#1184 Nathan Barry | Future Billionaires Will Come From Social Media

Nathan Barry is the founder and CEO of ConvertKit, a leading creator marketing platform, which does over $30 million a year in revenue. In this conversation, we talk about being a billion dollar creator, building companies from scratch versus buying them, how the greatest minds on the internet have built audiences, and how they think about monetizing them over time. ======================= Pomp writes a daily letter to over 200,000+ 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://pomp.substack.com/

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

• 0:02Anthony Pompliano?

  What's up everyone? This is Anthony Pompliano. Many of you know me as Pomp. You're listening to the Pomp Podcast, which is my effort to find the most interesting people in the world and sit with them for hours while I ask questions in an effort to learn. We have no advertisers on this podcast, so it would mean the world to me if you would subscribe to the show on your favorite audio platform, watch episodes on YouTube, and tell your friends and family about the podcast. My goal is to help millions learn from the world's most interesting people. So let's get into today's episode. Nathan Barry is the founder and CEO of ConvertKit. They have built an awesome business, doing over $30 million a year in revenue, completely bootstrapped with millions of dollars in profit. In this conversation, we talk about being a billion-dollar creator,

• 0:47Anthony Pompliano?

  building companies from scratch versus buying them, how some of the greatest minds on the internet have built audiences, and how they're thinking about monetizing them over time. I always enjoy talking to Nathan, and I think you guys will really like this one. Once you get done listening, jump on Twitter and let us know what you thought. Here's my conversation with Nathan Barry.

• 1:05Speaker 01

  At Edward Jones, we believe rich is more than caring about the latest and greatest. It's also taking care of what gives your life meaning. That's why your dedicated financial advisor meets you where you are with personalized financial strategies that help protect what matters, so you can preserve your progress while creating a path forward. The key to being rich is knowing what counts. Let's find your rich together. Edward Jones. Member SIPC.

• 1:34Anthony Pompliano?

  Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only. All right, guys. Bang, bang. I've got Nathan here. Nathan, I figured the great place to start would be the idea of billion-dollar creators. There are a bunch of people we know on the internet, they are working their asses off trying to build big companies or many different companies, and they're using distribution as a competitive advantage. Who do you think has the potential to become one of these billion-dollar creators?

• 2:19Speaker 02

  Okay, there's two people that come to mind right away, and we can talk about people who've already done it, because it's not that crazy of an idea.

• 2:27Speaker 02

  But two people that I'm watching right now are Nick Huber and Sahil Bloom. I think both of them are going to pull it off in a big way. Nick, because in the real estate space, I think everyone knows him as somebody who started up on Twitter and he's got a couple hundred thousand followers and all of that. But what he's done that's really interesting is looked at the real estate transaction, which is really expensive. Like if you think about what it takes to buy real estate, there's, you know, there's title companies that's making money, there's banks that are making a bunch of money, there's realtor, like all of that. And he's breaking it down and starting businesses around each part of that transaction.

• 3:05Speaker 02

  And so he shared these numbers publicly so we can talk about it, but one thing is, you know, instead of promoting like a digital product, right? That he could, it's very normal as a creator, it's a great way to make money. But he actually looked and said like, okay, what services can I provide? And he started a, a real estate cost segregation business that I think is doing like 200,000 to 250,000 a month in revenue right now. And they're like nine months in. And so he's in this space of like, what's the, what's the best way that I can direct this audience towards, you know, in this case of service, but something that will make me money.

• 3:42Speaker 02

  And he spun that up and blown away, it's just doing really, really well. And so I think that he's a good example. The other person Sahil Bloom, he's got like a lot more mainstream with his content. Uh, and he's, you know, building the newsletter, we talked about how he's, how he's growing that really fast. But, um, he's got this private equity background and I'm pretty sure that he's going to go like acquire a business or focus on something that then he can use his distribution to blow up in a big way. So if I were placing bets on like two people, three years from now, uh, it'd be those two.

• 4:18Anthony Pompliano?

  When you think about buying verse building, do you think most of the creators are going to end up picking one or the other? Or do you think it really is just a match with their background?

• 4:27Speaker 02

  I think that.

• 4:30Speaker 02

  That's a good question. Most people lean towards building, I think, because they see an option, an opportunity there. Unless you have a background like Sahil does and in investing in private equity. I think most people think about about building from scratch. And then that's kind of the creator way, right? Of like, I built an audience from scratch, you know, maybe I built this other business from scratch, so let me keep doing that.

• 4:54Speaker 02

  But buying is really interesting because you can accelerate the process. I've bought two companies now and like, it's so much faster. It can be a total pain.

• 5:05Anthony Pompliano?

  What are the two companies that you bought?

• 5:07Speaker 02

  Uh, one of them is a company called Fanbridge, which is email marketing for musicians. Uh, we were getting into that.

• 5:15Speaker 02

  That space a little while ago. It's a company that had raised a lot of venture capital and then had kind of stalled out. I think, actually, we're going to see a lot of companies right now.

• 5:27Speaker 02

  In this like down venture market, I think there's going to be a lot of companies that can't raise the next round that are really good targets to buy.

• 5:36Speaker 02

  So that one brought over.

• 5:37Anthony Pompliano?

  Can you talk about the dynamics of that deal? Like, are any of the numbers public in terms of, you know, what did they raise? What were they doing? Why did you guys think that you could grow it? How's it turned out?

• 5:47Speaker 02

  Yeah, um, the exact terms of the deal are probably the one thing that I can't share because it's under NDA. But the, basically, they had like 1,200 to 1,500 customers that were all in the music space. And so in acquiring them, you know, we brought over like Leon Bridges and a whole bunch of other musicians that were great name brands for us. And that like in one move, uh, expanded that. Uh, it worked out really well for us because it's a profitable acquisition almost from day one. You know, you get a company that's, that's just like coasting downhill. Another set of people that are doing really well is these two guys Xavier and Siava from Enduring Ventures.

• 6:30Anthony Pompliano?

  Yeah, explain a little bit about what they're doing.

• 6:33Speaker 02

  I don't know that I can do a great job. They raised a fund, uh, I think three years ago. And since then, they've been acquiring companies. Uh, they're up to 19 companies that they've bought in the last three years. And they're buying these for cash flow. A few of these that they buy are.

• 6:50Speaker 02

  Just fantastic, like cash flow businesses, two of them at least were like venture funded companies that couldn't raise another round. And so they just bought the assets and and turned it around and scaled it. And but they're using audience in a lot of these, same way that Nick is. It's just interesting watching what's going on in the space of people who are great at acquiring companies. I'm not great at it yet. I'm like just trying to learn from from other people. But yeah, it's it's fun to watch.

• 7:20Anthony Pompliano?

  When you see people building audience first and then either buying or building the companies on the back end, do you think this is how businesses are going to be built in the future? Like, you know, it used to be you built the product, then you go and you find the customers. Now we're not only seeing this happen with what I'll call like the internet celebrity, right? People who are big on Twitter or have a big email list, but we're also seeing, you know, Kim Kardashian, Kylie Jenner, The Rock, Conor McGregor, like you just go down the line of the like mainstream celebrity, but you're also seeing what I'll call like the crossover stars. So even like Logan Paul and KSI with Prime. They were able to build an audience on the internet, then they kind of cross over into the mainstream with WWE or whatever they're doing. They launched the drink, they're doing, you know, estimates are somewhere around $250 million a year in revenue last year.

• 8:04Anthony Pompliano?

  And it's just these massive businesses. Is this now because it's possible? And kind of the cat's out of the bag that everyone is going to want the audience first and then the company? Or will people still try to build companies in, you know, the quote, quote, traditional way?

• 8:16Speaker 02

  I don't know who the quote's from, so we'll have to look it up, but it's something like first time founders care about product. Second time founders care about distribution. And I think that's exactly what you're seeing here of early on, people are like, hey, I've got this idea. I want to bring it to market, you know, and you're getting to that first thousand a month in revenue and 10,000 a month and building that up. And that really matters. But then, like, a lot of times when people are doing their second, third, fourth company, they're looking for not what's the best deal? Or what's the best company that I could start? Or what's the best deal I could acquire based on the numbers? They're looking at how can I get the most distribution? And so if you take someone like Nick Huber, right, he's all in on distribution.

• 8:57Speaker 02

  He's got hundreds of thousands of people paying attention to him on Twitter in the real estate and small business space. And so he was like, great, now that I have this distribution, what services and companies can I pair with that? And that's how he's able to launch and scale these companies really quickly. Same thing with, you know, take someone from years ago like Mark Sisson with Primal Kitchen. He had this blog called Mark's Daily Apple. He's in the like the paleo recipe and lifestyle space. And he's got distribution and he can focus that on,

• 9:35Speaker 02

  you know, selling digital products, courses, affiliate stuff. That's a great business. You can make a couple of million dollars a year as a creator in that way. No way to make a billion dollars with that, that more traditional creator path. But what he did is he's like, with this distribution, I want to point it towards something that I own. And so he starts Primal Kitchen. It's a, I think it starts with a paleo friendly mayonnaise and they go to ketchups and other sauces. Ends up exiting in two years for $200 million to craft. Right. And because he's able to use his distribution to kickstart all of this. So yeah, you're going to see a ton more of that.

• 10:13Anthony Pompliano?

  Is there going to be this world, and maybe Nick is trying to do this, but other folks might be following as well, where people say, I want to build this company, but before I get started, let me build out distribution specifically for this company. So it's not, hey, already built an audience, now let me go find the companies. And it's kind of this serendipitous thing, but actually people will say, no, there's a playbook on how to get the distribution. So let me actually go build a new Twitter account. Let me go build a specific email list. Let me build a podcast specific for this business. And it's more of like master plan versus the serendipity that we've probably seen with the internet creator or celebrity to date.

• 10:50Speaker 02

  Trying to think of the master plan side. I don't know that there's as much of people calling their shot in advance. They're probably doing it privately behind the scenes.

• 11:01Speaker 02

  But maybe it would come across like as inauthentic ability, audience or something. Another example that comes to mind of someone doing it at the same time and doing it very deliberately. Is a woman named Suzie who started a website called Hey Grill Hey.

• 11:18Anthony Pompliano?

  What is that?

• 11:19Speaker 02

  And so she is like in the barbecue space. And so she decided she built up like one of the largest like barbecue brands for, you know, a content site. And all of that, I don't know, I think something like two to three million page views a month. So it's really good sized. And then she had this plan from the early days of like getting into retail and basically having your own line of like barbecue sauces and rubs and all of that. And that's something where now she's just at the point where her physical products are starting to eclipse the digital. And she's fully in, you know, manufacturing, getting into retail stores and all of that.

• 12:02Speaker 02

  And so I think she's a good example of like being deliberate from the beginning and building both simultaneously. And so she ends up like, she's starting a, you know, a food brand with like, which is something that's very expensive to do with no outside capital. Because she's got this core content business that's throwing off, you know, three to $5 million a year in revenue. And so she's able to then scale up her next thing that's significantly larger without having to raise capital for it. Cause she's got basically this golden goose in both distribution and cash flow from the core business.

• 12:38Anthony Pompliano?

  When you think about these companies, everything that we're talking about here is like creator buys, creator builds. Are there going to be large companies or do we have any examples where a large business says, hey, you know what? I think that this whole distribution first model makes sense. Let me go white label my product or let me go and partner and, you know, I'll use an example. If I was John. On dear tractor, right? Do I go find someone in the, in the space that's got a huge following of people who are potential customers for me? And I say, look, I don't want to do a traditional influencer deal where I pay you some money. Instead, I want to create a branded tractor for you. Or I want to create some sort of subsidiary where you and us are partners.

• 13:22Anthony Pompliano?

  Have we seen any of that type of stuff happen yet?

• 13:25Speaker 02

  I haven't seen that specifically. I do know from like the homestead world or

• 13:32Speaker 02

  I don't, we, my most random investment is a ghost town in California that we could talk about the whole content play around that, but that one like Kubota is this company, you know, they're a competitor, John Deere. And they're giving out like tractors and all of that and being like, here, just make sure these make it into your YouTube videos, you know, and that sort of thing. And you're like, sweet. Yeah. Thank you for the $30,000 tractor. I'll, I'll make sure you use it in videos. So there's a lot of the influencer play, but I haven't seen someone like partner in a white label sense. Maybe it's happening behind the scenes and I'm just not seeing it.

• 14:08Anthony Pompliano?

  I think this is like one of the biggest opportunities in the world right now is if you're a large company, especially if you're like a multinational or multi-billion dollar company. The extra cost and kind of the risk you take by simply partnering with someone and saying, hey, look, let us deliver the same exact product, but we want to do some sort of co-branded deal. Maybe the best thing that we've seen is like the LVMHs of the world or somebody like that. We've kind of seen, we've also seen a lot of like champagne companies or alcohol businesses that they're like closely intertwined. But you can imagine if, you know, again, maybe John Deere and a NASCAR driver teamed up and there was like a Dale Earnhardt, you know, John Deere tractor, right? I'm completely making this up, but like.

• 14:51Anthony Pompliano?

  It's selling, right? Like, like it's selling to someone somewhere. And so it gets in this weird world of like, okay, that's like a super, super niche product with a super niche type of person for kind of an overlap audience. But if you then back up and you say, hold on a second, well, what about food products? What about software products? What about all these other things? It feels kind of dumb for people not to try to go do this. And so I do wonder how much of it is just they haven't gotten there yet. They don't understand the value versus actually the creators are saying, why would I partner with you? I can just buy it myself or I can build it myself. I don't need you. I've got the thing that is unique, which is the audience. The product itself is somewhat commoditized at this point.

• 15:36Speaker 02

  Yeah, I agree, though. I think that creators could could make a mistake of productizing or commoditizing the product too much. Because if you think of it as, okay, I have the distribution that's 90% of the work and then the product is 10%, you know, and maybe someone's like going on Alibaba and figuring out like, oh, I'm going to white label these water bottles and, you know, sell them at a 20x markup or something like that. If you don't have that passion for the product as well, then I think at some point you're going to lose interest and move on from the

• 16:12Speaker 02

  like that, that whole idea. And so I would really encourage creators to think about what's the thing that I want to be all in on this product through these distribution channels for a long time? Because if you're just like, hey, 90% 90% distribution, 10% tack on a product, I think that's going to ultimately fail. Or you might make a bunch of value and then be able to sell it off, but it's not like we're gonna have to do this for years to get to a billion dollar brand. And so it's really like, what's the product that I'm really passionate about? That I can use this unfair advantage in distribution that I have to kickstart it and get it to this next level. Right? Like, using the primal kitchen example, Mark Sisson can do things like, say, he gets his first Whole Foods deal or some grocery store.

• 16:54Speaker 02

  Right? And they're in like two stores and it's a little test to see how it goes. Well, he can go on his email list and be like, okay, everybody within 50 miles of this store in Austin, like email just them, hey, go buy our new product in Whole Foods, right? And so Whole Foods is going to be like, whoa, this sold out. This is amazing. You know, let's, let's ramp it up. Let's try it out in more stores. So because he has this digital advantage. But I think it it really needs to be that the audience is kickstarting. A meaningful brand that then you're going to scale through traditional channels and all that, rather than just being that I, since I have this distribution, let me see what I can tackle on.

• 17:34Anthony Pompliano?

  You and I have talked to you in the past about these idea of partner networks as well, basically other types of revenue that somebody can get. So they can obviously sell a product or a service directly to their audience. But now there are these products that are popping up where basically creators can get paid for making referrals to other products or other creators. Talk a little bit about how those are working. I think you've even invested in one, maybe, and kind of like what, why is that so interesting to you?

• 17:59Speaker 02

  Yeah, so this one is a company called Sparkloop that we invested in a couple of years ago for their, they had a referral product where you, like if you're running a newsletter and you want to do like a morning brew style referral, right? You know, refer three friends and I'll give you the sticker, this hat, this digital download, any of that. So they had that product. Now, what they're doing that I think is really interesting is they built out a a network where you can advertise and say, hey, I'll pay, as a creator, I'll pay $2 per subscriber that anyone refers to me. And so you have all these creators who have been spending on, you know, Facebook and Google and those, especially with Apple's privacy changes,

• 18:41Speaker 02

  right? Those ad rates have tended to get quite a bit more expensive. And so now what they're doing is saying, hey, I'll pay other creators. And so think of it like the, it's like Substack's recommendations, right? It's that, but paid. And so you get the two sides of it. So using Sahil Bloom as an example, he's spending $25,000 a month on this network at the moment where he's saying to other creators, like, refer quality subscribers to me. I'm only going to pay for the people who are engaged. I'll pay, you know, $1.50, $2 a subscriber. And then other people are able to say like, great, this is a great new revenue stream for me. When someone signs up for my newsletter, it pops up and says, hey, do you also want to subscribe to Sahil Bloom and Nick Huber?

• 19:26Speaker 02

  And, you know, maybe a couple of other people. And I'm getting paid for that on the front end. And so what's wild about that is You and I have run lots of paid ads over the years and you always think in terms of payback period, right? How long, if I run an ad, how long does it take for me to make back the money that I spent? Um, maybe if we're doing e-commerce or something, I'm trying to have like a 30 day payback period in, in software or SaaS. If you raise capital, you know, you're like, oh, if I get a 12 month payback period, like that's fantastic. But in this case, you could, you know, as a creator, you're getting paid on the front end as new people are joining your list. And so it's great on both sides of that marketplace, both of, um, joining the list and then also like both of the creator

• 20:10Speaker 02

  who's referring and saying, hey, I'm getting paid right away. And then the creator who's basically in that sponsor role and saying, um, uh, like I'm paying other creators for engaged subscribers rather than going from Instagram through a funnel and all the way down. I think the other part of it, it's really interesting. Using Sahel's example again, he's actually, he sells sponsorships on his newsletter. And so like, that's a steady revenue stream and he's taking a hundred percent of what he makes in the sponsorships and turning around and spending it to grow faster. And so he's adding something like 50 to 80,000 subscribers a month, um, through all, you know, what he's doing on social and all of this, because he's just got this flywheel that's running super, super fast.

• 20:56Anthony Pompliano?

  And so when you start to see these partner networks, do you think that it'll only be for email subscribers? Or do you think that they will eventually be, hey, I want more Instagram followers. I want more podcast downloads. I want more, uh, you know, people at my conference or whatever other things, uh, some of these folks are doing, like, will it spread into other mediums? Or do you think email is uniquely positioned to, to work here?

• 21:18Speaker 02

  It's a good question. I think the reason it's going to work well in email is that email subscribers are worth a lot. And, and people tend to know, okay, if I set up these automations to promote, you know, this product, then I can pay $2 a subscriber, $4 a subscriber all day and have a good payback period. And then also, a lot of the infrastructure exists on this now, but the, the idea of a partner network like this, I think is super new. I haven't seen, I haven't seen it play out in,

• 21:49Speaker 02

  in these other channels yet, but I mean, it would totally work in podcasts. Well, I even like the idea in like conference registrations, you know, I'm running an event and like it's totally worth it. If you're like, hey, I'll, I'll pay for referrals and all that. So it's kind of like, everything old is new again. You know, there's nothing like this recommendations thing is just co-registrations. Like that's been around in online marketing forever, but now it's being brought to the creator space. Partner networks, it's just this affiliate idea, but brought specifically to, to content in a new way. And so I think we're, we're seeing these things get reinvented and it'll be interesting to see which ones, uh, which ones stick and which ones end up like kind of dropping off.

• 22:34Anthony Pompliano?

  Talk a little bit about marketing flywheels in general, like obviously a partner network, you're paying dollars, right? You're trying to get some sort of, uh, kind of top of funnel growth, that funnel, that top of funnel growth hopefully will lead to a flywheel, but you all have spent a lot of time thinking about this. What have you seen work there and whatnot?

• 22:52Speaker 02

  Yeah. So just for anyone in your audience who might not know what a flywheel is, if you imagine like a water pump, uh, I don't know, when I was a kid, we'd go camping somewhere, you know, and you'd have to like, it's this pump where you're going up and down with the handle. Um, and there's a constant amount of effort that goes into creating a pretty constant output, you know, each, each pump of a handle produces a certain amount of water. Now a flywheel is a different way of doing it where you end up with this big metal wheel sitting on top of the, um, of the pump and it might be super hard to get going. Like when you first turn that it's, it's, um, really challenging, you know, but then over time,

• 23:35Speaker 02

  as it gets the momentum going, it gets easier and easier. And then at that point you could be pumping water out as well, just like standing there with one hand, just like casually spinning it.

• 23:45Speaker 02

  And so kind of the rules of a flywheel are that instead of it being like one-off activities, you've made it so that each thing flows smoothly into the next. It's a continuous motion. The next thing is that um

• 24:01Speaker 02

  each turn of the flywheel should be a tiny bit easier than the last. And each turn of the flywheel should produce a little bit more output than the last one.

• 24:11Speaker 02

  So that's a real world example of something that we want to bring it to the digital space. So talking about like Sahil Bloom, for example. He's got, I don't know what, eight hundred thousand followers on Twitter now. He's he's built a great audience. And he's built a flywheel around his email newsletter. And so he's pushing from Twitter, Instagram, et cetera, into email. He's got it where when someone joins his list, they're getting welcome emails that that's like automated.

• 24:44Speaker 02

  And then, you know, if he wanted, he could sell digital products there and that would earn more per subscriber. Then he's selling newsletter or he's selling sponsorships in his newsletter. And so he's at this point making twenty five to thirty thousand dollars a month. Selling sponsorships and the more subscribers he has, the more money he earns. But what he cares about the most is growing the newsletter as fast as possible, right? He's trying to say, hey, can I go from two hundred thousand subscribers at the beginning of the year to a million at the end of the year for a book launch? And so then what's happening is he's got a referral program in place where he's saying, hey, if you refer people to me, then I'm going to

• 25:24Speaker 02

  give you an incentive. So that takes like every one subscriber who enters the top of the funnel and turns it into, say, one point two, like it's a little bit of a lift there. And then the revenue that he's generating is he's pouring all the way forward into this partner network to pay people, you know, to grow his list faster. So basically, the the bigger his his list is, the more he can charge advertisers, the more money he makes, which means the more money he can spend to grow his list faster, which is the bit makes his list bigger, which means he can spend more on advertising, which means he's making more money. So early on, this flywheel say was producing 10 to 15,000 a month in cash flow, all of which was getting reinvested. Now, as it's bigger, each rotation is producing

• 26:10Speaker 02

  $30,000 a month in cash flow, and he's reinvesting that, which means it gets bigger. As you're watching these results compound more and more, and instead of doing a bunch of one-off activities to grow his audience, he's putting it all into this automated system and flywheel and saying, okay, how can I tweak this? How can I improve the onboarding emails? How can I sell sponsors for a little bit more?

• 26:32Speaker 02

  And then it's just watching it get faster and faster, and it's gonna compound in a big way. And yeah, like, I fully expect him to hit a million subscribers by, like, within the next year.

• 26:44Anthony Pompliano?

  And so, once somebody has a million email subscribers, whether it's him or somebody else, what do you think is the best way to monetize it? Keep selling the ads? Is it launch a product? Is it try to sell digital products? Or do you actually think it's like, do everything?

• 26:57Speaker 02

  Well, are we going for cash flow or enterprise value?

• 27:00Anthony Pompliano?

  So that, that is the ultimate question, right? Is what I see a lot of folks doing is actually optimizing for the cash flow, not necessarily optimizing for the enterprise value. And it brings up one of the, like, trillion-dollar questions of this whole thing, which is if people put their name on it, are they able to sell it? Or are they willing to sell it? Right? There is, there's somebody who I don't want to bring up, because I don't know how comfortable he is with it being talked about publicly, but his name was on a very big email list. He sold it. And a couple of years ago, the company who bought it, they were blasting his name and image all over the place in ways that maybe he wasn't, you know, so excited about. But it was, look, his name and image were part of the deal. And so, you know, he, I haven't asked them specifically,

• 27:44Anthony Pompliano?

  but I'm sure he probably regrets that component of it at a minimum. And so, same thing with, you know, Rogan's podcast. He can't sell it because he can't walk away. So he can license it, he can do all these things. But like, the Joe Rogan, you know, experience is Joe Rogan. And so, you know, same thing with a number of people that we've seen build some of this stuff. It feels like maybe why they're building their products or the companies is because that has enterprise value, even if maybe the content doesn't.

• 28:13Speaker 02

  Yeah. So I don't think you have to choose. Like, it's not a totally binary of cash flow versus enterprise value. Because you can do both. You could have the advertising or, you know, some digital products or something else that that does good cash flow. And then one of these businesses that you're spinning up, buying, incubating, that's really going to build up the enterprise value. It's a good example, like, because Joe Rogan was involved with Onnit, right? And promoted them in the early days.

• 28:42Anthony Pompliano?

  I think I think he maybe even owned equity there with all.

• 28:46Speaker 02

  A portion of it. Yeah. So so that kind of thing of he can do, Joe Rogan can do cash flow through sponsorships for his podcast. And then he's like, I can't necessarily sell a podcast, nor would I want to. And so let me do, like, we spin up something that, like, the next Onnit or that sort of thing, that then is going to have enterprise value, can be invested in, can be sold, and is kickstarted with the name and distribution, but is not directly tied to it. So I think if you take like Sahil, for example, the obvious path that's for most creators is sell a book, you know, that's going to continue to grow the audience, that's going to drive good

• 29:29Speaker 02

  revenue. Like, if you look at James Clear, having the most popular book on Amazon, selling whatever, however many million copies a year, like, helpful, he's doing just fine. No, no, no one feels bad for him. And that's driving great cash flow. But then also, like, that's not going to turn into something worth a billion dollars unless you go and deliberately do it. And so I think it's finding that balance and make sure you're getting enough cash flow, that you're set, you're not stressed about money, you can take these big swings. Because I personally care about enterprise value. That's what I'm like, I want to lock in baseline cash flow. And then I'm like, look, what's going to get to something worth 100 million or a billion dollars or more?

• 30:11Anthony Pompliano?

  So let's talk about somebody who's just starting out. Like, we're talking about people who already have things working. They're trying to scale out there. You know, they have $20, $30,000 a month to reinvest in partner networks, all this stuff. There's somebody listening to this right now who's like, cool, I want to do this stuff. This sounds awesome. I have nothing. I have no Twitter audience. I have no email. I don't even know where to begin. What do I do? And so for those people, what have you seen as maybe like the most popular path? There's a bunch of ways to do it. But what is like the most popular path to starting to build an audience and being able to put yourself in a position to potentially be able to monetize it like this?

• 30:43Speaker 02

  I think the first thing that's important is to choose like a specific niche. People might see someone like Joe Rogan, who's able to interview people on every topic. And that's part of what makes the show so interesting is that, you know, it's this broad range of people they have on. And so then you're like, oh, I'm going to start a podcast and I'm going to go super, super broad or start a newsletter or Twitter audience. And I think the most important thing that you can do, if you're starting from scratch, is to go really narrow. And say, this is exactly who I'm creating content for. One example for that is when I first started to convert it. I was like, hey, I'm building another email marketing company. And it was for like, I had, here's why it's better for features are all of that.

• 31:28Speaker 02

  But it didn't actually take off until I chose a very specific niche. And I said, we're going to ignore the broad market and I'm going to build something just for professional bloggers. And so and actually focusing in on that, that's when we got traction. So the first, the first thing is choose a niche, even though it means excluding people. It's the easiest advice to give and the hardest advice to actually take for yourself. I think the next thing is taking like a direct outreach approach. And really going through and building out like.

• 32:06Speaker 02

  There's the idea of if I write great content and put it out there, like people will find it. And if you look at a lot of the content creators that we respect now, none of them had a build it and they will come or write it and they will come approach. They all very deliberately went out and.

• 32:24Speaker 02

  Like evangelize their content in other places. Like James Clear, when he was first building his newsletter before he was well known, he was guest posting nonstop. Like he was, he was writing in all of these other communities and going out to where readers were. Putting content there, writing something exactly for that, that community, whether it's Huffington Post or Quora or wherever else. And then bringing it back. I think another great example is Jason Lemkin, who runs Saster. It's now this giant community, you know, it gets like, I don't know, five, eight thousand people to show up in person for a SaaS conference. He's considered like one of the greatest minds and content creators in SaaS.

• 33:08Speaker 02

  And he has the track record to back it up, but he's built and sold multiple companies. He clearly knows his stuff, but he got started writing on Quora. He just would go on Quora every day and answer everybody's SaaS questions. Someone's like, hey, what's a good LTV to CAC ratio? And he'd be like, oh, here's how you should think about it. You know, he, I don't know what the, the numbers are, but I think he answered thousands of questions on Quora, like building that muscle of writing. And then people are like, who's this Jason guy? I keep coming across him. Oh, he has his own newsletter. He has his own blog. Okay. I'll start to follow that. And it wasn't because he was like spamming Reddit with like, here's my latest post. He was just genuinely being really, really useful in communities that already existed.

• 33:47Speaker 02

  And then we've seen it play out into, you know, hundreds of millions of dollars of ticket sales to conferences and an investment fund and all kinds of other great stuff. But it really just started with going to where the audience is and trying to see how much value he could provide directly.

• 34:03Anthony Pompliano?

  That, that makes a ton of sense. And it's basically no different than, um, you know, this idea of like, if something's super viral on Twitter, a lot of people will start talking about it, right? Cause obviously it brings eyeballs, you're able to then siphon them into followers. Once you get them as followers, you can then bring them to your email, et cetera. So it makes, uh, makes a lot of sense. You recently had a trip to Cabo and Nick Huber was actually telling me, he's like, I should ask you what your biggest takeaways from the trip were.

• 34:28Speaker 01

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• 34:43Anthony Pompliano?

  So what, uh, tell us a little bit about the trip and then what are some of the takeaways that you had?

• 34:48Speaker 02

  That trip was so good, like, uh, well, first Nick is the only person on that trip that I'd actually met in person before. So I was on the trip as well and he and I text all the time, but I'd never met him in person. And so that was fun. So I think the first takeaway is just make the time to meet up in person. Like Matt, the guy who organized it, you know, happens to have this like amazing condo at this super fancy exclusive resort. We're like walking by and like, oh, hi, Michael Phelps, you know, or like, but you don't need that, like to host it. You know, renting a four or five bedroom Airbnb somewhere random, you know, and having everyone fly in. Like, that's great.

• 35:31Speaker 02

  Just the idea of getting these smart people together and jamming on business for a long time. Was really, really important. It was huge. One thing, see a couple of takeaways. Coming from like the startup space, I think a lot about revenue growth and churn and I'll talk about those numbers. I don't talk about EBITDA and cash flow nearly at all. And all of these guys described their businesses in terms of how much EBITDA it did. And that was like a shift for me where I was like, oh, okay, I've been in one bubble and it's just like revenue growth and like Convertix profitable. That's part of running a sustainable bootstrap company.

• 36:15Speaker 02

  But it's just interesting hearing how efficiently people can run their businesses. I think the second thing, or I don't know, third thing, I don't know where we're at in the, in the list of takeaways, but

• 36:29Speaker 02

  the way people were spinning up businesses quickly, like I'm, I'm all in on one thing. And listening to these guys like

• 36:40Speaker 02

  Siva and Xavier from Enduring Ventures, they're like 19 companies, you know, and they're doing all these things. And it's because they're hiring great CEOs for every company. And they're like, we won't buy a company unless we have, we're like, we know who's going to operate it and run it long term. And I tend, like if I'm spinning up a new idea inside Convertix, I'm like, oh, I'll run it for a while. And they're just like, no, no, no, no, no. Like you, there's no scale in that. You can't do that. You have to find,

• 37:08Speaker 02

  find the operators who are going to make it happen. Nick's doing a great job with that with his businesses of he'll spin up a new business and the, the thing he talks about all the time is who am I going to find to run it? Like I have this idea, I imagine he, you know, he's got this like collection of ideas. And he's hunting for people and then when he finds the person that matches the idea, then that launches. And that's what I'm seeing. So that was, was really interesting. There's also a bunch of tax things that I kind of, that I knew in theory and they were like, you have to set this up now.

• 37:43Anthony Pompliano?

  So are there any examples of tax things that you took away is like, holy shit, I can't believe I didn't do this shit?

• 37:48Speaker 02

  Yeah. So QSBS, the qualified small business.

• 37:56Speaker 02

  Basically, what that means is you get, if you sell a company, specifically a C corp, you've held for at least five years. You get $10 million in gains tax free at the federal level, which that's pretty huge. That's amazing. Now, ConvertKit is an LLC and has been all the way along. There's another rule inside of QSBS that if you convert from an LLC to a C corp, you get 10, the $10 million or 10 times your basis, whichever is greater. And in this case, you know, ConvertKit converting the assets would be valued at 20, 30, 40, 50 million dollars.

• 38:36Speaker 02

  And so those tax implications would be potentially in the hundreds of millions instead of 10 million. And so a few of those guys were like, here's who to talk to. Here's the lawyers who have done this before. Like, this is a very important thing. Now, it means that if I can do that conversion, I have to then hold the business for another five years before any of that is eligible, but that's fine. I'm planning to work on this business for at least another 10. There was another takeaway. I, I, I knew about this conversion and I almost did it two years ago. But then I was thinking on the timeline.

• 39:13Speaker 02

  And just realizing one thing that another guy there, Ramin, pointed out. She was like, look, had you like five years seems like a long time, but had you done this when you first learned about it? You, that was two years ago. You already be 40% of the way through the five years.

• 39:30Anthony Pompliano?

  Yeah.

• 39:31Speaker 02

  And so thinking about like, oh, like time actually goes by really quickly. The other thing with this is you don't have to sell the whole company, right? So like the Enduring Ventures guys, they have this setup dialed in and they have no plans to sell their whole company. But they want their investors and their team and themselves to be able to sell, like in a secondary sale, to be able to sell like, maybe a hundred grand or, or 500 grand or a million dollars worth of stock and to do it tax free at the federal level. And that's. That's absolutely amazing. And that's something like we have that secondary system set up for ConvertKit. So I realized like, okay, if I converted all of this, then it'd be huge for my employees.

• 40:12Anthony Pompliano?

  Yeah, that that makes a ton of sense. And I guess part of this is also, there's direct actionable things that you probably pick up like the QSBS, but also it's just realizing, hey, this is important. I should pay attention, right? Somewhere to the EBITDA thing like you already kind of know it. You kind of think about your business with it to some degree. But when you're around people who like that's their most important thing. I think it kind of calibrates you on like, oh, maybe I should put more importance on this. Doesn't mean that has to become my most important thing, but it shouldn't be my least important thing. And it's their most important thing. Like, maybe I just need to move it up a little bit in my priority list. And so it's funny when you have friends that are operating cash flowing businesses that operate tech companies that operate venture capital firms,

• 40:54Anthony Pompliano?

  private equity firms, you know, all these different things, they each put their most important thing is different. And so in some way, if you have all those different friends, then you can almost, you know, find this equilibrium of like, all right, I want to have, you know, fast revenue growth, but doesn't need to be the fastest. I also want to have a profitable business, but doesn't have to have the highest profitability margin. And you kind of put it together and you end up with like a pretty good business, right? You're like, really good at a lot of different things, rather than have to be the best at one thing and everything else is like, okay. And I think that might be a might be an actual advantage in the in the market, especially in the business you guys are in.

• 41:28Speaker 02

  Yeah, I think so. And because people want to go to one extreme or the other. And like, everything happens in the middle. You know, it's all like, the world is a whole lot of shades of gray. And so, yeah, it's just interesting seeing what someone else prioritizes. And you're right, because like, there wasn't anything that I learned that was totally brand new, like I'd never heard it before. But it was exactly what you're saying of like, oh, you put way more weight on this than I did. Or like, I know about QSBS. I've known about it for a long time. And I've known about this conversion, but then realize that like, having someone sit down and go, okay, here's the numbers that actually matters.

• 42:08Speaker 02

  Oh, two other quick things that stood out to me. All these guys are ridiculously good at math in their heads. I don't know if it's because they have like Nick's background in real estate or Sahil's background in private equity or Rameen's background in like as a McKinsey consultant and all that, but I was just blown away like talking about something and they'd be like, oh, th- this return is that and just doing it all ahead and Rameen would be like, well, Nick, it'd probably be six percent instead of five. And Nick would be like, oh, and you just throw out like the updated number. So I was like, okay, I don't know. They know financial models and all of that really, really well. And I think a lot of founders are probably like, I'll hire someone for all of that.

• 42:50Speaker 02

  And you totally can, but it made me think like, okay, I need to level up my finance game. And then the last one is, uh, agencies are a great business. I think coming from the, the software world, I'm like, no, SaaS is where it's at. And I still think SaaS is a better business model. But just like the number of agency businesses that either they run in that group or know about and know the details of that are cash flow machines. I was like, oh, okay, that was a bit of a frame breaking thing for me. I had thought that, you know, maybe you make an agency, there's two million a year in revenue, 500,000 a year in cash flow, something like that. Like, that's a really solid business. But they were talking about these companies. They're like, no, no, no, here's an agency.

• 43:35Speaker 02

  And they're just pulling up examples from, uh, like the general business community, right? Here's an agency doing 20 million a year in cash flow. Here's a, an agency doing even more than that.

• 43:47Speaker 02

  And so it's fascinating watching people use agencies to like power their business empires and their whole POs and all of that.

• 43:54Anthony Pompliano?

  Yeah, it, it, um, when a business works, I mean, you can make money in a lot of different things. One of my favorite things to do, uh, I don't think I've actually ever said this publicly, but, uh, uh, one is to go on Zillow. And I go around the country and I look at like different, uh, properties and see our values going up or down. It's like you can get the like economic data or whatever, and it tells you, you know, home prices. But if you go on Zillow, like you very quickly can filter. And so you can see like, you know, The super luxury home, the like starter home and you kind of filter around, you go on the map and you can like get a very good sense of like our home prices going up or down and like and the nuance of it. But the second thing I like to do after that is I like to go around the country in some of the major cities and go on like a buy biz now or any of these sites

• 44:37Anthony Pompliano?

  and basically look at what are the businesses that are for sale that are like the local businesses. So they're not usually software based businesses. There's tons of like restaurants and that type of stuff. But also you'll get like industrials or there's always like a ton of lawn care companies and those types of things. But you'll also see like, the other day I was on one in a city in Florida and it was like a storm window manufacturing and installation. Or there was one that was meat distribution and processing, right? And you look at these things and you're like, dude, this window company literally makes $12 million a year in top line revenue and books about $5 million in terms of free cash flow. Like,

• 45:21Anthony Pompliano?

  what is going on? And it's easy. Like, there's hurricanes, there's a lot of rain and their pitch is like safety and security, both from crime or from the weather. Like, yeah, they're gonna print money. And so you look at that and you're like, you know, how much harder is that business to run than a software company? Depending on who you ask, like the person who knows that business is like this is like, I do this in my sleep. The software entrepreneur is like, dude, you have physical products, like you have to like install things, right? And then vice versa. Supply chain? Yeah, exactly. It sounds so hard, don't you? And so you look at these and what it gives you a good sense of is like we spend so much time on the internet, so much time looking at software, that it's a great reminder that like you can literally make money doing anything. And so when you see that, it one, it's inspiring,

• 46:05Anthony Pompliano?

  but two is it really starts to make you calculate not just how much money can you make in a business, how much time and effort does it take to generate that money? And I think your idea about an agency is like a perfect thing, right? Where many agencies are actually easier to run than software companies, because it's a proven model. Like, there's not a kind of market risk, there's execution risk, but like it's a well-known business model, you know where to find the customers, you know that they're gonna spend money on this and it's just like, can you win the business versus someone down the street? A lot of software is like, hey, we're trying to build this thing that solves a problem that you've never had a piece of software to solve before. And so when you do that type of stuff, it's much harder because you're taking execution risk, but you're also taking market risk. And so in some ways, it's like, yes, you can make more money, but you also take more risk, hence the risk reward.

• 46:48Anthony Pompliano?

  And so are you better off just saying, look, let me go and build businesses where I know there's just execution risk. Again, it comes down to the person, but, but I think it just introduces this new perspective. A lot of people don't think about the tech industry as much.

• 47:00Speaker 02

  Yeah, just when you're talking about execution risk and these in-person businesses. I've got a friend that started a plumbing company here in Boise where I live. He was not a plumber. His previous company was in tech and he's like, look, I want to do something tangible in the real world. So he buys this small plumbing company and he doubles, doubles revenue in six months and doubles it again in another year. So 18 months, he's basically four X revenue. And I asked him like, what did you do? Like, how did you transform this? Is it because the Boise market's growing like crazy? Like what's happening? He's like, yeah, it's a good, good question. I did two things. I followed up with every lead that came in.

• 47:44Speaker 02

  And I showed up and did the job that we were hired to do. And then he was like, and then I like asked for a referral, you know? So it's like, maybe three, maybe you counted as three full things. And it was just such an interesting thing of like, what you're, because everyone wants to know like, what's your unfair advantage? You know, like what, what's all that? And he's like, well, I have a basic lead system and I, you know, when someone calls up, we answer the phone. And then like show up to do an estimate and all of that. And then we do good work. And he was realizing like, oh, in some of these markets, the bar is so low. And he's like, yeah, now it's a great business and it's doing a couple of million a year in revenue.

• 48:26Speaker 02

  And he's like, I'm going to scale. And now I'm just limited to by how fast can I hire good plumbers? And that was fascinating to me.

• 48:33Anthony Pompliano?

  So I've talked on a. On the podcast before about this, but I have a friend, he's kind of a friend of a friend, who he had a whole thesis that electricians were going to become way more valuable in the future than they are today because people weren't going to trade schools. And so like, no one's going to automate away the electrician, right? Anytime soon. And so he basically started to buy up kind of your local electrician business. Sort of combine them together. He built a brand, he did the whole thing. And so he essentially in one area of Canada and in Southern California, has these really large footprints of electricians.

• 49:15Anthony Pompliano?

  And so what he's seeing is like, one, the infusion of new electricians is actually not rising. So therefore you have a supply, demand imbalance, which gives you pricing power. Then if you have a large footprint, you have price setting ability. And on top of that, you have new homes, plus you have kind of being able to fix existing homes.

• 49:34Speaker 02

  Remodels, all that.

• 49:36Anthony Pompliano?

  It applies to residential and commercial, right? And so he has like this whole thesis. I remember thinking like, damn, I don't like, that's not me, right? Like, I'm not that type of person who wants to go do that. And frankly, I would probably get bored with it, whatever. But like, he loves this and he is absolutely crushing it. And so if you think about from like a talent dynamic standpoint, are there certain tailwinds in industries? Like plumbing is probably another one. How many new, you know, kind of younger people are going into either apprenticeship mode or some sort of trade school to learn plumbing? My guess is that actually it's down significantly, right? In terms of what it was five or 10 years ago. And so same dynamic happens. And so when you kind of go through these different, you know, kind of, as you said,

• 50:20Anthony Pompliano?

  in-person businesses, just the supply, demand, you know, imbalance is attractive. And then just like, do what you say you're going to do. And so I have friends here in Miami who they're like, if I could just get someone to come cut my grass. On the day they said they're gonna cut it, we'd be golden. And so like the running joke for people from New York who like move here is like, oh Miami time. Right? Like, you know, somebody will say that they're gonna come do something, uh, whether it's work related, whether it is personal, whatever. They're like, I'll be there Tuesday at 8 a.m. and they show up like Wednesday afternoon. You're like, hey, man, like, we're not even in the same 24 hour period. Like, I got caught up yesterday doing this or whatever. And like, you're like, okay, cool. I get it. But like, just tell me that you can't come Tuesday, come Wednesday.

• 51:03Anthony Pompliano?

  And so to your point, like, literally just show up on time, do the job you said you're gonna do, follow up, like, these are basic, basic things. And so for a tech entrepreneur going to compete in these other markets, there's such an advantage that like, again, maybe it's just easier to do that.

• 51:19Speaker 02

  Yeah, I, there's this landscaper that I started to use and he's done a few jobs for me just on around our property. And he sent me an estimate and he uses this tool called Jobber, um, where you can like view the estimates, pay a deposit online. That's fantastic. It like texts you, uh, and I love that. And then he sent me a loom video of him like walking through the like, here's what the, the plan, answering questions in the estimate. You know, and I like, it stood out so much to me. And I was like, this is amazing. Like this is the first time I've ever gotten a loom video from a contractor, you know? And just the fact that I could put it at one and a half speed right there and, and watch it. And I told him like, uh, I love this.

• 52:00Speaker 02

  And he was like, yeah, you're actually like the fourth person this week who's commented on the fact that I send loom videos and how easy it is to, to understand and all that. Cause everyone else is like mailing invoices and estimates and all that. So it's just interesting, the space that you decide to compete in, cause like, do you wanna go compete against the best of the best? You know, in Silicon Valley in tech, or do you want to like go compete in a market that? Like just leveling up these systems, implementing a CRM and saying like, oh, we track all our leads and these deals didn't close. And so we're actually going to follow up and see, you know, does Suzie actually want to do the kitchen remodel that she reached out to us about six months ago? Yes, great. $100,000 of contracting work. So.

• 52:45Anthony Pompliano?

  So what I, what I think could be fun, we didn't plan this. So hopefully I'm not putting you on the spot here, but um, maybe we can just like throw out ideas that like you or I aren't going to go do, but like would be really interesting things. I'll go first to give you a second to, to think. But Nick actually started the cost segregation business. And one of the things people don't realize that they do there is rather than have someone physically come out to the location, they basically get the homeowner or the, the building owner on FaceTime and they FaceTime and they're able to do it, right? So you're using technology for kind of a more antiquated model. And so if you just use that mechanism, like where else could you basically use video conferencing, right? Or FaceTime or whatever, to replicate having someone physically drive out to a location?

• 53:31Anthony Pompliano?

  And you see this with like telemedicine, right? They're trying to figure out how to do that. But there's probably a bunch of other industries where literally now I don't have to show up. I can just have the person on the other end hold up their phone and do ABC, whatever. And it feels like there's a ton of business that'll be there. Any ideas like that, that you've seen that you think are interesting or people could, could take away?

• 53:52Speaker 02

  Yeah. Another one on that one, that Nick's doing really well is he's hiring a lot of team members in Latin America for that. And so there's some really great cost benefits. And then what I love is as he talks about that, he also has a recruiting firm to help you go higher. You know, so he's got that, that full circle. As you were talking about the electricians and the, like the pricing power and just the market dynamics, one of the things that's coming up is the scarcity of electricians. Right? That's going to be driving the market down the road. And so a similar idea.

• 54:30Speaker 02

  You know, with the cost tag business, you're saying, okay, where can we take virtual tours, you know, basically, or this offsite camera idea and change the business? One thing I hear in the electrician business is the electrician themselves is the bottleneck. Like, if you think from a theory of constraints perspective, we can only scale this business so much that we can, as we can get clients and we can get electricians. And I think it's going to be easier to get clients and electricians, especially if the trade schools are not turning out as many. And so what I think about is, okay, how do you be the best employer? How do you be the one where people are like, hell, yes, I want to work as an electrician here? Because they take really good care of me.

• 55:15Speaker 02

  You know, the benefits are fantastic. Like, go interview 20 electricians and find out what sucks about their job. And what are the things that may not be monetary? Because say you want to, you want to pay competitively. But what could you offer that is going to get them to say like, oh, this is a great place to work and tell their other friends? Like, hey, man, I'm sorry that your boss sucks, but I'm loving working over here. Especially in any market where they're actually the constraint. And so if you're saying, hey, I'm going to be the best employer for electricians, then I'm going to always be able to recruit more. I don't have to buy my competitors' business. I can just slowly siphon away all of their talent.

• 55:57Speaker 02

  And then I can, you know, maybe pick up their business or their territory for pennies on the dollar because they actually can't fulfill customer needs. And so if you're looking through, you know, in this whole shift, as the talent world changes with AI and everything else,

• 56:15Speaker 02

  what businesses have employees where, where the employee is key? It cannot function without it. You can't outsource it. You can't, anything like that. And then what would have to be true for you to be the absolute best employer in that market where people are saying, oh, I'd kill to work for Palm's company in this, in this area? Because then you've, you've zeroed in on the biggest constraint and then you've made it so you're the best person to work there. So I think that any of these services, businesses, landscapers, plumbers, electricians, all of those could do it really well. To an extent, you can do it in software, but it's not as the constraint's not as strong because you don't have, you're not geographically limited.

• 56:57Speaker 02

  I don't know. Do any other companies come to mind that like the people really, really matter? And you could win purely on talent?

• 57:04Anthony Pompliano?

  So I don't even know if it's just like talent alone, but I think what you're talking about is in a given city, there's only so many people who are world class, right? Or city class at doing X. And so if you go back to, you know, the, the kind of hurricane proof windows, right? How many window installers are actually the best in this specific city where I was looking, right? And I don't know, maybe there's five or 10 of them. If you go get the five or 10 best window installers in that city on your team, then like you win, right? Because literally everyone's like, oh, they have the best window installers, right?

• 57:43Anthony Pompliano?

  And so in some way, it's not even like the window installer is absolutely vital. We couldn't teach anyone else how to do this. They'd have to go to trade school or whatever. Like an electrician has a certain skill set that takes much longer to kind of learn. I'm sure window installing is difficult as well, but it seems like that might be simpler to learn.

• 58:02Speaker 02

  It's not a licensed skill in the same way.

• 58:04Anthony Pompliano?

  Correct. But like, damn, you could create a mini monopoly in your city. And if you just dominate the talent through the same mechanism, it isn't a supply, demand on like a national scale. It's just supply, demand on this, you know, local city level. Like all of the window business and revenue comes to you, right? And so if you think about that, that becomes interesting. The other thing is, I think a lot about like on time. And so, you know, I was joking earlier about friends who would be like, oh, like the guy who's supposed to cut my grass. Like he comes like a day late or whatever. But actually, if you think about a lot of businesses, their vendors, one of the biggest problems they have is they're not on time. And so, you know, trucking may be like a really simple one where is the truck driver quote unquote essential?

• 58:49Anthony Pompliano?

  No, you can get somebody else, right? And a lot of people don't know this, but like Walmart, I think the starting salary for a truck driver now is like over a hundred grand. Right? So if you basically get the license and you start driving at Walmart, you make a hundred grand. Flex on Instagram and tell everyone you got, you know, you make six figures, right? But what becomes fascinating about it is if you just Have a business where your people are trained to a certain standard. That is a differentiator. So again, you can find truck drivers everywhere. But maybe it's not the truck driver who is the quote unquote differentiating factor like having them versus not. It's Noah, truck driver that meets, you know, two or three main things. Hey, they're communicative. They're on time and you know, uh, I don't know, they drive really safe for, I'm making it up, but.

• 59:30Anthony Pompliano?

  It feels like that ends up being something that the business owner can control outside of just like, hey, I got all of the electricians. Right? And so, um, that, that comes to mind, but the other one that, uh, I think about a lot is, uh, chefs. So what I'm shocked by that no one has really done yet is local entrepreneurs saying, I don't want to do virtual kitchens across the country. Or anything like that. Instead, what I'm going to do is I'm going to take the five best chefs in a certain city. And we are going to do the virtual kitchen thing. But we not only want to deliver, uh, via the Ubers and the Door dashes and, and those platforms. We also are going to make stuff frozen that we can ship. Or we're going to make things that aren't perishable that we can ship.

• 1:00:16Anthony Pompliano?

  Right? Because if you really think about that kitchen, right now, most of the virtual kitchens, they are for local delivery. So your addressable market fits within kind of a, a, a radius. But if all of a sudden you're able to create things out of that same kitchen that can be shipped somewhere. Game on. Right? And so like you get into this very interesting world where like you're almost increasing the like revenue per square foot. By opening up the addressable market. And then this is where things like, uh, content, distribution, marketing, paid ads, et cetera. The better you are at that stuff. Now you're just playing e-commerce. Right? And so you, you kind of marry these two.

• 1:00:54Speaker 02

  You're also, I'm just thinking about the way that kitchen operates. If you're in a specific geographic market, you have, um, spikes in demand, right? Lunchtime, dinnertime.

• 1:01:06Speaker 02

  3pm on a Tuesday, we're not really very busy. There's not a lot happening, you know, and so I've got a staff. You know, I've got, I'm staffing up for three or four hours for lunch and then tapering off and staffing up for dinner. And so what you're talking about is using some of this, uh, this slack time, you know, in our, in our kitchen and say, hey, during that time, we're going to be producing, uh, maybe meals that are frozen or, um, right, or things for another market where that, that doesn't have the same capacity limitations. I think also in these local businesses, if you think about, okay, what are we going to do through the winter if we're a landscaping business? And if you have a great answer for that, and you're like, I can keep my employees employed all through the winter with something more like something better than snow removal than like,

• 1:01:50Speaker 02

  that, that's going to be a huge thing. Um, or you could just live in Miami where winter's not a thing that would work too. But I think a ton about what level do you want to compete? Do you want to compete at the top, right? So two electrician companies going head to head for the market? Who can drive the most leads? Who has the best brand? Who has the best reputation in the industry? Uh, all of that, you can and should compete at that level. Or like on the other end, do you want to compete? Like deep in the business for talent? And it's like, look, if I, if I win all of your talent, then you can't compete with me at the top level. I think another thing like for ConvertKit, you know, building email marketing software and all of this competing at the top is like,

• 1:02:35Speaker 02

  do we have better features in MailChimp? Do we, um, you know, in this particular thing, someone's like, hey, do you have A versus B, right? And we're, we're competing feature by feature or on a brand level. And we absolutely compete there. But where we're, um, looking to compete now is like, what do creators care about? Creators care about getting paid. And so now we're taking the angle of like, how can we just make sure that we're growing your audience faster than any other platform and how, and paying you more money? So like one thing that we launched is this, uh, sponsor network, and that's what's selling all the advertising in Sawhills newsletter. And it's, it's effectively a small agency inside of ConvertKit saying, hey, we will do all of the advertising and sponsorships for you. You know, we'll just take 20%.

• 1:03:20Speaker 02

  And so now when someone's like, wait, I don't pay convert it, convert it pays me. Like all of a sudden it moves from at the top level, like what features do you have or all of that to like, look, I'm never moving away because I get paid to be here. You know, Sihil's making $25,000 a month off of the sponsorships that he doesn't have to sell. And so I, after spending like 10 years competing head to head on the feature set and brand and all of that, then we're now shifting and saying, okay, how can we compete on what you care about most, which is getting creators paid. And so that like, that's the way that I like to shift the thinking is what actually do people care about most?

• 1:04:02Speaker 02

  And how can I go straight there instead of competing in the traditional sense?

• 1:04:07Anthony Pompliano?

  When you start thinking about uh kind of the business that you're building, how do you determine whether to create something like that internally versus outsource it versus go buy a business that you're then gonna kind of bring inside? Like, like, talk a little bit about the decision making. So you're like, hey, we want to help people make more money. We know that selling ads is a way to do that. How do we enter into helping? What's that process like?

• 1:04:32Speaker 01

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• 1:04:47Speaker 02

  Yeah, so my first thing is to like get crazy excited about it and distract my team and, and all of that. And I actually got a good little like mini Nick Huber lecture about the, this over the weekend. Cause he was like, look, you're coming in and you're going to your exec team. You're like, here's this new idea and it's so exciting. And they're like, what are you doing? We already have goals. We already have exactly what we're working towards. Like, don't distract, don't mess this up. And Nick was saying like, look, they're right. You know, ConvertKit's course subscription revenue does 34 million a year. Like that's the golden goose. Don't, don't screw that up. Keep everybody focused.

• 1:05:30Speaker 02

  And, and you should not be, you know, distracting your team with these new ideas.

• 1:05:36Speaker 02

  What's funny is that he was like, you're also right that this is a great idea and it 100% should be pursued. And like, so what you need to do is you need to, what's that?

• 1:05:47Anthony Pompliano?

  Both are true.

• 1:05:49Speaker 02

  Yeah, both are true. You need to hire a team either inside of ConvertKit specifically to pursue this. That's what we did with this sponsor network idea where we built out a team internally that they have their own goals. They're not distracting the rest of the team or priorities. You know, or you need to spin it up separately, right? Run it as an independent company. And so two examples on this with a sponsor network, it's basically an agency.

• 1:06:17Speaker 02

  You know, a software backed agency running inside a ConvertKit, making that happen. And now it's just really scrappy to get going. I think a month ago, we just passed a million dollars in sponsorship sold across that. And we actually still haven't written any major code. It's all like no code systems running all of that because it's like, let's prove out the model before we do something really expensive. Like put five engineers for six months on it. Cause that like engineering time is one of the biggest constraints in our business. And so that's how we spin that up. Another example is Sahil Bloom and I are actually starting an agency that does newsletter growth. Cause for a long time I've thought about.

• 1:07:02Speaker 02

  That ConvertKit should have a services arm because you get these creators who are like, you know, I want to do this and that. Like, can you do it all for me? It's like, well, we're a software company, like we, we, you know, we sell software. We don't do services. And I've thought that, you know, ConvertKit should have a services arm that could do that for people. But like, that's a whole thing to build up. How does it fit in the model and all of that? It's like, oh, you know, on Nick's advice, you spin it up as a separate company. And then we have it built in where if we ever want to fold that into ConvertKit and that makes sense, we can do it. But like, this other side is not a distraction to the team. And so we can run these smaller tests and then scale them.

• 1:07:42Anthony Pompliano?

  How much of, how much of it is you're able to do this because you've built a business that you all own? And you kind of don't need approvals.

• 1:07:52Speaker 02

  Yeah, I think that's, I think that's a big thing. I bet if I had, you know, if I owned thirty percent of the business because I had several co-founders and we'd raised, you know, fifty million adventure capital. I, I don't think these things would work, but because at this point, you know, I own eighty-five percent of the business and have taken no outside capital, then yeah. I can be like, hey, I'm gonna try this thing. And then if it works, then I'm gonna.

• 1:08:19Speaker 02

  Like scale it up and, and put like true systems behind it.

• 1:08:24Anthony Pompliano?

  Talk a little bit about ConvertKit today. How big is it? Kind of, how do you think about the business?

• 1:08:31Speaker 02

  Yeah, so it's got a couple of components to it. We're seventy people. We, thirty-four million in earned revenue, subscription-based.

• 1:08:41Speaker 02

  The target's creators. So, you know, someone building a newsletter, all of that. Anyone like maybe just launched a newsletter or podcast and I'm paying nine dollars a month for, you know, a few hundred subscribers or on the free plan. All the way up to most of the biggest newsletters on the web. So like James Clear, Tim Ferriss, Susan Cain, a lot of big authors, Ryan Holiday, all run the newsletters on ConvertKit. And then, oh, we've got a bunch in the entertainment space, which is fun. You know, Tim McGraw, Arnold Schwarzenegger writes a great daily newsletter on ConvertKit. Which is fun to read. My favorite thing is when he's on like Jimmy Kimmel or something and he's talking about like, go sign up for my newsletter.

• 1:09:22Speaker 02

  I wish you'd say there was a ConvertKit newsletter.

• 1:09:26Speaker 02

  We'll get that in later.

• 1:09:29Speaker 02

  Other things in the business, I guess things that I'm really thinking about a lot right now are how to get to a hundred percent net dollar retention. And so that's, for anyone who doesn't know, you'd also phrase that as net negative revenue churn, but basically, your expansion revenue from existing customers growing is bigger than, you know, any churn from cancellations.

• 1:09:52Speaker 02

  And so that's been a big focus of the last year of like, how do you make a much stickier product? How do you make a product that helps people grow faster? So we're we've currently gotten it all the way to ninety nine percent net dollar retention, which in like the small business market is pretty good. But I'm like, oh, you know, the next three months.

• 1:10:07Anthony Pompliano?

  You need one more, one more.

• 1:10:10Speaker 02

  Yeah, so close.

• 1:10:13Speaker 02

  But yeah, now it's it's thinking about what other things can we tack on? We've got Convertible Commerce, which is a like how you sell digital products, so paid newsletters, eBooks, coaching, all of that. And that's still pretty small, but processing like about a million dollars a month in payments on behalf of creators. And then this like sponsorship and advertising network. And so basically, like, how can we make creators more money is how that works. And then because we we end up making a small percentage of all of it.

• 1:10:45Anthony Pompliano?

  When you think about the journey that you've had doing this, would you go back and raise venture funding or bootstrapped? In hindsight, was the right way to go?

• 1:10:56Speaker 02

  Yeah, bootstrapped is the right thing for me. I'm not one of those people that's like bootstrap ride or die or venture capital, you know? There's plenty of people who want to have flame wars on the internet about which one's better. And I don't care that much.

• 1:11:10Speaker 02

  But like my style of operating, and I think for this business, bootstrapped is is absolutely right. Because like too many companies, when money's easy to come by, too many companies can spend too much time building without like really being validated with customers. And I had to get customer funding, you know, from the beginning. And so that's kept us really, really close to customers. And then I think there's other things like being able to take distributions and

• 1:11:43Speaker 02

  Make money along the way and not just worry about the exit. You know, like a lot of founders are basically broke for a very long time and then they sell and they're insanely wealthy. And, um, you know, building a bootstrapped company, you can have like this much more sensible net worth arc. And so that's something of like, you know, I can take healthy salary and distributions from convert care. And build a lot of enterprise value. So again, in that, it lets you play that cash flow versus enterprise value and you don't have to go all in on one or the other. You may like, look, I can do both.

• 1:12:18Anthony Pompliano?

  Yeah, I think it's, uh, I think it's super smart. Uh, the last thing I want to, uh, talk about before, uh, let you go is, um, you don't live in San Francisco, you don't live in New York, you live in Miami or Austin, uh, LA, uh, Singapore, Dubai, you know, name them. I don't know, maybe the top 25 most popular places that, uh, tech entrepreneurs like to brag about. You're in none of them. Talk a little bit about, uh, kind of how you thought about where to live, build the business, remote versus in person, et cetera.

• 1:12:48Speaker 02

  I, yeah, so I live in Boise, Idaho on a nine acre farm that, that, uh, we live on and raise our three boys here. There's this idea that someone said, I think it was a guy named Sean Blanc, who I first heard it from, and he said, if you work with your mind, you should rest with your hands. This idea of like, we spend all this time in front of the computer all day. And, you know, grinding it out, making our businesses better. And like, when you're not doing that, you should find something tangible. I like woodworking. I like building things. I like gardening, farming, you know, and a lot of my best ideas come when I'm doing something with my hands that like, just lets my brain wander.

• 1:13:32Speaker 02

  Um, so, uh, Boise is a really good place for that. Also another thing, how, how often do people, like, do you get the like, pump, I'm in, I'm in Miami, let's grab coffee. Twenty times a day, more?

• 1:13:44Anthony Pompliano?

  Yeah, people, people know that, uh, that's not my gig. So, uh, it's more so.

• 1:13:47Speaker 02

  They stop asking. Yeah. No one asked me that in Boise. I'm gonna go do lunch with somebody, uh, today. And it'll be like one a month. I get to be like heads down on my company. Um, because.

• 1:14:01Speaker 02

  Yeah, it's not, not that whole thing. And so I, I think it's been really good to live outside of those markets. And then once a month or every couple of months be like, hey, I'm gonna go to San Francisco and line up a ton of meetings. Or New York and, and just like batch that and say, basically I go from building mode to networking mode and move between that and say like, hey, I'm, I'm in building mode 95% of the time. And then I'm gonna switch into networking mode when I'm going to speak at this conference in New York and then I'm gonna line up a bunch of meetings around it.

• 1:14:37Speaker 02

  And so that, that's worked really well for me. And I, I think you're just gonna see a lot more of it as companies stay remote after COVID and, and all of that. But like,

• 1:14:49Speaker 02

  there's a ton of benefits to being in the, in big cities and being around other founders. And I would just like be really clear for yourself. Are those benefits that like are just social or ego or like, or are you really taking the, the most advantage of that? Like, is that serving you to go to the 12th founder dinner of the month?

• 1:15:11Speaker 02

  Or do you actually just need to sit down and build your company?

• 1:15:14Anthony Pompliano?

  Yeah, I, um, I, I tell a lot of young people, can you hit the 30 minute dinner? And they were just like, what do you mean? So, uh, people who live here might even gonna laugh if they hear this. I only go for 30 minutes. There's people I know very well, highly respect them. Uh, they do dinner a lot. They're, you know, always inviting me. Uh, I'm very, uh, uh, thankful that they invite me. I got things to do. And so what I do is I just show up for 30 minutes. And I say, hey, look, I'm not here to eat and whatever. I just want to say hi to everyone, you know, gotta go. Bye. And, uh, the big hack was, uh, when we had our daughter, right? Oh, I got, I got a little one at home.

• 1:15:49Speaker 02

  I gotta get her to bed. It's so great to see you all. And then maybe there's two people that you meet that you really wanted to meet and so you can do that. And then if you hit it off, you're like, hey, like, let me give you a call when, uh, I'm out pushing her in a stroller and she falls asleep and like, I'll give you a call next week, you know? And you can actually do that. That's great.

• 1:16:08Anthony Pompliano?

  Just smash it all into 30 minutes. And then now, now though, uh, I gotta be careful because, uh, if I go to one of these dinners, they don't even like save me a place to like eat. So I'm like, oh damn, I guess I really gotta go in 30 minutes.

• 1:16:20Speaker 02

  I was actually hungry and they're like, oh, for once you were gonna stay.

• 1:16:24Anthony Pompliano?

  Yeah, yeah, exactly. Um, all right. Where can we send people to find you on the internet? Find out more about ConvertKit?

• 1:16:30Speaker 02

  Yeah, good stuff. So I write a newsletter at NathanBerry.com, Barry's B A R R Y. And then if you're building an audience on the internet and you want to use Convertit, just Convertit.com will happily migrate anyone over for free. And yeah, just follow our buildings. I do some interviews on a show, just the Nathan Berry Show. If you search on anywhere podcasts are, that's where I'm having conversations with people I find interesting. And that's all I got.

• 1:17:00Anthony Pompliano?

  Dude, I enjoy talking every time we talk. You've built an amazing company and I love the way that you guys are thinking about everything. So thank you so much for doing this. We'll definitely do it again in the future.

• 1:17:09Speaker 02

  Sounds good. Thanks for having me.