SPEAKER_00: welcome everybody ask jason is where founders investors even folks looking for career advice any of those things get to ask me a question i've seen it all folks invested in 400 startups

SPEAKER_01: i built a couple of companies post five podcasts a week have done almost 2 000 episodes of this week

SPEAKER_04: in startups 175 episodes of all in i've written a book i'm 53 i got a lot of uh battle scars and

SPEAKER_03: some knowledge and some hacks here and there i've read a lot of books so let's get started with

SPEAKER_06: ask jason this week in startups is brought to you by vanta compliance and security shouldn't be a deal breaker for startups to win new business vanta makes it easy for companies to get a sock to report fast twist listeners can get a thousand dollars off for a limited time at vanta.com twist squarespace turn your idea into a new website go to squarespace.com twist for a free trial when you're ready to launch use offer code twist to save 10 off your first purchase of a website or domain and mercury ninety percent of startups fail just 10 out of every 100 make it mercury exists to close that gap helping companies succeed with banking and credit cards engineered for the startup journey join over a hundred thousand companies banking with mercury at mercury.com okay let's welcome our first

SPEAKER_16: guest our first guest our first guest is uh dustin oh there he is all right hey jason hey dustin how are you sir doing pretty well how are you doing all right you sound great my team did a good job vetting you and making sure you had a tight question what is your question yeah thanks uh john's on top of it so yeah my

SPEAKER_18: question is i'm 28 i've got a technical degree um i just shut down my startup after about three years of working on it my near-term plan is to work at a post product market fit startup and try to build some financial stability and learn from some really uh really bright founders before starting a company again got it um that's kind of my goal but i'm struggling to find roles that fit the more generalist skill set i've developed sure over the past three years um and going beyond that knowing how to like market myself um in that sense because a lot of companies are looking for for specialists yeah um so i'm curious

SPEAKER_21: if you had any advice on like where to look and how to pitch myself right you're an operations specialist

SPEAKER_00: you're a jack of all trades you're somebody who the ceo or the co-founders of a company could say hey we need to solve problem x with the outcome of uh y and uh we want you to update us z right so xyz hey here's

SPEAKER_25: the problem this is the outcome we're looking for and and you can come up with the process etc am i

SPEAKER_27: correct that that's your skill set yeah i mean that's what i felt like i did for three years uh building

SPEAKER_00: this this software startup okay and as you know as you build a startup um you add specialists so when you're the jack of all trades a super important position this is somebody who can play defense all five positions og ananobi on the knicks uh draymond green right and so you are one of those utility players who can you know basically work on any problem with the exception of maybe you're not going to be the designer of the product you're not going to be the developer of the product correct

SPEAKER_16: uh you you're not the designer or developer if you're talking about a company that already has product market fit they obviously have designers and developers already there right right right got it

SPEAKER_18: so but you did do the product in your startup yeah i wrote code i i was in figma um oh wow great

SPEAKER_16: yeah all right well so this uh this is why i asked that question because you have three swings at bat here

SPEAKER_00: and you could actually design uh products you can write code uh and you can do operations so you want to maximize uh revenue to build up your chip stack and learn am i getting that right as opposed to

SPEAKER_27: starting another company yeah next like three years ideally would look like yeah building some cash um um to to get ready for another another startup and learn from some really bright people let me ask a

SPEAKER_16: um a personal question here why do you need to build up cash do you have debt do you have family

SPEAKER_39: do you have kids you have a mortgage uh no family um i've got a bunch of student debt

SPEAKER_40: um and how much ballpark how much do you pay every month every year about 100k um it's works out to like

SPEAKER_00: 600 bucks a month right now okay so that's de minimis all right so i am going to question this concept of i need to build a chip stack i need to build up money do you or should you um lower your burn rate personal burn what's your personal burn right which uh just as a ballpark what are you paying rent and

SPEAKER_18: where are you based i paid about a thousand bucks a month in rent i'm based in denver um amazing yeah

SPEAKER_00: okay so you have micro burn you have very low burn you got six hundred dollars for your student loan

SPEAKER_25: you got a thousand for your rent and you know you put in another five hundred or a thousand dollars in

SPEAKER_04: other expenses i don't even got a car payment whatever i mean you've got about a forty thousand dollar a year burn which means you could accept a job offer for a hundred k pay a third in taxes or

SPEAKER_48: something to that effect and have a little wiggle room so you're actually in an incredible position

SPEAKER_49: to be a co-founder uh of a company and were you a solo founder or are you a co-founder of your last

SPEAKER_18: company i was a solo founder for the first year and a half and then i brought on um i first had an

SPEAKER_27: employee and then kind of upgraded to a co-founder after a while tell me your experience solo versus

SPEAKER_18: co-founder it was pretty similar i mean i as a solo founder i got the company to almost to its first revenue and then it was after we launched our first customer that i opened the door for my employee to come on as a co-founder with a stake in the company i felt like i kind of had a handle on everything and

SPEAKER_27: i really just wanted you know more help and this guy was kind of going above and beyond so i i opened

SPEAKER_01: the door for him you felt like you should have that but truth be told you set the thing up you

SPEAKER_00: did all the hard lifting alone very admirable um also quite um crazy um i always advise and it's just

SPEAKER_25: you know it's kind of like joelle and b trying to beat the knicks right now you know it's like everything's on his back and you know it's really hard for to put the whole team on your back and get there it's

SPEAKER_00: you know when you want to win championships pretty good to have three all-stars on the team as we saw

SPEAKER_48: with the warriors uh or we've seen with other teams two or three all-stars they tend to win the

SPEAKER_25: championships you know not since michael jordan have we seen or kobe maybe you know people be able to put a whole team on their back it's just it's just rare and it requires a lot of luck etc so

SPEAKER_00: okay i want to ask what is the thing you learned during your startup process a marketable skill a technique a category uh let's just um let's just chew the fat here but what were you know three things you learned and you became an expert on inside your startup that you weren't an expert on before your startup necessarily or maybe you had some expertise but you really sharpened the blade there

SPEAKER_70: in other words superpowers things you got really good at yeah um i think so we were a construction sas

SPEAKER_27: tool um and i did all of the implementation and training um you know going out in the field and literally teaching guys how to use ipads before i could even teach them how to use our software okay um and so being a you know a translator between some really blue-collar personas and

SPEAKER_70: uh you know silicon valley engineer types uh was something i got really good at in that that period of

SPEAKER_43: time so you developed a skill at taking a complex product and getting it in the hands of customer and

SPEAKER_00: making sure they were successful with it and you were you were fearless about this you didn't have a fear in talking to those customers or embracing them no no i mean there was fear for sure but i i knew it

SPEAKER_27: was absolutely critical and we did over 100 customer discovery interviews we were tracking down any job site we could get on um you know just going up and talking to people did you enjoy it yeah got it yeah

SPEAKER_80: so you were you were initially scared of talking to your customers and then you got great joy from it

SPEAKER_27: right yeah once you start to build relationships and get into the world okay so customer interviews

SPEAKER_16: figuring out the ideal customer profile and what they need in a product is something that you've

SPEAKER_83: gotten really good at okay let's put a pin in that listen a strong sales team can make all the

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SPEAKER_00: your sock two it's the number two thing you learned at your startup that was a great first one by the

SPEAKER_87: way number the second thing you you learned and that you became an expert at you know it's hard to say i'm

SPEAKER_18: an expert at b2b sales at this point you know i was doing this for three years but um you know i came

SPEAKER_27: out of school with an electrical engineering degree i hadn't really done sales uh before that and you know through an accelerator we did and through just going out and doing the sales process building the pipeline prospecting demos and in closing i i felt like i am you know an order of magnitude better at

SPEAKER_43: sales than i was when i first came out of school as an engineer amazing so you're the engineer who learned customer discovery and success and you're the engineer who learned uh b2b sales yeah

SPEAKER_00: amazing okay let's stop there for a second of those two which one do you enjoy most that's number one and

SPEAKER_92: number two which one do you think is more in demand uh in the market i mean i think i enjoyed the customer

SPEAKER_18: discovery more great especially because it was also involved the product side and you know customizing

SPEAKER_27: this product to meet the needs but i imagine sales is probably more in demand going back to that concept of companies want a specialist who can sit down and turn you know a and a b okay so you got to go with

SPEAKER_00: what you have the most passion for i can tell you both of these things are in high demand especially at

SPEAKER_49: startups now what i want you to do is instead of making a decision to start another company and

SPEAKER_00: instead of making a decision to go work for somebody else i want you to pause for a second and i want you to spend but 30 days it's a 30-day program where every day you work on your socials your sub stack etc and

SPEAKER_99: you build a brand dustin the customer discovery engineer come up with a really tight brand for it i like

SPEAKER_00: customer discovery as you know like a concept but there might be a better word is there a better word for

SPEAKER_27: customer discovery that you did this is kind of buzzwordy but the the value proposition design

SPEAKER_00: value prop design yeah okay doesn't doesn't roll off the tongue like customer discovery and you're an engineer that's something special about you so customer discovery engineer dd just created a new title

SPEAKER_43: program customer discovery engineer you're engineering customer discovery you're taking something that most

SPEAKER_00: people consider loopy doopy touchy feely granola hippy dippy and you're making it a science i want you to

SPEAKER_43: brand yourself on x instagram linkedin especially maybe tick tock and certainly a sub stack i would say linkedin x and sub stack would be the top three most important ones there gotcha and i just want you to

SPEAKER_00: create content about customer discovery and what you've learned and i want you to highlight other people's learnings and your opinion on them and you go on a 30 day uh because you seem like a very disciplined person i get the sense you're a discipline you're disciplined individual i think so yeah

SPEAKER_100: you work out regularly take a shower every day eat healthy i was a collegiate athlete before i got into

SPEAKER_16: startups enough said this is why there are some people who hire specifically i've seen it in sales groups as well there's some sales managers like i only hire people who are collegiate athletes and played you know sports some people have the same thing about military why discipline you need people

SPEAKER_00: with discipline so you are a disciplined person me telling you to do 30 of the 30 days of this not a big deal and you just brand yourself in your marquee image etc that you are passionate about this and that you're an expert on it and they have a lot of experience maybe you do an interview with somebody else and you record it uh you write some blog posts you start a sub stack see if you can get to a hundred people reading your sub stack now you've established yourself as the credible expert on this topic and so when you email somebody you just put uh dustin your last name is ramsey ramsey yeah dustin ramsey comma customer discovery engineer google customer discovery engineer i never heard of that tell me more

SPEAKER_48: it has a link to your link tree we'll go to your link tree my subscribe to my sub stack here are my interviews my 10 principles on customer discovery come up with your own um come up with your own

SPEAKER_00: thesis and playbook right your own best practices you know around um what you believe leads to this and then after 30 days of this i think what you do is you find you know 10 startups that are in the seed stage that have raised their seed round they got a million dollars and thanks coming to that effect and you say hey i really uh think what you're doing is interesting i'm a former founder myself and i am an expert on customer um discovery i'm wondering looking at the customers you have if you need help with this

SPEAKER_04: i charge reasonable rates and i'm passionate about startups and you can book a 20-minute discovery call

SPEAKER_121: with me at my calorie link here now let's see if you email 10 how many reply and you should just do

SPEAKER_48: one follow-up to each one hey i know how busy it is to be a founder just wondering if i could help you with customer discovery in any way i looked into you know your competitor and i saw some other discussions about your product and similar products on reddit hacker news twitter linkedin whatever i'm curious if you've looked at their customer bases and studied them i could help you with that with competitive intelligence so anyway this is all recorded you don't have to take any notes but what i'm trying

SPEAKER_00: to give you is a playbook to establish yourself as an expert and then engage 10 startups you think are

SPEAKER_43: amazing let's say two of them hire you come up with a rate that's reasonable but covers your 40 000

SPEAKER_48: expenses a year let's see in month two month one you're just putting your ideas out there and building your cred month two you're trying to get an engagement or two and then let's see if any of

SPEAKER_00: them bite and you know maybe you got to send 10 of these custom emails per week it's really important that these be custom emails you spend time yeah maybe an hour researching 15 minutes writing that

SPEAKER_125: means you got to spend now if you want to send 10 of these a week 12 hours something 13 hours on it not a lot you're a disciplined person so you're just sending two a day because you're disciplined

SPEAKER_49: you know how to do this so what will happen at the end of these two months is you'll have an idea if

SPEAKER_00: this skill specifically is marketable and if people uh engage with it and if there's a business there if there is a business there two things will happen one you'll start ringing the register and who knows what you could charge for this i think there's startups that will pay you 5 000 a month to do customer discovery 60 000 a year you might get three of them and now you're making 180 000 a year which is much more than any salary you would get at a startup you know which typically pays what did you pay at your startup 50 to 100k yeah ballpark for you know founder for uh founders typically spend 50 to 100k on startup employees those same employees if they can get a job in corporate america maybe they get it for 20 more but they get paid 60 to 120. so you know this is people take a discount on a startup because they get more freedom more opportunity more growth and we all know the deal and then what might happen is you find one of those in month three that you really vibe with now you've started to prevent these so instead of just sending them nonsense you say you know what um i really love your startup i know she got two co-founders um i think i've proven my worth here um i'm wondering if you jane and steve running acme corporation would be open to a discussion about bringing me on as your co-founder

SPEAKER_125: because i you know i make a fortune at this uh consulting it's incredibly lucrative but i think you have a billion dollar business on your hands here and gosh darn it i know you guys own 40 each and and i think if i own 20 of this company and was your third co-founder i understand you guys started it um well into vest like y'all are vesting and i think i could you know help you get this there you know and more than earn my 20 i think i can make this company five times more valuable with my contribution that's unique in the world because i am a customer uh discovery discovery engineer yeah

SPEAKER_48: so anyway uh this is the way i like to approach you things and if you look at the people who became

SPEAKER_00: the all-in creators like young spielberg or uh ray doing the meetups you know there's just a bunch of them the all-in talk uh duo there were a bunch of people who did work on spec that wound up making

SPEAKER_48: big careers out of it because they got attached to a rocket ship that podcast yeah what you could do here is you know attach yourself to uh one of these rocket ships and the fallback is you're making your own schedule you've got three four or five customers paying you you know two three four or five thousand a month and every time you get a customer you raise your fee you know 50 see what happens the first

SPEAKER_00: customer might be two thousand a month the next one's three the next one's four the next one's five the next one's eight and then you stop accepting customers um and then you raise the prices with the lowest one say hey you know i'm getting eight thousand a month now i charge you two i got to bring you up to six else to give you a 25 discount you start firing customers yeah you know you you might be able to build this into a half million dollar a year business in two or three years and and then

SPEAKER_48: think about your optionality yeah you're building a war chest now you can fund your startup you know

SPEAKER_00: for the first six months and many people have consulting firms that are ringing the register like this they wind up having the ability to discover really good ideas along the way so you're learning while you're doing this customer discovery engineering for everybody else and you're turning customer uh discovery into a science from an art and that's a good tagline turning customer discovery into a science taking customer discovery from an art to a science that'll appeal to a lot of folks so

SPEAKER_48: anyway this is a long ass jason but i think it's an important one uh because you know this strategy you

SPEAKER_00: said you wanted to build your chip stack could do both these things and uh what city are you in uh denver denver okay one of the things i want to encourage you to do is to become the host or co-host of founder fridays in denver so go to founder fridays.tech i started this just so eight people could get together in a chapter um and founders can just sit there and talk about their biggest problems

SPEAKER_60: and you know a founder who's you know wrapping up their startup and getting ready to start the next one that qualifies for as far as i'm concerned and now you're meeting with eight founders every first

SPEAKER_00: friday of every month gotta get in that discipline you're hosting it you you know um you might founder fridays.tech everybody and you might find your customers there you might find your next co-founder

SPEAKER_125: gig and so i wish you great success with that any questions for me dustin uh no it's really well said

SPEAKER_148: um opened my eyes a lot to uh alternative to the the job application and the networking my way into uh into a full-time gig um job applications are for suckers let me say very clearly going to the front

SPEAKER_00: door is stupid what you want to do is you want to uh go through the side door and say where's the owner yeah i have something very important somebody says you have an appointment said this is critically important that you get me in touch with the owner of this business because i have something that's

SPEAKER_121: going to change everything here and you just kind of just barrel your way into the top of the company

SPEAKER_125: now with sardis it's really easy because i have five employees and you can just there's ways to get people on social media and you just be relentless dealing them whatever this is one of the things i've

SPEAKER_48: been teaching my team um if people aren't complaining that you're being annoying you're not pushing hard

SPEAKER_00: enough yes so i would rather see you if you went after 10 a week for three weeks and there's 30 of them if you're not getting four or five people saying unsubscribe stop emailing me i'm not interested

SPEAKER_48: you didn't do your job you didn't push hard enough to get the meeting you should just say listen i i i noticed you opened the email but you didn't uh choose to book a meeting here's a 10 minute calendar link i only need 10 minutes to explain to you what you're doing wrong and what you need to

SPEAKER_00: fix with your startup uh and i'm happy to do that for free uh it's only 10 minutes of your time and uh i'm willing to do it seven days a week anytime you want so pick 365 days a year yeah anytime but we we should talk about this now because i think i have critical information for you including x y and z so

SPEAKER_16: be aggressive uh and you know turn all your startup knowledge and pain into a high paying gig

SPEAKER_125: and don't go through the front door i wish i'm trying to hire like a community manager a gm for

SPEAKER_48: founder fridays.tech i wish somebody would just aggressively tell me here's what you need to do here i'm going to join as the i'll be the gm of the co-host of the denver one let me show you what i can do i'll work on spec whatever you know somebody just aggressively went after the job and you

SPEAKER_19: know what i get get cover letters that look like they're chet gpt nonsense they don't even read

SPEAKER_125: so you know really be thoughtful and do a sniper shot not a machine gun you know or a shotgun approach

SPEAKER_19: yes sniper okay dustin uh i'm gonna put a 30 day uh requirement for you you're agreeing to come on ask jason in 30 days and do a follow-up correct yeah you got it you got it okay we're gonna review

SPEAKER_04: your work in 30 days awesome thanks jason hey startups you ever notice how successful businesses

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SPEAKER_48: off your first website or domain purchase that's squarespace.com twist francis good luck we've met we have how you doing i am doing great francis you're an investor you're passionate about startups

SPEAKER_173: and you have a question for me what is it uh you have mentioned your framework for likely winner versus definitive winner when it comes to deploying follow-on capital can we define those terms in a more concrete

SPEAKER_175: way a particular level of revenue a particular growth rate a particular type of lead coming in something

SPEAKER_80: like that fantastic question when you run a venture capital firm uh for people who don't know for

SPEAKER_43: example our launch fund for it will be a 50 million vehicle give or take we plan on deploying the first half of the fund into what we call primary investments our first investment in a startup

SPEAKER_125: now we are a high scale investor uh so we have our accelerator we have our pre-accelerator found

SPEAKER_00: university so we'll make let's say 200 bets with that first 25 million dollars on average 100k sometimes

SPEAKER_165: it's 250 or 500k sometimes as little as 25k just to get somebody started with their first check

SPEAKER_48: and then my team is examining of those 200 names which ones are likely winners which one are definitive winners coming out of the seed stage this isn't doesn't mean they're definitively going to win an

SPEAKER_00: ipo and become uber robin hood or like a huge company like com definitive winners let's start there a definitive winner has a known vc with a known partner just like somebody who is a real vc from a

SPEAKER_48: real firm who is uh leading the round and when you lead the round what that means is you pick the price of the round the terms of the round and you originate the term sheet you're giving an offer to you're

SPEAKER_67: giving an offer to the founder and you're joining the board and you're owning more than 10 percent

SPEAKER_48: generally speaking so if we break that down it's a priced round the terms for the round came from the vc they're joining the board and there's proper governance happening and it's pretty nice if it's

SPEAKER_00: a competitive round and there are multiple term sheets although that's not required in my framework and again this is just coming out of seed so if we see that mark souster from up front frenchers is putting the series a term sheet for density one of our unicorn companies that i'm on the board of and

SPEAKER_48: we did the seed round we're gonna go oh mark souster up front joining the board he's only got a certain number of board seats he can take he's a legit investor he's thoughtful and he priced the round and oh they had other offers that's for us a definitive winner robin hood that happened calm that happened and uh superhuman that happened so we we had four unicorns come out of the first launch fund

SPEAKER_00: launch fund one ten million dollar vehicle four unicorns in all four of those cases there was a

SPEAKER_04: definitive lead they joined the board they priced the round they sent a term sheet etc now let's put

SPEAKER_48: aside growth because in the likely in the definitive winners there's always some amount of growth it could be 2x it could be 5x you know sometimes you're starting in the seed stage with very low number so they made 50k in year one and they went to 500k in year two 10x huh you know but it's 10x on a small

SPEAKER_00: number let's put aside growth but that was what we saw when we looked back on our biggest winners now sometimes there is a party round and a party round is typically the it's a convertible note so it's not

SPEAKER_48: priced the terms typically come as you know from the founder the founder says i'm raising 2 million at a 15 million dollar valuation i want this i'm going to raise 1.5 million out of 15 million cap note um dilute 10 nobody's joining the board i have four people soft circled for 400k and i'm looking to fill in the other 1.1 million the largest check right now is 250 and then we've got two other 250k checks so they're passing the hat etc but if they get that round done it's a likely winner and then there's everything else which is people did an equity crowdfunding site uh they did a bridge round but they didn't get any new money in those are pretty easy for us we're going to stand pat which is a poker term for we're not folding our carts we're still on the cap table but we're not putting any more money into the pot we're going to stand pat we might get a little diluted if you raise some money but we want to wait and see because we could only invest in one out of every 20 companies we're

SPEAKER_121: we're going to take those 200 and maybe pick the best 10 to 30 depending on the quality that comes out of it uh to get additional funding definitive winners we want to back up the truck likely winners

SPEAKER_48: we want to keep our pro rata or at least place a bet maybe a little less than pro rata if we own 10

SPEAKER_00: maybe you know we get diluted one point and we get down to nine percent we put an extra 50k in instead

David Friedberg: of getting diluted down to 8.5 or we stay at 10 or maybe we put a little extra in but we're generally going to place a small bet in a likely winner we're going to place a bigger bet in a definitive

SPEAKER_48: winner what this means is when you look at our portfolio at the end of the day 200 bets will

SPEAKER_43: equal half the portfolio and 20 bets let's say 10 will equal the other head those 20 will have on

SPEAKER_48: average a million dollars put into them uh after they graduate from the seed stage and the rest will

SPEAKER_43: have 100k on average put into them and so this is the framework i created for our firm which operates at the seed stage a series a firm might have very different criteria you might have follow-up questions

SPEAKER_204: or thoughts 20 definitive winners get approximately a million is that all coming into their a or is that

SPEAKER_175: spread out over a b just trying to get a little more detail so yeah we could i mean it's going to be

SPEAKER_125: situational and so let's say it's sequoia coming in you know andreason horowitz you know somebody who's really tier tier one with a lot of money and they're joining the board um we're going to try to maximize and so in that case let's say we uh our pro rata is 500k we might ask for 750k we might ask for a million maybe we can only take our pro rata so but at least we got 500k in and there will be it would

SPEAKER_49: probably most likely be in the seed round or the series a in rare instances it might be series a

SPEAKER_125: series b the overall goal is to get ourselves to 10 to 15 ownership in our definitive winners why is that important when we look back when i was a sequoia scout you know in robin hood and uber we owned basis points in other words less than one percent of those companies now those were extraordinary

SPEAKER_48: outcomes so it wound up being massive returns then when we got to our fund one we owned um i think now we own two percent of superhuman uh five percent of calm five or maybe six percent of density and so we were able to get up into let's say low single digit numbers and then when we got to series b when we got to our second fund we had grin which became a unicorn and we wound up having i think 15 or 16 ownership

SPEAKER_43: that became a unicorn now 16 you know 15 ownership in a billion dollar company is a lot of money it's 150 million and even if the company were to sell for 500 million maybe it's a 75 million dollar position

SPEAKER_48: and so what's really important because you and i operate in a power law business is that when you see something could be in that power law category a company that is a category leader with high gross

SPEAKER_125: margins and is growing violently you you got to back up the truck because they're rare and you know

SPEAKER_43: what we didn't in fund one in fund one we did 109 names we didn't do follow-on funding and that was

SPEAKER_19: the nature of seed stage and solo gp investing it was called spray and pray chris saka ron conway or

SPEAKER_00: all these people came before me and i watched them i think spray and pray is like a silly term but it

SPEAKER_04: rhymes so it sticks uh people remember it but the idea of spray and pray was get a large enough number

SPEAKER_00: that you have a chance at an outlier and if you hit a power law winner it makes up for a lot of mistakes you can take a lot more risk but the high art i think is to have enough surface area which i think you and i would say is 50 to 100 names to hit an outlier and then have some capital left over and have the discipline and the system to understand it's a likely winner or a definitive

SPEAKER_48: winner hopefully and be able to put more money in and so this is what i've come to after you know being a fund manager just you know getting to my fourth fund and you really could combine my first three sequoia one and two as my first fund in terms of dollar amounts that would have been about 20

SPEAKER_125: million um and i was doing it part-time up until fund three and fund four i think is when i've gotten

SPEAKER_48: good at it if i'm being troll and most people will be like you're crazy you you've you've already crushed it but i think i got lucky on a lot of cases um had a great network but i think now i have

SPEAKER_00: a great process in fact i think i have the best process in the entire industry or maybe you know in

SPEAKER_125: the top 10 in terms of process and team right now currently on planet earth i think i'm in the top

SPEAKER_174: down in terms of processing any other questions or follow up just a comment and the data is backing what you're doing there was something that came out of primary bc yesterday data saying that you know for the very best funds they went from a 3.5 x multiple to an 8x simply by having a larger amount of reserves which average around 40 percent in those cases versus less than 20 for those

SPEAKER_220: three and a half x multiple funds which are still great but you know 8x is obviously better yeah i

SPEAKER_00: mean 8x is absurd 3x is way above the average and so you know i just think as a fund manager be thoughtful about this ilp other funds i was talking to uh sophia amarosa uh from trust fund who i'm an lp and i was like make sure you have some reserves and she's on her first fund and you know i i don't

SPEAKER_48: know where she wound up with that but i did have this discussion with her as an lp you know i would rather see you if you had a 10 million fund and you were gonna do 100 names 100k each i'd rather see you do 50k 100 names and then take the 5 million and put 500k into the top 10 of that group i think that would be a better strategy but you know what being a fund manager is hard you got to come up with your own strategy and so i just like to share my strategy publicly for two reasons one when i share

SPEAKER_00: my strategy smart people like yourself will amplify it and um you know kick the tires bang the drums and see if they can figure out if it's flawed or not and tell me hey that's not a good strategy um and i'll get better at my game the second thing is that we're really not in competition i learned

SPEAKER_48: this at the seed stage if you are below series a or before series a how many times do you see about

SPEAKER_66: one name or two names on the cap table it's almost always yeah and what's the what do you think the average is of the number of people investors on the cap table or entities by the time a typical startup

SPEAKER_121: gets it gets a series a done what do you think the number is unique investors take the one i saw

SPEAKER_174: recently it had 49 including mine i mean we'll just take that as an example right as they're getting

SPEAKER_196: their aid on yeah so i think the number is probably 25 to 50. i think that might be the high end but i do

SPEAKER_00: think it's like most typically 30 names you know um they pass the hat a whole bunch and then people have been very good about doing spvs maybe they'll work with one syndicate uh etc but you're an early stage investor tell the audience since you're here how you invest uh and your vehicles and your

SPEAKER_234: philosophy i'm curious i basically stole indoors and adapted to a much smaller scale i invest with

SPEAKER_173: your syndicate other syndicates direct wherever i can find the best deal and i do 50 reserves because

SPEAKER_174: i'm seeing that like what you're saying i'm just really grateful you put this information out there on the podcast angel university wherever so i can start with the experience that you have now and i don't have to learn all this for myself so that's just hugely impactful that's incredibly kind of you

SPEAKER_25: if anybody out there wants to learn angel dot university uh we have one coming up in may it's

SPEAKER_48: a three or four hour class it's three hundred dollars all proceeds go to charity and we've

SPEAKER_00: given a hundred seventy five thousand dollars to charity over the last five years mike savino and i have been doing the angel university course it's open to everybody anybody wants to take it it's all

SPEAKER_87: good okay uh great job francis and we'll talk to you soon being a founder can be overwhelming don't i

SPEAKER_241: know it you know i get those phone calls on the weekend sometimes people are a little overwhelmed

SPEAKER_80: they need to talk to jcal they got my phone number i know the reason why there's a hundred different

SPEAKER_03: things you're responsible for you got to take care of your office space or remote workers hr

SPEAKER_80: software raising money products customers it never ends and i know you just want to focus on your product and your customers well fortunately mercury is here to help simplify your banking and finance operations complete any banking task in just a few clicks streamline your operations with real-time data from your bank account and they've got an amazing interactive demo right on their website that lets you explore all the tools and how it works with mercury you're going to pay bills faster you're going to stay in control of company spend and you're going to speed up reconciliation the end result is the precision control and focus your startup needs to transform how you operate join over 100 000 startups that trust mercury for financial excellence growth and of course the community mercury the art of simplified finances client minutes mercury.com and start transforming your

SPEAKER_43: startup's journey today all right matthew you have a question for me about podcasts go yes i do uh

SPEAKER_245: so this is about sponsorships and ads um my main podcast law subscribed uh has two sponsors already uh but as it's grown over the last yeah thanks as it's grown over the last three years i've had other opportunities come my way but they're they're not aligned with the niche of the pot my current sponsors are twist has some of the best alignment with its sponsors products that help entrepreneurs with their businesses but i've noticed a few times uh you've um you've gone outside that uh nuts mattresses uh i'm just i wonder is it is it about the size of the bag which i kind of imagine was a giant bag of

SPEAKER_247: macadamia nuts um but uh or was the trade-off you know with the lack of brand alignment worth it i'm

SPEAKER_04: curious to know what the numbers have shown as as i get those opportunities yeah so um you know for people who are doing consumer products they want a low cpm they want to hit a large number of people

SPEAKER_48: so if it's audible which i am passionate about i'm a platinum member for audible for 10 years which means i've spent two thousand dollars with audible it's some of the best two thousand dollars ever spent i get 20 credits or 25 credits per year anytime anybody mentions a book on the podcast to me at a restaurant i just buy it i don't even think because books are as an example the greatest value you could ever have now is audible you know gonna get an roi on me reading them an ad good question uh or should they do joe rogan or somebody who's got massive scale right joe rogan has the largest scale uh they should probably do joe rogan uh because if they're trying to ring the register we're a very niche audience and it's a very low uh lifetime customer base now maybe they could make it work if if they had me selling the platinum and telling my experience from that we sell out every

SPEAKER_125: year now we've been doing it for over 10 years we know which brands are going to do well uh because the minimum ad buy is thirty thousand dollars for our podcast to buy five ads i think and that's 6k per

SPEAKER_196: okay if you're going to spend thirty thousand dollars and your product has a let's just say

SPEAKER_43: five hundred dollar a month price point which is cheap for a sas product right but let's just say it's five hundred a month that's six thousand a year and if your customers tend to stay with you for five years that's thirty thousand dollars you need to get but one customer to break even if i was

SPEAKER_00: running a business like that and my target audience included anybody in this week in startups and we price the ads lower than we probably should because we want them to pencil out that math and go no

SPEAKER_48: brainer and so the reason you see so many advertisers on this week in startups you know you hear me reading

SPEAKER_00: the ads over and over and over again and they come back every year and we have relationships for five or ten years with many of these um is because we probably under price the ads and then over deliver and

SPEAKER_48: make it a no-brainer and then we tell people oh okay your product macadamia nuts isn't very expensive but they say you know what we want you jacal we love you we're fans we love all in we love this week in startups we love that we love we love startups themselves you know we're doing some awareness so we don't actually care about roi as much now we might track some roi so what i tell the advertising team is please number one don't accept anybody who's a lame advertiser because i'm just not don't want to read the ad myself so we've had people who maybe had something where i didn't feel comfortable reading the ad um think about like something you might hear on like repeated ads on sirius xm that are just filling for a company that protects your privacy or your reputation or something like that those services get a lot of complaints i think because they're kind of like subscription services

SPEAKER_00: that some people may get value from but many people who sign up have a hard time unsubscribing

SPEAKER_48: yada yada so we say no to that when vapes first came out a lot of people wanted me to do vape stuff and you know there's been a lot of weird advertisers that we've said no to and we'll just tell them this is a b2b podcast it's a low hundreds of thousands of people listen to each episode over the

SPEAKER_04: first year or two when the episodes get published and we make them do a minimum ad buy so i think always

SPEAKER_48: have the targeted folks because then you don't have to deal with matthew people being upset that they didn't get the roi and then if they're roi people you know i think just asking them explain to us how you're doing your roi calculation because i think maybe one in 20 people use the codes so if somebody uses the twist code or your code for for your lost subscribe podcast i think maybe one in 20 one in 50 might use the code so you should just times it by 20 or 30 40 50 depending and you know if they say to you well you know our product costs 6 000 a year and our lifetime value is 30 000 and we want to get 10 people per ad buy i'm like so you want to get you want to put 30 000 and get 300 000 back really and you want to track all of them that probably doesn't make sense i think you're probably overestimating your ltv and your cac lifetime value and customer acquisition cost i think you should look at podcasting as two-thirds brand building one-third roi that's what i think the

SPEAKER_43: proper calculation should be one-third roi not that you can track it perfectly but you're getting some

SPEAKER_48: amount of the money back so on a 30 000 ad buy you get 10k back in customers you spent 20k getting marketing value and also the host reading your ad you know means something so having a trusted person read your ad uh maybe you break it into three buckets 10 000 to get the influence for reading your ad and whatever value that provides 10 000 for general awareness and then 10 000 for roi and just generally speaking i don't do it for the money which then means it sells out every year and then people demand i do more shows and i've actually been trying to do less shows as you've noticed i'm trying to get down to three days a week on this weekend service we peaked at six when i had molly as a co-host but it almost killed me it was just way too much content for me to do or my team to do and i think that's why a lot of people who are daily talk show hosts you know uh james corden just quit jimmy kimmel's gonna quit howard stern went down to three days a week i mean just

SPEAKER_125: it's a grind to be daily and so i think a lot of people quit so i hope that answers your question

SPEAKER_245: you're putting yourself in those categories of those that that caliber of late late night

SPEAKER_125: well no i don't because they have huge reach but you know if you were to say you know who is the jimmy kimmel or the james corden of startups i would be on the short list i guess so you know i think you have to understand what the natural audience is of your pockets so for yours law subscribed it's obviously has to do with law lawyers with the sub legal technologists okay so you know it might be very niche five percent of lawyers ten percent of lawyers i mean any lawyer who hates

SPEAKER_245: billing by the hour but uh so that's all of them but you know realistically right now i'm at around 300 listens an episode it's been growing though it started with you know five and i knew all of them um and so it's growing and since it's very niche and there's brand alignment with the sponsors they're happy i'm happy uh my listeners are happy and and you know as i get you know some random company or

SPEAKER_247: or even i i don't know if you've had this but people want to pay me to be on my podcast and i don't know about how i feel about that either no bueno yeah i just just sent them to ads it doesn't

SPEAKER_99: scale then the audience is just going to tune out because they don't feel you have objectivity

SPEAKER_48: already you know uh i think the audiences have adjusted to this but i'll tell you 10 years ago when i would read an ad um people would think it would compromise my objectivity uh because the first advertiser on the speaking service was this search engine that microsoft was launching called bing and we were their launch partner when they launched bing bing bing and i used to do these that bing bing bing and i would just they said do whatever you want in the ads i mean this is the early days of podcasting 12 years ago and i would just pull up the bing search engine and say hey let's look at

SPEAKER_125: the bing search engine let's do a couple searches compared to google searches and uh look at these cool features they've added that google doesn't have and they just trusted me to do that and i just picked a number for the ads i think i told them it was a thousand dollars an ad or two thousand

SPEAKER_48: dollars net and they weren't even buying it for that so what you really need to do is pair your uh podcast with a newsletter and you know um try to give some value with the newsletter between episodes and then you can really grow it and then you should also think about subscriptions for it because you have professionals but the great thing about doing a niche podcast in the stage you're at right now is you can literally email it every week programmatically like with a with an assistant or something or a ten dollar an hour outsource person doing 10 emails from your account or from

SPEAKER_00: an account you create with your name on it saying hey i'm matthew i have a podcast it's about law i did five episodes so far i thought you might be interested into it you can subscribe here it's a one-time email don't worry i'm not adding you to any list but if you want to be on a list you can go here i'm curious if you have any thoughts on these topics or if this is of interest to you or any friends hit reply and introduce the pod to your other friends i'm really having a good time doing it like just a simple email like that you might add 100 people a week or 10 people a week 50 people a week one of the nice things to be in year one of your podcast like that but just focus on the content and connecting with the audience i'm now going backwards and trying to figure out who the top one percent of the audience is for this week in startups you know we're in our 13th year i think we're almost at

SPEAKER_48: 2000 episodes so i like the idea of trying to own the relationship with the one percent and that's why we invested in a cover call a company called river that was doing the all-in meetups and now they're doing tim ferris's meetups my first millions meetups the blueprint meetups apologies meetups and this week in startups meetings i'm actually hiring a full-time or half-time person to manage our meetups uh founderfridays.tech you can go and check that out there's an equivalent for you matthew so i think email and in person you didn't ask this question but i'm just giving you a little mentorship as a podcaster i think in person and email as uh parts of what you're doing are super super super creative at this stage i think a creative is like a fancy word for additive so i think it would add a lot let me stop using silly words i think it'll add a lot if you did an in-person meetup what

SPEAKER_16: city are you in chicago perfect just do the law it's called lost subscribed is your podcast lost

SPEAKER_48: subscribe to say lost subscribed is doing a monthly meetup in chicago the first friday of every month we're inspired by jcal and i wanted to invite everybody to show up and just have a mixer what if 50 people show up and then you tell your sponsors you're automatically giving them a sponsorship to your no host meet up at a pub you know near a certain law firm i mean this thing could blow up for you so i'm giving you the playbook here in person drives online online drives in person email is a bit of glue especially in those legal spaces to make things grow and to have a direct relationship with your audience because you don't have a direct relationship with your audience by podcasting because you just

SPEAKER_43: have an rss feed how did i do math you rate rate rate my advice here one to ten me rate your advice yeah

SPEAKER_245: go ahead rate it you're having me do this live now too um i'll give you an 8.5 out of 10.

SPEAKER_43: oh i see you're giving me room to improve uh any follow-up questions for me uh no that was that was

SPEAKER_48: great thank you jason all right my brother good luck podcasting remember sound quality is everything all right great job and uh let's take our next caller i love doing this i love doing ask jason i can do this every week i love hearing what your challenges are in your career your startup your podcast your life

SPEAKER_80: i like giving advice so let's just keep going here ask jason ask jason jason david wait pick a name

SPEAKER_00: you want to be jason or david how do you want me to refer to you i'm jason you could be jay cal

David Friedberg: okay great all right but your last name is david yeah i got two i'm gonna call you i'm gonna call

SPEAKER_277: you mr dave mr david you have a question for jay cal go ahead jd i do uh when i sent it i didn't

SPEAKER_294: realize it was a crucible moment in our startup but uh we we are working through the standard i guess you'd call it cold start issues and building our hard side of our network which is the first product of three uh which is a network of independently owned gyms that we need to build up so we can move forward so our product is a is a network marketplace but our customers are paying us for world-class marketing and advertising so my question is should we continue to focus on uh the low cost growth and traction initiatives or because of our value props to our customers and that money or vc money would be spent on advertising which would also double as customer acquisition cost should we look to push for a seed round as a way to accelerate growth whereas most startups would spend the money to kind of build

SPEAKER_297: awareness of their product it is our products okay great you're trying to decide if you should go the

SPEAKER_99: venture route you should put jet fuel into your startup let's understand a little bit more of your

SPEAKER_294: startup who is your customer our customers are independent owners of i would call it community coaching focused gyms um one other thing i would say we we did i think answer this question and kind of went all in so i'm really hoping to tell you what we did to see what what you think so some person owns

SPEAKER_99: a gym in venice california and brooklyn and they do crossfit or pilates or yoga and they've got a small

SPEAKER_48: personalized gym and then what is the product that you provide them with well right now we started with

SPEAKER_313: a radio ad um the uh next one was going to be a billboard but we kept running into what does the

SPEAKER_314: billboard do what does the radio ad do you you drive people to their business to their business

SPEAKER_294: yeah so if you imagine uh you hear a commercial that says come to this amazing gym gym for us right

SPEAKER_315: you go to the website which is our mvp and then you click on it and it shows you the nearest ones to

SPEAKER_00: to your location got it okay so this is an arbitrage business like uh my friends i was the first investor

SPEAKER_48: in a company called thumbtack and thumbtack was a very interesting business because uh thumbtack you know would take a request for painting a house and then they would find five penters to give you a quote and they could buy ads search ads display ads etc for people looking to paint their house to get a

SPEAKER_00: plumber to whatever project was popular garden pool whatever and they could acquire a customer they

SPEAKER_48: could require a click for a couple of dollars turned it into a profile of a job painting this house in

SPEAKER_00: you know i don't know palo alto pretty expensive houses there and then they could sell that lead for

SPEAKER_48: thirty dollars to three different painters and arbitrage it for a hundred so you're kind of like thumbtack in that way um an arbitrage business these things tend to print money if you can figure it out so my question is have you figured it out in your pilots now have you figured out um the profitability of this you buy the radio ads um and then how many people come to the website and then you know what

SPEAKER_125: what do you wind up charging for those visits to the subsequent websites we have a three-tiered pricing uh

SPEAKER_305: philosophy well plan in place it starts low then it goes a little bit higher but it stays very low for what our customers are used to paying for advertising we have 10 customers they love what we're doing

SPEAKER_294: however it's really difficult to tell all of our customers like hey we're going to do this amazing thing which they're already happy with what we're doing but we need to scale it and what i mean by that is along the way we've kind of built in what i think is kind of a once in a lifetime opportunity for a cmo to come in as a with a founder status to implement a world-class marketing and advertising campaign to a brand that has never had one before which is the independent owners of these gyms and how i came up with that was talking to my co-founder you know we are to our customers we are representing them the way they've never been represented before they're not going to have to put a sandwich board outside and do their facebook ads you know our vision is super bowl commercial f1 car joel rogan podcast that sort of thing so we think that the right cmo can come in we'll see exactly what we're doing understand that they will be given the keys to essentially a brand new car with a freshly freshly

SPEAKER_48: minted copyright i think right now you're like worried about things that come later i think you're still in the experimental phase so i'd encourage you instead of um thinking about cmos f1 cars uh and vc let's put all that on the not right now board so you write it down but it's not right now

SPEAKER_04: and i think what you have to think about is is this a venture scale defensible business and as presented i think this is a money printing llc that one or two people who are really good at

SPEAKER_48: this kind of arbitrage or maybe a team of five can build a business that generates 10 million dollars in top line revenue and drops you know 40 to the bottom line and the founders just chop that up amongst them because this is an arbitrage style business you're going to try to get people to a landing page and then send their traffic to a bunch of folks and hopefully bring them customers there was a business in chicago that did this named groupon now they used a different device than you

SPEAKER_00: their device was like these cheap tickets to get into like it was unbelievable that you could take a yoga class for five bucks instead of 25 they just got the wrong customers kind of broke businesses

SPEAKER_48: because those people then wrote bad reviews um but i think you know for this to scale any vc who's

SPEAKER_125: going to look at this is going to think hmm this is more of an agency style business and i think they would be correct and looking at it as such it's not a platform yet and so i think that's going to be the big decision here is is it an agency business is it a platform that can scale and i think

SPEAKER_48: you're going to have to figure out is this the best group of customers to do this are you bringing them more customers than ever or should it be a software platform where you figured out how to do it for small gyms maybe you can figure out how to do it for other categories maybe there's a better category that's why i think you're still in the experimentation and triangulation phase i would put off raising money and just do experiments in which you know you can figure out where the most arbitrage is and there were people who've done this like i don't know if it's like 1 800 dentist or something like that but i think some people figured out like dentist appointments were a really good place to do this or hair salons somewhere where the ticket price was even more than a gym and so i would keep running these experiments and then figure out is this actually venture scale is it a

SPEAKER_125: software platform where you know anybody can come in and use the platform that's what vcs would be

SPEAKER_294: interested in working on with you if it was a platform if you had a 30 000 conservative estimate beachhead market for your first product and that 30 000 customer beachhead market created a 30 million arr additionally 50 000 customers for the secondary product of that beachhead market and then each market

SPEAKER_329: was scaled individually at the same cost would that's how we're looking at it yeah so you know it will

SPEAKER_19: really be in a vc's uh estimation if this is a low margin business or a high margin business and is it a software-based business that's unique and innovative in the world or is it just a web-based business and and more of a service type business and right now i think to become a plat to be perceived as a platform

SPEAKER_48: what they would be looking at is like hubspot which is a platform for you know small businesses to

SPEAKER_04: manage customers and the customer journey is it like hubspot or is it more like hiring a local agency to do radio ads for you and right now it kind of tips towards uh the latter as the former and for it to

SPEAKER_48: feel more like a platform that means people show up at it they sign in and they participate without a salesperson having to talk to them and you know it kind of grows and anybody can use it for whatever they want to try to do it for like youtube youtube grew into because youtube was a platform people didn't look at it like a content business so when youtube first started there was one group of people in the venture capital community who looked at youtube and said it's a content business

SPEAKER_04: we don't do content it's like cnn it's like vice it's like engage it it's like any other content business and then some people looked at and said no no no no they're gonna let anybody upload a video

SPEAKER_48: they're gonna sell ads against all of the videos and then they'll figure out the psychographics and the keywords and the videos and they'll start matching the ads to it and it's a platform anybody can use it for anything you could do cooking recipes you could do a podcast you could do bird's nest of an eagle's nest with a video camera on it and so vcs tend to want to be in platforms they don't want to be in service businesses they don't want to be in content businesses so you kind of fall into the services thing and so i think that's what you got to figure out if you had

SPEAKER_294: a highly fragmented market that was being top down uh fixed in terms of that and you know the consistency that sort of thing and then as the market grew as your product grew and then at scale which we practiced on each additional market once it's a national ad campaign then you have all of that revenue can be taken from one mark all these different markets and applied to one single market which is the national campaign and at that point that's when we would look at adding the other two products but we have to follow the chasm rules which we can't just sell our full product to our end customers unless we have you know some long-term consistency and and what we're doing and fix the

SPEAKER_48: fragmented market that that we're trying to fix yeah i think you got work to do um and i think send me the links and let me take a look at it and i'll give you some further feedback offline

SPEAKER_53: great question mr david okay well thank you douglas you're on you have a tight question for me go

SPEAKER_346: yeah hi hi thank you very much for your time my question is we're a young startup with a lot of really solid traction but we're having trouble selling ourselves against some of the sizzle of other startups of similar lifetime really focus on ai we have a lot of traction but we're our product we don't focus on ai how can we separate ourselves versus that when it comes to pitching investors and

SPEAKER_348: other valuable customers tell me about the startup who are your customers and what's the product

SPEAKER_346: to use our formal pitch we build premium experiences and revenue models for independent

SPEAKER_347: brick and more businesses so they can use as an upsell to their customers the less sexy pitches we sell fast passes or patreon for your favorite local bar coffee shop restaurant but but more

SPEAKER_345: like flower shops hobby stores bookstores these businesses that are like important and then people you know they love to go walk over and experience that and yeah it's a great idea membership programs

SPEAKER_352: and subscriptions for local businesses i've heard a pitch like this about a dozen times over the years

SPEAKER_04: of course it's it's it's out there uh crowdfunding's been out there and so building a platform where people can buy subscriptions uh and white labeling it where it's on somebody's website um and then figuring out the value proposition is a really great idea i don't think people are going to look at this and say ai has anything to do with it necessarily what they're going to look at it and say is what do your customers say about you after three six and twelve months of using your product how many of them are successful using it how many of them churn that's really what you need to get focused on because because this is one of those ideas that's been out there for a while and because it it's a software

SPEAKER_48: business that is trying to help small businesses a lot of people in the venture community don't like

SPEAKER_04: those businesses but i mentioned hubspot earlier hubspot and shopify figured out how to help small businesses and then those small businesses grew into medium size and sometimes even large ones

SPEAKER_48: but the the point here is how many customers uh how many pilots have you done so far we have 31 customers of an ally of another dozen okay so lois are letters of nothing never bring them up again that's the weak entrepreneurs so never bring them up they they basically mean you're focused on

SPEAKER_04: getting people to soft commit in a startup there's no time for soft commits let's go for the real one

SPEAKER_48: so of the 31 that you have in pilot how many are paying you all of them fantastic great so they're true customers the reason i ask that is sometimes people say 31 we have 31 customers and nobody's paying it uh what is the average payment per month of those 31. in total or other subscriptions that we take cut off um the average revenue generated by the one in that's number 15 from high to low median average

SPEAKER_43: is 900 a month yeah in revenue great how much of that 900 do you capture

SPEAKER_365: uh that's our that's your take that's our take take amazing so you're making ten thousand dollars per

SPEAKER_25: customer you got three hundred thousand in revenue um yeah you figured you figured something out

SPEAKER_346: clearly yeah um i think i think it's a market opportunity mostly yeah the owners are younger

SPEAKER_48: and they're familiar with the business model great describe for me the number one uh business in the platform you can say the name or not depending on if you have permission or you want to um but describe the number one uh customer in terms of their success with it and how it's changed their business

SPEAKER_364: we have a very nice restaurant in a highly walkable suburb of socal and their average head per ticket

SPEAKER_347: was about fifty dollars and they're really struggling because rent was going up labor costs were going up and they needed something to sell on top of that and further their despite all their experiments they were really getting burned out by food delivery software and other software aimed at this stuff they just wanted to focus on their customers we came in and said hey why don't we you offer this membership product to your best customers and they realized instead of like offering discounts or like value ads ads that these customers care about them they gave the they bought gift cards uh during covid because they were so afraid this business would go up well business they realized they could turn the membership into an upcharge because they their customers can only eat so much uh beef and drink so much wine in a night but you know the idea of buying a membership the membership can include things like hey first table available every time no never wait in line or take the what

SPEAKER_99: what was the number one reason their customers signed up for the membership uh so there were there

SPEAKER_347: were three primary answers we got one uh people who just were looking for somewhere consistent whether they could take customers or friends out so hey the perk of no reservation required was really sexy to

SPEAKER_48: these people ah so seated first fast pass yeah is what they got so they can be a hot shot when they come in they pay what was the amount they pay on average on average the the per head was fifty dollars

SPEAKER_125: table was what is the membership i'm sorry the membership fee for that customer the membership they charged a hundred dollars perfect so there were people in the local community who pay a hundred bucks to be treated like royalty when they came there and so all that all they had to do there was

SPEAKER_48: reserve a couple of tables just in case those people came out and it sounds like they were

SPEAKER_379: struggling anyway and so they got 10 people to do this 50 people to do it 100 people to do it they

SPEAKER_347: converted a little short of four percent of their overall customers we have currently 17 recurring

SPEAKER_48: customers from that location so they're making 1700 a month and then i guess what is their uh we'll have to study their churn and see if people churn and then what um with those reservations um i guess the what does that equal compare to their rent whether they pay 5 000 a month for rent 10 000 for a month

SPEAKER_347: for rent do you know the owner has an upfront with me about some of those costs but based on the area i'm guessing on the low end probably rents five thousand dollars right so you may have

SPEAKER_48: covered 30 percent of his rent with this and then you know it costs them nothing to include dessert or wine in a subscription hey you get or you get like a special appetizer you get a special thing i think this is amazing um and the question is can you replicate it and can you grow it um and yeah so i think you got a great business it has nothing to do with ai i think most people are going to think that this

SPEAKER_04: business is small you're not going to get a lot of love from the vc community necessarily um but what

SPEAKER_48: they will judge it on is how is it growing what are the customers say the churn rate so you've now moved into metrics and you're going to have to prove the value of the business so i think you're in the prove it to me model have you raised any funding not a penny amazing that's amazing congratulations on

SPEAKER_43: that the fact that you got it here you should come to an incubator or an accelerator that's a great

SPEAKER_48: way to get 125k into the business y combinator launch tech stars etc or you could try to do a seed

SPEAKER_04: round and try to raise but 250k and then figure out if you can take that 17 subscribers up to 50

SPEAKER_48: etc and figure out you know who who the the the great customers are here and just keep delighting

SPEAKER_125: them how do you do customer discovery how do you um how do you find out how are you doing from your

SPEAKER_347: customers you have any techniques yeah so originally we were heavily focused on restaurants and bars we went for this kind of like the best restaurant on the blocks or a thing thing would be really aggressively pitch that customer but if we could pick them up consistently would have a quarter of the time to pick up the other establishments in the area but when we kind of had this moment of like well we're doing a bar and a cop we're doing a bar and restaurant well i can't do a coffee shop we're doing a coffee shop but we can't do a bakery we can't do a bakery why can we do a deli and then from a deli why can't we like of all things like the we the jump from deli to barbershop and then the hobby stores just kind of came out of nowhere as people who approached us when they heard about the product they're like hey can we use it we thought sure and while the membership costs are lower the consistency the ease of the accessing those customers are what's interesting our discovery i think was we focused on owners who were familiar with the product so we started tapping i start i

SPEAKER_393: started tapping like people like hey are they subscribed to like a business newsletter are they

SPEAKER_125: subscribed to something on patreon like they understand subscriptions is i guess the concept fantastic

SPEAKER_48: i mean you know i think keep experimenting you know um and going and talking to these customers and

SPEAKER_125: running pilots with them could be really interesting um with cafes just thinking out loud here there's people who like to be regulars in cafes because they like to work here because working from home is

SPEAKER_04: so oppressive and lonely yep imagine some local cafe put in four standing desks you know really nice desks they don't have to be huge but standing desks um and uh they said hey if you're a member you get

SPEAKER_48: first shot at these you can use them you know for a couple of hours a day whatever it is or you get 10 hours with them you can run experiments like that and i think running experiments at this early stage is the way to go um and then try to figure out if one of these people can make more from subscriptions than they do you know from other revenue streams or if they can cover their rent and then you get the testimonials going and boom and you know like you have a zillion different experiments you could run you could have you know every month that coffee shop does a special uh coffee tasting and as part of your membership you get a pound of coffee and you get to come to that membership and they just pick whatever the slowest time is and you come pick up your coffee membership or maybe you get a locker you know so membership clubs are a thing like so how so i i look at this interesting membership club benefits part of it is being baller and being a vip part of it is an actual perk like a standing desk or getting seated first or the coffee or the free dessert but overall i think people have an affinity and they want to support folks and so um just really interesting really interesting i think density in a geo is also very important so that people you you can just have your team talking to people do you have an extroverted incredible person who is passionate about small businesses who walks into

SPEAKER_346: businesses and talks to them um i kind of learned to become that person because i recruited a better engineer than me to be the cto perfect so i think it's great that it's you it would be amazing

SPEAKER_04: if there was somebody else going out and doing that and you just made them an evangelist

SPEAKER_48: um and that person might be a 50 000 a year person who just loves local businesses and if they convert you know five a year or they convert one a month they pay for themselves right so i think you're you might be getting close to the time to do that i really think your business is interesting i think you should talk to my founder university team or the launch accelerator team i know you have spoken to somebody at some point but i'm just gonna have my team circle back around with you and um see if like it's a fit for our incubator um i think a lot of people have tried this and i think you might be the one to figure it out thank you very much have a lovely day all right

David Friedberg: everybody this has been another amazing episode of ask jason uh if you want to be on the next episode

SPEAKER_48: this week in startups.com slash ask jason this week in startups.com slash ask jason no spaces no dashes we'll see you all next time on this week in startups bye bye okay everybody i want to tell

SPEAKER_405: you about founder fridays what are founder fridays this is an opportunity for you if you're a founder

SPEAKER_04: to get together with a half dozen a dozen other founders on a friday the first friday of every month why is this important well if you meet with other founders you can talk about the things that are working at your startup and the things you're struggling with everything else in between and then you can trade notes and you can make friends it's really hard to be a founder isn't it you're alone all the time you've got to solve all these problems and other founders are having the same experience you're having it's isolating it can be scary it can be thrilling and people don't understand what you're going through if you go to a dinner party and there's one founder and seven other people you feel like a mutant you feel like somebody who doesn't belong there nobody understands why you're doing your startup why you're taking this risk the problems you're facing right they're npcs this is a non-npc event every first friday of the month we do founder fridays we're doing them now in 71 different cities and if this sounds appealing to you well you're a founder and you want to hang out with maybe seven other founders around a round table you can have breakfast you can have lunch you can have dinner you can have coffee you can co-work dinner however you want to do it and it's free we've been doing this for a couple of months now we've had 71 meetups around the world and 929 founders have joined i want you to join and i want you to come to the next one it's friday may 3rd now if your city's not on the list what are you going to do you're going to apply to run your city with two or three other founders again four founders by founders from the number one podcast for founders this week in startups comes founderfridays.tech go to founderfridays.tech to sign up and you're going to meet all these great founders and we give like a little uh prompt and this founder friday taking place on may 3rd we want you to bring two things with you your most significant challenge and one thing you wish you'd learned earlier we're going to go around the table and each person is going to do that and then you'll get feedback from your peers it's incredible it's magical and we don't want this to get big we want to keep it small so if you plan on going and you're interested and sounds appealing to you just go to founderfridays.tech t-e-c-h right great domain name founderfridays.tech and please take pictures and then share those pictures on twitter at mention us at twi startups at jason and it doesn't matter you could be in san francisco new york chicago la paris tokyo dubai these things are happening all over the world again 71 cities let's get it to 100 cities we've got over 900 members let's get it past a thousand go ahead and sign up and you'll be in touch with my team and we'll see you there once again founderfridays.tech