This Week in Startups - Early angel investing blind spots, thoughts on the creator economy PLUS Canny.io’s Sarah Hum | E1194

Episode Date: April 2, 2021

Check out Canny.io: https://canny.io FOLLOW Sarah: https://twitter.com/sarahhum FOLLOW Jason: https://linktr.ee/calacanis

This week in startups is brought to you by Squarespace. Turn your idea into a new website. Go to Squarespace.com slash Twist for a free trial. And when you're ready to launch, use offer code Twist to save 10% off your first purchase of a website or domain. LinkedIn jobs. A business is only as strong as its people. And every hire matters. Post your first job for free at LinkedIn.com slash twist.

Tiny. Want to sell your wonderful internet business? Tiny partners with founders to give them quick, straightforward exits that protect their team and culture. They'll make an offer within a week, close the deal within a month, and keep your business operating for the long term. Get in touch at tinycapital.com slash this week, and they'll let you know within a couple of days. Hey, everybody, we're going to use a new format today, which is basically for those of you who were around 11 years ago with insights from Tyler and Lon Harris and the cast of characters we used to have. We used to mix it up, right? We'd do some Ask Jasons at the beginning. We would do news at the end. In the middle, we might have a startup that's brand new. Well, you know what? I was thinking about it. I want to

have more startups on, but I want to have them on earlier. And so I'm bringing back our little mixed format here. So we're going to start with your questions, do an interview with a really cool founder I found a name Sarah Hum. She is the CEO and co-founder of Caney.io, which is a really cool piece of SaaS software that bootstrapped to a million dollars in ARR. Great discussion we had. And at the end, I'm going to talk about the creator economy as well as Kevin Kelly's thousand true fans concept and how that's all coming together with substack, Patreon only fans, Twitter super followers and a range of companies that are helping creators make money. But let's start with an Ask Jason question. Angelou on Twitter who says, what were your blind spots in your

early days as an angel investor? What are some early big misses? Well, I talked. about in the book, missing Dollar Shave Club, Twitter. In the early days, I didn't consider myself an angel investor. I thought I should invest in myself, not other people's companies, and that's exactly what I did. Until I realized, I have a heck of a network. I got a lot of friends who are building cool stuff. I'm just going to start placing bets on my friends, and Sequoia Capital and Ruloff both over there made me the first Sequoia Scout, and that really got my career going. Now, the biggest blind spot it comes to mind is I would look at a startup and I would think I can fix these problems. I could make this startup work.

And I would project onto the founder and my ability to execute or other people I've worked with this ability to execute and put it on them. And then I realize, oh, I don't go run that company every day. Just because I see a way for this to work, I need to make sure that this person can pilot that plane. In other words, if I'm Doc Rivers and I'm coaching, you know, whoever it is, or Clippers, 76ers, or Boston before that, I think. And I was a great point guard. I can't bring the ball up the court anymore. I can't run the offense.

I have to trust Rondo or Chris Paul or whoever's running the point guard position. I know a lot because I've run the point, but I am no longer on the court. I'm an old man with bad knees and my playing days are over. And that's kind of the challenge I had. Now I've freed myself from that. I look objectively at three things now, and I really obsessed about these. The product, the customers, and the team. And these form a virtuous flywheel, a flywheel that can become unstoppable if you get it right.

If you are able to recruit amazing talent to come to your startup, like, I've got amazing people on this week in startup's team who produce it, who market it, who make clips for you, who write show notes and pod notes, and book the guests and sell things. ads, all this stuff is incredibly tight, right? And it has to be tight because we're doing 150, 200 episodes a year now. I got that incredible team right. That team makes a great product. That product connects with an audience and for those advertisers. If it works for the audience and it works for the advertisers, then we can get more people or we can give them raises or we can invest in equipment. You get the idea. And the flywheel keeps going. And all you have to do is stay

focused. That's it. Just stay focused on those three things. instead of me saying, oh, I can make this company work, the founder has to make it work. So I got to pick a great founder who can recruit talent team. That can make a great product. That can delight customers and listen to those customers. So they make money that then gets put into building out more team. And focusing, the other blind spot I had was the market size. It's a fool's errand to try to figure out the market size of an emerging category.

What was the market size for meditation apps when I invested in com? It was $10,000 a month for Com. And I think it was probably $20,000 a month for Headspace or maybe even 30. So the total tam was $40,000 a month or $480,000 a year. That was the total tam of meditation apps at the time. Now there were 10 million people who were meditating every day, I'm sure, around the world. And some of them were using books, some were using CDs, some were going on SoundCloud. or YouTube to find stuff,

those two companies created the market. And then Sam Harris and some other companies flowed in with their meditation apps. And thus, any attempt at me trying to build the market size for meditation apps would have been just dumb. Same thing if you look at Robin Hood. Robin Hood's entire concept was to get a group of people who no longer wanted to invest in stocks,

the public, retail investors, and convince retail investors to join the stock market again after the dot-com bubble and the 2008 financial crisis recession. That one-two punch knocked out all retail investors. There was nobody who wanted to day trade stocks. Everybody just was like, you know what, we'll just do all this interesting stuff, you know, through our 401ks and we'll buy index funds. If you try to understand those two things, you would have missed Robin Hood and Com

because they induced, they induced a market to exist. In another way, Airbnb induced a market to exist. Hotels are doing great. People are still building more hotels and more hotel rooms, but we're getting more people to travel because Airbnb gave people an opportunity to get for 150 bucks or 400 bucks an apartment with two or three rooms with a kitchen so that you could make your own food and save money so people would take longer trips or more trips or trips to places that they previously couldn't afford because the hotels were too expensive.

You get it. So we call this market pull in the industry. and Elad Gill, who was on season five of episode three of Angel, he specifically talks about market pull, not what I'm talking about here with Robin and Com that they induced a market. He's talking about the market already exists and it pulls people. So there's already, you know, 10,000 headhunters and HR people. So they beg LinkedIn to let them put jobs on it, right? So there are two different theories here. Both of them are valid. They just may work at different times. Okay, let's get to our amazing interview with Sarah Hum, and at the end, I've got some thoughts about that creator

economy, so stick with us. From websites and online stores to marketing tools and analytic Squarespace is the all-in-one platform to build a beautiful online presence and run your business. With Squarespace, you can blog or publish content easily, promote your business, announce upcoming events or special projects, sell products and services of all kind, and more. No matter the problem, Squarespace, is the answer because they have beautiful templates by world-class designers, powerful e-commerce functionality built right in, and everything is optimized for mobile right out of the box. You have built-in SEO, free and secure hosting, and of course, 24-7 award-winning customer

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To save 10% off your first purchase of a website or domain, go to Squarespace.com slash twist for a free trial. All right. Next up on the program is a founder in Canada who has raised $0 and bootstrapped her company after a short stint at Facebook under two years to a million dollars in revenue. And for those of you who don't know the origin of this program, it was called This Week in Startups. And every week we talk about startups. But then startups became big, and we started getting bigger guess. And I started to realize, wait a second, our original mission was to expose you to new up-and-coming founders. We need to include that, don't we?

So you're going to see more founders who are in that, let's call it, half a million dollars to $5 million in revenue zone. So welcome to the program, Sarah Hum of Caney, which you can visit at canny.io. Welcome to the program. Perfect. Thanks, Jason. Good to be here. So tell me, what is canny.io? It was sent to me by one of my team members who said, this looks awesome, we should use this, people having a great experience with it. So tell us what you've built and why. Yeah, so I'm one of the founders of Canny. We are a SaaS company, and we help software teams really collect, you know, manage and understand feedback so they can prioritize the most impactful projects.

Got it. So I saw November 18, 2020. You did a tweet storm where you assessed the four years since leaving your job at Facebook. And you said in November you had almost 1.2 million in ARR, 760 customers. And this was my favorite. 46 investor chats turned down. You were able to build this company to over a million of revenue. And that was in November. I'm going to guess here we are six months later that I'm assuming that number's gone up a bit.

Mm-hmm. Why know investors? Why turn down all those calls? Why go the bootstrapping route? Yeah. Yeah, I think, I mean, I did my time in the Valley. I know kind of what that's like, and I see a lot of people go down that route, and I have nothing against that route. I think what we were really looking for is to kind of, you know, take hold of our own lives and really just be our own bosses.

my co-founder especially was a big fan of YC and what they were doing there. But it never really just felt like what we wanted, I guess, in our life. And so part of the reason was I wanted to travel. We ended up doing two years of traveling while building Canney. And yeah, it's just been so great. Just building something that's profitable that we can bring on people and pay them and have them be happy. and have a balanced life and all that good stuff. So we've really been able to achieve that.

And I'm really proud of that. And when it comes to turning down, I think, investor chats, I think that's a lot about just protecting your own time. You know, I'm personally very much still a maker. I still do a lot of the design I can't. Actually, all of design I can'ty. And so we just don't have time to kind of dilly dally and just have like these casual chats that aren't going to go anywhere, you know?

we aren't looking to raise. And so it just doesn't make sense. So how did you bootstrap this? Because a lot of founders are saying, I can't build a SaaS startup unless I have a million dollars or a half million dollars in friends and family. How were you able to get this flywheel going where you got enough revenue in to pay for your staff?

Were you independently wealthy with a trust fund or with your Facebook shares from your, brief stint there. How did you get the, because that's what everybody wants to know is, how do I get the flywheel started as a bootstrapped enterprise? Yeah, for sure. I mean, no trust fund, no, we did, neither of us come from money, nothing like that. I mean, Facebook salaries definitely helped both of us at least, you know, maintain our, our lifestyle for a little while. But it took us a long time. Honestly, it took us a long time to build the product to where it is today. We were able to do that because we are both product people.

designer. Andrew, my co-founder is an engineer. And so we were able to build a product without, you know, investing any capital into anything. And so we really just hunkered down and built the product until it started getting customers. We pretended to be marketers and tried to do that. And so people eventually started finding us. And then over time, you know, we made enough money to bring on hire number one and then two, you know, and then now we're 10. So let's talk a little bit about in SaaS, there was a company, yeah, user voice was the original one. Yeah. And there were other companies that were doing similar things.

And as is the case with, you know, product board, I guess, user voice, Happy Fox. I mean, there was a bunch of people in this sort of genre. What did you do differently than them? Or are they actually straight up competitors? So, I mean, funny story, because Kenny didn't, can I He wasn't really born out of, hey, we saw some cool products that we can do something better. It really was us, you know, being users, trying to give feedback to other products that didn't really listen to us. And so we set out to solve that problem.

We didn't know about user voice. We probably should have in hindsight. Like, we didn't really do that research that we were supposed to do. It worked out for us, luckily. But, yeah, it really came out of, like, a personal need. What was that mean? side. It was just like we gave feedback to Yelp and Uber and nobody cares. And we think especially, you know, when it comes to the B2B realm, like that's where it becomes really important is you listen

to people because you're trying to solve a problem for them. So you should really listen to them if they're saying your product isn't doing what it's supposed to. And so once that feedback comes in, is it sort of like dig in the early days or Reddit where people vote up like, I want this feature, I want that feature. I saw, I think Axiote. was one of your case studies. And I tried to find their public board, but I couldn't find it. Is this, I remember, I think user voice was all public boards.

Correct me if I'm wrong. But do you do private boards or public boards where people can? Because that was always the big decision I remember back in the day was, do we want to put our users out there publicly and then have our competitors watching our roadmap and maybe beating us to the next feature? Right. Yeah, this is totally a concern of a lot of people today still. We do both public and private.

You know, a lot of people are open to sharing their stuff, including us. Like, our competitors are, they're not going to know why we make our decisions, even if something's the most top voted. That doesn't mean it is the right thing to build. We believe in a lot of, like, there has to be identity behind feedback. It doesn't matter, you know, how many people. It's who they are. What are the majority of users choose to do?

and do they stick with it? Because it would seem to me that people, this is just my guess, founders would initially be like, oh my God, we have to keep this close to the vest. And then some number of them would say, you know what,

there is a greater value to opening this up. We don't have that many competitors. These ideas are fairly obvious. Yeah. You know, anybody who sends an email to their user base is going to get feedback real quick as to what people want.

Yeah. Yeah. When it comes to the public use case, it's mostly smaller companies. Smaller companies, less competition, they have less to lose, I guess. And they're more down for transparency. They want to show their customers that's kind of a differentiator in some ways. So a lot of the people that use Caney privately are bigger companies.

So they have a support team or customer success team that can actually support the inbound feedback. And then they go and take that feedback and put it into Caney where it gets all organized and they can actually make decisions from there. So yeah, let's talk about that second part of this because collecting feedback, you can do that with survey monkey type form and email to your folks and then people put it in a Google sheet. That's quick, easy, and free. And so the only parts that, you know, in this sort of 1.0 product that don't seem to be considered there is like the voting up or maybe the discussions around it, which, you know, may or may not have value to people. But I noticed with yours, there's some constant. here, that collecting feedback is maybe 25% of this process that analyzing the feedback and maybe working on your roadmap and getting consensus internally is a big part of this. Maybe you could explain to the audience what happens, you know, okay, we got 20 new features for Uber Eats and people want to know if they can whatever, send somebody a dish for free. People want to give gift cards, whatever it is. They want to have a shared menu and, you know, put it in order together for an office,

whatever those features are. What happens after it all comes in? Right. So I'm I mean, first off, I'll say that most of our customers are B2B. Okay. And so, you know, customers are paying for the product to do something. And so I feel like that's when it comes to, you know, feature requests that really block people from trying to achieve what the product is trying to do. And so that's where it becomes really important, right? It's like these people are paying you for, to do a job. Like, you need to do the job well.

And so that's one thing. We primarily serve B2B. That's kind of for us where the money is. and where the feedback is just a lot more valuable and tied to problems. Getting the feedback is one thing. Getting into one place is one thing. A lot of people who come to us have this spreadsheet. They're like, this is getting just unmanageable.

It's impossible to really distill what the insights are from that. And so, you know, bringing in to Canney, I think to my point earlier about identity, I think that's one of the most important things is like, is this, you know, just Joe Schmo, like signing up for a trial, not really serious about the product, or someone who's like an enterprise customer. You know, those are two very different people who both count as one vote. That's very different. And so as a product person, like, we use our own product internally.

Like we very much look at who is voting and not, you know, oh, 300 people voted on this. That doesn't mean that's what we're going to build. You might actually have people who are incredibly vocal who have no skin in the game. They barely use the product. And you really want to look at it differently. In fact, when we get feedback at inside.com, the startup, that identified your product and told me about it, we are looking at now, well, who subscribes to two or more newsletters, who opens five or more newsletters a week? Let's look at their feedback because the person who casually opens, you know, one newsletter a week and subscribes to one and, you know, their feedback might be different, right? And we want to go with that ideal customer profile.

So that's built in and baked into the product, yeah? Right, exactly. Yeah. So we call that feature segmentation. You just identify, you know, what are those levers that you determine are important, whether that's monthly spend, yeah, a number of emails, opened, whatever it is. And then you can see the votes totally change when you only filter the ones that you want. 20, 21 is looking up new beginnings means new opportunities to grow your business. If part of your strategy like mine is adding new team members, LinkedIn jobs finds the right person quickly. And to make things even better, they've sweetened the pot. You're going to get your first job post for free. Hiring is a huge part of what I'm doing right now, finding really talented people.

And that's because LinkedIn has over 722 million members worldwide. And those members mean business. If you post a job there, you can target it with specific screening questions. This is critical. This is a tip that I give everybody. What screening questions do is they remove all those crazy folks who just send their resume out to everybody without even reading the job description, right? If you ask a very simple question, why do you want to work for this week in startups? Why would you like to be on the launch investment team? Well, then people have to turn their brains on and write something. And if they put, because I need a job, well, that might not be the type of person you're looking to hire.

We love LinkedIn jobs because we can manage all these different candidates from one single view. You know, it's really nice to see who you know in common or who your team knows in common with the candidate for reference checks, which are critically important. I mean, LinkedIn is a giant built-in reference check machine. So when your business is ready to make that next hire, find the right person with LinkedIn jobs. I beg of you, stop wasting your time. LinkedIn.com slash twist.

LinkedIn.com slash T-W-I-T-W-I-T-T-T-T-T-T-T-T-T-T-T-T-T-T-T-T, and you will get a free. Of course, apply because they're giving you something for free. Okay, let's get back to this amazing episode. How are you thinking about funding, raising. And by the way, the product is beautifully designed. And I wasn't sure if you were the developer, UX or designer, and then you told me you're the designer. And it's absolutely gorgeous for people who haven't seen it. Go to canny.io, which is actually a really good name too. But I mean, the feedback is absolutely beautiful. Somewhere between like superhuman and like a cleaner,

crisper version, maybe superhuman notion design. I'm curious. That's so nice. What do you is there a design aesthetic name for what I'll call the notion stripped down, superhuman strip down, gray text thing? Is that named? I honestly, I'm not, I think I've always been like get rid of everything that isn't necessary. You know? And it's something about Canny is like it needs to kind of fit into every other product and not look obviously like a third party. And so I try to make it pretty generic, but that's not really a great term for it either.

Utilitarian is what comes to mind to me. Exactly. Yeah, it needs to stay out of the way. It needs to do its job. That's number one. Because people white label it, is that the reason? Like, it's under their domain name, or is it always company name. Dot canny.com.com.com.com.com.com.

It is company.comney.com.com. By default, but they can put it on their own custom domain. They can use our widget, so it's more embedded. But yeah, in any case, like we are just the tool, you know, we want to stand to the side. So you bootstrapped it to here. We're in the hottest market ever, specifically for SaaS companies. Have people, I'm assuming you got 40 introductory calls from associates or whoever who found out about the product because, you know, they saw one of their startups using it.

How do you think about fundraising now? because it is so brilliant to own the whole company and to get to this point because if you did add investors now, you have the high ground because you're either profitable or break-even or within spitting distance, you know, depending on how much you're paying folks and how things have grown. So how do you think about it now? Because it would seem that the strategy to get to, you know, call it a million and a half dollars, if that's about where you are, it might be different than the strategy to get to $15 million. So what you're thinking about it now?

Yeah, that's exactly about where we are right now, actually. And I guess the answer is we don't think about it. I recently listened to your chat with Sahil from Gumroad. And he said one of the things was it was hard not to spend the money when it was right there. And I'm thinking the total opposite. I'm thinking, you know, we have a bunch of money sitting in the bank. Like, what do we do with this? Oh, you mean your profits?

And we have the opposite problem. Yeah, it's like if you gave me a million dollars today, I would. have a hard time figuring out where that goes. Yeah. Well, I mean, customer acquisition would be one, adding customer support, maybe more, maybe even a sales team. And so those would be the things that most VCs, when they would give you money, would say, here's a no-brainer way to add it, you know, customer support lowers churn

and increases engagement. you know, having an extra designer or a developer so you can refactor everything and refine stuff on maybe a faster velocity and people if there creates redundancy in the organization. That's one thing I've been thinking about my organization a lot is because Inside has been growing, inside.com has been growing so nicely and launch has been growing so nicely that I'm thinking about burnout of my team members. Right. And then also extra capacity, which I've always run startups, you know, at 120%, you know,

the engine revving at 120%. Now I kind of want to rub the engine at 70% and have people have those 20 or extra 30% of time to maybe just put an extra 10% polish on things or be more organized or reflect. So anyway, that's been my thinking on this right now. It just says, you know, peer to peer.

We're both founders of companies. I don't know. Yeah, I think when it comes to, yeah, spending money, I think people make a lot of sense. But at the same time, whenever we approach hiring, it's like very, very intentional, like exactly where is the pain, when do we need to bring someone on? And then for me, as also like a first time manager, I'm also very wary, like, will Kenny be satisfactory to you? Will we help you reach,

you know, your personal goals? And I think, I don't know, I think it's easy for managers not to think about that, even though that's, I feel like what a manager should be doing. Oh, 100%. I mean, speaking about great podcast episodes, we had, Aaron Mayer from the Netflix book. No Rules Rules, which was like written by her and Reed Hastings, and it feels like it's written more by her, to be totally honest. You know, they really understand human capital and hiring the best people, paying the best salaries, and just investing in people. So I agree with you that it's, and one of the great things about you being in Canada is you can be one of the top SaaS companies in Canada, whereas if you were in the Valley, you would be one of

a thousand and you know i don't know do you care about people you're you're a remote team from what i read on your on your twitter screen fully remote fully remote so have you met the people who work for you in person i mean with covid that's really it's been annoying but uh we try to get before covid we tried to get together four times a year um and so we invest a lot in those relationships we think we work a lot better when we've met each other in person so we've had some really really awesome trips just getting to know each other in person um we've been brought on a bunch of people this year, so unfortunately we haven't got to meet them yet. What makes for a great company retreat? What makes for a great company retreat? Did you read any of

the retreat books? Like five disfunctions of a team or whatever? I don't read books, really. For me, I just have to learn by doing. But it's really just like make sure you have time to bond. Like, and it's not just work the whole time. Yeah, like we spend, you know, usually the day, like the early day working just to figure out how to work together in person. But then we go have drinks, we go have dinner, we go do fun things, we go do dumb things. It's just like, who are these people? And we just feel so much more comfortable around each other and just like ready to do cool stuff together after we've done those. And we're just way more energized. All right. And are you hiring now? We are. We are. We are. There's a good chance to fill the positions for you. So I always like

to give back to the founders. So tell the, tell the audience what it's like to work there and what positions are open. Yeah. So positions-wise, we're looking for sales and engineering. We're always looking for a product, honestly. That's our bread and butter, and we always want to, you know, focus on that. Canny is, I don't know, it's just the people here that really make it for me. That's the most, the biggest thing I'm proud of being a founder here is like, we've put

together such an awesome group that just, you know, we can have. a lot of fun, you know, together. And it's not just work all the time because we are our own bosses. And, you know, it's not like we have to give investor reports every quarter or whatever it is. And so we really like to try things and fail at things and just be honest with what we've been able to do and we're not being able to do. And it's never like a scary thing. Yeah. It's just like celebrate the wins.

And then every time we do something wrong, what do we learn from it? You know, what can we do next time? So low pressure and chill. but high expectation. Honestly, we do a lot with the little that we have. That's the nice thing about small teams. Yeah. No dead weight.

Yes, yes. And no management. I feel like, yeah, I feel like that's the weakness of a lot of companies out there. It's just like too many hands, too many chefs. And so, yeah, we just have a really solid product. I'm the only designer, and the product feels like it's been done by one mind as opposed to me. It does actually. I think that might be your superpower is that you've really pulled to, it feels very holistic.

I agree. And utilitarian. I mean, I think, you know, the functionability of a product, I guess, you know, it's how sensible it is to the, an intuitive to the user base and how it kind of gets out of the way is very clear from using it. So everybody go try canny. com. It's super cheap too.

Thanks so much. You charge like 50 or 100 bucks and then it's. Tell our users that. Yes. It's so cheap. And I mean, we, and you do. don't need to have a, if you had a hundred thousand people using your product, the idea is if you invite them all hundred thousand, maybe one percent will show up to give feedback or point five.

So you only pay for the people who show up. Is that right? Exactly. I mean, I think that's kind of cool. Yeah. So it's free, I think, up to a hundred people giving feedback. Is that right? Or 50? We don't have a free plan yet. Oh, okay. Yeah. How do you think about that? Free, free, freemium? It's always like we go up or we go down, you know, and we're, and at the same, time we're a small company and that's kind of in our blood and we want to serve the smaller companies. But at the same time, with that, it means a lot more support. Are we ready for that? You know, there's a lot of questions and it's not just like an easy, on switch. So we're waiting for the red time. I kind of feel like in the early stages of SaaS companies,

you know, like the free trials result in so many looky-lose coming through and distracting you who don't actually have skin in the game. And 50 bucks, you know, on a credit card is such a low benchmark that it's just ensuring that the person is not, has some basic level of qualification for this in seriousness. Yes. Yes.

And people who have a feedback problem, they have customers. You know, you don't have a feedback problem if you have two users. Right. Yeah, no problem. You can just get them on a conference call. You could use I message in that case.

All right, listen, it's so great to meet you. Continued success. if you ever decide that you want to raise money, save me a slice. It seems I was just in my chat with my producers. I was like, she's kind of awesome, isn't she? And they were like, yeah, she's awesome. There's always a back channel about the founder when we have them on the pod. And it's like, oh boy, this is going to be a tough one to get interesting information out of.

And everybody's like, wow, she's good. So congratulations. You pass the internal back channel. You passed the back channel test of this week and startups. Yes, love it. Thanks so much, Jason. Stick with us. We've got more to come.

In the past, selling your business was a miserable task. Months of negotiations, tons of legal fees, due diligence, and sometimes you'd have to watch the new owners take your precious product or service that you spent a decade building, and then they would trash it, and you would sit there absolutely devastated. Trust me, when I saw Weblogs Inc. We sold them, I think, I sold AOL 98 blogs. And then I watched them take all the blogs and redirect them to the Huffington Post,

then redirect them again, I just heard, to Yahoo. It's just like, leave these brands alone and be good stewards to them. Now there is a new acquirer on the block, and that acquire is Tiny. And I had Tiny's co-founder, Andrew Wilkinson, on episode 1174 back in February. He's a really famous guy in the industry. I've known him for a long time. And he described their Warren Buffett-like approach to acquisitions. Andrew and his team started Tiny to become the buyer they wish they could have sold to.

Fair, fast, and founder-friendly. If you're looking for a new home for your internet business, they'll respond in a day or two, make an offer within seven days, and choose a straightforward deal structure for you in about 30 days. They'll just get it done. Just a high-quality guy, high-quality team over at Tiny. Tiny is partnering with founders to give them quick, straightforward exits that protect their team and the culture.

If you're looking for a sale and looking for your internet service or product to have a new home, Tiny's the place to go. Get in touch at tinycapital.com slash this week, Tinycapital.com this week, and they'll let you know within a couple of days. again tinycapital.com slash this week. Okay, let's get back to this amazing episode. Okay, let's take a moment and talk about something that's in the news a whole lot. And that's the creator economy. What is the creator economy? It's people at home, like me and you, writing a newsletter, doing a podcast, or writing tweets, or maybe hosting a live stream and getting

paid for it, not from advertisers necessarily, but more from our fans. And this was something that saw first with Patreon, right? People started a Patreon for anything. Support my music, support my poetry, support my tweeting even. Some people during the social justice movement said, hey, can you just support me to go out there and tweet about social justice and sort of be a quasi-commentator? Like a commentator on Fox News or MSNBC or any radio station. And Patreon really gets a lot of credit for creating this. And it comes from something that Kevin Kelly wrote. Kevin Kelly, for those you who are young is a famous futurist that we grew up on in the Wired area, which was a magazine about the internet. I know this sounds crazy to Youngens, but there was this magazine in the 90s

about the internet and the internet revolution, and we read it like a Bible. But the thousand true fans you can go find on KK.org where you just type Kevin Kelly, a thousand true fans. And essentially what he said, you know, during this is to be a successful creator, you don't need millions. You don't need millions of dollars or millions of customers, millions of clients, for millions of fans to make a living as a crafts person, nice use of non-gender of craftsmen, making a craftsperson, photographer, musician, designer, author, animator, app maker, entrepreneur, or inventor, you need only thousands of true fans. True fan is defined as a fan that will buy anything you produce. These diehard fans will drive 200 miles to see you sing.

They will buy the hardback and paperback and audible version of your book. They will purchase your next figurines, sight on scene. They will pay for the best. of DVD version of your free YouTube channel. They will come to your chef's table once a month. If you have roughly a thousand true fans like this, also known as super fans, you can make a living if you are content to make a living but not a fortune. Here's how the math works. You need to meet two criteria. First, you have to create enough each year that you can earn on average a $100 profit from each true fan. This is easier to do in some arts and businesses and others. But it's a good creative challenge in every era because it is always easier and better to give your existing

customer more than it is to find new fans. So anyway, you get the idea you can go read this. And he wrote this, I think, back in 2008. He's edited it and he's worked on it a whole bunch. But this really was the start of a lot of people's thinking around sustainability in content producing categories. So super interesting for you as a content creator to think about this. What have we seen? YouTubers started to have hundreds of thousands and millions and tens of millions of fans. And even if they just had a thousand true fans, they could make that 100. thousand and people have blown past that. YouTube added a subscribe feature because a lot of YouTubers were creating patrons. So they took Patreon and they built it into YouTube. YouTube actually has,

I think, three ways to monetize. One is advertising, duh, but that's not great on YouTube because they kind of get low CPMs and they have so many views that any one creator doesn't make that much money. Then they have like stickers and super chats. So if there's a live show going on or whatever, you can give a super chat. You can basically give a tip in there. And then they have subscriptions where you can not just subscribe, but you can join a channel. And Twitch obviously has these features as well. And then substack for journalists for email newsletters. And we really have started to build this incredible creator economy. Now, something has been added to this, which is super interesting. Some of the companies have raised so much money that they're underwriting

or giving guarantees to artists to join their platform and leave wherever they were coming from. In other words, the risk of leaving the New York Times as a writer, the risk of leaving New York Magazine, the risk of leaving a famous podcast, right? That's really scary for people to do. And if the platform can say, we'll guarantee you X amount, boy, that's going to work. And this is something that's caused a bit of a stir. There was this tweet where a venture capitalist said, hey, here are 10 jobs kids want. And I don't know the source of this. I've been trying to find it. But it basically said 34% of the of kids want to be a YouTuber 18% want to be a vlog or a blogger, which is kind of similar to number one, musician, actor, filmmaker, doctor, nurse, TV presenter,

you know, right on down the line. If you look at those, you can basically say one, two, three, four, five, and seven are influencers, performers in some way, content creators. And so there's nothing wrong with this. It's totally legitimate. for a child who watches YouTube all day to want to be a YouTuber. My three daughters have talked about becoming YouTubers as well, especially because there's some kid who makes a ton of money unboxing toys. Can you imagine? That's your dream job. My dream job when I was a kid was, I was fascinated by Siskel and Ebert, and I told my mom, I'm going to be like Siskel and Ebert. I'm going to get paid to go to the movies because I love going to the movies. And I did do an inside

Sundance or a weblogs, Inc. blogging Sundance blog at one point. And I lived my dream 15, 20 years ago where I got a media pass for going to Sundance, and I would see five movies a day, and I met Roger Ebert because he would hang out in the Yarrow, which is a hotel at Sundance in Park City. And he would just sit there with the other cub reporters and all nature of film fans and just sit and have a cup of coffee and talk to everybody. It was pretty darn cool. He's a cool cat. And here we are. There was a Harris poll recently on the 50th anniversary of Apollo 11, and they basically surveyed 3,000 children in the United States, China and the UK. They asked, what do you want to be when you grow up? In China, 56% of kids said astronaut. And then astronaut was

only 11% for the UK and the US. So should we take from this that Americans are soft, et cetera? No, we are super privileged. Kids grow up on YouTube here. It's totally fine. It doesn't mean that's what they're going to wind up doing. And it's totally cool that we have this new artistic ability in my mind. This reminds me of like patrons, like the Mindici family or something, where artists could have fans and not just rich people, but the average Joe can give, and Jane can give a thousand bucks a year, a hundred bucks a year to Kevin Kelly's thousand true fans concept,

and they can be sustained to do great art in the world. This is actually super cool when you think about it. It's almost like Star Trek where like the idea of having a job doesn't really matter, and this is almost like universal basic income in a way. I know many podcasts, Sam Harris is, who really doesn't need to make money, He's a book author and does very well with his books. There's a podcast called Red Scare, Brett East Analysis podcast,

and a bunch of other ones on Patreon have become very sustainable based off of, and I'm talking sustainable to, you know, five and six figures worth of revenue per month in some of these podcasts. And that's a whole new class of work. So when we talk about jobs going away in the world and people not being able to have a factory job, let's say, do we really think it's worse that the factory job went away and was given to a robot and then doing art, we're making a podcast or drawing art or writing poetry is a lesser use of

human creativity or human energy. I actually love the fact that people are getting paid to make entertainment or share insights or share art. It's super, super cool. According to Susan Wojewski, who is a CEO of YouTube, they've paid out 30 billion to creators from 2018 to 2020. So this is about $10 billion a year. I'm sure it's more weighted towards 2020.

This is pretty incredible when you think about that economy and how powerful those YouTubers are getting. And they're all growing up now 10 years later. And people who are 16 years old or 26 and 26 year olds or 40 year olds, you know, you get the idea. That is just a massive amount of wealth being transferred to individuals in a very open playing field. Another great thing for society can go on there in the most interesting person who sustains themselves over time to get those thousand true fans or 10,000 or 100,000 or a million does very well. and Cameo just became a unicorn with $100 million in funding for a billion dollar valuation. We had Steve on the pod in episode 963. And that was another example of sort of artists getting paid for interacting with fans. Obviously only fans falls into this, which would be kind of adult and racy in, I think, most cases.

But the New Yorker wrote recently that substack offer Matthew Euglesias, I hope I'm pronoun that right, the Vox co-founder, a huge advance to make the jump, $250,000 in exchange for 85% of the first year subscription revenue. Unfortunately for Matt, while he got the downside protection, it turned out that I think his substack made $800,000. So he left something like $500,000 on the table. In the next year, he gets 90% and the team at substack only gets 10%. So he's going to make a million dollars next year, at least as his subscriber base has grown so much. The idea, that a journalist can make a million dollars and the platform makes $100,000, it's a little ridiculous to pay $100,000 to Substack. I would be totally honest. I would be

shocked if Matt doesn't leave Substack and just take his subscribers with him because it is portable. He has their emails. He owns the emails. He owns the Stripe accounts and the billing relationship unless there's something in his advance contract that he's got to stay there for three or four years. It would be crazy to stay for the second year because he could use, you know, Squarespace, Mail, Chimp, pick the service, Ghost. There's a bunch of them out there. And for $1,000 to $2,000 a year, just have SaaS. And you could hire a full-time customer support rep for $40,000 a year, $50,000 a year to manage all this firm and save a ton and get paid a lot more money. But, you know, he may stay loyal to Substack.

That's going to be an interesting question. At the same time, Substack recently raised $65 million at a $650 million valuation, which is absolutely stunning. What's also stunning about this and is going to become a very notable business case example, one way, or the other is that Indrisen Horowitz has copied the Sequoia playbook, Sequoia Capital, another venture capital firm here, that did every round of funding, I understand, in WhatsApp. So WhatsApp was doing so well that Sequoia did, I think, three or four rounds of funding in it, according to, you know, stories in the press.

So now you have, you have, Andreessen Harowitz, doing that same thing, but they're marking up these investments in a major way. And there was a lot of controversy around Clubhouse, raising out $100 million with 2 or 3,000 users than raising at a billion with maybe five million users, just outrageous prices. But when you market up yourself as a venture capitalist, what does that say to your LPs, the limited partners who gave you the money? It says that company didn't go to the market and get that priced. You gave them that valuation.

In other words, you marked up your own shares. And in a private company, that can be a little bit suspect. Now, if the revenue and the user base grew greater than 10x in both these cases, it happens to be a 10x step up, then I guess you could start to make sense of this. But if they're starting from a very high point, well, maybe it's harder, right? And so we'll see if they wind up becoming ginormous successes and clubhouse is worth 25 billion and substack becomes worth six billion, let's say, that would be amazing. And what these two firms are doing, and I think it's at the behest or mentorship of the Andreessen Harowitz team is they're running the same playbook,

which is they're giving huge advances to people who work for traditional media. And, you know, Andresen's been fighting with traditional media. So there's some really bad feelings going around in the journalist circles about Andresen Horowitz's behavior and trying to steal journalists to build up and unbundle and break apart the New York Times, right? Or break apart Vox. They're not, you know, if you're not happy with the coverage of Vox or you're not happy with the coverage in the New York Times, why don't you steal the best writers? That's exactly what Indyston Horowitz's companies are doing. And it's a slightly different approach than what Peter Thiel did, which was, hey, let's just destroy Gawker by suing them and find everybody who has a case against Gawker. And Gawker was pretty dumb in that they took tons of editorial risks. In fact, Nick famously said to me and to others, the only thing that could stop Gawker is Gawker itself. And Gawker will be the end of Gawker in all likelihood. And boy, was he correct in that regard, wasn't he? Gawker was so crazy in the stuff they published without vetting it in some cases. Of course, probably 99. 99 of 100 stories were probably, reasonably vetted, but it only takes one out of a thousand or one out of a hundred that are not

vetted to take you down like the Hulk Hogan one did. So anyway, that's a little bit of a side story there. But we're seeing a massive, massive, massive embracing of this, including Twitter buying review and launching Twitter spaces. So Twitter knows all the journalists are on Twitter and that Patreon steals their graph, graph being the social graph, Clubhouse steals the graph, substack has stolen the graph. they all go in there, and I'm using stolen and air quotes here. You know, with their permission, they're basically taking your graph from Twitter.

And when you go sign up for a newsletter or a clubhouse, it knows who else you follow, who else you follow, and it upsells you on following them or subscribing to their email. And I think Jack at Twitter was like, you know what, it's enough. Stop taking our users. We're going to keep them here. Just like at some point Zuckerberg said with Instagram and WhatsApp, hey, stop taking our graph. Stop taking our users.

I'm using air quotes for our users again because those users don't belong to anybody. They're users. But we're seeing the platform say, we're going to build this in. So YouTube built it in. Twitter is building it in. They're going to have superfollow soon, which I'm really interested in. I may launch super followers on mine and charge people for like half of my tweets, not because I want the money, but because I want to know who my thousand true fans are, right?

And we started a Patreon. The problem was this podcast comes out five days a week and getting it a day or too early. It doesn't really provide all that much value. And Tim Ferriss tried to go from advertising to paid. And I got to tell you, if you're a 10-year-old podcast like we are or this week in tech is or Tim Ferriss is, it's really hard to start over with paid subscribers. Because the entire audience has been getting it for free. Now you've got to retrain them. So super, super difficult.

But it's a very unique time right now. And I love, love, love that, you know, people are starting to look at this as a career and having five or 10 different ways to dip their toes. whether it's substack, and Clubhouse is doing a creator program too. So that's super interesting because Clubhouse, I don't know if you've noticed, if you're on Clubhouse, but it's basically died. It's become a ghost town and it's like really weird rooms. And the excitement now that the pandemic is ending seems to be down. And a lot of the rooms just seem to be like people talking about coaching or NFTs.

And it's all quite repetitive, right? What they really need is kind of podcast. They really need to have somebody doing something every day. Now, would I move this podcast onto Clubhouse and build their brand? Of course not. I'm going to build my own brand with my own website. I hate these platforms that steal users. Will I go on Clubhouse once in a while and try to get those users to find out about

this week and startups? You bet you I will. So I always take the approach. And this is my best advice. Own your users' emails. Own the billing relationship. And own their SMS phone numbers. Do not become dependent on any of these platforms.

Be able to move your user base. And it's certainly fine to just bounce. around. Twitch wants us to do the all-in podcast on Twitch. Spotify wants us to do more with this week and startups. All the platforms are looking for content creators. What I say is we're going to try to consolidate our traffic for our podcast around the platforms that will help us grow. And so it's going to be a bit of a dogfight and the winner in all of this will be audiences and creators because the audiences are going to get better and better content because the creators are going to become more and more sustainable.

It's a really great time to be in this field. Okay. So those are my thoughts on what's happening in the field right now, and we will see you all next time on this weekend startups.