3 Genius Business Ideas We're 'Borrowing' From Syed Balkhi

Episode 553: Shaan Puri (https://twitter.com/ShaanVP) and Sam Parr (https://twitter.com/theSamParr) talk to Syed Balkhi about the business ideas he would go after if he wasn’t already running WPBeginner. Watch Syed's $0 To +$100M story here: https://www.youtube.com/watch?v=gzHdrQ5pDFo Want to see Sam and Shaan’s smiling faces? Head to the MFM YouTube Channel and subscribe - http://tinyurl.com/5n7ftsy5 — Show Notes: (0:00) Intro (3:30) Offshore bookkeeping (6:00) Level it up with reseller and white label (8:30) Sourcing your outsourced talent (12:00) Barnacle on the Whale: Quickbooks plugins (19:00) The most powerful idea of our generation (22:30) X but open source (x= popular platform) (27:30) Creating disproportionate value (31:30) Flavors of capital funds (39:30) Is $10-50M the perfect amount in the bank? (45:30) First you own your things, then they own you (47:30) The true cost of luxury (52:30) Paid marketing vs. acquiring resellers (58:00) Compounding goodwill is the best form of compounding — Links: • Syed Balkhi Twitter - https://twitter.com/syedbalkhi • WPBeginner - https://www.wpbeginner.com/ • Appflowy - https://www.appflowy.io/ • Stability AI - https://stability.ai/ • Cal.com - http://cal.com/ • OSS Capital Twitter - http://tinyurl.com/ynvpmu7j • Automattic - https://automattic.com/ • WooCommerce - https://wordpress.org/plugins/woocommerce/ • CleanShot X - https://cleanshot.com/ • GitLab - https://about.gitlab.com/ • Guy Spier - https://www.guyspier.com/ — Check Out Shaan's Stuff: Need to hire? You should use the same service Shaan uses to hire developers, designers, & Virtual Assistants → it’s called Shepherd (tell ‘em Shaan sent you): https://bit.ly/SupportShepherd — Check Out Sam's Stuff: • Hampton - https://www.joinhampton.com/ • Ideation Bootcamp - https://www.ideationbootcamp.co/ • Copy That - https://copythat.com • Hampton Wealth Survey - https://joinhampton.com/wealth Past guests on My First Million include Rob Dyrdek, Hasan Minhaj, Balaji Srinivasan, Jake Paul, Dr. Andrew Huberman, Gary Vee, Lance Armstrong, Sophia Amoruso, Ariel Helwani, Ramit Sethi, Stanley Druckenmiller, Peter Diamandis, Dharmesh Shah, Brian Halligan, Marc Lore, Jason Calacanis, Andrew Wilkinson, Julian Shapiro, Kat Cole, Codie Sanchez, Nader Al-Naji, Steph Smith, Trung Phan, Nick Huber, Anthony Pompliano, Ben Askren, Ramon Van Meer, Brianne Kimmel, Andrew Gazdecki, Scott Belsky, Moiz Ali, Dan Held, Elaine Zelby, Michael Saylor, Ryan Begelman, Jack Butcher, Reed Duchscher, Tai Lopez, Harley Finkelstein, Alexa von Tobel, Noah Kagan, Nick Bare, Greg Isenberg, James Altucher, Randy Hetrick and more. — Other episodes you might enjoy: • #224 Rob Dyrdek - How Tracking Every Second of His Life Took Rob Drydek from 0 to $405M in Exits • #209 Gary Vaynerchuk - Why NFTS Are the Future • #178 Balaji Srinivasan - Balaji on How to Fix the Media, Cloud Cities & Crypto • #169 - How One Man Started 5, Billion Dollar Companies, Dan Gilbert's Empire, & Talking With Warren Buffett • ​​​​#218 - Why You Should Take a Think Week Like Bill Gates • Dave Portnoy vs The World, Extreme Body Monitoring, The Future of Apparel Retail, "How Much is Anthony Pompliano Worth?", and More • How Mr Beast Got 100M Views in Less Than 4 Days, The $25M Chrome Extension, and More

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

• 0:00Shaan Puri?

  All right, we've got our buddy Said Balkhi on today. If you don't know Said, he is one of the few people on earth who has bootstrapped a company to a unicorn status, a billion dollar company without ever taking outside money. The guy's a legend. He's in his 30s and he's done all this. What I liked about this episode is most people, we talked to a lot of guys who have made it, but they're kind of just like, you ask them, what would you do today? And they kind of just shrug like, I don't know, that's what worked for me back then, but good luck to you. And you're like, shit, all right, I gotta figure this out myself. Said's the opposite. He didn't close the door behind him. He kind of just puts a ladder down and he's like, hey, here's three specific opportunities that I see. And what I liked about these opportunities is he's very specific. He says exactly what he would do. And actually, he's looked into doing some of these things.

• 0:42Shaan Puri?

  The second thing is that he, these are not like moonshot ideas. It's not like, oh, invent the next big AI thing. These are just ideas that will just work. Like if you do execute them well, they will work.

• 0:54Sam Parr?

  And this is one of those episodes where I actually was like writing down what he was saying. I was like, oh, I should do that.

• 0:59Shaan Puri?

  I literally slacked Ben. I was like, at Ben, at Ben, call me when you're free. Call me. I gotta talk about some of these ideas.

• 1:04Sam Parr?

  And by the way, at the end, we talk about money and we ask a little bit about what people's numbers are. You'll understand when we get to that part about what your number is. I want you guys to do me a favor. If you're listening on your podcast app, go to our YouTube page. Obviously you have to subscribe because that's the gentleman's agreement. You subscribe when you, when we create valuable content for you. All we ask is just for subscribe, but tell us in the comment section what your number is. You'll understand when you get to that part. And also you can view what other people's numbers are. So this will be like a little bit of a social experiment.

• 1:43Sam Parr?

  We have to do an intro, Sean. So Said was on the podcast like six months ago. You were a hit. People loved you. Basically, the gist of the pod is you have this empire that you own, that you've not raised money for. It mostly started as a WordPress blog called WP Beginner. And then you saw which WordPress plugins, among other types of businesses, were most popular. You bought them or invested in them. Now your empire is doing something like over a hundred million. I think you were somewhat vague, but I think you said over a hundred million in revenue, the whole thing. You own gas stations, I think. You own tons of real estate. So you're just a, you kind of have your hands in everything.

• 2:20Shaan Puri?

  The title last time, the catchy title, which I thought was really cool. Said is one of the few, very few people on earth who is a bootstrapped billionaire, meaning or has built a billion dollar company, sorry, as a boot strap, so not taking external money. And did it kind of slow and steady and in a really unique way where you, you really grew inside this WordPress ecosystem and WordPress turned out to be really big. Andrew Wilkinson came on and called this strategy the barnacle on the whale. So there's, you know, a whale and it's a, it's a growing whale. And if you can be the right barnacle, you can actually just kind of grow with it. And you can ride that, you could surf that wave and actually build a large business yourself.

• 2:58Sam Parr?

  And by the way, for the record, we have to protect Said here. He never said billionaire, I think. I think we said that. So that's us. He could, he doesn't have to deny or confirm it.

• 3:07Speaker 02

  I tend not to focus on the valuation. The, the goal is to keep building cool things that our users are loving.

• 3:16Speaker 02

  And with the team that I enjoy working with and have a good time.

• 3:19Shaan Puri?

  And if you want Said's like backstory, you know, from, we were talking about like when you were a kid, what you were doing in your teens to how you built this empire, like we did that episode. So this one, we're going to do something different, which was just, we were like, hey, come back on. You're like, well, I kind of told my story already. But we said, actually just come in and just hang out with us. Like we do a normal MFM where we're going to talk about five different things. It'd be great to have you here just to talk about those, whatever random things that come up along the way. So if you want the backstory, go there. If you want to hang out, come here.

• 3:46Sam Parr?

  So Said, where you made this amazing document. You have another topic on here that I know that's just going to get, that's gonna, it's gonna make Sean just super horny because he's going to be able to promote his own thing. What do you have here?

• 3:59Shaan Puri?

  Hold on, let me get bumped up while you do this. Go ahead. I'll scratch.

• 4:01Sam Parr?

  Yeah.

• 4:04Speaker 02

  I see, you know, there's a massive opportunity in, in productized services with the offshore market. Especially in industries where the TAM is really, really high. I believe this is greatly underestimated. Everybody's trying to go build this massive, big idea business and spending years and years building software, which may or may not work. Or if you're good at sales and you have some sort of audience, taking this Model and going to town. Of course, as a matter of fact, I was evaluating a business earlier today that just came to my table that that's doing productized services. What's an example?

• 4:39Shaan Puri?

  Yeah, give an example because I don't think most people know productized service offshore market. That's a lot of words.

• 4:43Speaker 02

  Sure, sure. So we took an investment stake in a company called Seahawk Media. And they offer custom WordPress development, website maintenance, basically other web master related services at affordable prices. And we can also do it white label. So this is like, if you're a small business and you can't afford to hire a full time developer, you can go here, you know, basically get a developer for hire kind of thing at very, very low rates because the team is based out of in India. And, you know, there's a white label offer there as well. So other agencies, web hosting companies, businesses can add like add on revenue, you know, by reselling Seahawk. But other example could be take like very large market like bookkeeping. Right. There's this company called Bench. I use them.

• 5:27Speaker 02

  Yeah, they charge you between like $299 or $499 and then more, right? Per month to do your bookkeeping and they're really, really slow. One of our portfolio companies were using it and super annoyed and we brought this thing in house. But I know that many accounting firms now have offices in Pakistan, India, Al Ittam, et cetera, where they're doing this fractional CFOing task, like very, very basic task, like bookkeeping and basic P and L. At super low cost. So someone can go in and say, hey, we will do the bookkeeping for you at this rate. I know of course, like Shepard, right? This is, this is one of the companies.

• 6:04Shaan Puri?

  Tell me more about that.

• 6:09Speaker 02

  I think that there's, there's a large opportunity here where you take a market where TAM is really high, especially a services market, and then you turn it into a productized service, you offshore the talent. And then you add like a reseller or a white label model. I think the, the one that I was looking at was bookkeeping. And I think the TAM there is so, so large. And the key is, is, is the reseller and white labeling model, which is what we learned from Seahawk Media. So let's, let's talk about Seahawk, right? Because you have a tactical example here. So Seahawk is basically your outsourced WordPress development agency. And how much does it cost roughly? Let's say it costs like a thousand dollar bill a website. I'm just making this up.

• 6:54Speaker 02

  Um, and you're a web hosting company and a bunch of your clients are coming to you and saying, "Hey, I want you to maintain my website." And you're like, "Oh, we just do hosting." I don't want to build a services department. So they will go to Seahawk, partner with Seahawk and say, "Hey, can you manage these clients for me?" And we do a rough split. Um, so now there are many web hosting companies that are effectively white labeling Seahawk Media's team, um, and offering add-on services to their customers like custom website design, um, maintenance by the hour, you know, site optimization, hack site repair. All sorts of these services, um, have been productized and delivered without you ever building

• 7:39Speaker 02

  your own team. So in that, in that same way, by the way, this is something that we're going to do on, on WP Beginner. I know the team is working on it and it's going to go live, is we will start offering professional websites. So anybody who comes to WP Beginner, um, can get a website done and so on. But you can do the same exact thing in every space. So let's say bookkeeping. I can go to all the smaller CPA firms that don't have the economics to build on their own bookkeeping and just say, "Why don't you just white label my services?" And this is like, you know, now Joe's CPA bookkeeping. Uh, you're getting all the clients, you charge whatever markup you want, um, you're paying the X. Uh, so on the backend, it still works the same way.

• 8:23Speaker 02

  So if you're like, for example, Shepherd, uh, can, can like, instead of doing a traditional affiliate model, you can do this white label model where other people are, are just becomes like your lead source.

• 8:33Sam Parr?

  I have a question for both you guys. Sean with Shepherd and Said, I, I'm sure you, you know a bit about this as well. When you guys are out, so I think, Sean, you guys have people in Latin America. I think you also have people in Asia.

• 8:46Shaan Puri?

  Yeah.

• 8:46Sam Parr?

  Uh, when you are going out and I don't know how many people you guys have, but let's just say hundreds. When you're going out and you're like finding these people, how hard is it to find them? How hard is it to train them? And how hard is it to keep the quality high?

• 9:00Shaan Puri?

  Um, I mean, it's the main thing, right? If you don't provide quality talent, or if you're not able to provide higher quality talent than somebody could just easily search for, then you don't really have a business. So for example, with Shepherd, they have a hundred recruiters. Like I remember when I was doing the investment, I was like, "Hey, what's this like giant payroll thing? I thought there's like nobody here." Like what's, what are these hundred people? Who are these hundred people? Where, where's your office? He's like, We have an office in the Philippines, an office in LatAm. And what's in that office is just recruiters who are constantly searching for talent and then basically testing them, filtering them and trying to, because you're like, the whole game is people want to hire overseas. They want the cost savings, but what you don't want is the average person in the Philippines or the average developer in LatAm. You want the top 1%, the top 5%.

• 9:44Shaan Puri?

  And so who's going to do that filtering? And that's the, that is the whole service of what Shepard does is goes to find that. So in order to do that, is it hard? I don't know if I would say it's like, it's not like rocket science, but it did take somebody on the ground in the Philippines who started an office, has 100 recruiters there, and then they have a whole system and process how they intake talent. And so they're getting thousands of resumes and then they're trying to filter down. Okay, when somebody comes to us asking for a designer or a bookkeeper, how do we give them the best and not the average person? So you do want to have that. So that's the like, that what Said saying is you've already built that hard infrastructure. Now you could go to Joe, the CPA and say, you need a bookkeeper. Well, I actually already have the good bookkeepers here. You already have a customer relationship. Why don't you create an add-on service? It's extra revenue for you without extra work.

• 10:29Shaan Puri?

  That's really smart.

• 10:30Speaker 02

  Right, yeah. And you know, same to echo Sean's point, quality is very, very important. If you can't deliver quality, it doesn't work. But the good thing over the years that we're seeing is that talent across the world is getting better. So if you go 10 years ago and you're trying to hire overseas, whether it's Philippines, India, you may not have had that same level of talent, but the new generation, much better English, you know, more technologically adept and so on. So when we're hiring in Seahawk, for example, this, this is, you know, super vetted talent. We know they can build WordPress website. Or so, you know, if you're a business owner, you're like, how do I know when I go to Upwork that this person actually knows what they're doing? Figure that anybody can go make a profile on Upwork.

• 11:15Speaker 02

  There's not a lot of vetting being done. Here, you know that this is a vetted person who can do it. And it's in Seahawk's best interest to vet that person because if that person is working on a client's website for some big hosting company, you're not just going to lose that one client. You, you might lose the contract.

• 11:31Shaan Puri?

  Right.

• 11:31Speaker 02

  Of white labeling the service for that big hosting company.

• 11:33Sam Parr?

  And so are you, Said, are you going to start this for accounting, the productized service of accounting or bookkeeping?

• 11:39Speaker 02

  No, I'm not actively looking to start it, but I'm studying it right now. And I talked with one of the influencers in the accounting space to see if there's a JV potential.

• 11:52Sam Parr?

  I bet that guy's just a thrill to be around.

• 11:55Shaan Puri?

  Accounting influencers.

• 11:57Sam Parr?

  Yeah. It's like, ooh, he's got his top button on button. Do you like to party?

• 12:05Sam Parr?

  That guy's just a thrill.

• 12:08Shaan Puri?

  So you have another one here, which is ecosystems. And this is the kind of barnacle on the whale idea that we were talking about earlier. So you were like, here's what you wrote. You go, I'll be the first to admit, I've benefited tremendously off WordPress and the growth of WordPress. And I'm grateful for that. Andrew has talked about how he, with WeCommerce, benefited from the growth of Shopify. He got in early, started making Shopify themes, and then as Shopify grew, his themes business grew. And then they bought more Shopify apps. And you said, there's got to be more of these, basically. There's not just those two, there are more. So what are some other ecosystems that you see that you think are exciting?

• 12:43Speaker 02

  The one that I'm excited about is QuickBooks and the Xero apps. So these accounting platforms are very, very sticky. I missed a deal here. It was a really, really good business.

• 12:57Speaker 02

  They were doing like $3 million in revenue, extremely profitable.

• 13:02Speaker 02

  And I believe there's a lot of value in someone acquiring multiple one of these QuickBooks apps or Xero apps, or maybe QuickBooks apps, and then you port it over Xero and so on. And then you cross-sell. So it doesn't matter if the user switched from QuickBooks to Xero or vice versa. You're still keeping that customer. You can even multiply that effect by going and tying multiple ecosystems. So you can say QuickBooks and Shopify, or QuickBooks and WordPress, and so on. I think there's a serious potential here when you're looking at these businesses.

• 13:40Shaan Puri?

  Dude, this episode, I know this episode is good because Said is saying ideas. And I'm literally like opening up an email thread, being like, we gotta do this. We gotta do this right now. And it looks like I'm sitting, I'm almost like on my toes up, ready to like go sprint. Because I like, he's saying things that immediately I can see the opportunity. This is good.

• 14:01Sam Parr?

  Sean, do you know how many users, this is shocking. Do you know how many users or how many customers QuickBooks has?

• 14:07Shaan Puri?

  I would guess like 2 million. I would just guess a crazy number.

• 14:11Sam Parr?

  Said, do you know?

• 14:13Speaker 02

  Go ahead.

• 14:14Sam Parr?

  I believe 30. I think it's 30 million people.

• 14:16Shaan Puri?

  Wow.

• 14:16Sam Parr?

  30 million, 30 million customers QuickBooks has, which is insane. What does Xero have?

• 14:24Speaker 02

  It's smaller, but it's in the millions as well.

• 14:26Sam Parr?

  Am I right? Is it about 30 or is it even more? My number could be old.

• 14:30Speaker 02

  I think you're spot on there.

• 14:33Shaan Puri?

  And what do you think's the play? Is it software plugins or is it agencies that manage service?

• 14:39Speaker 02

  I think the software play, the one that I was looking at was software play. And I've seen like other software plays in this. The one that I really wanted, I missed it. It's so stupid.

• 14:49Shaan Puri?

  I can see the regret in your face, dude. I've never seen you have like FOMO. This is amazing.

• 14:55Speaker 02

  But like, you know, there are other, you know, implementation partners around these that have Bill adjacent apps that you can go in and then use that as distribution. This is a very essential tool. Like you're not going to not get rid of it.

• 15:10Shaan Puri?

  Said, he's had two great loves of his life, his wife and then whatever this app is that got away.

• 15:16Shaan Puri?

  He'll never stop thinking about this app.

• 15:18Speaker 02

  No, I'm studying the ecosystem. And I think this ecosystem, you can find like wonderful businesses that they're not going to be venture growth. Right? They're not going to have venture growth, but they're going to be extremely profitable. And you know that people are going to keep using QuickBooks or Xero because as long as they have a business.

• 15:36Sam Parr?

  Okay, so what you're talking about is the QuickBooks. I just Googled QuickBooks plugins. So you're just talking about something like that. So there's like.

• 15:43Speaker 02

  That's right.

• 15:44Sam Parr?

  There's a variety of plugins that you can buy. I imagine they cost money.

• 15:48Speaker 02

  Yes.

• 15:49Sam Parr?

  How much, are you the biggest WordPress plugin business on WordPress?

• 15:56Speaker 02

  I think collectively, when you look at it, after automatic, we would be the biggest.

• 16:01Sam Parr?

  Who? Okay. And we promised that we're not going to dive deep on numbers. Can you say like the second or third place? Like what, how big of a business would they have? Also tens of millions of dollars?

• 16:13Speaker 02

  Yeah.

• 16:14Sam Parr?

  And so how big of a business do you think you could build just on the QuickBooks platform or the QuickBooks ecosystem?

• 16:22Speaker 02

  I think if you look at the app store, just like Shopify has an app store, QuickBooks has an app store. And if you take a couple of apps that might be doing three million, four million, two million dollars in that range, and you exit by five, and you buy five of those, two million doing two million, you just built a $10 million business that may not be cross-selling enough so you can unlock more value. They might be mismanaged gems. By the way, if someone wants to do it, reach out to me. I would like to invest in it.

• 16:51Shaan Puri?

  Yeah.

• 16:52Speaker 02

  I'm studying this. And if you're listening and you have a QuickBooks app.

• 16:56Shaan Puri?

  Sean at QuickBooks.com, I'll forward you to Said, don't worry.

• 16:59Sam Parr?

  Yeah, you're gonna be like the mafia, like, where's my cut, bitch?

• 17:02Shaan Puri?

  Yeah, yeah, yeah. There's no direct access here.

• 17:05Sam Parr?

  Yeah, yeah, yeah. So like when you do, I imagine that there's, so there's software, like Jungle Scout, I think, or there's a bunch for Amazon, where you could see which services or products are selling the highest. I imagine there's the same for Shopify. When you're studying QuickBooks, I can't imagine that that software exists. What does studying mean?

• 17:24Speaker 02

  I think you're looking at the number of reviews that a specific app has, all the signals, they might be featuring something that's popular, looking at what's in the new. You can Google or search in the QuickBooks category, you know, the tags they're using, and see how many solutions show up in that, and gauge by, okay, if only 3% or 4% of users are gonna leave a review, that's probably how many users that they actually have. So if somebody has like 100 reviews, that's only 4% of their user base, potentially. So you can sort of make a hypothesis there and say, okay, this category or this keyword,

• 18:06Speaker 02

  maybe it's receipt management or whatever, it maybe has 20 apps, and that's how big the market size is for a receipt app in QuickBooks.

• 18:16Sam Parr?

  Dude, you're basically a billionaire building these like...

• 18:21Sam Parr?

  Plugins, basically. And I think that that's, I mean, that's, that's awesome. Like, that's just so funny, because the people listening to this, you guys should actually go to the YouTube, because you're smiling as if it's like too good to be true. You're like, no one's talking about this. I can't believe, why is no one talking about this? Like, that's kind of the vibe I'm getting from your facial expressions.

• 18:39Speaker 02

  I enjoy the game of business and I enjoy finding, finding these opportunities that allows us to compound. And, and that's what's exciting.

• 18:49Sam Parr?

  Dude, anytime I hear a billionaire talking about where he's founding, compounding, I'm like, talk dirty to me, baby. Yeah. Like, you're.

• 18:57Speaker 02

  You keep saying billionaire, which.

• 19:01Sam Parr?

  By the way, I'm completely making that up. I wanna, I wanna respect that. I'm, I was being hyperbolic there.

• 19:08Shaan Puri?

  It's a state of mind, baby. It's a state of mind. It's not a. So, um, yeah, let's do open source, because I was reading today, Y Combinator put out a like, request for startups. They like, kind of update this once a year. And one of the things, and one of the top requests that they had was more for-profit open source companies. And they were like, we funded GitLab, and they named like five. We funded 150 of these. And we want to do more. Like, we like this model. This is a good model. And I was reading it. And I was like, I think I, like, I know what it is, but I don't know why it's, why it's like particularly interesting, or why it's unique and special. So tell us about the open source stuff. What, what is intriguing to you about open source?

• 19:48Speaker 02

  I believe that open source is one of the most powerful ideas of our generation. Because it gives you many freedoms. So, anyone from anywhere in the world can look at the code and learn from it. Imagine like, you know, having some of the best programmers in the world writing code, and then you, some new kid, in India or Pakistan or US, wherever you are, be able to read that code. And then, when you see something that, maybe there's an idea that you have, you want to contribute back to it, you can just write a patch and commit that patch. And then the project maintainers can say, okay, this is great. They can adapt your code and all of a sudden your code is now being used on millions of websites.

• 20:31Shaan Puri?

  Can you explain, because this is a kind of counterintuitive idea, right? Like, normal business would be, it's our product, we hire people, they build the product. We would never want others to see our secret sauce, our code, or be able to use it or fork it, which it means is basically remix it for themselves. And so like, I don't know, is there anything interesting about the origins of this? Like, when it came out, was this a controversial idea? Because it, to me, it's pretty anti the way you would normally build a business. Can you paint that picture, kind of from first principles? And why would anyone want to contribute?

• 21:01Speaker 02

  So, well, one, it's this very, very controversial in the beginning, right? It was copy left. You have copyright and this is copy left. Like, hey, everything we're building is for the good of society, for progressing technology, for innovation. So there's a lot of people that get behind that vision. The freedoms that it offers in countries, like, a lot of people can't afford some of the more expensive enterprise software. Maybe they're in Pakistan, or maybe they're in Africa somewhere, where they don't have the resources to have those kind of tools to build their business. And now you have this open source platform. Let's say WordPress. It gives you the freedom to publish anywhere. Maybe there's censorship happening on any other social media platform or publishing platform.

• 21:46Speaker 02

  And you can self-host your own WordPress site and, you know, put your take out there. So that vision becomes really, really important. I think when you look at long term, anybody can write code, you can hire developers anywhere. So most markets will get competitive and your vision becomes a USP. Okay? And that's what open source brings to the table. And it's going to disrupt basically every established market that exists. And there are startups that are coming out. I was looking at this guy, I talked to this guy named Joseph, he runs OSS Capital. And he's deep into the open source community, he's looking at, you know, various GitHub projects. And he has a pretty cool method, right?

• 22:31Speaker 02

  He sourced them by The number of stars, that means how many developers are really liking that code. And then he gets behind them. So one of the things that he invested in was at Flowy, which is a Notion competitor, but open source and affordable. So now I can make my own Notion and use it. Maybe I can self-host it and significantly reduce costs in my business.

• 22:50Shaan Puri?

  Let's do some examples. So there's Windows, the operating system, then you had Linux, the the open sourced counterpart and Linux is like a, what, like 20 billion or something like that. It's like a big, very big, like kind of enterprise and they make their money off just the services, right? Cause the product is free. That's kind of the whole point of open sources. You could just use a self-hosted for free. But if you want the like, is that all that they do with Red Hat? Is it just services that generates so much revenue?

• 23:16Speaker 02

  Services, add-ons, you know, premium versions of that. So like NGINX, for example, there's a free version of NGINX and then there's the pro version of NGINX, which gives you a lot more features, et cetera. To save you time and convenience. Same thing in WordPress. The core of WordPress is free and does many, many things. And there's, then there's plugins and many of the plugins are free, which give you a lot of cool things. But then if you want more convenience, you pay for additional updates and support.

• 23:41Shaan Puri?

  So you have WordPress, which is the free, you know, open source publisher. I don't even know what the closed source version of WordPress is. Maybe it's just social media. But then you have like Android, open source, iOS, the Apple, you know, operating system, closed source. There's always this kind of like dual winner. And, and so people have this strategy of just like X, but open source, like Slack, but open source, Notion, but open source. Is that generally like a good, like I like blueprints when it comes to business. Somebody told me about a blueprint. They were like just superhuman for X. The way superhuman just took one piece of work software. It was like, pay 20 bucks a month, but I'm going to make it like really slick.

• 24:22Shaan Puri?

  And like incredible UX and just way better design. And like linear was a good example of that. Linear was basically superhuman for Jira, for the ticketing system. And it worked. It's like a very successful company. Is a blueprint, is a successful blueprint in your mind, like popular thing, but open source? Does that work?

• 24:39Speaker 02

  Absolutely. I think you take something that has a large TAM. Uh, and then you make open source version out of it that is cost effective, affordable. And now you grow with the community over long term. Like, I don't think anybody could build what WordPress did as a proprietary software. But the reason why WordPress was so successful was because all the other website building platforms uh, or all other hosting companies, as you say, that didn't want to have their own website builder, they started contributing to it. So GoDaddy, instead of building their own website builder, I mean, they have one, but they went in WordPress and started contributing to WordPress. Uh, and, and, and many other hosting companies did too. So Shopify, which is essentially a hosting company, uh, same thing with Wix, at the core of it, they're hosting.

• 25:24Speaker 02

  Um, they have their own proprietary platforms versus WordPress is built by and built on top of by many, many, many other hosting companies and this sheer number of contributors are a lot. And you, you see the same thing um, in, in Chrome as well and, and others.

• 25:40Sam Parr?

  But can't you say that, okay, so WordPress powers how much, thirty five percent of the internet?

• 25:46Speaker 02

  Probably a little more, like forty percent.

• 25:48Sam Parr?

  Okay, so forty percent. Okay, so Shopify has a hu- today, they're worth a hundred billion dollars. I don't know what WordPress is worth. I don't know what their revenue is because they're a privately held company. But for controlling thirty or forty percent of the internet, you, you should be making many tens of billions of dollars a year in revenue. Do you think WordPress is over a billion in revenue? I would think no.

• 26:08Speaker 02

  So I think when you think about WordPress, WordPress is a community project. And there is a proprietary company that the founder of WordPress, uh, Matt Moll, like started called Automatic. Automatic has good sized revenues. They're a private company, so I don't know what, what those revenues are. Um, but I, it would be fair to say that's not as high as, as Shopify. But when you look at the collective ecosystem of WordPress and all the companies that are in it, um, you take GoDaddy, how big is GoDaddy? You take many, many, many other hosting companies or WP Engine and so on, and you put collectively together. I would say that the market cap will be bigger.

• 26:44Shaan Puri?

  Yeah, Auto- so Automatic was valued at three billion and it was valued at seven billion at some point in its private. These are, I don't know if this is rumors or confirmed, but it's like published in a bunch of different places. And so that's what the Automatic is kind of the, the. Uh, the company that like kind of, I don't, what would you call it? The steward of the open source program or the open source project? I'm not sure what you would call it. They're essentially the red hat. What red hat was for Linux? Automatic is that for WordPress, right?

• 27:09Speaker 02

  They have the same founders, yes.

• 27:11Shaan Puri?

  Yeah. And plus Sam, you, you get all the developer street cred, bro. Like, I mean, Matt Mullin, like that guy's

• 27:17Speaker 02

  Right.

• 27:17Shaan Puri?

  He, he's a made man. He's untouchable.

• 27:20Sam Parr?

  There's no doubt that it's awesome. I think actually, when I think of like internet heroes, I think Matt Mullin is, is, is up there. I actually use WordPress. So check this out. Let me explain the difference in business models. I used WordPress for the hustle. The hustle ended up being worth tens of millions of dollars. It reaches hundreds of millions of people. Uh, and we are small compared to many of the others on WordPress, you know? So I know I had a friend that had a WordPress site that was doing a hundred million monthly uniques. Um, and so there's no doubt that it's the best, but look, check this out. I bought WordPress's software called Woo Commerce. Woo Commerce was, uh, $300 a year. I had a business on there that was doing five million a year in recurring revenue, and I paid them $300 every single year. If this were Shopify or something else, I would have been paying them, I believe 50 thou-

• 28:04Sam Parr?

  I think it's a 10% or 5%. So I'd been paying them 25 to 50 grand a year. And I was like, this is a fucking steal. I'm stealing from these guys. And I, I was like, I don't understand this business. I'm getting all of the value and they're getting virtually none.

• 28:18Speaker 02

  Well, I think the value is disproportionately favored in, in, in, for the consumer. And that's what you want in a business, right? You want your users to have disproportional value, uh, coming from you. And I think like, if, but when you look at products, and this happens when you're studying long-term, then your product can't be 10x better in a specific space. Uh, it, it, it really becomes all about the brand, uh, and the value that you're delivering when customers aren't using your product like actively. So having that value being so disproportional makes your business far more stickier, uh, than your competitor who might be charging an arm around like.

• 29:00Shaan Puri?

  I have a bad idea for you, Said. So where, where else have we seen this where, oh, the customer's just getting an incredible deal? Uh, one idea that comes to mind is Costco. And Costco is basically like, hey, we'll sell you the goods at cost plus 10%. And that's just going to cover the kind of the carrying cost of putting these items on the shelf. So like if whatever that bag of rice actually costs, it's that plus 10%, that's the, that's always the price. And we're going to negotiate the shit out of these vendors, by the way, to get the lowest possible version of that price. And we're going to use our scale to do that. And all you gotta do is pay us $120 a year. It's like $120, I'm saving that in one grocery trip, two grocery trips, this is a no brainer. And they've built a like, you know, huge subscription business off this. Do you think somebody could do that in the software world?

• 29:43Shaan Puri?

  Cause I've, I've seen a couple of examples of this where I bought this um, screenshotting tool that's really good. It's called Cleanshot X and uh, free, free shout out for those guys. They uh, so it's really good like screenshot tool. But one of the ways you can buy it is off some, some service that like, it's like, it has all the random software tools. Put there on the shelf, like a, like a Costco or like an Amazon for random software tools. And it's usually at a lower price than if you go buy direct than on the site. And I think it's if you have, if you have a membership to the overall thing, then you can just get these tools for free. I kind of wonder if somebody could do this with the open source community and just say, all right, pay us $1,000 a year and then you're going to get, you know, Woo Commerce, you're getting all these things at the lowest possible price.

• 30:27Shaan Puri?

  So you're just going to get, go, go round up all of the software and say, hey, you're going to be selling at cost plus 10% and we're going to have this uh,

• 30:37Shaan Puri?

  you know, the subscription revenue to, for our members who want to shop there. Is that a, how bad, how bad, on a scale of one to terrible, what, where is that idea?

• 30:44Speaker 02

  Two sided marketplaces are generally a tough business to, to build. So there are challenges and, there are challenges in, in the model. But uh, but you know, you could, you can try it. And I think there, there are companies doing it. I think if you focus it on us, maybe a subset, let's say um, agencies. And you say, hey, development agencies, we can get you access to these offers uh, at a lower price, probably. That's where I would start and then you try to make it broader versus saying we have every software under the sun. Because you have to do some backend integration of SDKs. A lot of indie software don't have the ability to have reseller models and versus like, hey, here's, here's my thing. Take the payment, give me money in the backend.

• 31:26Speaker 02

  That's generally not how software provisioning works, but there's a little bit more nuance there than what Costco has.

• 31:33Sam Parr?

  So what is this OSS capital doing? They basically, you said they go through GitHub projects and they look at like which things have like some combination of engaged users, large TAM. And what do they do? They invest in them or they add, they build products for them?

• 31:46Speaker 02

  They're, they're investing in them. And I think they're investing in.

• 31:50Shaan Puri?

  The open source community, he's like, what? They just give them hugs and shit? What? Where's the money of this whole business? What's going on?

• 31:56Sam Parr?

  They invested five high fives?

• 31:58Speaker 02

  No, I, no, actually they're, they're investing capital in, in those businesses and helping them come into market. Like, I mean, if you look at GitLab, for example, it's like 11 billion dollar market cap right now. So like AppFlowy going after the Notion market or like Cal.com going after the scheduling market. I think we're going to see many of these established companies that might be unicorns right now in the project management spaces and such, get disrupted by an open source solution. And then what's going to happen is like you and I can take AppFlowy and say, we're making Notion for doctors. And we can take the code, fork it, make it better, and then contribute back to it because the way the licensing is done.

• 32:42Speaker 02

  So there will be flavors of these open source software that, that will get created, like there are flavors of WordPress that are created. And that's what makes it so disruptive. Because like a doctor who might be using Notion will say, well, I want to go use this tool because it does like the extra 5% that Notion won't do.

• 32:58Sam Parr?

  Well, which categories and products do you think? You think this model would work for? Where you're like, you see a particular product category, you say, if we, if we did, if we attacked that category with the open source blueprint or framework, I think that could be a winning combination.

• 33:13Speaker 02

  I think.

• 33:15Speaker 02

  Open source CRM that does a well, good enough job will be, will be quite disruptive.

• 33:21Shaan Puri?

  Perfect segue to our sponsor. Play the ad, baby.

• 33:26Speaker 02

  But I think you, you, you take, you take any, you know, large TAM market and software and you add open source component to it.

• 33:35Shaan Puri?

  Like Sam Dido Stability AI, they're basically OpenAI, but open source. They're the ones who make stable diffusion. Right? How big are they? They're multi-billion already. My business, AI hype cycle, they're, they're very big, right? But, but people actually use, you know, stable diffusion a lot, right? It's like a, it's a big project. We invested, I think, Sam, you invested with me, right? And Cal.com, which is like the Cal and, Cal and Lee, but open source competitor. Cause Cal and Lee is like really expensive and the Cal.com guys have done a good job of building the open source version of that. I really like this thesis. In fact, I think this OSS capital thing is really smart. Like there's a few like strategic venture fund ideas that I really liked. This is one of them. Another one that I had heard was somebody who's just taking pro rata's.

• 34:18Shaan Puri?

  So they're like, oh, you do all the work of finding the company, you know, 30% of them are going to die or whatever before they raise their next round. But of the ones that raise their next round, you have pro rata, you could top up and keep your percentage, but most investors don't want to do it or don't have the capital to do it. So these guys are just pro rata and that's pretty smart. I think there's a few like, like strategic venture funds. One I really wanted to do was just a flipper. So you basically, you would say, hey, I want to invest, but I'll be out when you raise your series A. I'm going to do, I'm really helpful in this zero to one, but as soon as you get to your series A, I'm out. Because a normal venture fund is like seven to 10 years and you're hoping for this like thousand X outcome. But the seed to series A valuation lift is like three X and it's usually in 12 to 18 months. And so if you could just

• 35:03Shaan Puri?

  pick well of like what seed startups are most likely to get to a series A. Or you're just in an environment where a lot of companies are able to raise their next round, you can flip and for the founder, it's great because you're like, cool, I could take this capital today, but it's actually non-dilutive. Like they're going to be out by the next round and that same, those same shares go to the next investor. So it's actually less dilutive than normal capital.

• 35:23Sam Parr?

  But wouldn't you be accused of like a pump and dump?

• 35:26Speaker 02

  Well, you're not pumping it though.

• 35:28Shaan Puri?

  Like when somebody buys a home and, and then sells it a year later, is that a pump and dump? Like, no.

• 35:34Sam Parr?

  Well, no, because, well, I would argue a, a, a home has like realized value, which is.

• 35:40Shaan Puri?

  But that's what happens with a, from a seed startup, when you invest or pre-seed startup, 18 months later, they've now built a product, they have customers, they have some traction, they, their story is so much better, right? Like they are a de-risk startup in some way if they're able to raise.

• 35:53Sam Parr?

  Theoretically, but not always.

• 35:55Shaan Puri?

  Usually.

• 35:55Speaker 02

  You're right. You're right. But, but the risk goes a little bit lower. And you, you were in the, you entered the riskiest stage at seed. So.

• 36:04Shaan Puri?

  The problem is it's just like a faux pas. Like startup investing is supposed to be this like true believers. I, I was in and I'm here for the long haul and like you're going to change the world. Whereas when you sell at the series A, you're like, oh, you might change the world, but probably not. All I know is you changed my bank account, you know, by three X if I, if I sold this right. And so I think that's the problem is it's so like, it's an anti-signal. Like nobody wants to see that your first investor wants out right away. It's such a bad signal. So you would have to first build your brand of this is what we do. It's not like for any company, we do this. It doesn't mean anything about them. We do this with every company we invest in. And you'd have to frame it not as like a quick flip because that sounds like self-serving. You'd have to phrase it

• 36:48Shaan Puri?

  as like non-dilutive. It's like, we're the early stage guys. We're really helpful early. We don't know anything after that. And like, we want you to not dilute yourself so much to take our capital because we're going to basically give you back those shares to sell to the next guy rather than just losing more and more equity as you go.

• 37:04Speaker 02

  Yes, still very, very high risk. You have to be a very good picker and say, yes, this is going to go from C to A.

• 37:12Shaan Puri?

  But like I looked at my portfolio. So I looked at like 100 companies. I don't remember the exact numbers off the top of my head, but basically it was like out of 100 angel investments that I did. Then I looked at what percentage of them raised the next round and what was the average multiple of the companies that raised the next round. You just multiply those together and it'll tell you like what's your expected value. And the math math when I did it last time, which was basically that enough companies raised the next round at enough of a multiple where you would be getting a good return. I think it was like 30%. I was, the math was basically that I would be making 30% on my money, which was fantastic and better than almost every venture fund out there. But I didn't, I didn't actually do that strategy because I thought of it later and also it's really hard to get around that perception problem.

• 37:57Shaan Puri?

  I thought of it when one of my pre-seed companies raised a series A and I was like, this company's not going to work. I wish I could just sell right now.

• 38:05Speaker 02

  Bro, that's, you're proving my point. You're, you've just proven my point.

• 38:11Shaan Puri?

  There's no point. No, that proves my point that you could, you could.

• 38:14Speaker 02

  Well, you're not pumping, you are dumping though.

• 38:16Shaan Puri?

  Yeah, you're dumping. Yeah, exactly.

• 38:17Speaker 02

  Yeah. That's what you should, that's what you should call it. Your dumping schemes.

• 38:21Shaan Puri?

  Speaking of numbers, I tweeted this out this morning. I want, I'm curious what you guys will guess. So I asked a question. I'll tell you, I guess I'll give you the background. So I was talking to, I heard this like coach, like a exec coach or whatever. And I was telling him, I was like, yeah, I'm trying to do, he's like, what are your goals for the year? So I was like, yeah, I'm trying to do this, this and this. And one of the things I said, I was like, yeah, if I sell this business, I think I'll make, and I don't know what I said. I was like, I think I could make 20 million bucks. And I was like, and I was like, that'd be great because then

• 38:46Shaan Puri?

  paused, I was like, I was like, I don't actually, I have no idea. Well, I have no idea what will change. And I was like, I was like, cause no, it'll be cool. Cause then I can, then my life will be better because I'll. Uh, what will change? And I was like, wait, what am I doing? What is there any benefit to incremental? And so I, I started thinking about this. I was like, I do want this. However, I do think it's a little silly that I can't point to maybe an area of life that I want to improve using the money. Money's a tool. I believe that, but I have no idea what I'm going to use this tool for. I'm just going to Home Depot, trying to get a tool. And it's like, what do you need this drill for? And I'm like, I have no idea. Well, that was a little silly. So I tweeted out a question today. I said, how much money do you think

• 39:30Shaan Puri?

  you need to live your desired lifestyle? Cause I think I'm very close to just living the exact desired lifestyle I have. I don't really have any more like desires of what I want to change. So what is money good for in that sense? And so I asked people, I said, zero to one million, one to 10 million, 10 to 50, or more than 50, 50 plus. And I said, how much money do you think you need in your bank account in order to be living your desired lifestyle? One of the answers got 47 or 48%. Which one do you think it is, Said? And what's your answer? Yeah.

• 39:59Speaker 02

  Well, I think if you're, if you're looking at between those four choices, most people probably said 10 to 50.

• 40:06Shaan Puri?

  That's what I would have guessed.

• 40:08Speaker 02

  Okay.

• 40:08Shaan Puri?

  That's what I would have said myself also. I think that's like the, like, kind of my, my, nothing is not utopia where somebody's feeding me grapes and shit like that. But like, what I actually want, what I actually care about, I think is totally achievable in that range. So do you, uh, and so Sam's question was a good one. What, what would your answer be? Like you've surpassed all these. Great. What, what, but what do you think actually made a difference in your lifestyle where you're like, oh, I now have the money to live the lifestyle I want. I call it the threshold number.

• 40:37Speaker 02

  You know, I have a very simple life. I don't, I don't have these crazy desires of wearing the fanciest clothes or any of those things. Um, for me, the, the $10 million number was more than enough, to have a good life. Um, you know, I do what I do because I enjoy it. What would, I want to be a productive member of society and this is fun for me. But you know, people might say their number is more.

• 41:04Shaan Puri?

  Do you think anything changes? Uh, like maybe like as you go, as you go up? What gets unlocked at those levels of the game? The only ones I could think of, I'll just give you my answer. So I was like, I think if you go above 50 or go above 100, you know, private travel is like, you know, the big unlock where you know, you don't have to think, you just fly private everywhere, do all that. I think that's the biggest one. And the second one is if, if you really care about you being the one to give to charitable causes, I think that's the other thing that you could do is you could make large charitable donations. I don't really know what else gets unlocked past that. But you know, you might have other ideas. Am I missing anything? What gets unlocked over 50?

• 41:41Speaker 02

  I think it's, it's just the level of convenience that you get. Whether it is, and whether it is through private travel, whether it is through private help at home and so on. And then the level of that that you can, you know, access just, just get elevated. Also.

• 42:03Sam Parr?

  Do you think there's a difference between 50 and 500? Like, is there like a number where you think the level of convenience is mostly quite similar? Like, is it more convenient to have a significantly larger plane than a smaller private plane?

• 42:17Speaker 02

  Yeah, I mean, it makes a difference on how far you're trying to go.

• 42:22Shaan Puri?

  The poor rich guy in his small plane just puttering out and couldn't make it across the Atlantic.

• 42:27Speaker 02

  I mean, yeah, like, you know, you can spend any amount of money that you want. If you have money, you can spend it. Do you really need it? I don't know. And that's that based on each person. But even if you look at Taylor Swift, right? She had to take, she took a private jet, but it was not hers. Like she contracted a service to fly from Japan or wherever she was to Superbowl because her own jet can't fly that far.

• 42:52Shaan Puri?

  Right.

• 42:53Speaker 02

  Now, does that mean that she, she can't afford a bigger jet? No, I'm pretty sure she can. But it just doesn't make financial sense for her. To maybe have a global 8,000 or something like this.

• 43:03Sam Parr?

  What was your number, Sean?

• 43:04Shaan Puri?

  Mine was in the 10 to 50. I thought 10 to 50, like that's, that is, past that is, there's very few things that are as appealing or just like big diminishing returns. But this is my perspective today. My, my number, my perspective 10 years ago would have been 1 to 10. You know, I would have been like, oh, 10, past 10, what does it matter? And now past 10, you're like, that kind of matters. And maybe that same thing happens again. I'm not sure. That's why I kind of like I say, I want to ask other people's opinions.

• 43:33Shaan Puri?

  Because again, I think A, it doesn't get talked out, talked about much. But clearly we're all acting on it. Everybody who's listening to this podcast, everybody on Twitter, you're all playing a money game and you're spending a huge portion of your life earning, earning money. And it is probably worth knowing what's, where does money really improve the quality of your life? And what are those thresholds where, and what are the things you can unlock? And so you could decide for yourself if it's really worth devoting this much energy and this much time to accumulating more.

• 44:03Sam Parr?

  I think 10, 10 gives you a, a base. You, you've got your fortress of solitude. 10 is enough that you could tell most people to fuck off because you don't need much from anyone. I actually still think you can lose 10 if you make a handful of bad investments.

• 44:19Sam Parr?

  What, Syed, you're going to look at me stupid because I?

• 44:22Shaan Puri?

  Lose a hundred if you make a handful of bad investments. There's no, no, no number you can't lose.

• 44:26Sam Parr?

  That's true. And I think, I think a threshold is 10. I think another threshold is 50. That, that's my current thinking.

• 44:33Shaan Puri?

  What do you think happens at 50? What's the difference?

• 44:35Sam Parr?

  I think at 50, you can fly private safely. Like with that, like it's no big deal. You can fly private most every time you want.

• 44:43Shaan Puri?

  And that, and that's the only difference?

• 44:46Sam Parr?

  Well, you could have a, you know, at, with $10 million liquid, I wouldn't buy a $5 million house.

• 44:52Shaan Puri?

  A certain number, your nanny speaks Spanish. At a next number, she speaks English and Spanish. Next number, she speaks English, Spanish and French, right? That's what else changes?

• 45:01Sam Parr?

  But like Sean, where you, where you live, you live in one of the most expensive, like 50 mile radius parts of the world.

• 45:08Sam Parr?

  Like a really sick house is probably $6 million, right?

• 45:11Shaan Puri?

  Yeah.

• 45:12Sam Parr?

  You're not going to buy that if you're worth 10, but you would buy that if you're worth 30 probably, right?

• 45:17Shaan Puri?

  Challenge accepted.

• 45:19Shaan Puri?

  Tell me I won't do something, I will.

• 45:22Speaker 02

  But you know, no matter how big your house is, you can, you will only ever be sitting in one seat at a time. So it's important to have like perspective to not let the, let the goalposts keep moving, you know, forward and then for what? Like, I mean, there's a house here that's $170 million for sale, like, you know, not too far away from.

• 45:42Shaan Puri?

  Somebody who was at the camp with us, I won't say their name, but they, uh, they have a like a probably like a 15, 20 million dollar home. And they called me yesterday and they were talking and they were like, oh, sorry. I've been like, cause I called them. They were like, oh, sorry. I've been house hunting all day. A house hunting, you just bought like your dream home last year. And you told me like, we went crazy on this house because it's our dream home and it's, it's, it's what we've been working for all these years. Why we, we made all this money. And then they were like, he's like, God, he's like, yeah, but he's like, our HVAC broke. And then he's like, he's like, you know, that's 50, his 50 grand to fix that. He's like, my, the guy fits our, fix our AC. He's got like engineering degrees. I pay, pay two grand a month to our, our pool guy. Our pool guys make it two grand a month. He's like, and another four grand for landscaping. He's like, it's just annoying. He's like, everything that's,

• 46:27Shaan Puri?

  it's all my problem. He's like, he's like, yeah, it's great when we entertain people, but most of the time I'd be like, you said, I'm just sitting in one chair. I'm sitting in the same chair and I have whatever 10,000 extra square feet or 20,000 extra square feet of like, empty house. And so it was just like such a visceral reminder of the, like the age old wisdom of like, first you own your things and then they own you. And it was like, he was just explaining all the ways that his thing now owned him. And he had this like reaction where he's like, I gotta change this because like, this is not my dream. Actually, I thought this was my dream. It is not my dream actually, because I don't want to be owned by this. Where now my monthly nut is so high, I have to stress about, you know, about all these things, or when things break, it's such a colossal break. I feel so

• 47:10Shaan Puri?

  wasteful, you know, that I'm spending this much just fixing our whatever pool or whatever it is, when in reality that money could, like, I remember what that money could do for me. I used to live a whole year off that money. And now it's just, you know, going to, to one little thing. How many square feet was this place? I don't know. It's probably like 15,000 square feet or something like that.

• 47:28Sam Parr?

  That's fucking insane. That is so insane, isn't it?

• 47:31Shaan Puri?

  I'd guess. It's more than 10, less than 20, I think.

• 47:34Sam Parr?

  Dude, that's like, you need, that's a commercial property, basically. You need like a property manager. That's insane.

• 47:40Speaker 02

  I think it's important. One of the things that a lot of people don't think about is the holding cost of anything that you're, that you're acquiring. Uh, whether it's a property or a business or what, you know, understanding the holding cost, the real holding cost, uh, may help you not make certain decisions.

• 47:57Shaan Puri?

  There's other, there's other hidden costs too, right? Holding cost is one. Opportunity cost is another that people usually discount. There's a great tweet that was going viral. I don't know if you saw it yesterday, but the guy said, he goes, he goes, I think making between 150 and 250K is the worst. It's like, what? He's like, is they say it's the worst? Cause it's too much money to just say, fuck it. I'm just going to go do this thing I really want. So it's like too much money to walk away from, but it's not enough to ever like, actually get escape velocity financially. Cause you're paying like a huge amount of taxes and then you probably live in a, your lifestyle creeps up. And so, and I, and I saw, like, I see this so often, which is that there's some range. I don't know what the, the, the numbers depend on where you live and what industry you're in, but

• 48:37Shaan Puri?

  something like 200 grand to 500 grand is like, the, it's, that's the real golden handcuffs. And that's the real like, danger zone. That doesn't sound like a danger zone. It's a hit, but it's a hidden danger usually. Cause if you're making that much, you're probably very talented. However, it is so hard to walk away from that amount of money. If you, once you get to that, and take a risk, maybe start a business or take another job that might, give you all kinds of other things, but maybe have less certainty or less annual guaranteed pay. Uh, and I could see that tweet going viral because I think it resonated with so many people. The guy had like no followers, but the tweet had like 20,000 likes.

• 49:11Speaker 02

  You know, uh, I mean, it also depends on your personality. My uncle moved to US 40 years ago. He's a teacher. Um, and you know, teachers in America don't make a lot of money, but he's still retired a millionaire. So I think it's all about how you invest that and yeah, I'm compounding.

• 49:27Sam Parr?

  I think that tweet is really fucking stupid. Um,

• 49:30Shaan Puri?

  Why do you think?

• 49:31Sam Parr?

  I think that if you make $250,000 a year, you can live. A very rich life. Um, I think that you could have a beautiful, rich life. I think you can retire by a certain age. I think, I think that that is an out of touch tweet. I think that tweet is true. If your goal is to make tens of millions of dollars or be your own boss at a young age.

• 49:52Shaan Puri?

  I think it's, I think it's true for the people it's true for, right? Which is if you want to be an entrepreneur. Or you want to be financially free and not have to trade your time for, for a salary, right?

• 50:04Sam Parr?

  No, you can be financially free on two fifty a year.

• 50:06Shaan Puri?

  If you're sixty.

• 50:09Shaan Puri?

  And I don't know. I live in California. I'm using California as my frame of reference here.

• 50:14Sam Parr?

  Then yeah, where you live definitely changes things and what your burn is.

• 50:18Shaan Puri?

  New York, California, like a lot of places, like stuff, I don't know, like. What's the amount of money you need? Even if you're living in Texas, like, what do you think is the real amount of money? You make two fifty a year. And then you have taxes. So you're taking home, I don't know what the math is, but like something like one seventy five or one eighty, something like that. And then you pay for life and you might be stashing away a hundred K a year.

• 50:40Shaan Puri?

  How many years do you have to stash away a hundred K in order to like? Be financially, be financially free. It takes a decade plus.

• 50:47Sam Parr?

  Yeah, a decade, a decade.

• 50:48Shaan Puri?

  Right. And even to get to two fifty, that takes you usually seven to 10 years to get to making that much, right? Seven years to get to that, that salary threshold too, right? So now you're seventeen to twenty years in. That's a lot. That's a long time.

• 51:01Sam Parr?

  Sid, what are you gonna say? You don't like what Sean's saying right now. I can tell.

• 51:05Speaker 02

  I think it's.

• 51:08Speaker 02

  There's, there's certain, something about the guaranteed payment and it really depends on your personality. Like the folks that are going to become an entrepreneur, they don't need to walk away from two fifty. A lot of times, like, I mean, when I started, I had nothing. No salary, right? Um, so a lot of folks start out and they don't have a salary and they, they just kind of go and pursue it. If you, if that's what you want to do, you go do it. You have, you have to have conviction. And I think that's, that's key to the success anyways. Um, especially as an entrepreneur.

• 51:34Shaan Puri?

  I'll clarify one thing. I'm not giving advice to other people for what they should do or what the average person should do. I'm saying. From my perspective of what I would want in my life, which is the only thing I can really speak on is the things that I know about myself. Right. And I know that most of the people who listen to this podcast are going to be people who are like minded. Otherwise, how did you get to episode five hundred? If you weren't into entrepreneurship or you weren't like minded in, in, in some way with, with our ethos. And for people in our world, I think then it's a valuable message, right? Like. Um, I, I think there's a lot. I know I have a lot of friends personally who are in this situation. I know what they actually want out of life. I know where they, where they live and the lifestyle they desire. And for them, that is a very dangerous thing. Of course, to, if I'm just speaking generically, that advice totally doesn't apply.

• 52:16Shaan Puri?

  It's totally out of touch and it's, it's a total overkill. I get that.

• 52:20Sam Parr?

  I think that's fair. I, I wanted to give you an alley, I wanted to give you an alley-oop.

• 52:25Shaan Puri?

  It's like I shot myself in the foot and then I put a Band-Aid on at the very end. So it's all good.

• 52:32Sam Parr?

  Where do we want to go from here?

• 52:34Shaan Puri?

  Let's do a couple of other ones that you have on this doc. So you have, um, let's go to the bottom here with the strong, strong opinions or philosophies. And so you talked about acquiring a business versus paid marketing. I think this is kind of interesting. I think most people don't really think about this. I know. When I was running my company, I never thought like, hey, let me grow through acquisition. That wasn't, it wasn't on my radar. What's your point here? What do you, what do you, what do you think is the takeaway?

• 52:59Speaker 02

  I think, uh, when, when you think about growing a subscription business, there's only three ways to grow it. You get new customers, you expand existing customers, you reduce churn. And in the new customer bucket, most of the people are always looking at PPC and especially a certain scale, you might be spending a lot of money in PPC.

• 53:16Sam Parr?

  Pay per click?

• 53:18Speaker 02

  Pay per click, exactly. Pay per click advertising. Um, and your CAC might be high, especially in a very, very competitive market. In that sense, it makes sense to just go pay a revenue multiplier to buy a business that has the customers that you, that you're targeting anyways. And then cross-sell. Um, and I would say that that's, that's something that more CEOs need to think about, um, when they're thinking about growth.

• 53:44Sam Parr?

  You know, who knows about this?

• 53:47Sam Parr?

  Ya boi. I sold the hustle to HubSpot because I actually didn't know about this. They knew about it.

• 53:52Shaan Puri?

  What are you talking about?

• 53:54Sam Parr?

  They made the right. I know about it in that I know a guy. I know a guy. I know a guy who did this and they bought my business. That was the whole point of HubSpot. That was the whole point of this podcast. Now, I don't have too much information. I haven't been part of it forever, but I think it's working. So are you talking about buying other like products or like content sites?

• 54:14Speaker 02

  Anything and everything. I was looking at this publicly traded company and where I was looking to potentially establish a sizable stake. And their revenues were growing steadily, but not exponentially because they couldn't compete with the larger competitors.

• 54:31Speaker 02

  But the reseller side of their business was great. One of their resellers were actually making more money than this company was.

• 54:38Sam Parr?

  What's a reseller? Like, could you give an example that isn't related to this company?

• 54:42Speaker 02

  Sure. So like I could, for example, resell HubSpot or any other, you know, hosting. I can be a hosting reseller. I can make my own hosting company selling Amazon. I can be Amazon reseller and so on. So for this business, they basically just acquired one of their resellers and boosted their revenue. It's just like the same customer that they had and bringing it in. I wanted to work with the management and just kind of fund their acquisition of the reseller because the margins, if it was in-house, we much, much better.

• 55:14Shaan Puri?

  How can a reseller make more than the main thing if you're just reselling and then presumably giving a cut back to the mothership? How does the reseller ever make more money?

• 55:21Speaker 02

  No, it all depends on the pricing and how you're licensing and what you're charging on your end.

• 55:26Shaan Puri?

  Okay.

• 55:27Speaker 02

  So like, let's say we both could be drop shipping the same thing and I could charge like five times premium because I know how to market better. And you're charging only 2X.

• 55:37Shaan Puri?

  Okay.

• 55:37Speaker 02

  Right? So, but that's just one example that you can, you can look into your own ecosystem, start acquiring your resellers and bring that customer in-house. But also what HubSpot did with the content site makes total sense. What was Zendesk just recently did with Klaus makes total sense and so on. So I think that when you're looking at, you know, acquisition and growth, like, you know, I'm talking about acquisition from like new customer acquisition. Think about M and A as a viable option, especially when your PPC budget is, is high.

• 56:16Sam Parr?

  Could your WordPress empire have existed without you owning WP Beginner?

• 56:21Sam Parr?

  So WP Beginner for the listeners, by the way, it's like a blog. If you Google how to set up an email service on WordPress, WP Beginner, which Cyad owns, always shows up number one. So would your empire have existed without WP Beginner?

• 56:33Speaker 02

  Well, no, the answer is no, but for many reasons, no. I think you can't build solutions to solve problem that you don't fully understand. And for me to be able to build the best solution in the market, I had to communicate with the audience. I had to understand their pain points. And that, I believe, was our biggest advantage. Of course, the marketing and having the audience is very important, too. Very, very important. But I think that understanding of the pain point is crucial. Like, for example, in talking to their customers and also my various company founders and GMs, I realized that we were not happy with the Helpdesk software.

• 57:14Speaker 02

  So we went and acquired a stake in Groove, right? Which is a Helpdesk software that will drastically reduce cost for anybody who's using Zendesk or anybody using Helpscout. But now I know that, like, certain customers that are using Groove may also want our other solutions. And I know that many of our customers and agencies and so on, they're all using a Helpdesk software. So I can cross-promote Groove to them and say, hey, if you switch from Zendesk or whatever, you'll save 40%. If you're an agency, you're using Front for your communication, switch here and you'll save 80%. So that level of synergy gets unlocked and can be quite lucrative.

• 57:59Shaan Puri?

  Can we finish with these two, like, life lesson type things? I think they're both good. I know we're on time, but I want to do it anyways. Compounding goodwill is the best form of compounding. What do you mean by that?

• 58:10Speaker 02

  I think too many times we are very transactional in the relationships that we're in. You know, we're doing something nice and saying, hey, do something back in return for me. I think just giving with no expectation return. A lot of us are very smart. And sometimes in that we can be kind of, you know, a holy, you know, and not so nice. So I think intellect is a gift and kindness is a choice. And if we choose to be kind, over long term, this, this comes back multi, multi, multi folds. So not letting your ego or the keyboard warrior get to you and, and you know, I'm smarter than you. You're a hundred percent wrong. Yeah. Just, just going along and trying to help out wherever you can.

• 58:55Shaan Puri?

  Even if you feel like you're in the right, sometimes it's better to just be kind anyways.

• 58:59Speaker 02

  Yes.

• 59:00Shaan Puri?

  You know, sometimes I get stuck on that where I'm like, this is, but this is right. That's what we said. And actually it doesn't matter what we said. I suggest in that moment, it's, it matters more to them than it does to me to just let it, to just be kind and it's go their way rather than, than mine. I've learned that lesson the hard way a couple of times.

• 59:16Speaker 02

  Absolutely.

• 59:17Shaan Puri?

  You wrote this guy's name, Guy Spier. I've seen this guy around, but I don't know him. Who is this guy? He's got something special. He hosts some conference thing, right? That people really like. Who is this guy? Why is he the example of that?

• 59:28Speaker 02

  Yeah. So he, he's a really good friend now. And we're in a forum together. So he, his conference is called Value X, very well-known value investor. Has a book as well. And you know, he talks about compounding goodwill. In his book, uh, and then intelligent investor, uh, education of value investor, actually. And I'm always really, really amazed by his level of generosity. The amount of like, hey, you need this, let me just connect you with X and Y and Z. And long-term, what he's been able to do is build this amazing network of super duper talented people. That like, you know, if he rings, they'll pick up and help out whatever and nothing, nothing in returns.

• 1:00:12Speaker 02

  I think he is an amazing example. And I learned a ton from him, even, you know, we were in Chicago a couple of months ago. And he gave me an idea to acquire like the very cool deal idea. Of doing acquisitions and then.

• 1:00:29Speaker 02

  Long story short, I was able to actually use it. A deal came and I used that exact tactic to make a, make a purchase in a very tax efficient way. So I think his ability to just, you know, do that is really good.

• 1:00:42Sam Parr?

  But I, you know, I don't know you that well. We're, we're friends, but we don't hang out too much. If I had to guess, I would say that you're a very shrewd negotiator. And I would say that you're probably a very disciplined and firm manager. I think you're probably quite nice, but I think that like you're a very disciplined person, which sometimes people would say, well, you're just being an asshole or something like that. You know, if you have enough employees, some of them are going to think that about you. How are you balancing being a nice person? And also like trying to get the best of a deal or uh trying to capture a little bit more value for yourself than for the other person?

• 1:01:23Speaker 02

  I think not all juice has to be squeezed if you think about value on a very long term way. So part of the discipline is to say, okay, well, we don't have to squeeze all the juice today. You know, you, that, that's the whole point about compounding goodwill. You know, if, if I acquire something from a founder um and let go of a few percentages, because that helps me have a great long-term relationship with this person. That's a worthwhile decision rather than saying, you know what, you're down and I'm gonna like, you know, kind of crush it. And that, that, that's not good for reputation long term.

• 1:02:02Sam Parr?

  But do you go into, do you go into a negotiation saying, here's my threshold of I can no longer do, or I won't do it at this number, but I will do it anything below this. And then you go with like a number and you leave room for that negotiation or for that threshold. And then you just don't ever cross that particular number like.

• 1:02:19Shaan Puri?

  He's talking about goodwill and you're like super calculating about it.

• 1:02:24Shaan Puri?

  Like a trick.

• 1:02:25Sam Parr?

  Well, because I know, I know that he's a value investor and a value investor, they like, at some point, they're like, you, you make money on the buy. You make money when you buy something at a low price. And so like, there has to be like a threshold of like, it doesn't make sense after this. And so I just can't be a nice guy anymore.

• 1:02:40Speaker 02

  Just because you're winning, it doesn't mean the other person has to lose. And I think that's a very important aspect of compounding goodwill. You know, that's also the example of like, you know, just because, you know, you're very smart. You don't have to prove the other person wrong. You can, you can agree to disagree or move on and just saying, okay, you know, this is fine. Maybe it's worthwhile considering this and, you know, letting that conversation be and going away. But of course, in business, you have to be very, very disciplined, especially as a capital allocator. And that's, that's that.

• 1:03:12Sam Parr?

  Let me tell you guys a quick story as we wrap up here. That was like the best good guy story that I heard. I heard it on another podcast, but apparently Adam Sandler, Adam Sandler was in New York. He was taking acting classes, classes. And the, the teacher was like, hey, I want to take you out for a beer. Let's talk. So the teacher takes him out and he goes, look, Adam, you don't have what it takes. And I just want you to quit doing it now because I don't want you to waste two decades. And it's just not going to go your way. I want to show you love and respect by telling you now. Obviously 10 years passed, Adam Sandler's still doing this. He's an epic star. He's at the top of his game. He's at a bar in New York. He's with his friends, he's with his buddies. He sees that professor, that teacher out. And he's, and I imagine in his head, he's thinking like, well, should I go rub it in this guy's face?

• 1:03:56Sam Parr?

  And being like, told you I win. He walks over to the guy and he brings his buddies with him. And Adam looks at his buddies, he goes, hey, I want to meet, I want you guys to meet Professor Blankety Blank. They were the only professor that was kind enough to take me out and buy me a beer. And I heard that story and I was like, that is one of the best stories I've ever heard about treating people respectfully. Even though, you know, you may be a little bit angry or you didn't like them at the time. But Sean, did you, you saw that?

• 1:04:23Shaan Puri?

  I saw that clip. I love that story. It's Brad Pitt telling the story, by the way, which just makes it even better. You did good, but Brad Pitt telling the story was a little bit better, I think, just.

• 1:04:32Sam Parr?

  Hey, no, I saw Andrew Santino say it.

• 1:04:34Shaan Puri?

  Oh, okay, maybe it was somebody else.

• 1:04:37Speaker 02

  I think Sam did an excellent job.

• 1:04:38Shaan Puri?

  Yeah, you're my Brad Pitt, Sam.

• 1:04:43Sam Parr?

  Both, both, both hot guys from Missouri. I'll take it.

• 1:04:50Sam Parr?

  Sayad, thank you very much. That's the pod.

• 1:04:52Speaker 02

  Thank you.