#398: Web Smith on The Future of Media

Web Smith is the Founder of 2PM, an unique company that creates some of the best reports and summaries breaking down the DTC industry. In this conversation, we discuss the future of media, owning the relationship with your customer, linear commerce, DTC brands, and how Web has built 2PM. ============================== Athletic Brewing is re-imagining beer for the modern adult. We love beer. But we also love being healthy, active and at our best. No matter your motivation, if you want to keep a clear head and drink healthier, we are here for you. Athletic makes non-alcoholic beer that you don't have to compromise to enjoy. The beers are fully flavored, clean ingredient, and a fraction of the calories of full strength beer - they fit in any occasion. Check out www.athleticbrewing.com for more details and free shipping nationwide. ============================== Choice is a new self-directed IRA product that I'm really excited about. If you are listening to this, you are likely part of the 7.1 million bitcoin owners who have retirement accounts with dollars in them, but not bitcoin. I was in that situation too. Now you can actually buy real Bitcoin in your retirement account. I'm talking about owning your private keys and using tax-advantaged dollars to do it too. Absolute game changer. https://www.retirewithchoice.com/pomp ============================== Pomp writes a daily letter to over 50,000 investors about business, technology, and finance. He breaks down complex topics into easy to understand language, while sharing opinions on various aspects of each industry. You can subscribe at https://www.pompletter.com

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Anthony Pompliano?

  What's up everyone, this is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Let's kick this thing off. Webb Smith is the founder of 2PM, a unique company that creates some of the best reports and summaries breaking down the D to C industry. In this conversation, we discuss the future of media, owning the relationship with your customer, linear commerce, D to C brands, and how Webb has built 2PM. I really enjoyed this conversation with Webb, and I hope you do as well. Before we get into the episode though, I want to quickly talk about our sponsors. First up is Athletic Brewing. I absolutely love this company. They're all about reimagining beer for the modern adult.

• 0:45Anthony Pompliano?

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• 1:29Anthony Pompliano?

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• 2:14Anthony Pompliano?

  orders who have retirement accounts with dollars in them, but not Bitcoin. I used to be in that situation too. But now you can actually buy real Bitcoin in your retirement account. That's what I'm doing. That's how I solved my problem. I'm talking about owning your private keys and using tax tax advantage dollars to do it too. It's an absolute game changer. Again, Choice by Kingdom Trust, a self-directed IRA product that allows you to buy Bitcoin, hold the private keys, and do all of it with tax advantage dollars. You can head over to retirewithchoice.com/pomp. Again, retirewithchoice.com/pomp and get signed up today. They're awesome. I love it. And so will

• 2:55Anthony Pompliano?

  you. Retirewithchoice.com/pomp. Lastly, don't forget that I write a daily letter to over 75,000 investors about business, technology, and finance. I break down complex topics into easy to understand language while sharing my personal opinion on various aspects of each industry. You can subscribe at pompletter.com. Again, pompletter.com. All right, let's get into this episode with Webb. I can't wait to hear what you guys think about it.

• 3:24Speaker 01

  Anthony Pompliano is a partner at Morgan Creek Digital. All opinions expressed by Pomp or his guests on this podcast are solely their opinions and do not reflect the opinions of Morgan Creek Digital or Morgan Creek Capital Management. You should not treat any opinion expressed by Pomp as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. This podcast is for informational purposes only.

• 3:49Anthony Pompliano?

  All right, guys. Bang, bang. Wow, do I have a treat for you guys today. Webb is here. Thank you so much for doing this, my friend. Oh, my honor, man. Thanks for having me. Absolutely. Let's jump right in to those who have seen the tweets. You are the expert when it comes to all things e-commerce media and direct to consumer it seems like. But talk to us about your background and kind of what you did before you started 2PM.

• 4:15Speaker 02

  Yeah, so I've spent my career mostly in e-commerce. I would say my first big boy job was marketing at Rogue Fitness. One of the, I would say the nation's preeminent direct-to-consumer fitness manufacturer. Learned a ton about customer acquisition and a lot of the components of the business that you don't get to really see in larger organizations. And it's a big company now, really proud of what they've done. Left there, went to Misen in Maine, co-founded that with Kevin Lebel. That's continuing to grow, really excited to see that company exceed expectations. And from there, I decided to not be an entrepreneur for a while. So I worked for a few folks.

• 4:58Speaker 02

  Was, you know, focused on e-commerce at uncreate.com. And then I was director of e-commerce at Gear Patrol. And it was at Gear Patrol when I focused on starting 2PM because frankly, I think we were beginning the election season around then. And I wanted a place to go where we just focused on the craft and the industry. And I think I curated my first newsletter for 12 subscribers. And just sort of took it from there. And, you know, I decided to go all in, gave myself about six weeks to start generating revenue. And thank God it worked out.

• 5:33Anthony Pompliano?

  I love that. Let's talk a little bit about, first, the name 2PM. It stands for two polymaths. What was the thought process behind the name? And then we can get into kind of what you guys are doing today.

• 5:45Speaker 02

  Yeah, I think one of the interesting things about the digital industry is that the more generalist you are in your approach to education, obviously, deep generalism is the goal. The more you can sort of see the interconnectivity, you know, I want to call it neural pathways between ideas and concepts and industries. And I think the other industries solve your industry's problems, right? So if you're an ecommerce person and you focus solely on retail and all that nonsense.

• 6:15Speaker 02

  I think one of the things that you can find is that it's usually the adjacent industries, or maybe the arts and sciences, excuse me, that you you can sort of rely upon to help you, I don't know, fill voids in your strategies or address issues that maybe, you know, traditionalists wouldn't see because they're focused solely on on their craft. And I think that's sort of the goal with with two PM to help you build new neural pathways between ideas.

• 6:45Anthony Pompliano?

  Yeah, I love that. And it feels to me like that's also a very ever-expanding kind of mission, right? There's always new things to learn about. There's always new things that you can kind of get better at to to help in this in this journey. So when you get started, you said you curated a newsletter at first. Talk us just through kind of the evolution of the product, kind of from where you started to what you guys are offering today.

• 7:07Speaker 02

  Yeah, listen, I think I was amateurish at the beginning. Hopefully, not too bad. I'm still growing as as a writer and as a curator. I read every single thing that I curate. So I would say the beginning, I would, I was probably rushed. The first, I would say, 180 newsletters involved quite a bit of my time and I put my heart into them, but they aren't close to the quality that you're seeing today. With, you know, with increased subscription and increased paid membership, I'm able to add more the newsletters as far as original content, original artwork and things like that. And so

• 7:53Speaker 02

  there's a, there's a vast difference between even last year's newsletters and this year's newsletters. And my, and my goal, you know, with this type of model is to continue to improve. You know, we have a very lean team. It's me and maybe five or six contractors. They work really well. I think they're the top of their industries and, you know, they they contract their time to 2pm and I couldn't do it without them. But the vast majority of this falls on my shoulders and it's, that's something that's likely never going to change.

• 8:23Anthony Pompliano?

  Yeah. And one of the things that when I first started reading some of the work that you guys have is you really have these kind of, I'll call them the intersection of three ideas, direct to consumer, e-commerce and media. There's Those touch a lot of things, right? So kind of they're very broad type terminology. How do you think about what you're covering, right? Is that an accurate depiction? Or do you kind of think about it in a different way than just commerce, media and direct to consumer?

• 8:53Speaker 02

  Yeah, I think that the sort of the, you know, the center of those industries are a leading indicator of greater conversations elsewhere. If you look at retail data, for instance, you can begin to sort of project, forecast other industries, right? Like by looking at the things that I was covering a year ago, I could say, hey, this is going to happen to the suburbs. This is what's going to happen to malls. You know, these are the sociological shifts that are that are occurring. And you could see that just by studying where we spend our money, how we spend our money, where we spend our time and how we spend our time. Well, it just so happens that, you know, we are in e-commerce economy,

• 9:38Speaker 02

  or at least we're becoming that. And if you are in any industry, any industry in the world, it's more than likely that your industry will be influenced by, you know, these digital businesses in some way, shape or form.

• 9:54Speaker 02

  So whereas e-commerce began as sort of a niche study, I think it's becoming essentially the new infrastructure for this for this century. And I'm not trying to sound self-important, but I do think that studying this stuff will help people really understand other aspects of our, I don't know, our day-to-day lives that maybe we're not considering.

• 10:17Anthony Pompliano?

  Yeah, it's really interesting. This morning I wrote kind of about this digital commerce trend and how that leads to the financialization of everything. And I was excited to talk to you because I hadn't spent a lot of time thinking about it. And I feel like I'm talking to the the person who's probably spent the most time talking about it. But but the way that I kind of came up with the framework in my head was like, we started out with like, simple things, right? Like buying books and then it evolved to everything from you can buy groceries and electronics and kind of all these items that I think are now ingrained in people's heads and associated with. E-commerce, but when you really pull back and look at like, well, what are people buying online? Like Carvana is a multi-billion dollar business. They're selling used cars and you basically go like a giant vending machine or open doors doing a real estate transaction where you can buy and sell online.

• 11:02Anthony Pompliano?

  And so e-commerce is no longer like that niche industry of like, let's sell little things that we can put in a box and ship to you. It's now pretty much every transaction, right? So maybe talk a little bit about how that evolution, how you've seen it happen. And are there, I don't know, kind of guideposts or, you know, a box that you draw around like what's e-commerce and what's not? Or does this eventually just eat kind of every transaction in the world ends up being digital?

• 11:28Speaker 02

  Yeah, I think one of the most important things is something that I tweet on occasion and that's, listen, D to C or direct to consumer can be very insular, right? I almost don't like that term anymore because people think about it in one specific way. Think about it in small businesses that use Shopify. Whatever, right? Like that's typically what people think about when they think of those, that acronym. I think of it in the terms of a philosophy, right? If you were studying the way that those businesses operated five years ago, even three years ago, you could see how those same strategies and philosophies would then be imparted upon other industries,

• 12:08Speaker 02

  whether it's telehealth or real estate or car purchasing, whatever it is, they're the same principles. And so I don't think that e-commerce itself is insular anymore. I do think that every industry that we know and touch, whether it's grocery, education, how we consume anything will be affected by these philosophies. And that's why I think they're so important to study.

• 12:34Anthony Pompliano?

  Yeah. And one of the terms that you use often, which I just absolutely love is linear commerce. Explain what that is and kind of gives maybe an example or two as to how people are implementing this in the, in the real world.

• 12:47Speaker 02

  Yeah, simply put, it's the line where media meets commerce. And for me, that is sort of the center of a sustainable, profitable, long-term viable business. Because they can, they can influence demand and they can meet that demand with supply. Or they have supply and they can manufacture that demand, whichever side of the industry they're coming from. So you're seeing You know, you're very familiar with Barstool. That's a media company that became a very commerce-focused brand. There are commerce companies that became very good at publishing video, right?

• 13:31Speaker 02

  Literature, whatever it is. I think one of the examples that I gave was actually from 1894 yesterday, where I explained that the founders of Michelin Tire began Michelin ratings because they were ginning up demand for tires. They knew that if you traveled more to heralded restaurants in France, you would burn more rubber and buy more tires. There are, there are so many examples of that, and that's the core of linear commerce, taking two core functionalities, two core competencies, and making them the focus of your business.

• 14:08Anthony Pompliano?

  So I think, let's use Barstool as an example, because I think many people listening to this will at least have an idea as to how that business works, which is basically, you know, it was a blog, then it kind of moved into this social media realm. Now, there's a lot of video, audio-type content, but they also have a hundred-plus-million-dollar revenue business on that. And obviously, some of that is advertising. I think it's about 30%, 33%. They've got a big merchandise business, and then they've got kind of other types of revenue sources. How do you look at a business like that in terms of merchandise is a very easy type of kind of linear commerce play, right? Of just, okay, we've got eyeballs, we're going to sell them t-shirts, right? With kind of all kinds of branding, whatever. Where can

• 14:51Anthony Pompliano?

  a business like that go, right? And I think of it almost as like, as they mature as a business, the products that they sell become more sophisticated, not necessarily more complex, but just, it's not as easy as like, let's put a print on a t-shirt and sell that through drop shipping. So how do you see like, the evolution of these companies as they get more serious about this idea of linear commerce?

• 15:11Speaker 02

  Yeah, I think the core of linear commerce is loyalty, right? And so, especially from the media side, when you look at Barstool, yeah, they started off pretty simply with, you know, hats and t-shirts, and maybe polo shirts, things like that. But what are they doing now? They're, they've launched their first digital app for betting. They've launched their own digital sports book. That's a pretty complex product. They can do that, and they can shoot to number one in sports because they have a ton of loyalty in their readership. For Barstool, probably the next sort of evolution to that is the physical sports book, right? And so when you see Penn Gaming launch Barstool,

• 15:54Speaker 02

  you know, sports books and/or restaurants with sports book capabilities around the country, market by market, I'm not saying that that's what they're gonna do, but it wouldn't surprise me if they did it. A lot of that's going to be because of the loyalty that they've built up over the, over the decade plus they've been in business. And yeah, you're gonna see more companies follow that, follow that path, especially if they have the types of audiences that, that Barstool has.

• 16:20Anthony Pompliano?

  Yeah, and it also feels like because they've built loyalty to Barstool, they've also built loyalty to the individual kind of celebrities or personalities. And then they almost have these like inside jokes with that audience. And I think that that kind of drives the loyalty. But I remember seeing in one of the decks, I think with Penn National Gaming, the idea that they may launch like pizza shops, right? So physical locations that sell pizza under the One Byte name. They've got an app that does that. And, and you kind of start to realize that, wait a second, every single thing that keeps the consumer loyal, but the inside jokes, the content, like all that can be productized to some degree. I think that's kind of what you're getting at with this linear commerce idea, right?

• 17:00Speaker 02

  Right, right. A hundred percent. I don't think there are many businesses that have done it better than them. I, I know that they're clearly a divisive and sort of controversial company in some ways. A lot of people would say that, but I think even if you are incapable of appreciating what they've done for their industry, objectively, you have to see that they've, they've succeeded in ways that other businesses have not. And there are lessons that are applicable, most certainly to, to a number of businesses. I really wish that people would set aside some of their distaste or their antics and just study their business model. Because, you know, Erica's done a wonderful job.

• 17:43Speaker 02

  Like him or not, Dave is. Like he has a Midas touch when it comes to productizing certain verticals and it's just, it's been interesting to see.

• 17:53Anthony Pompliano?

  Yeah. And one of the ideas that is fascinating to me is this idea that businesses use to build their product and then go find customers, right? And now what might be happening is some businesses actually go find the customer first and then build the products. And so Barstool is one example of that. One, does that sound right to you? And kind of, do you think that that will become more popular over time? And then two is, does it work if somebody sets out to do it? Right? So one of the things about like a Barstool or some of these that are now doing this is, I don't know if they necessarily like had some grand plan or you know, some master plan. Instead, they kind of just did the thing in the short term that made the most sense to kind of continue to drive revenue, build audience, et cetera. And now as they kind of mature, it looks like, oh my God, look at this amazing thing. They spent 10

• 18:37Anthony Pompliano?

  years building an audience and now they've got all these products. Like, how do you think about somebody doing it intentionally versus it has to be organic and kind of build over time?

• 18:47Speaker 02

  Listen, I think that intention can be important. I've always said this. I think one of my tweet patterns is I'll, I'll have like a short timeline and I'll say 2010, people focused on building products and then building demand around it. Now people focus on building an audience and then monetizing that audience. You have to have an element of sincerity around what you're doing. You can't say, hey, let's build an email list as big as we can and acquire a bunch of email lists from people that are no longer in business. And then hopefully we can find a way to, to build a sustainable commerce business off of that. Yeah, that

• 19:27Speaker 02

  might work in a, in a very short term, but it takes a lot of originality and sincerity behind it. You know, intention is not bad, but I guarantee you, when the Barstool folks start, when they started this back in whenever 2007, 2006, I don't know when it was, they didn't say, hey, one day, you know, we're going to monetize this and turn it into a 150 million dollar, million dollar a year company. That wasn't the goal. The goal was, how do we appease the people that we care about most? How do we really reach this niche? And just give them everything that we got? And hope for the best. And what they found was that needs to be a heck of a lot bigger than

• 20:10Speaker 02

  they thought. And that's the only reason why it worked, right? They were so sincere about what they wanted to accomplish early on.

• 20:19Anthony Pompliano?

  Yeah. How do companies think about this if they don't have the benefit of starting today, right? So they've already built a product and kind of they look more like a traditional company. What do you see that the most successful companies doing to kind of transition to this linear commerce world? Are they just going and trying to create as much content as possible? Or there are other things that they can do to kind of navigate this transition?

• 20:41Speaker 02

  I think it's a really good question. I think you can sort of use 2PM as sort of a microcosm of this right now. I mean, the first 180 letters of 2PM, they were free and they were published in my spare time after work typically, before work. And that was the goal. I was like, I'm going to get to 180 letters. I'm probably going to stop. And I got to like 179. I'm like, I sort of want to continue this because there are people that are reading this that I would have never been able to introduce myself to. And that's just a really cool resource to have. Let's continue this. I should probably find a way to monetize it because I can't do this anymore in my spare time for free. And that's when I decided to make the pivot to WordPress.

• 21:24Speaker 02

  And I, I think I pivoted from, I forgot the platform that I was originally using, but I moved to MailChimp and I spent a little money on design, you know, it was a big chunk of money for me at the time. And eventually it became, okay, how do I productize some, how do I productize some of this so I can make a living and not have to work two jobs right now? And that's, that's sort of how that worked. Now it's, I think 2PM has five or six products. So, you know, when I get notifications, they're never the same. It's, there's six ways essentially to transact in the site. But at the core of everything that I've done, it's all been, how do I serve this particular industry that at the time was very niche? I think what we're seeing is that the

• 22:08Speaker 02

  e-commerce industry is not as niche as we once thought.

• 22:13Anthony Pompliano?

  Yeah. And so when you thought about monetizing, there's obviously a bunch of different ways you could do that. You could do everything from advertising in the newsletter. You could do subscriptions. You could do affiliate links. You could do kind of merchandise or commerce. How did you think about kind of sequentially rolling out those five or six products from a monetization standpoint?

• 22:33Speaker 02

  Yeah, I think originally it was just traditional membership like, hey, I need a percentage of you all to the transact so that I can like afford food for my daughters next week, you know, and that that worked out. And thankfully it did. And then I moved towards, I really want to maintain operational focus. So I listen, I believe that the best writing is operator driven. And you can't do that unless you're actually in the thick of it. And so I was like, Okay, I should probably, you know, consult companies and, you know, have some skin in the game and help build from the inside out and without breaking

• 23:14Speaker 02

  any confidentiality or anything like that, use the things that I'm seeing at scale to shade my writing in ways, right? To show that, hey, you know, there's still things that I'm doing on a day to day basis that when I do write about them, you know, they're based in actual doing and not just observation. So that was the impetus behind the consulting. And then there's just smaller packages and a few other things of the site that you can do. And I'm always surprised whenever, whenever people transact, but so far, so far, so good.

• 23:51Anthony Pompliano?

  Yeah. And one of the things you tweeted recently that I found really fascinating is you basically were saying, look, if I was to start a D to C brand today, I would go after product first, then go after distribution, and then I would focus on brand. When people think of D to C, I think this goes back to the conversation around like, they have a specific type of company in their mind, right? So maybe like a Casper or whatever it is. And they think of like, really, quote unquote, powerful brands or well known brands. And then maybe it's something about the product and then the distribution. And so in my head, like, that's kind of the starting point for some people when they hear D to C. Another kind of data point on this is Y C is famous for saying, you know, first time founders focus on product, second time founders focus on distribution. And so when

• 24:33Anthony Pompliano?

  I saw kind of your order in terms of what you would focus on, it surprised me a little bit. Maybe talk through like, why product and distribution and then brand, kind of if you were to build a D C company today?

• 24:45Speaker 02

  Yeah, listen, I think that was a very unique tweet for me. I wouldn't normally say something like that, but that was in response to that Bloomberg blending report. I don't know if you saw that. It was really, really interesting.

• 24:59Anthony Pompliano?

  What was the report?

• 25:01Speaker 02

  He was essentially, it was a great opinion piece. I forgot the gentleman's name, but he was essentially writing that a lot of these direct-to-consumer brands seem sort of idyllic and identical in their approach to messaging, their approach to their marks, their actual physical marks and all that stuff. And a lot of that is the result of the, what I call the D to C industrial complex. You know, there's probably 10 or 15 agencies that get paid really, really well to produce

• 25:32Speaker 02

  images and brands and messaging and a narrative around the founders and why they started the company and everything like that. And so you're seeing the same adjectives and the same sort of positioning for every single brand. And a lot of it, a lot of it is being sort of called out because not only are a lot of these brands doing that, and listen, there are a few, there are a few exceptions in that article. I would like to cite that like the Sills included in that article, whereas she bootstrapped for the first five years, she probably didn't have any business being in that article, to be fair. But the larger point was, there is sort of a homogeneity about all of it. And couple that with the fact that there have been so few exits and so little

• 26:16Speaker 02

  liquidity outside of, you know, a handful of founders taking $10 million off the table here and there, which I definitely disagree with. And what you have is sort of a frustration within the industry. The antidote to that, the antidote to that is essentially building a product that people actually like, right? And so when I was tweeting that, I was talking about a lot of the brands that actually did. Achieve liquidity events, brands that did grow on profit and cash flow versus raising the $5 million first, coming up with the brand and the message, then rolling out the product and hoping for the best. There are a number of those companies. And so I cited,

• 26:58Speaker 02

  you know, Jay's Ice Creams in Columbus, Ohio. There's Ciete Foods in Austin, San Antonio, I believe. There's Bulletproof, you know, there's going back a little bit further, there's GT Dave and Synergy, right? These are companies that are on the way to billion dollar status, and they did it way differently than the vast majority of direct to consumer brands today typically do it. And they're seeing more success. So you have to ask yourselves why. And my short answer is that they focused on building a great product first and getting those people to actually like it. The product developed the audience in ways.

• 27:35Anthony Pompliano?

  Yeah, it's really, really interesting because, you know, we're talking about D to C type companies right now, but we've seen this with other companies as well. So whether it's the Nicola kind of car company, right? Or it's the Quibby's of the world who kind of go out, they raised tons of money. And I think that, you know, people who have been around a while, especially from a venture capital perspective, red flag number one is you raise way too much money and you don't even have a product yet, right? Red flag number two is like, you don't have any of the venture capital firms actually invested. So they kind of all passed and you went elsewhere for capital. And I think that like, every once in a while, we have to almost have these to remind everyone of this focus on like, the ultimate goal here is to find that product market fit. It's not to raise as much capital

• 28:17Anthony Pompliano?

  as possible. So it's interesting that, you know, even though you see it in the D to C space, and it kind of feels like this like homogenous type thing, the mechanism is still happening elsewhere as well, right? It's almost like a sign of the times to some degree, it feels like.

• 28:31Speaker 02

  Oh, for sure. I mean, I think that you raised a few interesting points. Obviously, with Nicola, it's, that's a great example of not having anything to show for a lot of money invested. But, you know, in a much lesser sense, there are no brands that are as egregious, nearly as egregious as what that company's done. But there are a lot of brands that don't really have a path to exit optionality because they've raised a lot of money relative to their potential market cap. And they, they are not

• 29:05Speaker 02

  Private equity fodder anymore because of that, because of that cap table situation. And they will probably not be able to reach sort of exit velocity because they need paid marketing or whatever mechanism is out there to, to really sort of gain a lot of traction within the industry. It's just a really weird dance. And I think the only way to beat that dance is to have a product that can put up numbers. What I would say anywhere between one to three million in the first five years and annual revenue profitably before they're really taking on growth capital. If that's sort of the DNA of the company, I think that company actually has a better shot of becoming a billion dollar brand than somebody coming out of the gates raising 20 to 50 million dollars.

• 29:50Anthony Pompliano?

  Yeah. And talk a little bit about how you're seeing founders navigate to that point, right? So when somebody hears kind of a million to $3 million, there are certain businesses where the capital needed to, to start is very low, right? Literally just if you can build software, then you're off to the races. Some of these businesses though, there's physical products involved. There's some capital intensive nature. And so how do you see founders kind of getting off the ground to the point where it may make sense to actually go out and raise kind of these larger rounds?

• 30:18Speaker 02

  Yeah, listen, I, I know that nothing happens in a vacuum, right? I mean, if you look at Mizzen, we definitely raised a $250,000 friends and family round. We, we would still consider ourselves bootstrappers in ways because you know, we didn't pay ourselves for the first two and a half years and trust me, it was really painful.

• 30:35Speaker 02

  But we, we tried to build a strategy around not needing to raise more money. And we did. And because we built a strategy around trying to not raise more money, we were probably more capable of raising money in a reasonable fashion that put the company in a decent, long-term position. I would say that listen, I think that for a lot of founders, especially coastal ones, raising money is pretty easy relative to the industry. And direct to consumer was hot. It's fallen off, but it's, it's coming back as e-commerce penetration continues to rise. And so it's going to continue to be easier for LA, New York, San Francisco, Boston, so on and so forth, to to raise that $3 million seed or pre-seed even, you know?

• 31:20Speaker 02

  And I just don't think that that's the The route, even if you are in a capital intensive business, try to do it without institutional capital, try to do it, you know, with people that know you, know you well and believe in your vision. Obviously, not everyone has that Rolodex. I, I, trust me, I speak from experience. You didn't have that Rolodex at the very beginning. It was very hard for us, but it can be done. And, you know, for reference, that entire $250,000 capital expenditure was focused on buying our first run of first generation shirts from Mizzen, which, you know, sorry, Kevin, I mean, I could think, I think you can say this now because we can look back on it fondly, but the first generation of shirts, they weren't great. So selling

• 32:05Speaker 02

  them was pretty difficult, but we, we found a way to do it.

• 32:09Anthony Pompliano?

  Yeah. And let's talk a little bit about kind of this creator economy. It's really interesting to me how it's almost like creators are the new small business, right? And what we're seeing is take the Substack, you know, kind of revolution, if you will, there's much people leaving. And now they've got this ability to kind of do, you know, one version of where you, you really started with like this membership model. Do you see those people trying to build out actual businesses? Or is this just a where writers want to get paid to write, right? And what I keep going back to is this idea of, is there a separation between kind of people who want to build a business and people who want to just create? Or are we going to see kind of the rise of the hybrid, right? The people

• 32:52Anthony Pompliano?

  who want to create things, but also have the ambition and the skill sets to actually build businesses as like the CEO as well?

• 33:00Speaker 02

  Yeah, listen, I think that's sort of the conundrum that I'm in right now. Right? It's like, I want 2PM to be a media company, not a person. And so I've built strategies around that. With Substack in particular, obviously, you're very familiar with it. I think that the vast majority of the, the top users are individuals. They are building their own creator pipelines. They're not necessarily building media companies. I think it's hard. To build a media company on Substack, obviously, there are a few exceptions and those exceptions might be growing in the in the near future, but but it's it's hard. So I think with

• 33:41Speaker 02

  Casey Newton, for instance, today, right? Like you see him as a as one heck of a journalist. Like that's you will make a lot of money as an individual journalist. I'm I think it's different than the alternative, which is, I think that I forgot the name, but the group from Deadspin that launched on Substack a few a few weeks ago. Do you remember the name?

• 34:03Anthony Pompliano?

  I don't, but I know who you're talking about.

• 34:04Speaker 02

  So I think it's 30 of them and they are, I think they

• 34:09Anthony Pompliano?

  Is this Defector?

• 34:11Speaker 02

  Yes, yes. So 20,000 something subscriptions, uh, which is insane. So that's sort of the dichotomy right there. There's the individual and then there's sort of the the umbrella where you hear you hear Defector, but you don't know as well. I can't name a single journalist that's actually writing for Defector, but it's a very valuable organization that could potentially believe Substack and do its own thing and have just as just as much success. I think that's the difference, right? But can you can you build an audience? Can you build a structure around employing the right people? And can you port that audience elsewhere on your own URL and with your own design, with your own logo work to build a media company? I think that's sort of like

• 34:55Speaker 02

  the the mark that determines that.

• 34:59Anthony Pompliano?

  Yeah. And we've obviously seen this before with like the BuzzFeed and they came out BuzzFeed products, right? And kind of put it through. And one of my favorite examples, and the name's going to escape me now, but they do the really in-depth product reviews. Like if there's a watch that says, you know, it's 30 meters kind of water resistant, they literally put it on and go 30 meters down in the water and make sure that it it does it. But those types of organizations have found multiple ways to monetize, but they have large staffs, right? That they're kind of well-funded. In this creator economy, we're almost seeing people start businesses from scratch with no Funding in most cases, maybe there's some kind of personal funding that they're, you know,

• 35:42Anthony Pompliano?

  putting towards it, but, but it really does feel like we're getting back to this idea of like, the only people who are going to survive and have the option or possibility of thriving, or the people who find product market fit, right? Cause they're going to use the, the revenue to basically fuel anything else they want to do. Is that directionally correct, you think?

• 35:58Speaker 02

  It is. I mean, I think there are a number of companies. I'm not trying to sell anyone short because I've seen it happen myself. There are a number of companies that started small and have quite a substantial footprint on the industry. I think an example is probably one of my stops. I mean, Uncreate is probably a great example because, you know, I don't know what the, what the payroll is, but they, they have no more than 15 people right now. And if you compare them to much, much larger organizations with 60 or even a hundred people, the output looks the same. Well, that company started with one person doing one thing, right? And it sort of scaled up from there. So I'm not gonna, I'm not gonna belittle anyone that starts off as one person because

• 36:40Speaker 02

  clearly that's the same way that I started. I just know that to build an actual sort of,

• 36:47Speaker 02

  to build brand equity, I think we have to focus more on in an animate brand and not the person behind it. I think that's, that's the key difference in, in, in the creator economy today.

• 37:01Anthony Pompliano?

  Yeah. You, you've made a number of investments. You consult, you have been an advisor to companies and then you've obviously worked at them. Talk a little bit maybe about, we spent, talking about the brands and kind of the companies. What's some of the infrastructure that you're seeing? That's enabling all this, right? So Substack is one that's kind of helping to accelerate it. Are there other companies that people may or may not have heard about that you kind of put in the infrastructure category, but you think will become really important in the future?

• 37:27Speaker 02

  Yeah, listen, I'm a huge fan of Memorable. They've been my engine for quite some time. There's alternative platforms for publishing. I think Ghost is popping up. You know, traditionally Klavio is an alternative, though it's typically focused on B2B.

• 37:45Speaker 02

  I think that Shopify is on to something. I've, I've gotten sort of food in from a few of their folks that they're coming up with solutions for the creator economy themselves. I think it's a very fascinating time and I don't know if you're familiar with Li Jen from A16Z. She talks about this quite a bit. There's a host of SaaS platforms that are focused on answering this question, especially as the American electorate continues and the American consumer therefore continues to sort of fracture, right? Like everyone's moving in their own directions. I think the media and commerce will reflect that.

• 38:22Anthony Pompliano?

  Yeah, it's really interesting as well because it feels like while we're talking about this vertical kind of integration between content, brand, products, et cetera, for the businesses, the infrastructure providers have actually stayed pretty independent, meaning that, you know, if you look at Amazon, Amazon basically helps you sell things, but also they sell their own things and kind of compete with you. Substack, for example, doesn't have their own publications also on Substack, right? Or Shopify, to my knowledge, doesn't sell products as well as kind of arm the rebels of other people. Does that change over time? Like, do you see a world where the infrastructure providers start to eat more and more of the stack and actually compete with the people that they're helping to some degree?

• 39:07Speaker 02

  I do.

• 39:10Speaker 02

  I think Substack will become its own media company. I think eventually they're going to acquire some of the top performers and sort of build a strategy around their own direct brand of media. I don't know what that focus will be on, but maybe it's, maybe it's local news, whatever. I think they're going to focus on that. I think eventually Shopify will focus on becoming a marketplace and competing head on with Amazon. They have access to hundreds of brands that will never work with Amazon, and I think that that's a competitive advantage that they have yet to realize. It's, you know, going back to the original comments on linear commerce, it's incumbent upon a lot of these platforms to eventually compete with the people that are using the platforms. I think that's natural.

• 39:52Speaker 02

  The margins are probably higher if they do that, and it's, it's a lot more long-term viable if they are building those strategies around being their own supply and their own demand.

• 40:02Anthony Pompliano?

  And as you think through how a lot of this is financed, there's been a bunch of attention lately on, you know, companies like Pipe and others that are finding ways to, let's say,

• 40:15Anthony Pompliano?

  have more advantageous capital given to SaaS companies with reoccurring revenue, right? I don't think we've seen too much yet, and you know more than I do, in terms of either D to C companies or kind of the creator class around financing in a non-dilutive way. Any thoughts there as like how that part of the industry may evolve to help some of these people access capital, but still kind of remain true to the way they want to build the companies?

• 40:40Speaker 02

  Well, I haven't heard much with regards to non-dilutive capital outside of the advances that Substack, I guess, continues to provide a few top performers.

• 40:54Speaker 02

  Eventually, there will probably be mechanisms around that, you know, maybe, I forgot the name of the provider out of Toronto.

• 41:05Speaker 02

  They provide-

• 41:06Anthony Pompliano?

  ClearBank?

• 41:06Speaker 02

  Yes, thank you so much. You're the man.

• 41:09Anthony Pompliano?

  I just have a bunch of company names floating around in my head, so-

• 41:13Speaker 02

  That was so good. Thank you so much, because it completely slipped my mind. But yeah, I could see them focusing on something like that for creators. It makes sense. There are certainly a few things that you can invest in in the first two to six months of doing business that can help you to drive more revenue moving forward. And frankly, for people like me, I've done everything organically so far. You know, a conversation with ClearBank is probably, I'm not trying to plug them, but a conversation with someone like ClearBank could probably be advantageous for me because, you know, at some point, I will probably have to pursue paid marketing and paid acquisition. And it's, it will probably be smarter for my business to do that on top of everything

• 41:51Speaker 02

  else that I'm doing. And, you know, there are a host of creator newsletters, creator-based newsletters that could benefit the same.

• 42:02Anthony Pompliano?

  Yeah, what's really interesting about it too is I think a lot of people have thought about SaaS recurring revenue, right? So I build a software platform, you pay me for, you get to use it, you know, on a kind of a daily basis or weekly basis. Is there a difference in the recurring revenue of a Substack or, you know, one of these other platforms? You got a different type of customer in many cases, the price points may be different, but from a mechanism standpoint, it's still recurring revenue, right?

• 42:28Speaker 02

  I think there's a slight difference and I think, I think for me, it's one that I actually focus on.

• 42:34Speaker 02

  You know, I think the goal is to make your platform a resource, just like SaaS is typically focused on being a resource for users. And that resource could provide a lot of lock-in for your, for your customers.

• 42:50Speaker 02

  You know, lowering churn, boosting retention and all that. I could see investors focusing on newsletters that become their own resources. For us, it's, you know, we focus a lot on the databases. We are trying to quantify the private markets. You know, Jeff Richards is one of my mentors out at GGB Capital and I tell him all the time, like, I, I'm trying to build private markets Bloomberg, which I know sounds incredibly ostentatious, but one of my goals is to help investors say, hey, these are the direct to consumer brands that are probably most likely to have some semblance of exit optionality based on these metrics. And we are improving those metrics by the month.

• 43:34Speaker 02

  So that's a resource that I, that I could see investors being really interested in funding.

• 43:39Anthony Pompliano?

  Absolutely. The last thing I want to talk about before we go to the rapid fire to finish this is this idea of membership, right? So you've done a fantastic job, I think, of kind of really directing the, the branding, the conversation around membership and not so much a transactional relationship or just like, hey, you're a subscriber, right? Talk about kind of one, what your thought process is behind membership versus maybe subscribers? And some of the advantages or even maybe disadvantages to, to pursuing a strategy that's built on membership more than anything else.

• 44:11Speaker 02

  Well, I think that's really, really important to note. Membership is is the most important thing that you can focus on. Subscribers to me are are are flimsy. They're passing. They can certainly be loyal, but most most often, you know, if if I think that subscribers as a class are typically less engaged with your product. Members are people that you have a two way relationship with. So they can email you. You can help them solve problems. If you had a room full of members, the members would feel like they are around like minded, valuable people. They're like a cohort, and that's the way that I see my members. That's why I host our dinners

• 44:57Speaker 02

  to get try to get as many of them in the room together as possible. Obviously, COVID put a you know, put a hold on that for a little bit, but we're kicking that off again pretty soon. Here in the city, here in New York, and I'm really excited for that. I think those are sort of the elements that can help above beyond traditional subscribers, build a long term strategy around members that stick with you, users that stick with you.

• 45:19Anthony Pompliano?

  Yeah, I think it's Jared Dicker who talks a lot about like, membership basically is the loyalty, right? Going back to kind of where we started the conversation and and it not only is a very aspirational thing, right? But it also starts to bleed into identity. And so if you can do it the right way, that identity, you know, people don't want to change their identity very often, right? And that's a really interesting way to look at it.

• 45:42Speaker 02

  Absolutely. I mean, Jared is on to something. I love the way that he thinks. He's he's he's right on when it comes to the delineation between the two. I think they often get conflated and they're not the same at all.

• 45:54Speaker 02

  To have a subscriber is wonderful. I mean, that's what we're all seeking, right? Anyone in this economy, that's what we're focused on. But but, you know, I think what's really going to continue your business and allow you to build to build on in the long term. Those are members and they're they're paying you for the future of your company, not what exists right now.

• 46:14Anthony Pompliano?

  Absolutely. Before we get into the rapid fire, where can people find you on the internet? Or find out more about 2PM?

• 46:21Speaker 02

  Yeah, so I'm just at Web, at W E B on Twitter. You can find me on LinkedIn, just Web Smith. Obviously, my pride and joy, my, my, my non-human baby is 2pml.com or 2pm.inc, either one. And yeah, I think that that's where you will enjoy your time.

• 46:43Anthony Pompliano?

  Getting at Web on Twitter, a three-letter Twitter handle means that you either know magic or you were early. Which one is it?

• 46:50Speaker 02

  I, I, I got lucky. I, um, long story short, I ended up buying the handle in 2010 from this British aristocrat that was sitting on it and he wanted like $72,000 for it. And I was not in a position at all to pay even a fraction of that. And so I paid him in installments, like 3,000 bucks. And he handed it over to me and I was like, man, this is, this is really important. And he's like, okay, fine. After six months of delineation. So, uh, yeah, that's, that's how it works.

• 47:23Anthony Pompliano?

  That's an amazing story and the fact that he's an aristocrat makes it even better.

• 47:27Speaker 02

  Oh, yeah. Yeah. He, he, I think he, he lived in a castle or something. I saw a photo one day. I don't know if he was being serious, but like, man, I don't know what, what money you're making, but that's definitely not what's happening in Austin, Texas right now.

• 47:39Anthony Pompliano?

  Yeah. Well, what's even better is like to sell a Twitter handle for $72,000 is like only somebody who lives in a castle would.

• 47:46Speaker 02

  I'd think that. No, uh, I have like a few pennies. Please help me.

• 47:53Anthony Pompliano?

  I love it. Uh, what is, I ask the same two questions to everybody. What is the most important book that you've ever read?

• 48:00Speaker 02

  Oof, Shoe Dog.

• 48:03Anthony Pompliano?

  Why?

• 48:07Speaker 02

  I don't think that there are many books that show you the entire path from zero to one like that book. Just the pain, the repetitiveness of dismay and destruction, how they bounce back from a time and of time. As someone that's really focused on retail and brands, that book was really, that book was really important for me to read. And it's one that's like etched in my memory.

• 48:32Anthony Pompliano?

  I love that answer. Second one's more fun. Aliens believer or non believer?

• 48:39Speaker 02

  I do tend to believe that we get a lot of our technology from foreign planets.

• 48:45Anthony Pompliano?

  Okay, hold on. No one's ever said that before. Explain where, where are we getting this technology?

• 48:50Speaker 02

  Listen, I know that we have some wonderful scientists on the face of the planet, you know. Thank you to the Germans and the Russians for helping us, you know, pioneer the space age. But I think that we've just seen some drastic booms in technology over the last 200, 300 years that

• 49:11Speaker 02

  a logical person would say is probably inspired from elsewhere. I don't know. I mean, I never really think about it. So this is probably going to be held against me. But I think it's logical. You know, we can't be alone, right?

• 49:21Anthony Pompliano?

  Yeah, I tend to agree with you that we're definitely not alone. I don't know about getting technology from elsewhere. But the, the most fascinating story I've heard on the alien front is this guy Bob Lazar.

• 49:33Speaker 02

  Yeah.

• 49:35Anthony Pompliano?

  Yeah, well, he and he's more of the belief of like, we have technology here that we can't explain and it came from somewhere else. Right? So it's down the right path. To wrap this up, you could ask me one question. What's the one question you got for me?

• 49:48Speaker 02

  Oof. How do you stay so productive? You're really knocking these out.

• 49:54Anthony Pompliano?

  Yeah, I said it yesterday on Sunday's podcast. Between yesterday and today, I'll have recorded eight podcasts. I've done the newsletter each day, the daily YouTube show. I signed a term sheet for an investment yesterday, like

• 50:10Speaker 02

  Yeah.

• 50:10Anthony Pompliano?

  Cranking. And it just comes down to

• 50:15Anthony Pompliano?

  Really enjoying doing this, like getting to spend an hour and a half with you as I was like woke up this morning. I was like, yes, like, let's do it. So just excited to kind of learn from, from people who spend a lot of time thinking about specific things. The second part I think is just being really efficient with your day. So if you look kind of, you know, my day is scheduled to the minute, kind of all the way through. And then also I think there's this element of focusing on the micro, but understanding the impact that has on the macro of like, I always use the example, Nick Saban talks about, you know, just do your job on this play. And every offensive play is drawn up to be a touchdown. And the only reason why we didn't score a touchdown is because someone messed up their job. Right?

• 50:59Anthony Pompliano?

  And so if you kind of just think of like, okay, what's my job? It's like, do the same thing every day for five plus years. And then like, then you get to enjoy the, the, you know, kind of benefits of that. Yeah.

• 51:11Speaker 02

  I really like you said about every offensive play being drawn up to score a touchdown. That, that's pretty impactful.

• 51:18Speaker 02

  But it all comes down to execution, right?

• 51:20Anthony Pompliano?

  It's, uh, when I started to think about this years ago, a football coach told me this and I was like, I never thought about that. Like literally every play is a touchdown on the board. Right? And what you realize is like, there's both internal and external factors that can prevent it. So, you know, the center may snap the ball and then miss the guy in front of him. On the block he's supposed to make, but is it because he messed up, right? Like he didn't take the right steps or do what he's supposed to do. Or is it just that the player across the, you know, the line is a better player and just anticipated something like, so it's not always kind of self-imposed or kind of self-inflicted wounds. It can be external forces.

• 52:02Anthony Pompliano?

  But if you just know, look, every place touchdown and I'm going to do my job. And if everyone else does their job, we're going to score. It's a pretty good way to look at life, friend.

• 52:10Speaker 02

  Pretty profound, man. Pretty profound.

• 52:13Anthony Pompliano?

  That's why Nick Saban has a bunch of national championships and you and I are sitting here on the, on the internet wishing that, our, our college football teams were as good as Alabama.

• 52:21Speaker 02

  Fair enough. Fair enough.

• 52:23Anthony Pompliano?

  Awesome. Listen, thank you so much for, for taking the time to do this. I think people are going to learn a ton from you today.

• 52:28Speaker 02

  Thank you.

• 52:28Anthony Pompliano?

  I highly suggest everyone go check out 2PM or find web at, at web on Twitter and we will definitely have to do this again in the future.

• 52:36Speaker 02

  Sounds good, sir. Talk to you soon.