SPEAKER_02
Props to this guy for doing this. I gotta give him credit. I'm more into this than you are I kind of love that a guy is dreaming like this
SPEAKER_01
So we We just did this other intro mics got screwed up. We're gonna do it again We could say what we said even faster though We're talking about the stuff that we're the startups that we're investing in I actually put it into a format So like the name of the deal Why each of us did it why it can be great? But I also want to say why it can suck why it will fail. Yeah, this is like the Disclaimer here.
We have a stake in everything that you're gonna. We're gonna be talking about I Frankly don't care if people use it or not. I mean this is more so entertainment I have a feeling some people will use it but that and also this isn't like investment advice a lot of these companies are very likely Gonna go out of business because that's just how startup investing works While you're listening to this podcast, you're probably doing something else too.
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SPEAKER_02
Yeah, and you couldn't invest in them if you wanted to most likely the the good outcome of this would be a you hear about some Cool startups that are doing interesting things and it just gets your wheels turning about like oh shit I've never even thought about that. That's exciting and then the other is you get a taste of what it's like to invest in deals And how you think how how an angel investor thinks about investing in an early-stage startups? Alright
SPEAKER_01
I don't want to say really quick that doesn't I don't want people to know I'll say for me. I'm not necessarily I'm not saying I'm good at this But I'm I'm just kind of doing it like publicly so people are watching me learn like get in shape publicly I've probably done 30 deals, but anyway You want to um Alright, let me go first because I have this deal that I I have to make an introduction to you because they specifically asked for you It's the top one. It's called abstract ops and I need to know if you want to join this or not
SPEAKER_02
I actually I just emailed the guy today because I was like shit when I saw you write this I was like oh shit. I forgot to reply to that guy. Did I introduce you? You told me about it and I was like I forgot to ask about it.
So I emailed yeah
SPEAKER_01
He I offered you him or him one somehow you're already in the know and he said he wants to talk to you So I know this guy there's two guys. I don't know the second one the first one his name is Adam Specter He's one of the founders. I think he's the COO.
I've known him since 2014 or 15 maybe I've been in a book club with them There's four of us who have a book club and I invested in the seed round I didn't have much money at the time, but I think I invested either one thousand or two thousand dollars I don't remember but I got right pro rata So when what that basically means is when they were gonna raise again I got to invest again and that's why I find out about this Adam's amazing I ended up investing around four hundred thousand dollars and I got a preference that saying that I do my own money that comes straight out of my Checking account and then I also have this thing called Hampton, BC So Hampton, BC dot com or is it dot com or dot co? And you can it's where I use Angelus where I invest Hampton, BC dot com It's where I invest like my own money and then if someone wants to join they can so in this deal I did both my own and Hampton's money and we invested about four hundred thousand dollars basically what it is Yeah, most abstract ops so have you the like if you're like know what you're talking about a little bit It's you would say it's like net net suite for startups If you don't know what that is which a lot of people don't know what that is it basically I don't know what that sweet is so when you start a company There's all I don't actually know if you had to do this because you actually had people earlier on on But when I started my company There's a lot of stuff that I would always forget to do because I'm just an absent minded person so for example if you have Employees in different states to file taxes into each state or even just to register in each state And it's not like a huge penalty It's like a hundred dollar penalty if you don't do it correctly and you get a notice But it's important to do it all right. Otherwise it adds up or Another example is like certain HR practices and certain back-end practices like onboarding contractors in a very particular type of way getting them to Assign like an intellectual property release. There's just a thousand different things and abstract ops is software that helps you That basically adds in what all those things are and it's workflow so you can see which tasks need to get done Does that make sense? It's a little bit fluffy, but does that make sense? That's a little bit fluffy
SPEAKER_02
but I recommend people actually go to their landing page not because That has anything to do with the investment, but it's such a good landing page So so what you see if you go there so it says so I'm just gonna point out a couple of brilliant things I'm gonna use this in my power writing course because this is an example of an amazing landing page for a fairly boring Business that would normally have a cookie cutter very boring stock photo type of website and so it says Stop running from your back office tasks, which is basically like they had a million ways They could explain their business like we make it easy to handle You know your your back office tasks or to handle HR legal and and legal HR legal and finance ops And so stop running from it I think it's great shows me this person understands like how founders are which is like we put the shit off as far as we possibly can Because it's a pain in the ass, so we just don't want to think about it And then it has this stick figure running away from a tornado Like a little hand-drawn tornado and I love it and then the the first like sub headline is I I started a company to do a bunch of back office work literally no founder ever right and it's like I just get that I love the that they have personality I think what that does is it makes it way easier It shows me that whoever's behind this knows marketing and they're gonna have a much easier time recruiting like customers and users because They're taking the average mundane things and they're turning them into little sales moments where I start to love this brand and I think Slack did this extremely well if you open up Slack there's like 10 little delightful details that make you kind of like Slack even though it's a pretty boring like work chat tool and So so that was something that stood out to me right away
SPEAKER_01
So I'll explain why I made a decision to invest the first is I know the founder his name is Adam And he had previously sold the company to Twitter. I don't know if it was incredibly successful
SPEAKER_02
But I don't care to me. It's like all right. It's in what we call that the sweet spot Yeah, you know you did just enough that I don't think you're an idiot, but you didn't get rich enough where where I I'm worried that you're gonna be you know some lazy want to be Steve Jobs visionary type for your next thing It's like you're you're hungrier than you were the first time and you're smarter than you were the first time too
SPEAKER_01
Yeah, and so that's one of the reasons why the second reason is the product I like I know like frankly, I think they're still figuring out the product They have like close to seven figures in recurring revenue But I think they're still even figuring out the product which frankly is a reason why you shouldn't have it I shouldn't have invested like they're still kind of tinkering exactly what it's gonna become But I do know that when it comes to the back office of startups This was something that I failed that for years like I struggled so hard to like make sure I filed my taxes in Washington Because we had one guy who was working more than 40 hours a week there Yeah, like it was just like a nightmare and it stressed me out and there when I was selling my company There was so much stuff that was like loose paperwork the the the things that make me worried though is that Xenophants gusto or the thousand of other companies that they can just once you because like it's hard to get once you start using gusto or some payroll provider getting out of that is a pain in the ass So if these companies are smart which some of them are but they're still big slow companies Then they're gonna do a good job of ripping abstract ops off and offering these features as a add-on But I actually I think that could be said for a lot of different companies Also because it's this like huge and it's kind of vague now because it's not a very narrow product because this is like huge idea I get nervous that they're not gonna be all sell this to customers But they've done a pretty good job of getting some of like the cooler HIPAA companies already as beta customers So it's incredibly interesting to me. What about you?
SPEAKER_02
So so I kind of agree so I guess like the one thing for me is it's not super clear Like even on their website they have a bunch of these like little examples So it says pure CEO we handle and automate your HR legal ops finance So you don't have to and then I like it Oh, it says be scrappy not sloppy, which is definitely a distinction I've failed at many many times is falling into sloppy but calling it scrappy as my as my cover But they have a bunch of like use cases like pay legal invoice send equity grant to advisor set up health insurance Compose investor update and so I'm not sure how one platform can either do all those things Or is it just a to-do list so that you actually do this? I don't actually know the product well enough because I haven't used it, but I would say that's one challenges It seems like it's trying to do a whole bunch of things which means it's either a very generic horizontal tool or it's a complicated tool
SPEAKER_01
Which one is it? I think it's gonna be a complicated tool at first that said I think that like a company like a net suite which does a little which is like a net, you know quick books Yeah, net suite is like that but plus a lot more And what I've noticed is that being particularly being a hub spot once I can get if you can be a good enough salesman and get someone to Start buying your shit It's incredibly easy just to start selling them more and building more stuff on top of that And I'm hoping that's what we can do with abstract ops and one of the kind of question marks here
SPEAKER_02
Is is this automated or are there just humans in the back end that are like helping do all this stuff a
SPEAKER_01
little bit of both
SPEAKER_02
Currently currently a little bit of both, but I think that's that's the question is can they get it to be more software than than humans? So that it scales better. Are you gonna invest? We'll see I want to actually use the product because I I'm guilty of this like I said so like I have a company that You know my basically my my personal company that's like back offices kind of sloppy It's kind of a mess like our quick books like I don't want to open any of those tabs I don't want to open gusto. I don't want to open quick books It's like something I like choose to avoid I'd rather like I'd rather put it off until shit breaks and then it's I know it's too late But like fuck I hate thinking about this stuff I only rent I only want to think about growth if I can and so I actually think I would be a potential user for this And so I'm gonna use it and I'm gonna see is this magical for me or not And that'll be the the maker break for investing which is always the best if you can be if you are the customer It's way easier to invest than things that you're guessing about tell me about one that you're excited about All right, I'm gonna tell you about one called jar.
So I think I emailed you this deal because I think you should do it But what is it so jar is you know that app acorns? It's like kind of a big fintech app Public I don't know if they I think they're like spacking or something like that They're like a mold they're like over a billion dollar valuation and what? The genius there was like you would buy something and they would just be like hey Do you want to like do you want to it would just tell you up front? Do you want to be a saver? Okay, you want to be a saver great Well, here's why we can make it easy for you You don't have to think too much when you buy Starbucks and it's your bill is you know 323 Let's just round up to four and we'll just round up the savings and we'll just deposit that and oh look over time If we just keep rounding up you'll you'll save that's how it started at least It was a pretty clever idea people like that and so what these guys are doing is they're taking the acorns model And tweaking a little bit, but they're doing it in India and so here's what I like about it You most apps when you want to go invest It's like you download some fintech app and then you got to like link your account So you got a deposit money and then it's like great. What do you want to invest in or how do you want to set this up? You know, do you want to do a mutual fund? You want to do an index fund like what do you want to do and it's like shit? I need knowledge now and then it's like hey by the way You can't just start investing right away like we have to verify your identity So like scan your driver's license hold it up to the screen, you know with a nude photo and whatever else right? There's like all these steps that go into just getting started with any investing app because that's the law and what these guys figured out is a Did this used to be called spenny? No Are you sure? Yeah, I think they're Don't remember spenny. They didn't mention that at least it's called their their URL was like changejar.
in And so what they were doing is they were like look the average person in India is not this was like their story They were like I got my job when I was 21 like most people But I don't start I didn't start saving anything or investing until I was 30 and when I was 30 was like Oh shit I want to like buy a house sometime and like I want to get married and like I really should start doing adult stuff and So he's like that lost decade between 20 and 30 is Like a huge difference in your net results if you had started saving earlier Like everybody seen these compound savings charts where if you start at 21 versus 31 you know you end up with millions of dollars more because you've been able to like save for an extra decade and Even in small amounts and so what they said was how do we solve that problem? How do we get you to start investing at 21 instead of 31 and what they did was they're like we're gonna simplify the shit out of this We're gonna simplify it where in 45 seconds you can have your first investment done So how do you do that and they said well here's the thing in India? Everybody believes in gold and I know this because my family in India has like gold shops They like sell jewelry and whatnot and gold is like the thing every like if you ask a mom there about stocks They can't tell you a single thing It's not even a big stocks is not like a big thing there But everybody has like a gold set of jewelry as they're like safety nets crazy And like if we ever have to flee we're just gonna grab the gold and we're gonna run and like this was literally happened in India Where there's like a where Pakistan and India split up so people literally did have to flee So it's like kind of baked in that way and so they're like we only offer one asset It's gold everybody already believes in it and they want it the second thing is your first up to a certain weight of gold You don't have to do all the financial compliance That you have to do for like stocks or real estate or other like larger investments or different asset classes So they're like there's this loophole where basically we can get you to start saving right away You don't have to verify your ID and you don't have to like link your accounts to do all this other stuff So I love that like the simplicity that was in their go-to-market because I was like Oh people will actually do that if I can in 45 seconds get saving great And then once I reach this threshold where I've bought a certain weight of gold Then it asks you to put your put your put way more information in but by then I'm kind of pot committed because I already have my I already have wealth here even a small amount I'll like protect that versus a normal app you just bounce before you even put the first dollar in was this your own money that you Invested or the funds money? Well, I put my own money into the fund But then all my investments have to go through the fund unless The founder itself won't let the fund invest and because that's like a like an angel is rule Well, that's the rule I set when I started the fun because I didn't want to have a conflict of interest where I'm doing the good deals And my own money and I'm doing the borderline deals and the funds money. No, I wanted it to be clean so that hey Every deal I do I just do it through this one vehicle. How much do you invest? so I put in 150k and It's got a $12 million valuation and a 20% discount and so so I put in 150k They're raising about a million bucks.
They already have good traction. So like, you know, what do you look for? You like the team you like the product and then you got to like the traction in the market size And so market size I like because I think this micro savings thing can add up really big in India There's just so many people and so like their average user after I think like two or three months has has saved $300 already in the app US dollars And so that's like pretty significant for a very early like just putting micro payment after micro payment in of just rounding up your expenses Or just automating and saying every day I want to put in 50 rupees But just like, you know, whatever a dollar or less than a dollar And so it's like every day I want to put in 50 rupees and because my goal is to save up enough where I can pay for my wedding You know in five years and so it's kind of like sets the goal and then it says great You should put in 75 a day and you say yes, and then India also has this crazy thing. I don't know if you've heard of UPI No So basically the country like you know how like in the States you have like every bank just kind of has their own clunky software And there's different payment that you know, you can use striped for payments You can use something else for payments and there's no like there's no country level payments rails And so in India the government came in and was like yo in the next year everybody has to move to this news payment standard it's the universal payments whatever infrastructure or something like that and This will just make it so that anybody who's taking payments You just build on top of these rails and we're gonna modernize payments in India Oh through this and so they did that big change and so that's change that's changed again That's why there's a lot of innovation in India right now because this UPI thing was like a pretty major breakthrough And the second thing is they just released this feature called autopay Which is basically like a recurring auto investment and so these guys are using that new feature of UPI So I just think the like why now makes a lot of sense for for this And I like the the hack that they have around just buying gold so that you you've reduced all the friction of getting somebody started
SPEAKER_01
Do you so are you're totally okay with investing in India like because I don't I've only invested in American-based companies I've had Australia. I've had you're all over Europe And I'm like for some reason that GAT freaks me out a little it yeah
SPEAKER_02
it kind of does to me too, but I've been investing in India and And so so when I do when I invest in India there is definitely like some trepidation So that's my why it could fail I just wrote India question mark question mark question mark like easy for me to be fooled right like these guys could be Well-known scammers in India that I don't know right these guys could be I mean they weren't right They went through YC I think so so so you know I actually I don't know if they went to YC But I know well the other other companies I invest in know these guys and they went their competitor went to YC
SPEAKER_01
Which is your second point why they could fail is there's a lot of people in the space exactly
SPEAKER_02
So fintech is just super hot worldwide right now There's like every day There's a new credit card a new debit card a new neobank that's popping up And then there's bigger players that are trying to modernize and so I think the one way they could fail is that there's probably like 10 between 10 and 50 legit competitors to this in India that are not doing directly this but they can add this as a feature or they Could pivot into this or they could like recognize the the clever things that these guys are doing and implement them So I think that's the those are the two which is like there's a bunch of competitors and fintech right now for every idea And the second thing is India is always a little bit of a question mark and it's something It's very easy for shit to look good in India because You know cost of customer acquisitions always super cheap. It's like oh man, you're getting users for 80 cents. That's awesome But like the reality is not all these Indian companies can be great So so I got it like my own filter for India is off because I come at it with a US point of view Having said all that The two Indian investments I've done so far are probably two of my best investments And so I'm gonna keep betting there because I think that the country is like It's in a sweet spot where there's just a lot of innovation There's just gonna be a lot of winners out of this batch and I just need to bet in on enough of them that Okay, even if I get fooled by one or two or I didn't understand the market landscape.
I get into enough winners Is my goal also because I'm Indian I kind of have this advantage where a lot of people in India follow me through this podcast or through Twitter and So I have been able to get into like any deal like these guys when they were reaching out They're like we asked only for two intros you and Naval and I was like, okay, bro You have one of us in the wrong league there But the reality is that's kind of an opportunity for me is I agree I don't my brand bigger there. I can get into any deal. I want there.
I agree. I think it's why like
SPEAKER_01
Like Bruno Mars is like the most watched person on YouTube It's because what you see because in the we're see from in the Philippines Wherever he's from if you see someone who you recognize in America who's crushing and kicking ass Everyone rallies around that person from the outside country like like oh, he's one of us
SPEAKER_02
Manny Pacquiao in the Philippines He's like the president there and he's just because he's like a famous boxer here
SPEAKER_01
They just want to go all out for their guy. Yeah, our Bjork in Iceland. So you're like the you're the you're the
SPEAKER_02
India I'm saying if I keep betting then I have a path to do that But if I'm never investing there then I can't build that like it takes a stack of reasons why you should be like Known and and respected in a place and I think one of the reasons why you could be known and respected is having invested in some winners But I got to plant those seeds now. All right
SPEAKER_01
Can I tell you what I'm really excited about and I wasn't excited at first and then I started using it I'm like, oh, I'm in okay. So okay, the name is bad and they're gonna change it. They're gonna change the name I think it's called the names are really bad.
It's called rumor. So I'm actually highlighting it
SPEAKER_02
You can see the memo that I wrote for you say it the names fine when you spell it you you know It sounds like you've got cotton in your mouth or something like that. So I've talked about
SPEAKER_01
Bring a trailer bring a trailer is this website that originally started as like a car or they would show off cool cars That were on sale from around the web. They eventually launched their own Auction platform, but they just did a really good job of making editorializing it making feel like a community so you can buy classic or Even newer cars that fit a certain demographic Rumor is doing that for houses and by the way, if you want to invest Sean, let me know
SPEAKER_02
I wouldn't have been interested in this except for the bring it when you've educated me on how bring a trailer is a great business And then we've looked into different auctions through the podcast So now when I look at this I see it differently than like, oh just another home buying website Okay, I don't really how are you different than?
SPEAKER_01
Because look at some of the example auctions and then click comments and read the comments. That's kind of like why it's me How do I go to an auction? I don't even know if those are fake auctions or or what the founder bought a bunch of homes Just to put on that site for auctions And so go to the water bunch of homes I think he like owns like 20 he's like a he was like a he's a property owner like he owns
SPEAKER_02
He's like a landlord. Let's just let's just explain it. So I'm on rumor.
It's our R U U M R.com right now. They might change the name So I go Washington looks to be the only market that's open so I'm there right now And I'm just looking at this for the first time.
So I see that there's this house in Washington. There's a bunch of pictures and It's on sale for a hundred three thousand dollars and it says that there's 13 hours left presumably in this auction and Then there's some details about it like all the normal house details and then I can log in I can make an offer and then I see people Who are making offers? but then there I see people who are also commenting like is the electric heating system baseboard or something else and Then you see replies from like I assume either the owner or the agent Like answering questions in the chat here while people are bidding a hundred thousand one hundred one thousand one hundred and two thousand And that's currently at a hundred and three thousand is the neat right?
SPEAKER_01
It's a house this and yeah, but it's a little bit different than eBay It's a little bit different But yeah, that is but if the reason it's one of the reasons why I think this can exist is let's say your Buying a house for half a million dollars and they do like a first and final offer process where everyone submits their offer on a Friday If you're getting half a million dollars for a house and you see that the winning bid was 505 You're like well fuck if you guys would have told me I would have bet 510 and you would have made more money And I would have got what I wanted right and so it's kind of trying to solve for that But let me explain to you why I think this could be cool. So first I'm the founder was pretty interesting He's a military guy, so I like military folks. He also started stay Alfred.
You know stay Alfred
SPEAKER_02
By the way, we should we should highlight the groups that we are inherently biased to invest in Mormons military guys Russians Any immigrant anybody who's lived in the US illegally You know for a period of time anybody who is you know single parent? I'm in you did you already did the hardest thing of your life McKinsey oh because you know, that's that's a that's a no for me the the other ones that I guess like our Almost like I lean in I'm a little bit interested. It's like. Oh, how'd you what were you doing? Like when you were younger and it's like well, I was like, you know flipping cars or I was flipping shoes on eBay or I Kind of don't want to say because I was like this affiliate marketer for these like shape You don't understand that's like
SPEAKER_01
Yeah shady internet arbitrage, er, so this guy started stay Alfred which was like a you know Sonder It's like a competitor to Sonder where they would like rent out entire buildings and then sublease them for Work travel got to a hundred million in revenue raised 60 million dollars Crash and burned and went out of business and you know what that's awesome. I love that so that's initially why I was interested I told them I love bring a trailer and he goes. Oh great their co-founder works here And so does three other team break a trailer sold the rumors like half a million dollars And since two thousand billion half sorry half a billion since 2012.
I remember in 2012 I was playing around with Real estate stuff online and I thought Homes should be bought and sold online just like we buy and sell clothing and I a lot of people in with rumor You can actually still go and see the house and an open home like at an open house But in my mind, I still think that in 10 20 30 years it will be normal actually to buy a house site on scene Even though a lot of people don't think that now I think I think that will be the case and check this out
SPEAKER_02
So why would I okay? So let's say I say I'm a seller So why would I sell here when I feel like okay? I'm gonna have this 13 hour auction I don't know what's gonna happen. Do I have to take the offers or I can just reject all? Yeah, you can have a reserve Okay, great and then is it because I think I'm gonna get a higher price or because I save money through the fees
SPEAKER_01
So what's the reason I choose this over like traditional help listings? Yeah, the higher price. That's the goal higher price by creating like a
SPEAKER_02
Like do they take the same fee as like a normal 5% of whatever agent fees?
SPEAKER_01
They take less because what the problem with real estate is the agents are still like integral like they're so very important to the industry If you cut the agents out then like the agency like oh fuck you guys. I'm a bad mouth you I'm gonna make sure no one ever uses them So they actually get the agent in on the deal and they just like make the agents job a little bit better and a little bit easier Right And so we'll see if it works But let me explain two things first is we invested along and the reason why I was intrigued is all of stay Alfred's competitors This guy's old company all the CEOs all invested in this company and I was like that's kind of an interesting signal
SPEAKER_02
competitors Respect you like I'll bet on your next thing that means something and they were all real estate guys
SPEAKER_01
So this is still related to that business business. So I was like that's intriguing second So I invested and then I get a call Jordan calls me the guy who's starting this he goes Adam Newman just put two million bucks in I was like fucking a got it like I think that's pretty good. I think that's a good side Why is that a good sign cuz some people would think that's a bad sign.
No no no no first of all like I'm not saying what Adam did is great I frankly don't even know the entire story, but I I'm pretty he's this the founder of we work
SPEAKER_02
Yeah, like none of like whatever did a bunch shit and ended up walking away Kind of like drove the company into a weird spot and and was accused of a lot of things And then he walked away, you know pretty wealthy as part of the his agreement to leave and my thing is Adam Newman regardless
SPEAKER_01
Let's say he did a lot of bad stuff. Let's say he was unethical. Let's say all that's true I'm not saying it is but let's for argument's sake say it is He's still built something huge and amazing in a very short amount of time and has access to all types of stuff and sees all Types of stuff so I think if he's interested it's a good right And then why can they fail? I think if they execute this poorly it's gonna it's gonna be bad I also think that um like oh I put I put it could be if they raise too much money I actually don't think that's gonna be the case I think they have to actually this company's got to raise a ton a ton a ton a ton of money What can make this fail? I don't know maybe if Zillow offers this
SPEAKER_02
Well, also, I think it's a new behavior and anytime you're betting on a new behavior That's like the risk of it failing is that like maybe people won't want to buy the house sight unseen Or maybe people won't want to sell the house in this way They want their hand held through a traditional process because it's the biggest asset in their life and they they don't want to risk it
SPEAKER_01
Which is and you can buy this you can go this is not entirely sight unseen But yeah, it's a new behavior. There's a lot of new stuff about it But my thing was like when I was doing the math I'm like you don't need that much volume to build something quite large and Right once you have the home on there you can upsell like property Assessment or what's it called them? Inspections I think you can upsell a lot. I just thought it was interesting
SPEAKER_02
I think you could closing so so one thing that's good here is you you don't want all your bets to be logical Clear good ideas because that means your risk profile wasn't right with start investing You need a few ideas that You know sound like they're gonna fail when you when you invest in them And then you either either they fail and you're like, yeah well duh or you end up looking like a genius six years later Seven years later because that non obvious Contrarian idea turned out to be something people actually wanted to do turned out to be a new behavior people were willing to do and so I think it's good to have I this was the one note. I told my team who like helps me with investing I said, I don't think we're taking weird enough bets. I don't think we're taking wild enough bets because That's where the big outsized crazy returns are gonna be as in things that are non Not obvious today, you know like low valuation not everybody wants to invest in them the sort of thing
SPEAKER_01
All right everyone today's episode is brought to you by imperfect action hosted by Steph Taylor It's a podcast on HubSpots podcast network the audio destination for business professionals Imperfect action is a bite-sized online marketing podcast for business owners So join Steph Taylor actually answers all your business marketing questions that deep dives into the nitty gritty of online marketing content marketing social media marketing and marketing for strategy for business owners a few recent episodes include some of the biggest mistakes You can make with your launch another one is why growing your audience feel so hard in 2022 and another one is five ways to make content creation less consuming so check it out It's called imperfect action. You can look it up wherever you get your podcast Do you did you do sace? Yes Is that interest you to talk about or no?
SPEAKER_02
We've kind of talked about them before I want to do another one. All right. I want to do one Okay, you'll kind of I think you'll like this one.
I think you'll want in on this one although it might be too late So it's called one build. So what one build is is here's the problem as the guy describes. So I talk so I meet the guy How'd you meet him? Ben or Zach found him and then they really liked him and they were like hey, you really got to talk to this guy so I said, okay, great, let's do it and I forgot I don't know how they found him.
I think he was like in some wicy batch or something like that So so basically I talked to this guy and he's like, yeah, I was working at cloud kitchens The startup started by Travis Clanick. He's like I was one of the first like 20 people there And my job was like, you know, they wanted to go build out all these cloud kits all these kitchens around the world And they were like, all right, you know, we want to build this $10 million project We want to build this $20 million project and he's like, I'm a data guy Like my background is like data science and they were like look, we need you to like be intelligent about how we're gonna like Plan out these builds. We're trying to spend this much this year.
It's a big number So like help us out with the data side of building out. So he's like, all right, no problem how hard can it be and He goes into it and he's like, okay, great so we have this let's say we're doing this deal and we're trying to build out this kitchen in Seattle and The estimate is like 10 million But like it could be plus or minus like four or five million and that's a pretty big difference Like if it's 15, it's different than 10, which is different than six So like which one is it and the guys were like, well, like it depends like it depends on what he's like It depends on the cost of construction and he's like, okay Well, what does that depend on and it all comes down to like one of the biggest variables is material costs So there are many ways that your construction costs can go out of whack Like you don't get the permits in time. It's it gets delayed labor errors but one big one is materials and so What he was like, he's like, okay, well, how hard can that be like let's just figure out the material cost and let's just spec it out and They're like, no, no, it doesn't work like that.
Like here's the spec Here's the plan like a construction plan and now to cost this you either you need to hire a cost estimator And what they do and what you would do if you wanted to do this yourself is there's this book that gets printed once a year which is like the this is like the bit the blue book of like all materials cost like if you want a Three-foot piece of lumber. It's gonna cost you this much But like as anybody seen especially during COVID like material cost like lumber has like had huge amounts of variants I don't know if you've seen this but like yeah, yeah, yeah, like you know a truck carrying lumber is like like right now It's like a truck carrying bricks of gold. It's like if you robbed that truck You would have like so much value right now because lumber was so expensive And so he's like the problem is that there's no real-time data I said he said so that's what I decided to leave and go build is basically an API That will give you real-time material pricing for construction.
So all you do is you upload what your what your Your construction plan is so and then it basically gives you an accurate real-time cost of it And if that's changing over time, you'll see how it's changing week by week day by day and companies who are building
SPEAKER_01
I don't know any of the companies but companies who are building Construction companies who work in the construction business who are designing stuff. They will use one build software to Integrate with their software. So it says in real-time.
How much this is costing exactly so so basically you
SPEAKER_02
Yeah, they're selling straight to the to the they're selling to the builder and to cost estimators who do this as their job It's like hey, here's a way to do your job faster But I think over time my sense is that it over time it eliminates the need for cost estimators as a profession But but I think you know the main thing is if you're a contractor Right whether you're if you're building your own project You want to know what are my real costs going to be and you want to know how those change over time? And then oh if we swap this out for this How does that change our pricing and the other thing is let's say you're a contractor You had to go bid for a job if you bid too high if you put your budget if you put the cost too high You may not get the job right because that's your sales pitches. Hey, I'll build it for 12 And if 12 is too high of a number they're gonna give it to some other guy who bid bid 8 But if the guy who bid 8 is underestimating it and actually cost him 10 he has to eat that loss and so bidding for jobs and accurately bidding for a job is Basically like a huge part of the sales process of construction. Alright, so what do I like? I like that this problem seems real I talked to a few people in real estate and they were like yeah, of course.
This is like this is a huge problem The you know, they're just the material cost for construction is twice the amount annually of all of e-commerce so it's like humongous market as a multi-trillion trillion dollar plus market of just the of just material construction costs and Smart guy, I like their approach there. I think they're kind of like the leader in that space It doesn't seem like they have a ton of competition like I don't think Like what I was saying before about savings at micro saving apps or credit cards. It's like there's a hundred of those startups right now I don't think there's hundred of this startup And then they already have some traction right they have seven figures of ARR already booked And so I invested in this thing in their series a and and I think there's also a big idea that I like which is After you cost it for them after you say oh, here's the here's your Estimated cost for this you could also just add a buy button down the road and then be like cool Purchase all those supplies and actually build a marketplace where suppliers can sell the supplies through their thing because the person's already at the They already have their invoice basically ready ready to buy This is amazing the thing you can fail right so why would I hesitate first the valuation was higher so it was like at a Over 50 million dollars.
Oh my god You know so I put in a hundred K I don't own a big piece of this But I want it in rather than being on the outside and then the second thing is I think Construction is a pretty old-school industry. It's all pen and paper like that trillion dollars of material purchasing is all done Just through pen and paper offline right now Who are you bringing it online can be a brutally hard thing to do?
SPEAKER_01
I'm looking at my meta prop. I'm seeing who all invested in these folks. I think maybe I know some of these people Who's leading this series a?
SPEAKER_02
You know, I don't actually know I don't remember off top of my head
SPEAKER_01
Wow, this is sick. This is great. It's a cool one if they're still raisin I would talk to them in a heartbeat my fear about this like if I had to like say what the downsides are is Can you easily replicate this like and I don't think so because what they're doing is not just the it's not just the app
SPEAKER_02
That says great, you know upload your thing and get your cost It's like where does that data even live? So this is like, you know that company climate corporation that basically Like what they did was they basically Agriculture weather data sold for billions sold for billions and basically what they offered to like, you know, hey farmers like here's all you know farmers and others is basically like We took this unstructured Offline data and we made it structured and online. So for example They're first taking all of the material call all of the materials and they're turning them into skews Like if you've ever done e-commerce a skew is just like You know if you're at a grocery store a Hershey's chocolate bar That's one skew and then a Twix bar will be another skew and the large Twix bar is another skew So basically they took everything you can buy in construction and they're turning them all into skews first So first that's the first step then they have to get the price feeds Okay, how are we gonna get real-time price data on all these things when prices vary from supplier to supplier vendor to vendor? And so then they're they have to do that and then they have to turn that whole thing into an API that like can be queried easily And get accurate price it and so so I think they have a I think that's the real innovation here is Being the one to organize and collect all that data Then after that really anybody can build an app that just asks them Hey, what's the price of lumber right now in Tucson, Arizona for this size of this type of lumber? And they should get back in answer and then if that changes in three months They should get that change notification that the price is increasing. That's sick.
I'm into this. I'm looking at all this now
SPEAKER_01
I'm taking out notes. I think this is amazing. I'm into this one a lot You want to do one more you like yeah, okay? Here's a boring one.
Wait, let me look let's do a boring one Okay, so I actually included this email in here because I wanted to show it and I blacked out a Couple things so don't read those things, but this one's like boring It's not a seed investment, but I just wanted to people to see how this worked. Yeah, so my friend Nathan Barry Nathan Barry started this company called convert kit, you know convert kit. I'm a user.
Yeah, I pay him Love convert kit if you Google convert kit revenue, you can see all their metrics all their numbers It's amazing. Nathan is you know, he's young. He's like 28 maybe right, but he like comes off way older He owns I think almost the entire company so convert kit is like a MailChimp competitor, but slightly different I don't you it's hard to explain unless you're an email marketing nerd, but it's just like MailChimp It's just like HubSpot.
It's just like a lot of these companies, but geared particularly I believe towards bloggers and He has grown the company very steady for about two years and he asked me if I wanted to buy some secondary at a 7x Multiple so their revenue is 28 million and he's raising at 7x that what's that? I don't even know 300 200 million 200 million dollars I invested I thought I invested $50,000 of my own money and the reason I would do that
SPEAKER_02
I would do that in a heartbeat. Yeah, well you want to yeah, I do want to that's great. It's like no brainer
SPEAKER_01
All right, I'll make an intro. Oh, let me write this. I know the guy, but yeah, I Interest so I get credit So he owes me one So the way that it worked was he goes Nathan emailed me about a week ago He goes funny story after you and I talked on how secondary liquidity works on my podcast I guess I can say the same Darmash heard the episode Darmash is the founder of hub spot Who's gonna be on in a few days heard the podcast and he reached out saying if you could buy X worth of shares directly from our Shareholders after surveying former and current teammates who sold hold stock options.
We're putting together a secondary round at seven times ARR And we're looking to raise 2.5 million in total with 2.05 so 2 million already committed ARR is 28 million net revenue is 27.
3 million which is up 34% revenue churn 3.8% customers 36,000 Profit this year 11% 12% profit. He sent me that email and I just said all here's what I replied I go, how will I get liquidity? He goes? I'm either going to keep buying more companies And you and then I'll go public or I'm gonna do more offerings in the future to sell and I go great in 50,000 right?
SPEAKER_02
Yeah, that it so here's my thinking my thinking is I'm super safe, right? Like the odds of this going south are Under sub 5% easily and I and so this is my safe bet
SPEAKER_01
So to me this is not so the way that I'm doing my net worth is one percentage of the vast majority let's say 95% is in Index funds boring 5% is going to be in angel investing and this This is considered private equity. I guess it's but it's not angel investing to me
SPEAKER_02
Right, it's more of the boring stuff. This goes in your boring stuff budget. Yes, but it's not quite boring
SPEAKER_01
Like I can't sell it overnight, but I know Nathan. He's trustworthy. He's ethical.
He's amazing I've been asking to invest in him since he started the company, right? So I put 50 grand of my own money in this and this is gonna come Straight from this is coming out of like the boring pool. What do you think about this? You like this? I like it a lot
SPEAKER_02
Yeah, I think that this is a really defensible stable company There's a lot of people that are super interested in you know email software There's like bigger companies and then there's like the sub stacks of the world that are trying to do things but I've used all their products Convert kid is the best product out there of the of this batch Once you're once you're hooked on it. It's hard to stop paying In fact, I told my team I was like, hey guys our convert kid bill is like two to two to three grand a year Like we should just isn't there like a free thing that will just let us do all this I feel like email software is everywhere and then sure enough they go kick the tires of a bunch of different things They're like, ah, we can switch we can get it cheaper, but we're gonna give up X Y and Z It's like well X Y and Z all seem like the important things. I don't want to give those up And so so I think he's built a very steady business that you know today I think convert kid could sell for more than 200 million I think I think if you wanted to sell this business today, you could probably sell it for somewhere like 30 to 40 percent higher than that That's bad.
That'd be my guess And it's just gonna keep growing. I think 25 to 35 percent a year
SPEAKER_01
And there's a world pounding I can see Nathan being the type of guy and a lot of people say this But I actually believe if he told me this is what he wanted to do was he was like I think I'll run it for 25 years and try to grow it 25 percent every single year through buying different companies I'd be like, oh, okay. Cool. I believe you in right
SPEAKER_02
I believe you're gonna try that and I believe you're capable of that and we see pretty much every major like creator economy deal And they're all just like you I think you're sick of creator economy at this point
SPEAKER_01
I'm very sick of it
SPEAKER_02
There's just so many creator tools and creator economy startups and honestly most of them are not very good It's like there's more funding in the creator economy startups than there is like actual revenue in the creator economy right now So so there's like this there's like this I don't know overhype in that space But this is an actual bit. This is a real business in the creator economy, right? This is like independent creators use this as their like back end for sending emails to their audience bloggers and newsletter folks and And I think that there's a lot of room to run like the thing I would do if I was him is I would figure out I Would go into the click funnels market. I think click funnels is a bigger company.
I think click funnels I was over a hundred million a year. Yeah, but they're turn is shit They're trying to ship but you know the I think as a upsell I think there's a lot of people who use convert kit that also create landing pages and try to like sell stuff And I think that click funnels is actually one of the better products for doing that even though I agree I think it just it's very effective at actually converting people and I think that that's the way I would go with this As a like as a route to getting bigger
SPEAKER_01
But but yeah, I think there's a pretty safe bet. Well, I already made an introduction Nathan. It's in your inbox.
Awesome
SPEAKER_02
You want to do one more? Yeah, let's do one more. Okay. I have a crazy one Yeah, I have a crazy one actually can we talk about that other crazy one? Yeah, you were telling me about that one
SPEAKER_01
Let's do that one. Okay, so what what cam his name is cam I had this guy reach out to me because he was a volunteer at hustle con years ago and I've always stayed in touch with him I love cam. He's a nice guy and I I thought he would always go places He emailed me like a week ago or a five weeks like maybe a month ago and he's like I got this idea I'm gonna build a build the world fair and I you and me Sean are way different immediately.
I said nope
SPEAKER_02
Nope, I'm up like I was never even entertaining this explain because I didn't even really know what the world fair is So explain what that even means. I'm gonna build the world
SPEAKER_01
Yeah, because it's like it's I just not imaginative or smart enough to understand these things you go ahead so
SPEAKER_02
And actually if you can link me the link the memo in here because I think it'll be it'll be useful to talk about But basically what I understand is the world fair is an event that happens has happened like, you know 70 years ago and then 20 years before that or whatever it's sort of like the Olympics It's basically this world scale event and in the same way that you know The Olympics every four years it happens and it goes into some country And it like you know some city and like takes over the whole city and it brings like tons and tons of millions and millions of tourists and And so, you know the previous world fair. So here's here's previous world fairs So Seville 1992 had 42 million attendees Shanghai 2010 had 73 million and Milan in 2015 had 23 million Attendees so basically this guy's trying to throw an event with 50 million attendees And so that's like the that's the premise is hey, I'm gonna build this event And it's gonna have 50 million people attend and I think I can make billions of dollars He he estimates, you know over five billion dollars per fair that he'll generate in some combination of tickets plus additional spend when you're there as well as like, you know the virtual live stream media rights to the to the thing and and Forget about the fact that like, you know the Like the city itself gets like this huge amount of economic activity when you get 50 million people coming to town That generates a lot of economic activity for the city So his idea is basically go city to city and say hey, do you want this like jumpstart of economic activity? Host the world like put up put your city up and put funding up and put resources up Let me host a world fair here. So and it's like Disney World on crack
SPEAKER_01
I told Cameron this earlier today and so he's a listener. So I want to let him know I love this guy And I think he's very competent. I just think this idea.
I think it's stupid particularly for like a VC funny thing I have hosted of like we're calling this a world's fair venture thing. This is a conference This is a trade show can conferences and trade shows make money. Yeah, they can but like to start Coachella Coachella makes a hundred million dollars a year and they've been around for like Third or no 20 years now or a lot of the Palooza 20 years like right this is oh
SPEAKER_02
The degree of difficulty on this is like at an insane level I would say and it's a level So that's the reason not to invest the reason to invest is also that the degree of difficulty is insane And the person behind this is insane and it's gonna compete against nobody and it's sort of this
SPEAKER_01
What do you mean it gets nobody if there's tons of these like like this cool I'm trying to do this. I mean Web Sun summit did something like this like yeah, but dude Do you want to compete against the Olympics? What happened to the Olympics last year?
SPEAKER_02
Yeah, I that's the thing who is competing against the Olympics? Nobody it's like when Elon goes and competes against NASA. It's like nobody else is competing against NASA
SPEAKER_01
There's a Commonwealth Games. There's world championships and different sports. There's all types of stuff
SPEAKER_02
I there you know, the entrepreneur will nobody who's who's trying to do it for capitalism basically nobody's trying to make a profit
SPEAKER_01
There was one person Ted Turner he launched the common or what did Ted Turner launch? The Goodwill Games
SPEAKER_02
Yeah, I mean, I mean did that work to the network? What do you know about that?
SPEAKER_01
I don't know if it made profit, but I know that it was a thing he invented it because he needed a programming for First TV stations or TV stations. Yeah, I believe it was called the Goodwill Games. Anyway, no I mean like do they work? Yeah, they don't not work.
It's kind of like just the American Pageant work like well it kind of probably makes money It's like an annuity it kind of works like every year for 40 years and it does only okay
SPEAKER_02
So is your okay? What's your criticism? Is your criticism that he's not gonna be able to do it at the scale or that? Even if you do it at the scale, it's not gonna make that much money. It will never ever ever happen at that scale
SPEAKER_01
I'm just saying that like look like and this is me saying someone betting my own money Like I'm not willing to bet my money that it will I'm willing to bet my money that Cam will do many amazing things I just think it's like literally like it's this is like it says like against physics. I think like like
SPEAKER_02
Do you know I mean so the most most relatable version of this is the Summit right so so the guys who created summit and then they bought the mountain and they're like, you know doing that I think that's sort of like the closest analog that I know and I've personally seen Anesthetic a good business as that was not a great business. Oh business. It was nowhere near well
SPEAKER_01
Okay, why do you think it's a horrible business they ran out of money multiple times it doesn't make a profit the event part Or you're talking about the mountain part the event both all What are you talking about Ryan will tell you first it Ryan made all this money selling trade shows and ads for a real estate newsletter And trade show business that was a killer business then they invested it in this other thing and it was just okay Like would you want to have invested your month? Like I just this this boggles my mind I have only a few dollars to pick between X Y and Z This like doesn't even come up on the like I'd rather go all it on abstract ox Just like give me some boring ass software. That's just gonna make money for 50 years
SPEAKER_02
So I agree with you from that point of view if I'm if I'm gonna invest I'm not personally gonna invest in this but I Think from his point of view from the guy who's building this point of view I Don't know you could be if you're a lunatic you can do some kind of amazing things You can really exceed like where others have gone for example, I know Patty who started a web summit and You know him that's cool. What's he like? Awesome awesome guy like you know should be the whatever of Ireland someday a prime minister President or whatever they have over there. He's amazing.
He's a really amazing guy But at the same time if you are trying to build a huge conference You're gonna approach it very differently than trying to create a World fair and then trying to create like an Olympics. And so I think it is really not that much harder. I I think it maybe it's it's harder But it's not that much harder than pulling off what Patty did over seven years of web summit The good thing with web summit is he was able to iterate so he's able to start super small like oh great I got a hundred people to come to Ireland for this conference in the next year I got a thousand next year.
I got 10,000 then I get a hundred thousand like he was able to step it up Whereas I don't I think with the World Fair thing There's no like tiny World Fair. I don't think so. I'm not sure You know how he's gonna possibly do this.
I yeah I'm his two is two phases are phase one host 25 million guests phase two host another 25 million I don't wanna I gotta say props to this guy. Is he like young? I hope he's young 26 he he props to this guy for doing this. I gotta give him credit I'm more into this that you are I kind of love that a guy's dreaming like this I also think it's insane and slightly, you know, I bet you you don't put your money in it I will not put my money into it, but I did put my money into something slightly crazy also I put a very small amount but 25k into a which is like below what I would invest in any other startup Into a guy trying to build a startup city.
So But I think that that has better odds of succeeding than this World Fair. Yeah, because you have rent every month Yeah, well, can I talk about that real quick? I know we're late for the other thing But basically what this guy's doing so we've heard about startup cities Bology came on this podcast and he kind of said I think the 2010s were about crypto And I think the 2020s are gonna be a start about startup cities. Bology also invested in this So it's this thing called praxis and basically what they did was they created this Social network like kind of like a club in New York La SF with just a bunch of cool people like founders People from entertainment like Hollywood New York stuff circle shit.
Yeah, just like, you know, so who house type shit And so they host cool parties. So they just been hosting cool parties and then basically they were like awesome we have the seed community of dope people and You know a city is basically just like an if you want to create the next Hollywood, right? You need all that aspiring actors You need the filmmakers whatever if you need if you want to create the next Silicon Valley You need the fun the VCs and the entrepreneurs and the engineers to build stuff And so either these guys premises basically like if you're gonna build a new city you need to have a network effect of dope people who want to be around each other and so he's been curating this community for a while and then they're going to the Like Mediterranean and they're going to these countries like good. Hey Croatia.
Can we get like a piece of land? That's ours. I give us this land for free that's beautiful land by the ocean and Let us come up with our own financial regulation rule of law and we're not gonna do Croatian law We're gonna do our own law and like just give us total sovereignty and in exchange You own a piece of equity in this land and we're gonna bring like the best American cool kid talent to this like this startup city basically to come live here and And then we're and basically it's a real estate company That's just building buildings and renting out the the office space them and all the
SPEAKER_01
Residences to the cool kids theoretically. I'm into this. I would have to I would want to know are the people like buttoned up Real estate people or they like people from Burning Man who wear like Coachella hats all the time And you know like leather shoes like like like like leather like pants like I need it I need to know like what they look like and what they're about if they're buttoned up Maybe I don't want to buff you want
SPEAKER_02
Just gonna he's gonna be out there recruiting the community and then you need the real estate guy who's like yeah Yeah, go do your thing. Let me let me actually set this thing up so that this works, right?
SPEAKER_01
So and by the way on the website for practice Cameron Weiss from the last company. He He's a member he started blogging about the world's fair on March 16, 2021. I linked it to you.
Yeah, he's a member
SPEAKER_02
That's that's that's the kind of dreamers you'll get in this community So I put a small amount of money into it because I'm just really interested to learn and like this is a this is a wild idea that You know, I think the portfolio has to have some wild ideas. It cannot just be Like things that are easy to understand and easy to like imagine working because I think we'll miss out on the large outlier winners
SPEAKER_01
So alright pimp your can people still sign up for your rolling fund?
SPEAKER_02
Yeah, go to go to Angel list just type my name in and then you could just you don't even need to email me You can just subscribe to my really fun and then I'll email you so you can invest with me We're doing we have about four million and Four million a year we invest across about 30 startups and for me. I don't do a rolling fund
SPEAKER_01
I have a syndicate if you go on to Angel list and type in like it's called Hampton VC Because I used to live on a street called Hampton not because I'm from the Hamptons, but Hampton VC comm if you just go there And then just click learn more you'll get taken straight to the Angel list page and just click apply And then whenever I have a deal you just are notified and you can invest or not invest is up to you And Sam's memos are dope. So you should go subscribe Well, thank you. By the way, everyone's saying great stuff about power writing.
Oh, yeah, they love it
SPEAKER_02
I'm putting my heart into it. I like I was like too embarrassed if it sucked so I like really really tried
SPEAKER_01
Well, everyone's saying great things Sarah's class is going live soon, but they're saying great things about it. All right