SPEAKER_03: 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, I built a couple of companies, host five podcasts a week, have done almost 2000 episodes of This Week in Startups, 175 episodes of All In. I've written a book.I'm 53.I got a lot of battle scars and some knowledge and some hacks here and there.I've read a lot of books.So let's get started with Ask Jason.
SPEAKER_00: 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 SOC to report fast. Twist listeners can get $1,000 off for a limited time at vanta.com slash twist.Squarespace.Turn your idea into a new website.Go to squarespace.com slash 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.90% 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 100,000 companies banking with Mercury at Mercury.com.
SPEAKER_03: Okay, let's welcome our first guest. Our first guest is Dustin.Oh, there he is.All right.
SPEAKER_02: Hey, Jason.
SPEAKER_03: Hey, Dustin.How are you, sir?
SPEAKER_02: Doing pretty well.How are you doing?
SPEAKER_03: 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?
SPEAKER_02: Yeah, thanks.John's on top of it.So yeah, my question is, I'm 28.I've got a technical degree.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, really bright founders before starting a company again.Got it. that's kind of my goal, but I'm struggling to find roles that fit the more generalist skillset I've developed for 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 was curious if you had any advice on like where to look and how to pitch myself.
SPEAKER_03: Right.You're an operations specialist.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 Y. And we want you to update us Z. Right.So X, Y, Z. Here's the problem.This is the outcome we're looking for.And you can come up with the process, et cetera.Am I correct that that's your skill set?
SPEAKER_02: Yeah.I mean, that's what I felt like I did for three years building this software startup.
SPEAKER_03: Okay.And as you know, as you build a startup, 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, Draymond Green, right?And so you are one of those utility players who can... 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?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?
SPEAKER_02: Right, right.
SPEAKER_03: Got it.But you did do the product in your startup.
SPEAKER_02: Yeah, I wrote code.I was in Figma.Oh, wow.
SPEAKER_03: Great.
SPEAKER_02: Yeah.
SPEAKER_03: All right.Well, so this is why I asked that question, because you have three swings at bat here and you could actually design products.You can write code and you can do operations.So you want to maximize revenue to build up your chip stack and learn.Am I getting that right?As opposed to starting another company?
SPEAKER_02: Yeah, next, like three years, ideally would look like Yeah, building some cash to get ready for another another startup and learn from some really bright people.
SPEAKER_03: Let me ask a personal question here.Why do you need to build up cash?You have debt?Do you have family?Do you have kids?You have a mortgage?
SPEAKER_02: No family.I've got a bunch of student debt.How much?
SPEAKER_03: Ballpark.How much do you pay every month, every year?
SPEAKER_02: About $100K.It works out to like $600 a month right now.
SPEAKER_03: 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 lower your burn rate personal burn what's your personal burn right which just as a ballpark what are you paying rent and where are you based I pay about a thousand bucks a month in rent I'm based in Denver amazing yeah okay so you have micro burn You have very low burn.You got $600 for your student loan.
You got $1,000 for your rent.And you put in another $500 or $1,000 in other expenses.I don't know if you got a car payment, whatever.I mean, you've got about a $40,000 a year burn, which means you could accept a job offer for $100,000. pay a third in taxes or something to that effect and have a little wiggle room.So you're actually in an incredible position to be a co-founder of a company.And were you a solo founder or are you a co-founder of your last company?
SPEAKER_02: I was a solo founder for the first year and a half.And then I brought on, I first an employee and then kind of upgraded to a co-founder after a while.
SPEAKER_03: Tell me your experience solo versus co-founder.
SPEAKER_02: It was pretty similar.I mean, 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 I really just wanted more help.And this guy was kind of going above and beyond.So I opened the door for him.
SPEAKER_03: So you felt like you should have that, but... truth be told you set the thing up you did all the hard lifting alone very admirable um also quite um crazy um i always advise and it's just 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 you know when you want to win championships pretty good to have three all-stars on the team as we saw with the warriors uh or we've seen with other teams two or three all-stars they tend to win the 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 Okay.I want to ask, what is the thing you learned... During your startup process, a marketable skill, a technique, a category, let's just chew the fat here.But what were 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.In other words, superpowers, things you got really good at.
SPEAKER_02: Yeah.I think... So we were a construction SaaS tool.Got it.And I did all of the implementation and training, going out in the field and literally teaching guys how to use iPads before I could even teach them how to use our software.
SPEAKER_03: Okay.
SPEAKER_02: And so being a translator between some really blue-collar personas and Silicon Valley engineer types was something I got really good at in that period of time.
SPEAKER_03: So you developed a skill at taking a complex product and getting it in the hands of customer and making sure they were successful with it.And you were fearless about this.You didn't have a fear in talking to those customers or embracing them, no?
SPEAKER_02: No, we did over.I mean, there was fear for sure, but I knew it was absolutely critical.And we did over 100 customer discovery interviews.We were tracking down any job site we could get on, you know, just going up and talking to people.
SPEAKER_03: Did you enjoy it?Yeah.Got it.Yeah.So you were initially scared of talking to your customers, and then you got great joy from it, right?
SPEAKER_02: Yeah.Once you start to build relationships and get into the world.Awesome.
SPEAKER_03: Okay, so customer interviews, figuring out the ideal customer profile and what they need in a product is something that you've gotten really good at.Okay, let's put a pin in that.Listen, a strong sales team can make all the difference for a B2B startup. But if you're going to hire sharks, you need to let them hunt and you can't slow them down with compliance hurdles like SOC 2.What is SOC 2?Well, any company that stores customer data in the cloud needs to be SOC 2 compliant.If you don't have your SOC 2 tight, your sales team can't close major deals.It's that simple.But thankfully, Vanta makes it really easy to get and renew your SOC 2 compliance.On average, Vanta customers are compliant in just two to four weeks.
Without Vanta, it takes three to five months.Vanta can save you hundreds of hours of work and up to 85% on compliance costs.And Vanta does more than just SOC 2.They also automate up to 90% compliance for GDPR, HIPAA, and more.So here's your call to action.Stop slowing your sales team down and use Vanta.Get $1,000 off at vanta.com slash twist.That's vanta.com slash twist for $1,000 off your SOC 2. It's the number two thing you learned at your startup.That was a great first one, by the way.
Second thing you learned and that you became an expert at.
SPEAKER_02: It's hard to say I'm an expert at B2B sales at this point.I was doing this for 3 years.But I came out of school with an electrical engineering degree.I hadn't really done sales before that.And through an accelerator we did and through just going out and doing the sales process, building the pipeline, prospecting, demos, and enclosing, I felt like I... You know, an order of magnitude better at sales than I was when I first came out of school as an engineer.
SPEAKER_03: Amazing.So you're the engineer who learned customer discovery and success.
SPEAKER_04: And you're the engineer who learned B2B sales.Yeah.Amazing.
SPEAKER_03: Okay.
SPEAKER_04: Yeah.
SPEAKER_03: Let's stop there for a second.Of those two, which one do you enjoy most?That's number one.And number two, which one do you think is more in demand in the market?
SPEAKER_02: I mean, I think I enjoy the customer discovery more.Great.Especially because it was also involved the product side. in customizing 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 A into B. Okay.
SPEAKER_03: So you got to go with what you have the most passion for.I can tell you both of these things are in high demand, especially at startups.Now, what I want you to do is instead of making a decision to start another company, and 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 about 30 days.It's a 30-day program where every day you work on your socials, your sub stack, et cetera, and you build a brand.Dustin, the customer discovery engineer come up with a really tight brand for it i like customer discovery as you know like a concept but there might be a better word is there a better word for customer discovery that you did this is kind of buzzwordy but the the value proposition design 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.Just created a new title.Customer discovery engineer.
You're engineering... customer discovery.You're taking something that most people consider loopy-doopy, touchy-feely, granola, hippy-dippy, and you're making it a science.I want you to brand yourself on X, Instagram, LinkedIn especially, maybe TikTok, and certainly a sub-stack.I would say LinkedIn, X, and sub-stack would be the top three most important ones there. And I just want you to 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, because you seem like a very disciplined person.I get the sense you're a disciplined individual. I think so.
Yeah.You work out regularly, take a shower every day, eat healthy.
SPEAKER_02: I was a collegiate athlete before I got into startups.
SPEAKER_03: 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 sports.Some people have the same thing about military.Why?Discipline. You need people with discipline.So you are a disciplined person.Me telling you to do 30 days of this, not a big deal.And you just brand yourself in your marquee image, et cetera, 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.You write some blog posts.You start a sub stack.See if you can get to 100 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, Dustin, your last name is Ramsey?
SPEAKER_04: Ramsey, yeah.
SPEAKER_03: Dustin Ramsey, customer discovery engineer.You go, customer discovery engineer.I never heard of that.Tell me more.It has a link to your link tree. Go to your link tree, subscribe to my sub stack, hear my interview, my 10 principles on customer discovery.Come up with your own thesis and playbook, right?Your own best practices around what you believe leads to this.And then after 30 days of this, I think what you do is you find 10 startups that are in the seed stage. that have raised their seed around, they got a million dollars in the bank, something to that effect.
And you say, hey, I really think what you're doing is interesting.I'm a former founder myself, and I am an expert on customer discovery. I'm wondering, looking at the customers you have, if you need help with this, I charge reasonable rates, and I'm passionate about startups.And you can book a 20 minute discovery call with me at my Calendly link here.Now, let's see if you email 10, how many reply, and you should just do 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 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 to give you is a playbook. to establish yourself as an expert, and then engage 10 startups you think are amazing.Let's say two of them hire you.Come up with a rate that's reasonable but covers your $40,000 in 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 them bite and maybe you got to send 10 of these custom emails per week.It's really important that these be custom emails.
You spend time, maybe an hour researching, 15 minutes writing.That means you got to spend, 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.You know how to do this. So what will happen at the end of these two months is you'll have an idea if this skill specifically is marketable and if people 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 are 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, which typically pays... What did you pay at your startup?$50,000 to $100,000? The ballpark for 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 this is people take a discount on a startup because they get more freedom, more opportunity, more growth.And we all know the deal.Right. And then what might happen is you find one of those in month three that you really vibe with.Now you've started to pre-vet these.So instead of just sending them nonsense, you say, you know what?
I really love your startup.I noticed you got two co-founders.I think I've proven my worth here.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. Because I make a fortune at this 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 I think if I own 20% of this company and was your third co-founder, I understand you guys started it.I'm willing to vest like y'all are vesting.
And I think I could help you get this there 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 so anyway uh this is the way i like to approach things and if you look at the people who became 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 and that wound up making big careers out of it because they got attached to a rocket ship, that Pocknitz.
SPEAKER_05: Yeah.
SPEAKER_03: What you could do here is, you know, attach yourself to one of these rocket ships and the fallback is you're making your own schedule, you've got three, four, five customers paying you, You know, two, three, four, five thousand a month.And every time you get a customer, you raise your fee, you know, 50 percent.See what happens.The first 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.
And then you raise the prices with the lowest one.So, hey, you know, I'm getting eight thousand a month now.I charge you two.I got to bring you up to six.I'll still give you a 25 percent discount.You start firing customers.Yeah. You might be able to build this into a half million dollar a year business in two or three years and then think about your optionality. Then you're building a war chest.Now you can fund your startup 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.You're turning customer discovery into a science from an art perspective. 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 anyway, this is a long-ass Jason, but I think it's an important one.Because this strategy, you said you wanted to build a chip stack, could do both these things.
And 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 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 founders every first Friday of every month.You've got to get in that discipline.You're hosting it.You might, founderfridays.tech, everybody.You might find your customers there.You might find your next co-founder gig.And so I wish you great success with that.Any questions for me, Dustin?
SPEAKER_02: No, it's really well said.Opened my eyes a lot to alternative to the job application and the networking my way into a full-time gig.
SPEAKER_03: Job applications are for suckers.Let me say that clearly.Going through the front door is stupid.What you want to do is you want to go through the side door and say, where's the owner?Yeah. I have something very important.Somebody says, you have an appointment.I said, this is critically important that you get me in touch with the owner of this business because I have something that's going to change everything here.And you just kind of just barrel your way into the top of the company.Now with service, 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 been teaching my team.If people aren't complaining that you're being annoying, you're not pushing hard enough. 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.You didn't do your job.You didn't push hard enough to get the meeting.And you should just say, listen, I noticed you opened the email, but you didn't 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 fix with your startup.And I'm happy to do that for free.It's only 10 minutes of your time.And I'm willing to do it seven days a week, anytime you want.So pick 365 days a year, anytime.But we should talk about this now because I think I have critical information for you, including X, Y, and Z. So be aggressive and turn all your startup knowledge and pain into a high-paying gig and don't go through the front door.I wish... I'm trying to hire a community manager, a GM for founderfridays.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.Somebody just aggressively went after the job.And you know what I get? Get cover letters that look like they're chat GPT nonsense.They don't even read.So, you know, really be thoughtful and do a sniper shot, not a machine gun, you know, or a shotgun approach.Sniper shots.Okay.Dustin, I'm going to put a 30-day requirement for you.
You're agreeing to come on Ask Jason in 30 days and do a follow-up, correct?
SPEAKER_02: Yeah, you got it.You got it.
SPEAKER_03: Okay.We're going to review your work in 30 days.
SPEAKER_02: Awesome.Thanks, Jason.
SPEAKER_03: Hey, startups, you ever notice how successful businesses are constantly evolving?Well, that's because they add fresh features to get their customers excited.And that's why I am all in on Squarespace and you should be too.Squarespace is adding new features and revolutionizing their platform all the time.I've told you this before. This includes powering all their tools with AI, you guessed it.And one of my favorites, this is incredible, is Blueprint AI.Yes, it's their guided design system for building a new website.It's fast, it's custom, and it's built specifically for your business needs.They've put over a billion design combinations at your fingertips, so you get an online presence that's unique to your brand.
We used it to build our own Founder University website.The process was so simple.We were... prompted through a series of questions, and then Blueprint AI took control, tailoring everything to our preferences, from website structure to the color scheme, very important for me, and from design elements to font pairings.I love fonts, by the way.It's just one of the things I'm into.Boom, within minutes, we had a sleek new website ready to go live so check out squarespace.com slash twist for a free trial and make sure you try this blueprint ai tool it's amazing and when you're ready to launch go to squarespace.com slash twist to get 10 off your first website or domain purchase that's squarespace.com slash twist francis Good luck, we've met.We have.
How are you doing?I am doing great.Francis, you're an investor, you're passionate about startups, and you have a question for me.What is it?
SPEAKER_07: 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 way, a particular level of revenue, a particular growth rate, a particular type of lead coming in, something like that?
SPEAKER_03: Fantastic question.When you run a venture capital firm, for people who don't know, for 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.Now, we are a high-scale investor.So we have our accelerator.We have our pre-accelerator found in university.So we'll make, let's say, 200 bets with that first $25 million.On average, 100K.Sometimes it's 250 or 500K.Sometimes as little as 25K just to get somebody started with their first check.
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 doesn't mean they're definitively going to win an IPO and become Uber, Robinhood, 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 real firm who is 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 the founder.And you're joining the board.And you're owning more than 10%. generally speaking.
So if we break that down, it's a price 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 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 ventures is putting the series a term sheet for density one of our unicorn companies that i'm on the board of and 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 Superhuman, that happened.So we had four unicorns come out of the first launch fund.
Launch fund one, $10 million vehicle, four unicorns.In all four of those cases, there was a definitive lead.They joined the board.They priced the round.They sent a term sheet, et cetera. Now, let's put aside growth because in the likely and the definitive winners, there's always some amount of growth.It could be 2x.It could be 5x.Sometimes you're starting in the seed stage with very low numbers.So they made 50k in year one and they went to 500k in year two.
10x.But it's 10x on a small 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 priced.The terms typically come, as you know, from the founder.The founder says, I'm raising $2 million at a $15 million valuation.I want this, I'm going to raise $1.5 million at a $15 million cap note.I'm going to 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, et cetera.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.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 can only invest in one out of every 20 companies.We're going to take those 200 and maybe pick the best 10 to 30, depending on the quality that comes out of it, to get additional funding. Definitive winners, we want to back up the truck.Likely winners, we want to keep our pro rata or at least place a bet, maybe a little less than pro rata.If we own 10%, maybe we get diluted one point and we get down to 9% and we put an extra 50K in instead 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 winner.What this means is when you look at our portfolio at the end of the day, 200 bets will equal half the portfolio and 20 bets, let's say 10%, will equal the other half. Those 20 will have, on average, a million dollars put into them after they graduate from the seed stage, and the rest will 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. or thoughts.
SPEAKER_07: 20 definitive winners get approximately a million.Is that all coming into their A or is that spread out over A, B?Yeah.Just trying to get a little more detail.
SPEAKER_03: So, yeah, we could, I mean, it's going to be situational.And so, let's say it's Sequoia coming in, you know, Andreessen Horowitz, you know, somebody who's really tier tier one with a lot of money, and they're joining the board, we're going to try to maximize.And so in that case, let's say we are 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.And there will be it would probably most likely be in the seed round. Or the Series A. In rare instances, it might be Series A, 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, in Robinhood and Uber, we owned basis points.In other words, less than 1% of those companies.
Now, those were extraordinary outcomes, so it wound up being massive returns. Then when we got to our fund one, we owned, um, I think now we own 2% of superhuman, uh, 5% of calm five or maybe 6% of density.And so we were able to get up until let's say low single digit numbers.And then when we got to series B, when we got to our second fund, we had grand, which became a unicorn and we wound up having, I think 15 or 16% ownership 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 position.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 margins and is growing violently, you got to back up the truck because they're rare.
And you know what?We didn't in fund one.In fund one, we did 109 names.We didn't do follow-on funding. And that was the nature of seed stage and solo GP investing.It was called Spray and Pray.Chris Saka, Ron Conway, all these people came before me and I watched them.I think Spray and Pray is like a silly term, but it rhymes, so it sticks.People remember it. But the idea of spray and pray was get a large enough number 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 winner, hopefully, and be able to put more money in.And so this is what I've come to after being a fund manager, just getting to my fourth fund. And you really could combine my first three, Sequoia 1 and 2, as my first fund in terms of dollar amounts.That would have been about $20 million.And I was doing it part-time up until Fund 3.And Fund 4, I think, is when I've gotten good at it.And most people would be like, you're crazy.
You've already crushed it.But I think I got lucky on a lot of cases, had a great network.But I think now I have a great In fact, I think I have the best process in the entire industry, or maybe in the top 10 in terms of process and team right now, currently, on planet Earth.I think I'm in the top 10 in terms of process and team.Any other questions?Or follow-up?
SPEAKER_07: 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 for the very best funds, they went from a 3.5x multiple to an 8x simply by having a larger amount of reserves, which averaged around 40% in those cases, versus less than 20% for those 3.5x multiple funds, which are still great, but 8x is obviously better.
SPEAKER_03: Yeah, I 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.I LP other funds.I was talking to Sofia Amorosa from TrustFund, who I'm an LP in, and I was like, make sure you have some reserves.And... She's on her first fund.And I don't know where she wound up with that, but I did have this discussion with her as an LP.I would rather see you, if you had a 10 million fund and you were going to 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 my strategy, smart people like yourself will amplify it and 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.And I'll get better at my game.The second thing is that we're really not in competition.I learned this at the seed stage.If you are... below series a or before series a how many times do you see but 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 gets it gets a series a done what do you think the number is unique investors take the one i saw recently it had 49 including mine i mean we'll just take that as an example right as they're getting their a done
Yeah.So I think the numbers probably 25 to 50.I think that might be the high end.But I do think it's like, most typically 30 names, you know, they pass the hat a whole bunch.And then people have been very good about doing SPVs, maybe they'll work with one syndicate, etc.But you're an early stage investor, tell the audience since you're here, how you invest and your vehicles and your philosophy.I'm curious.
SPEAKER_07: I basically stole yours and adapted it to a much smaller scale.I invest with your syndicate, other syndicates, direct, wherever I can find the best deal.And I do 50% reserves because 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.
SPEAKER_03: That's... Incredibly kind of you.If anybody out there wants to learn, angel.university.We have one coming up in May.It's a three or four hour class.It's $300.All proceeds go to charity.And we've given $175,000 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 good.Okay.Great job, Francis.And we'll talk to you soon.Being a founder can be overwhelming.Don't I know it.You know, I get those phone calls on the weekend.Sometimes people are a little overwhelmed.They need to talk to JCal.They got my phone number.
I know the reason why.There's a hundred different things you're responsible for. You got to take care of your office space or remote workers, HR, software, raising money, product, 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.Apply in minutes.Mercury.com and start transforming your startup's journey today.All right, Matthew, you have a question for me about podcasts.Go.
SPEAKER_09: Yes, I do.So this is about sponsorships and ads.My main podcast, Lost Subscribed, has two sponsors already.But as it's grown over the last three years, I've had other opportunities come my way, but they're not aligned with the niche of the pod.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 you've gone outside that, nuts, mattresses.I wonder, is it about the size of the bag, which I kind of imagine was a giant bag of macadamia nuts?Or was the trade-off with the lack of brand alignment worth it?I'm curious to know what the numbers have shown as I get those opportunities.
SPEAKER_03: Yeah, so for people who are doing consumer products... They want a low CPM.They want to hit a large number of people.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 $2,000 with Audible.It's some of the best $2,000 I've 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 going to get an ROI on me reading them an ad?Good question.Or should they do Joe Rogan or somebody who's got massive scale?Joe Rogan has the largest scale. They should probably do Joe Rogan because if they're trying to ring the register, we're a very niche audience and it's a very low lifetime customer base.Now, maybe they could make it work if they had me selling the platinum and telling my experience from that.We sell out every year now.We've been doing it for over 10 years.We know which brands are going to do well because the minimum ad buy is $30,000 for a podcast to buy five ads, I think, and that's 6K per ad.Okay.
If you're going to spend $30,000 and your product has a, let's just say, $500 a month price point, which is cheap for a SaaS product, right?But let's just say it's 500 a month.That's 6,000 a year.And if your customers tend to stay with you for five years, that's $30,000.You need to get but one customer to break even. If I was 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 brainer.And so the reason you see so many advertisers on this week in startups, you hear me reading the ads over and over and over again, and they come back every year. and we have relationships for five or 10 years with many of these, is because we probably underprice the ads and then over-deliver and make it a no-brainer.And then we tell people, oh, okay, your product, Macadamia Nuts, isn't very expensive.They say, you know what?
We want you, J. Cal.We love you.We're fans.We love All In.We love This Week in Startups.We love that.We love startups themselves.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.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 that some people may get value from, but many people who sign up have a hard time unsubscribing, yada, yada. So we say no to that.When vapes first came out, a lot of people wanted me to do vape stuff.And 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 first year or two when the episodes get published. And we make them do a minimum ad buy.
So I think always 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 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 if they say to you, well, 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 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 proper calculation should be.One-third ROI, not that you can track it perfectly, but you're getting some amount of the money back.So in a $30,000 ad buy, you get 10K back in customers, and 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 ten thousand to get the influencer reading your ad and whatever value that provides ten thousand for general awareness and then ten thousand 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 week.Sorry, 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, James Corden just quit.Jimmy Kimmel is going to quit.Howard Stern went down to three days a week.I mean, just it's a grind to be daily.And so I think a lot of people quit.So I hope that answers your question.
SPEAKER_09: You're putting yourself in those categories of that caliber of late night talk show.
SPEAKER_03: Well, no, I don't because they have huge reach.But if you were to say, who was the Jimmy Kimmel or the James Corden of startups, I would be on the short list, I guess.And I think you have to understand what the natural audience is of your podcast.So for yours, Law Subscribed, it obviously has to do with law.It has to do with the subsection of it.Okay, so it might be- Very niche. 5% of lawyers, 10% of lawyers.
SPEAKER_09: I mean, any lawyer who hates billing by the hour.But 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.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.My listeners are happy.And, you know, as I get, you know, some random company or even 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.
SPEAKER_03: No bueno.Just send them to ads.It doesn't scale.Then the audience is just going to tune out because they don't feel you have objectivity.Already, I think the audiences have adjusted to this, but I'll tell you, 10 years ago, when I would read an ad, 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 at 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 i'd say hey let's look at the bing search engine let's do a couple searches compared to google searches and 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 $1,000 an ad or $2,000 an ad, and they weren't even buying it for that.So... What you really need to do is pair your podcast with a newsletter and 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 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 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 1% of the audience is for this week in startups.We're in our 13th year, I think.We're almost at 2,000 episodes.
Yeah. I like the idea of trying to own the relationship with the 1%.And that's why we invested in a company called River that was doing the all-in meetups.And now they're doing Tim Ferriss' meetups, my First Millions meetups, the Blueprint meetups, Bology's meetups, and this week in Star Wars meetups.I'm actually hiring a full-time or half-time person to manage our meetups.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 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 city are you in?Chicago.Perfect. Just do the, it's called Lost Subscribed, is your podcast?Lost Subscribed.
Just say Lost Subscribed is doing a monthly meetup in Chicago, the first Friday of every month.We're inspired by J-Cal.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 meetup at a pub 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. By podcasting, because you just have an RSS feed.
How did I do, Matthew?Rate my advice here.One to 10.
SPEAKER_09: Me rate your advice?Yeah, go ahead.
SPEAKER_03: Rate it.
SPEAKER_09: You're having me do this live now, too?Why not?I'll give you an 8.5 out of 10.
SPEAKER_03: Oh, I see.You're giving me room to improve.Any follow-up questions for me?
SPEAKER_09: No, that was great.Thank you, Jason.
SPEAKER_03: All right, my brother.Good luck podcasting.Remember... Sound quality is everything.All right, great job.And let's take our next caller.I love doing this.I love doing Ask Jason.I could do this every week.I love hearing what your challenges are in your career, your startup, your podcast, your life.
And I like giving advice.So let's just keep going here.Ask Jason.Ask Jason.Jason David.Wait, pick a name.You want to be Jason or David?How do you want me to refer to you?
SPEAKER_04: I'm Jason.You could be J. Cal.
SPEAKER_03: Okay, great.All right.But your last name's David?
SPEAKER_04: Yeah, I got two first names.
SPEAKER_03: I'm going to call you Mr. David.Mr. David.That's fine.You have a question for J. Cal?Go ahead, J.D.
SPEAKER_06: I do.When I sent it, I didn't realize it was a crucial moment in our startup, but 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, which is a network of independently owned gyms that we need to build up so we can move forward.Our product 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 the low-cost growth and traction initiatives or because of our value prop to our customers and that money or VC money would be spent on advertising, which would also double as customer acquisition costs, 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 awareness of their product.It is our products.
SPEAKER_03: Okay, great.You're trying to decide if you should go the venture route.You should put jet fuel into your startup.Let's understand a little bit more of your startup.Who is your customer?
SPEAKER_06: Our customers are independent owners of, I would call it, community coaching focused gyms.Got it.One other thing I would say, 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 you think.
SPEAKER_03: Okay. person owns a gym in venice california and brooklyn and they do crossfit or pilates or yoga and they've got a small personalized gym and then what is the product that you provide them with well right now we started with a radio ad um the uh next one was going to be a billboard
SPEAKER_06: But we kept running into... What does the billboard do?
SPEAKER_03: What does the radio ad do?You drive people to their business?
SPEAKER_06: Yeah.So if you imagine you hear a commercial that says, come to this amazing gym for us, right?You go to the website, which is our MVP, and then you click on it and it shows you the nearest ones to your location.
SPEAKER_03: Got it.Okay.So this is an arbitrage business.Like my friends, I was the first investor in a company called Thumbtack.And Thumbtack was a very interesting business because Thumbtack would take a request for painting a house, and then they would find five painters to give you a quote. And they could buy ads, search ads, display ads, et cetera, for people looking to paint their house, to get a plumber, to whatever project was popular, garden, pool, whatever. And they could acquire a click for a couple of dollars, turn it into a profile of a job painting this house in, I don't know, Palo Alto.Pretty expensive houses there.And then they could sell that lead for $30 to three different painters and arbitrage it for $100.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 what do you wind up charging for those visits to the subsequent websites we have a three-tiered pricing uh
SPEAKER_06: 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.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 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.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.Our vision is Super Bowl commercial, F1 car, Joe 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 minted
SPEAKER_03: I think right now you're worried about things that come later.I think you're still in the experimental phase.So I'd encourage you, instead of thinking about CMOs, F1 cars, and VC, let's put all that on the not right now board.So you write it down, but it's not right now.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 this kind of arbitrage, or maybe a team of five, can build a business that generates $10 million 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.
Their device was like these cheap tickets to get into, like, it was unbelievable that you could take a yoga class for $5 instead of $25.They just got the wrong customers.It kind of broke businesses because those people then wrote bad reviews.But I think, you know, for this to scale, any VC who's 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 in 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 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 can figure out where the most arbitrage is.And there were people who've done this.I don't know if it's 1-800-DENTIST or something like that, but I think some people figured out 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 software platform where you know anybody can come in and use the platform that's what vcs would be interested in working on with you if it was a platform
SPEAKER_06: 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 was scaled individually at the same cost.That's how we're looking at it.
SPEAKER_03: Yeah.So, you know, it will really be in a VC's 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 more of a service type business?And right now, I think to be perceived as a platform, what they would be looking at is like HubSpot, which is a platform for small businesses to 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 the latter as the former.And for it to 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.We don't do content.It's like CNN.It's like Vice.It's like Engadget.It's like any other content business.And then some people looked at it and said, no, no, no, no, no. They're going to let anybody upload a video.
They're going to sell ads against all of the videos.And then they'll figure out the psychographics and the keywords in 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 a 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.
SPEAKER_06: If you had 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 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 CASM rules, which we can't just sell our full product to our end customers unless we have some long-term consistency in what we're doing and fix the fragmented market that we're trying to fix.
SPEAKER_03: Yeah.I think you got work to do.And I think send me the links and let me take a look at it and I'll give you some further feedback offline.Great question, Mr. David.Okay.Well done.Thank you. Douglas, you're on.You have a tight question for me.Go.
SPEAKER_01: 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 other valuable customers?
SPEAKER_03: Tell me about the startup.Who are your customers and what's the product?
SPEAKER_01: To use our formal pitch, we build premium experiences and revenue models for independent brick-and-mortar businesses so they can use that as an upsell to their customers.The less sexy pitch is we sell FastPasses or Patreon for your favorite local bar, coffee shop, restaurant.But more like flower shops, coffee stores, bookstores, these businesses that are important.And people, they love to go walk over and experience that.Yeah.
SPEAKER_03: It's a great idea.Membership programs and subscriptions for local businesses.I've heard a pitch like this about a dozen times over the years.Of course.It's out there.Crowdfunding's been out there.And so building a platform where people can buy subscriptions and white labeling it where it's on somebody's website 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 12 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's a software business that is trying to help small businesses, a lot of people in the venture community don't like 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-sized and sometimes even large ones.But the point here is, how many pilots have you done so far?
SPEAKER_01: We have 31 customers with an LOI of another dozen.
SPEAKER_03: Okay.So LOIs are letters of nothing.Never bring them up again.That's for weak entrepreneurs.So never bring them up.They basically mean you're focused on getting people to soft commit.In a startup, there's no time for soft commits.Let's go for the real one.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 we have 31 customers and nobody's paying it.What is the average payment per month of those 31?
SPEAKER_01: In total or other subscriptions that we take a cut of?
SPEAKER_03: The average revenue generated by the one that's number 15 from high to low.The median.
SPEAKER_01: Average is $900.
SPEAKER_03: A month?Yeah.In revenue.Great.How much of that $900 do you capture? Or is that your take?That's our take.Amazing.So you're making $10,000 per customer.You got $300,000 in revenue.
I love that.Yeah.You figured something out, clearly.
SPEAKER_01: Yeah.I think it's a market opportunity, mostly.Yeah.The owners are younger and they're familiar with the business model.
SPEAKER_03: Great.Describe for me the number one business in the platform.You can say the name or not, depending on if you have permission or you want to.But describe the number one customer in terms of their success with it and how it's changed their business.
SPEAKER_01: We have a very nice restaurant in a highly walkable suburb of SoCal, and their average head per ticket was about $50.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, 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 you offer this membership product to your best customers?And they realized, instead of offering discounts or value ads, that these customers care about them.They bought gift cards during COVID because they were so afraid this would go out of business. They realized they could turn the membership into an upcharge because their customers can only eat so much beef and drink so much wine in a night.But the idea of buying a membership, the membership can include things like, hey, first table available every time.No, never wait in line.
SPEAKER_03: What was the number one reason their customers signed up for the membership?
SPEAKER_01: So there were three primary answers we got.One, 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 these people.
SPEAKER_03: So seated first, fast pass is what they got.So they can be a hotshot when they come in.What was the amount they pay on average?
SPEAKER_01: On average, the per head was $50.Table was a little over that.
SPEAKER_03: No, what is the membership?I'm sorry, the membership fee.
SPEAKER_01: For that customer, the membership, they charged $100.
SPEAKER_03: Perfect.So there were people in the local community who pay $100 to be treated like royalty when they came there.Yes.And so all that... All they had to do there was reserve a couple of tables just in case those people came out.And it sounds like they were struggling anyway.And so they got 10 people to do this, 50 people to do it, 100 people to do it.
SPEAKER_01: They converted a little short of 4% of their overall customers.We have currently 17 recurring customers from that location.Amazing.
SPEAKER_03: So they're making $1,700 a month.And then I guess, we'll have to study their churn and see if people churn.And then with those reservations, I guess, what does that equal compared to their rent?Do they pay $5,000 a month for rent?$10,000 for a month for rent?Do you know?
SPEAKER_01: 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 rent's $5,000.
SPEAKER_03: right so you may have covered 30 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 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 business is small.You're not going to get a lot of love from the VC community necessarily.But what 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?
SPEAKER_01: Not a penny.
SPEAKER_03: Amazing.That's amazing.Congratulations on that.The fact that you got it here, you should come to an incubator or an accelerator.That's a great way to get 125K into the business, Y Combinator, Launch, Techstars, etc.Or you could try to do a seed round and try to raise but 250K and then figure out if you can take that 17 subscribers up to 50, etc.And figure out... you know who who the the the great customers are here and just keep delighting them how do you do customer discovery how do you um how do you find out how you're doing from your 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 it would
SPEAKER_01: 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.I can't do a bakery.We can't do a bakery.Why can't we do a deli?And then from a deli, why can't we like of all things like the jump from deli to barbershop and then 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 started tapping people like, hey, are they subscribed to a business newsletter?Are they subscribed to something on Patreon?
SPEAKER_03: They understand subscriptions is, I guess, the concept.Fantastic.I think keep experimenting. And going and talking to these customers and running pilots with them could be really interesting with cafes.Just thinking out loud here, there's people who like to be regulars in cafes because they like to work there because working from home is so oppressive and lonely.Imagine some local cafe put in four standing desks. really nice desks.They don't have to be huge, but standing desks.And they said, hey, if you're a member, you get first shot at these.You can use them 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.And then try to figure out if one of these people can make more from subscriptions than they do 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 look at this and just think 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 just really interesting.
Really interesting.I think density in a geo is also very important so that people... 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 businesses and talks to them?
SPEAKER_01: I kind of learned to become that person because I recruited a better engineer than me to be the CTO.
SPEAKER_03: Perfect.So I think it's great that it's you.It would be amazing if there was somebody else going out and doing that and you just made them an evangelist.And that person might be a $50,000 a year person who just loves local businesses.And if they convert five a year or they convert one a month, they pay for themselves, right?So I think 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 going to 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.
SPEAKER_01: Thank you very much.Have a lovely day.
SPEAKER_03: All right, everybody.This has been another amazing episode of Ask Jason.If you want to be on the next episode, thisweekinstartups.com slash Ask Jason.thisweekinstartups.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 you about Founder Fridays.What are Founder Fridays?This is an opportunity for you, if you're a founder, 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 roundtable.
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, for 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 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 it 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 TWI. 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 1,000.
Go ahead and sign up, and you'll be in touch with my team, and we'll see you there.Once again, founderfridays.tech.
