example is, I look at my sleep and I'll write out, here's how I slept last night. I've been going through a period where I just haven't been sleeping well and I'm trying to figure out what it is. And so I'll write like a little sleep journal. And as I do it, I might say I should try intermittent fasting. And what

I can do is I can click on, I can make intermittent fasting a page like Wikipedia and I can click that and then I can see every single time I've ever referenced intermittent fasting. So for example, I could go, man, during what periods of my life have I been doing that and how did I feel? How did it affect me? Or what have my feelings been about this specific person I work with? Like, it's quite interesting. And I don't know if I'm going to stick with it or whether that's super valuable, but it is interesting. And I think that there's an opportunity for them to make this into something that's way more extensible with an API where I can just dump my brain in every morning and have it kind of put stuff out to Twitter, send an email, do other stuff. But yeah, at this point,

it's more of a curiosity. It's something that's interesting. Yeah. And part of, I think my interest in this type of stuff is if you think of your brain as a computer, right, we just run into limitations. And so you can't possibly remember everything or think back to a certain date with the accuracy you need, et cetera. And it almost kind of feels like you're trying to, in some weird way, like index your brain on a daily basis. And I love your example about kind of the journaling of like, great, I wrote it, but like, I'm never going to go back and read it, right? Or maybe I'll go read it five years from now, or, you know, next year as a review type thing. I guess part of it is, do you tend to think back to solve the problem? So when you say like

sleeping, for example, if you weren't writing this stuff down in something like Rome, are you the type of person who would normally say, hey, you know what, I've actually slept pretty good this week. And I kind of tested intermittent fasting, I think that that's what what solved it? Or did you feel kind of blind to a lot of this? And that's where the interest in journaling came from? Yeah, I think it's living in a fog, right? Where you kind of forget. I mean, you could ask like, how was your weekend? And I'd be like, oh, I don't really know how I felt or how my weekend's been lately. I would only have the context of whatever happened really recently. And again, I've only been doing this for about a month now, but I've started to, you know, starting to link these

thoughts together and do this stuff. I think the fundamental question though is, and it's same, the same thing is true for getting things done. The system works really well if you follow it very strictly. And, but you do get into this situation where you end up living and breathing this product. And so the problem is you're like, okay, should I be sitting in this meeting constantly writing everything down? Or during the meeting, am I writing shorthand notes and then putting them in later. And by doing that, I just killed an hour. Am I going to get future value out of these notes or not? And if I'm not always getting value out of the notes, I think it becomes this thing where the process becomes too all consuming. And so I found this

with getting things done. I use it loosely, but there's people where it's like every single thing in their life. If there's a scratch on their hardwood floor, they're like, oh, I need to tag this as home and you know schedule it and stuff i'm not like that so i mean again with any of these systems all the productivity nerds get excited about them and in reality they're only as good as the inputs it kind of reminds me of a calendar right i'm one of these people like it was not on my calendar i will not show up right because and literally because i'm like too dumb to remember um the calendar is just literally notes uh so it makes a lot of sense um when i told people that you were going to come on, I had a lot of questions around, uh, kind of getting

started. Um, and, uh, a lot of things, it seemed like people asking questions around, uh, how much money is needed to get started. And, and, uh, things that I look at is almost like, uh, planning, uh, to go into this. It sounds like you were much more, uh, kind of backing into it, but any thoughts around if you were going to restart tiny and that, and this type of business today, kind of what those foundational components would be to really put yourself in a position to be successful? Yeah, I mean, I always think, I talk a lot about like launchpad businesses. So this idea of, let's say you want to be Elon Musk, and you want to launch the next space mission. There's two ways to go about doing that. And if you're inexperienced, you know, one's very high

risk. So let's say that you're 20 years old, and you want to go start the next SpaceX, you can go convince a bunch of investors to give you money, which might be very hard. And because you're inexperienced, you'll probably fail. And because you raise venture, there's even more risk, right? I always think that the whole point of entrepreneurship is freedom at its core, right? People want to be able to get up in their day and work on something they're passionate about with people they like, and they don't want people to tell them what to do. That's it. That's what it is for me, at least. And so if you think about it, like you really want to tick off your Maslow's hierarchy of needs before anything else. So I want to be able to pay my rent, live a comfortable

life, drive a car, go out for dinner and not worry about it, all those things. And so what I really look for is a first business that's simple, and it doesn't have to be scalable. It doesn't have to be a venture scale billion dollar idea. It can be something very, very boring. And the idea would be to build a business that can get you $50,000 to $200,000 a year and give you a permanent base, or at least a short-term base, so you can go and launch all your crazy ideas with less risk. And so, you know, I use an example. There's a guy I know who found like a, it's a table, a specific table, like a furniture table that's kind of classic, and it's been ripped off and replicated a whole bunch. And so he went out, he bought all the replicas, he reviewed them on a

website and he said he ranked them this is the best one and then he went out and he did a bunch of seo made sure it got a bunch of traffic on google and then he did affiliate and so he gets paid a fee whenever someone buys one of these replicas and the business makes him 50 to 100 thousand dollars a year and it probably took him three or four days to put the business together spends a couple hours a month on it and i just think that's the magic of internet businesses so i think if someone depends on what someone wants to do but if they're starting a business I think the goal should be, yeah, $50,000 to $200,000 a year, and then go off and do the crazy stuff and whatever else. But there's a kind of a profound sense of security from having

something like that. Yeah. And I forget, unfortunately, who I heard this from. But just recently, I heard somebody talking about kind of, rather than going out and getting 10 different revenue streams, like finding one, that's the cash cow, doubling and tripling down on that really get it kind of rocking and then diversifying out. And they were using examples like, you know, Google with the search engine, right? Or Amazon and all of these businesses that we know now that are great businesses. It feels like you would be an advocate for doing the same thing in starting a business in kind of these non-scalable versions as well, or non-venture backable versions as well. Is that fair? Well, I mean, I think those businesses have network

effects, right? So if there's a business, there's a business that we are shareholders in that is a network of clinics, of medical clinics all over Canada. So it's basically clinic wait times, right? And when the guy was starting it, so this guy comes to me and he says, look, I'm going to start this network of walk-in clinics in Canada. It's like Soviet Russia. We have all these like, you know, government and, you know, poorly operated clinics and there's these long waits. So if you need medical attention, it's going to take you three, four, or five hours of sitting in a room with a bunch of sick people. So you want to make sure that's the shortest possible wait. And what you used to have to do is call.

So you'd call five clinics. You'd go to whatever one had the shortest wait. And the clinic operators hated getting these phone calls because they'd have these MOAs that would just sit there and answer the phone all day. And so he went out and he went to all of the clinics and he said, hey, why don't you just tell everyone to go to medimap.ca, which is his website. and we're going to make a map of all the clinics in your city and show the wait times. And so he got them all to install software that pops up every 30 minutes and says, update the wait time. So he managed to pull it off. We ended up investing significantly in the business and he had no revenue model whatsoever, which is not something I normally would invest in. What I saw was a

network effect. I saw that he, at the time we invested, had 60% of all walk-in clinics in Canada on this network. And now he has something like 86% or something. So that's a situation where when you have a network effect like that, it makes it impossible to compete with. No one can start TELUS or any of these big multinational billion dollar corporations. They can't go out and go to all the clinics and say, we'll pay you $10,000 and whatever. It's going to be too much of a pain in the ass and doesn't make sense. And so in that business, We said, don't worry about revenue. Don't worry about any other monetization. Just get every clinic in Canada using this, and then we'll worry about monetization. So that's an example of a business where the network effect and building that most important thing like Google nailing search and becoming a verb was really important. but a lot of these businesses i'm thinking of are more boring they're like you know i know a guy who

runs um it's a it's a newsletter and he just goes out and he buys 10 domains a day like just weird domains so be like shoelaces.co or whatever and he buys 10 of them and it's just a newsletter where he sends them out and he buys them for 10 bucks and he sells them for a hundred or a thousand and there's all these domain nerds and they all follow him on this newsletter and they just keep buying his domains. And it takes him an hour a day or something, and he makes good money from that. So that's what I mean about a dead simple, dumb business that just gives you that cushion and pays your bills. I'm not talking about the network effect and Amazon or anything like that. When I hear businesses like that, it always cracks me up because the people behind a business that

like the domain business is just a resourceful person, right? It's somebody who literally figured out, hey, here is a little niche of the world that there's just enough interest where I can build a business and almost optimize kind of the time invested for capital received, right? I had a problem. I'm going to solve this for myself. And there's got to be, you know, a thousand other people who agree. For sure. I've heard on other podcasts, you've talked about kind of this internal narrative that you spend time on. What are some of the internal narratives that you're talking about now or telling yourself, given that we're, you know, kind of two and a half months or so into this economic shock and kind of a lot of

the uncertainty that's in the world. Just any internal narrative stuff there that would be interesting to folks? Well, I'm trying to remind myself that when horrible things happen, there's almost always opportunity because it's kind of like a forest fire, right? So forest fire rips through and a lot of destruction happens, right? A lot of venture businesses go out of business, a lot of, you know, big businesses like Hertz go out of business. And I think there's always opportunities there to start a business when there's maximum pessimism, because you don't have as many competitors. And I think over the last 10 years, there's been nothing but unbridled optimism. And so it's made it a challenging business environment, whether you were starting,

you know, a delivery business, you're going to get venture competition, any kind of software business, almost every single vertical is hyper competitive because of venture. And so I think that'll probably slow down and there'll be some level of correction there, which I think in many ways, despite being very sad for the people whose businesses are going to struggle or go out of business, I think it's probably, you know, of benefit to new entrepreneurs. So I'm excited about that. I'm really just trying to remember that the world has been really boring for the last 40 years and that my grandparents and great grandparents lived through times that were way more harrowing. I mean, they weren't sitting when the 1918 flu pandemic happened,

they would just pick up the newspaper one day and it would say, you know, a thousand people just died and we don't know what to do about it. And you should squirt porridge up your nose and all these ridiculous folk remedies. And, you know, they all saw my great aunt died of the Spanish flu. They weren't sitting at home on Netflix and, you know, they didn't have therapeutic drugs and stuff. So I'm trying to just remind myself that this is not the worst thing that's happened to anybody and that we're in the first world and to be grateful. But, you know, it's a very odd time. And it's hard because on one hand, as a business person, I'm very optimistic and excited about the opportunity coming and, you know, the businesses that will get started as a result of

this. But as a human, you know, there's a lot of crazy stuff going on in the world right now. And it certainly makes me feel nervous and cautious. Yeah, I think that's great. Kind of reminder that we're all going to die one day too, right? So it's a great perspective. The last thing I want to end talking about is this idea of kind of a venture backed graveyard, right? And what I mean by that is there's been an explosion of companies over the last five to 10 years that have been backed through venture capital. Many of them on the day they took that venture capital believed they were going to build the next great billion dollar plus startup. Venture capitalists believe that and everyone kind of gave it their best effort. But where we find them today is

it didn't play out the way that everyone thought it was. And so that may be because of things under their control or not under their control. There's kind of a whole gamut there. But my question to you is given the model that you've employed, do you think that there is a opportunity to go get the previously venture capital funded businesses that didn't scale to those billion dollar companies and start to actually kind of wean them off the dependency on venture capital and push them into something that looks more like I'll call kind of a tiny business, meaning the businesses that you guys normally look at? Like, can you transition? Or is it once they've taken the venture capital, no matter how badly it goes, it's kind of a fatal shot, and they can't transition back to

a sustainable business model? I think it's like drug addiction, right? So it's like heroin, you shoot heroin a couple times, there's people who get out, and then there's people who just they unfortunately don't do well with it. And so I think that I'm really, really excited whenever we get the opportunity to take a venture-backed business and dust it off and clean up the P&L and get it back to its former glory, that's really exciting. We just did that with a business called Meteor that we bought that Andreessen Horowitz had put $50 million into. And it was a wonderful business and it had great customers and was growing at 30 plus percent a year, but it just wasn't growing at 100 or 200 percent a year. And so the business had to pivot. And when they pivoted,

there is this orphan business left over. And it was really cool. We were able to buy it and re-engage the community and plug in a great team and start actively working on it again. So that's been really cool. And I think there's going to be a lot of opportunities like that over the next year or two. I think that venture, it's not that venture is going to go away. It's that venture is only going to fund the very best deals. So you see this with companies like Notion that are incredibly hot. They're growing really fast. They're in a great space. They've got all the right metrics, those guys will be able to raise fine. But the business that's growing at 20% a year, 30% a year, 40% a year even may not be able to raise or if it's just a slightly more challenging

environment. And I think those are the opportunities that we're very excited about where we can help them wean off the venture juice and build a sustainable business. And there's obviously pain associated with that, right? A lot of these companies have been run in ways that their P&L is just totally out of whack. And, you know, they've done some crazy stuff. And we see P&Ls of these businesses every day, and it just boggles the mind. We basically, we've been around for 15 years. For the first 10 years, we couldn't even get a bank loan. We could barely get credit cards, right? We just had no access to capital at all. And it made us incredibly, incredibly disciplined P&L operators. We had to be, otherwise we'd go to business. That was all we had. And so when I

see these businesses, it just blows my mind. Like I can't believe how much money they burn and it's staggering. Can you take a business that's done that, right? And to be clear, I think you're saying this as well as I am, that's the model they're in, right? So it's not like they're doing anything that's malicious or bad. It's just they've been given a lot of money and used the money to grow, right? But if you have a team that has through muscle memory been trained to spend a lot of money and try to hit that high growth. Is it possible to then take that business with the same team and kind of retrain them to go after the more sustainable model? Or like in the business that you bought, do you have to basically bring in a new team and then you can just take the actual

assets with a new team and can do it? I mean, we talk to founders all the time who say, I wish I never raised venture. This isn't right for me. I don't want to shoot for the moon. I'm risk averse? Can you buy out my venture investors? And we look at those deals all the time. In that instance, yes, because they've self-opted into that and they think so. If I had a venture investor, private equity investor come to me and say, hey, look, I own 60% of this business. They've burned through all this money and they're not in that camp. That's a totally different story. We would really have to think hard about that because not only are you doing management change, but you're changing the business model and the P&L and stuff. What we would look for in a venture-backed

business is something that is ultimately sustainable with high margins, that's simple, and is still doing well despite having this crazy venture stuff going on. What kills me is seeing these businesses where the unit economics don't make sense, where they spend $5 to make $1 of revenue, and then they burn $3 in operating costs or whatever. Those are the businesses we would not be interested in. The ones that I love are the ones where if you just dust off the P&L a little bit, and you operate it a little more conservatively, there's a wonderful, profitable business underneath. Yeah, the speaking of kind of these D to C companies, or the high CAC type businesses, I think it goes back to our conversation with the Joe Rogans, the Kylie

Jenners, like, I think we're seeing the rise of entrepreneurs who are able to drastically reduce that cost of acquisition because they have the built-in audience, right? And that's where you're almost seeing the business models that didn't work five years ago will come back. It'll just be with a different unit economic basis. And it's because the person now starting the company will actually have the customers there rather than have to go acquire them. Yeah. If you own an amazing, busy office building and you have tens of thousands of people in a lobby and you can start at your own coffee shop and put it in there. You're going to sell a lot of coffee, no matter what you do. It could be the worst coffee in the world. And I think that's what

you see with Kylie Jenner is she starts a makeup brand. It barely matters. It's just branded and hot and she can promote it on her own channel for free. I think there's going to be a lot more of that happening. And I, again, like going back to she's done this, you know, she's become a billionaire. I don't know what the exact numbers look like or whatever, but I think if you think about it, if she could do a digital product, right, where she can actually have true 95 or 99% margins, that's where things can get really crazy, like the Rogan kind of numbers, especially if it's recurring revenue. Because at the end of the day, then you have the best SaaS business in the world. You have no R&D cost. Yeah. And I guess as part of that, do you think that's where this goes?

Like, do you see a world where these influencers start to get away from building merch and kind of the easy kind of low hanging fruit stuff? And they actually started to say, I want to build software products, whether they're mobile apps or web based stuff. And that's like, becomes the holy grail. Well, you look at Sam Harris, you know, he has this huge podcast, he's doing this subscription thing. And then we helped him build his meditation app. Right. And it's the exact same thing. He's publicly speaking about meditation, he's written books about it, and he has a loyal audience. Well, it's perfectly logical to say, hey, you should use my meditation app, you know me, you trust me, and I have this free acquisition channel. Um, you know, and now he's got this whole other business right there that, you know, it wasn't that complicated for us to help him. We use metal lab and metal lab built, um, built the meditation app and designed it. Um, and you know, I think it was profitable relatively quickly. Yeah, that makes a ton of sense. Um, before we, uh, we wrap up, I asked everyone the same two questions.

Uh, the first is what is the most important book that you've ever read? Oh man. Well, the book I go back to most is, it's actually a compilation of quotes by Charlie Munger. And Charlie Munger is like the lesser known number two to Warren Buffett. And he's like super, super interesting. Buffett, if you watch his interviews, he says the same thing a lot. He's very interesting, but he says the same thing. munger is like a you know he's like john coltrane he just goes all over the place and says all sorts of interesting stuff um but it's just a complication of quotes by him called the tau of charlie munger and uh it basically is all his most important quotes and then kind of explained underneath and surprisingly i never expected to like this book but it's become this thing that i go back to over and over and over again and i listen to it as an audiobook in the car and i've

probably listened to it like 300 times. But I'd say everything you need to know about business is in that book. I think he's by far the best business person in the world. I thought you were going to say you've read it like 10 times, not 300. 300 is a lot. Yeah, I know. For like three or four years, I listened to it like once a week. I love that. Last question is aliens, believer or non-believer? Wow, curveball. I think logically, they probably do exist. But I question whether or not we've actually had any interaction with them. I saw some of these crazy videos, though. So I don't know. I'd say extraordinary claims require extraordinary evidence. So we're going to need to see some

evidence. Yeah, what is the logic behind they probably exist? Well, I think that the universe is so big that I would say probabilistically, odds are they do, but whether or not we would ever interact with them or cross paths, I mean, who knows, right? For sure. And then to end it, you get to ask me one question. What is the one question you have for me? So I've been very interested in crypto from the perspective of enabling microtransactions or live commerce, right? So this idea of like, if I work for 30 seconds, I can get paid 30 seconds worth of tokens or whatever. I've been very interested in crypto, but it kind of feels like we're in 1997 still, right? And everyone's getting really excited about this technology, but the actual

use cases are yet to come through. And it's been three or four years where there's been heavy venture investment, what do you see as the most interesting real business that has real revenue and real profit or the potential to do something significant? So let me go back. So there's two or three questions in there. A huge believer in, I call it streaming payments or kind of micro payments that you described. And the use case I always go to is like, I think a lot of people look at like 30 seconds worth of work and they're like, that's ridiculous. And so I say, hey, look, if you kind of extrapolate that out, like, why do you go home today from your job and you didn't get a paycheck? Right? Why do you have to wait two weeks to get it? And so just like little things

like that, I think people like, oh, that'd be awesome if I got a paycheck today. And tomorrow I got another one. I do think that that will happen. I think that crypto and Bitcoin and things like that will make it possible. But I do think that there's like, consumer behavior changes that have to happen both at the corporate level and for the individual. So some of that is still at play uh in terms of like where we are uh i think you're being overly generous saying we're in 1997 i actually take the stance of like uh we're probably in the like early 90 like 90 1992 somewhere in there uh and the reason why i say that is like if you remember back even into like the mid 90s aol dial-up like there was still the noise and you only could use you know one phone

line and if you were on the internet your parents couldn't use the phone and they were yelling at you. And like all of those things that I think, uh, you know, people probably your age, my age, like kind of nostalgia of like, Oh, I remember those days. Uh, that's basically what's happening in crypto now. Right. It's just like, it is really hard to use. Right. And, and, uh, that has to improve over time to get the mass adoption that just comes with time though. Um, and so I think that's kind of like the trajectory of just reminding ourselves, like if you go look at Amazon's first website compared today, today's standards, it looks ridiculous back then. Like it was great. And so that'll happen in crypto as well. But in terms of the companies, I would say

that pretty much hands down, the best businesses as a group has been the exchanges. So the whole idea was Coinbase, Gemini, Binance, Kraken, you just go down the line, all of them. So that's been interesting. One of the businesses that we funded, this company called BlockFi, that basically is building out all the financial services or they use the terminology wealth management. So you give them crypto, they'll give you a US dollar loan. You can put an interest bearing accounts, right?

All these kinds of products that really treat- The problem with all those though is they benefit from speculation. So like what I'm really wondering is, so like Coinbase can make a lot of money even if it's just a bunch of people speculating and buying the currency or whatever. And I totally agree.

Like we've known Brian at Coinbase since day one, basically, we help them build their original website. But who's actually built that business that does the paychecks or enables remote work in some cool way or whatever? It seems like the biggest problem with crypto right now is that people talk about it at all, right? I think like if you started a startup, and you just said, we pay your employees at the end of the day magically, and it's not, you know, e-crypto solutions, and you need to use ether and all this stuff. It seems like it's, it's like talking about TCP IP, when you're running a web business, right? it's just irrelevant. Completely agree. And so another business that we invest in is a company

called Zap. They built this thing called Strike, which if let's say I want to send you money, if I want to send it through Venmo, for example, what really is happening is I'm taking dollars out of my bank account, putting it into my Venmo account, sending it to you. And then if you want to withdraw that, you can pay a fee and do it immediately, or you can do it for free over like three-day period or whatever it is. What they allow you to do is send dollars between two parties cheaper and faster than Visa, Venmo, et cetera. But what they're actually technically doing is they're taking dollars out of my bank account. They're converting it to Bitcoin, sending it across the lightning network, converting it back to dollars and handing you the dollars.

And so you can imagine on day one, they're in every country in the world because they're just relying on the Bitcoin rails, things like that. The reason why it's interesting to us is because you and I never even have to know anything about Bitcoin, right? It's like, it's almost being used as like a payment rail. We're just thinking of dollars. I sent you 20 bucks, you receive 20 bucks. And so things like that, I agree with you are where like, you're going to get the big consumer adoption. Because ultimately, you know, there's a lot of technology that we use even with money, right? I joke all the time and say, what is the car that you carry around? Most people, they couldn't even tell you the technology that's there, right? How do you use the ATMs? How do you

send wires, all of this stuff. As you get younger and younger, I always tell the story, I asked my 22-year-old brother at the time, I said, how do you send money to your friends? He said, I use two tools. I use Venmo and Uber. I remember being like, what do you mean Uber? He's like, oh, when we take a ride together, we split it in Uber. I was like, how many people over the age of 30 would think of Uber as a way to send money to people? Nobody. It's just like these kids are growing up with a phone in their hand, their relationship to the digital financial world is very different. And so I think that you've got to definitely break away from the hardcore crypto ethos of the marketing aspect. I don't think you have to give up the ethos, but you definitely have

to present the information in a way that is less friction for the user. It's crazy when you think about just the two and a half percent of every transaction is just gone, right? It's just rent seeking by Visa and Interchange and Stripe and all those other people. That is staggering. And I think there's probably a lot of lost productivity because of that two and a half percent. I can't believe they've been able to hold that up for 50 years or whatever it is. The one that really got me thrown for a loop was, I think it was Kroger, maybe like a year and a half ago or so. They came out and they were like, look, we're not taking. And they just listed a bunch of cards at certain locations. Right. And I remember customer backlash being like, what do you mean? You know, I'll make

it up. My MasterCard doesn't work there anymore. Right. And they were like, well, let us explain. We're paying, you know, 2.3% on every single swipe. Like, no. Right. And we think you're still going to come to Kroger. You'll just use this other payment method. And so like, that's an egregious response, I think, from any of the large corporations historically. But I agree with you that once a solution comes up that says, Hey, I can take that away, right? I can take back chargebacks. Like, you know, I kind of remove all of this for you. Uh, people will flock to it. The question is just, you know, who's going to build that solution. I think, I think also like I was quite excited to see Facebook do Libra and it's too bad, you know, they've hit all the regulatory

roadblocks and maybe they're not the right party to do it or whatever. But if you could go and you could buy something in Shopify or Instagram and it said, Hey, with Visa, you know, it's two and a half percent more expensive or save, you know, 10 bucks and do it using Libra. I think it's profound. I think nobody thinks about that frictional cost that they're constantly paying. And it's just, it's crazy to me. Yeah. And I think this is the kind of Jack Dorsey at Twitter's whole focus, right? With Square and all this stuff is his belief is basically the internet is a very unique economy, right? So you kind of think of it as each country has their own economy. Then you have this digital economy built on top that kind of layers across all of these boundaries. And

that economy has very specific advantages, but the money we use in that economy is still tied to the physical world and has a lot of friction to it. So he believes, right, I think as many people in the Bitcoin community, like Bitcoin will be the native currency of the internet. Is it Bitcoin? Is it something else? Everyone will debate it. But to me, this idea of one square can now go into any country in the world and immediately set up shop and not have to worry about, you know, FX and all that kind of stuff. That's interesting. But two is, you know, going back to the strike example, if I can send money to somebody in the United States, whether it's individual or merchant, and it costs the same and takes just as long as it does to send that same

money to somebody in China. I mean, you start getting into this game of like, you're actually reducing friction, drastically incentivizing commerce on a global scale. And the generation of people on the internet are going to benefit, right? I mean, it just changes the economics of a lot of businesses. Totally. That's cool. So, all right, man, listen, I appreciate you doing this. This is awesome. I think people will enjoy it. Yeah, that was fun. Where can we send people if they want to learn more about you, Tiny, or any of the companies? So best thing to do is probably follow me on twitter it's a wilkinson and our website's tinycapital.com and they can see the businesses and stuff there if they want to sell us business uh send us an email