#427 Andrew Wilkinson on Why He Buys Certain Companies

Andrew Wilkinson is the co-founder and Managing Partner at Tiny. He previously founded MetaLab, one of the world’s top design agencies. He has gone from working out of his apartment a little over a decade ago, to today overseeing a group of companies with over 300 employees and tens of millions in revenue. In this conversation, we discuss economic freedom, importance of speaking the language of founders, hiring advice, capital allocation for non-profits, and then we unpack a number of Tiny’s acquisitions. ======================= Digital art is here, and it's real. NFTs are selling for hundreds and thousands of dollars. The only platform I buy on is Nifty Gateway, which is an official sponsor of the Pomp Podcast. They release content from the best NFT artists in the world twice weekly, and have featured many world famous artists including Kenny Scharf, Trevor Jones and WhIsBe. NFTs on Nifty Gateway are in extremely high demand, so if you really want one, make sure to be on the website as soon as it is released. Go to http://www.niftygateway.com and sign up for an account today. ======================= Coinbase Wallets are adding support for .crypto and .zil domains through their partnership with Unstoppable Domains. Unstoppable Domains provides an all-in-one solution for blockchain domains. You can send money using these new domains instead of long Bitcoin wallet addresses, while also storing your domain in Coinbase's collectibles section. Go to unstoppabledomains.com in the dapp browser to register and manage your domains. ======================= Crypto.com is the only all-in-one platform that allows you to BUY / SELL / STORE / EARN / LOAN / INVEST crypto all from one place. Join over 1 million users currently using the Crypto.com app. Download and earn $50 USD using my code ‘pomp2020’, or use the link https://platinum.crypto.com/r/pomp2020 when you sign up for one of their metal cards today. =======================

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. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Let's kick this thing off. Andrew Wilkinson is the co-founder and managing partner at Tiny. He previously founded MetaLab, one of the world's top design agencies, and he has gone from working out of his apartment a little over a decade ago, to today overseeing a group of companies with more than 300 employees and tens of millions in revenue. In this conversation, we discuss economic freedom, the importance of speaking the language of founders, hiring advice, capital allocation for nonprofits, and then we unpack a number of Tiny's acquisitions. I really enjoyed

• 0:44Anthony Pompliano?

  this conversation with Andrew, and I hope you do as well. Before we get into the episode, I want to quickly talk about our sponsors. First up is Nifty Gateway. Digital art is here and it is real. I'm really, really excited about this, and I think it's an awesome opportunity, and it's a growing market. The NFTs, non-fungible tokens, are selling for hundreds and thousands of dollars. The only platform I buy on is Nifty Gateway, which is an official sponsor of this podcast. They release content from the best NFT artists in the world twice weekly, and they've featured many world famous artists, including Kenny Scharf, Trevor Jones, and Huze B. I personally think the digital art market will one day be bigger than the traditional

• 1:27Anthony Pompliano?

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• 1:52Anthony Pompliano?

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• 2:37Anthony Pompliano?

  You go to a Coinbase Wallet, you type in pomp.crypto, and next thing you know, I will get the Bitcoin that you're sending to me. So it's really, really cool. Just like URLs before that were IP addresses, and then we got the human-readable URLs. That's what Unstoppable Domains is doing. Now, just like with URLs, if somebody buys the URL you want before you do, you can't get it. So there's only one version of it. And so if you want a specific name, it could be your name, it could be the name of your company, a product. Maybe you think a domain will be worth more money in the future. Whatever it is, you have to go to unstoppabledomains.com and get the domain you want now. First come, first served. So head on over to unstoppabledomains.com and go get the domains that you want.

• 3:22Anthony Pompliano?

  Lastly, is crypto.com. They're an all-in-one platform that allows you to buy, sell, store, earn, loan, or invest crypto all from one place. You can join over 1 million users currently using the crypto.com app. They've got a great name, crypto.com, which is a great URL, and it's the place where mass adoption is happening. It's an all-in-one platform where you can buy, sell, store, earn, loan, or invest crypto all from one single place. Go check them out at crypto.com. All right, let's get into this episode with Andrew. I hope you guys enjoy this one.

• 3:55Speaker 01

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

• 4:27Anthony Pompliano?

  All right, guys. Bang, bang. I've got Andrew back for another episode. Thank you so much for doing this, sir.

• 4:33Speaker 02

  Yeah, great to be here.

• 4:35Anthony Pompliano?

  Absolutely. While we are doing this, you are in quarantine in Canada on your way back, so it gives me the perfect time to ask you a bunch of questions about the Tiny Portfolio. For those that didn't watch the first episode that we did together, maybe just give us kind of a quick one minute on what Tiny is and how you think about that business.

• 4:55Speaker 02

  Yeah, so I'm an accidental entrepreneur and then became an accidental investor. And I would say I'm somebody who's just very lazy. So when I don't like doing something, I'll do almost anything to get out of it. And so the forum that took was I hated my first job and every job after that, I hated working for other people. So I decided, okay, the easy thing is, the lazy thing is to start a business. And then once I started doing a business, I went, oh, man, I don't like doing all this work. There's all these things I don't enjoy in the business. I'm getting that off my plate, so I delegated it to other people. And then at a certain point, maybe six or seven years in, I was like, man, I really don't like running a business. I hate having, I like companies when they're small, when they're 10 or 20 people, but

• 5:39Speaker 02

  I'm not the guy to run them when they're 50. And so I said, okay, I'm lazy, I'm going to delegate it. So I started delegating it to CEOs. And at the end of the day, I was like, holy crap, this is amazing. I can delegate the entire operations of the company. And so when I think about what do I actually want to do, what do I love? It's people, problems, and deals. And so, you know, people and problems, I get from the existing businesses and I get to meet new people through. Business and all that kind of stuff. That's kind of my number one North Star is just meeting interesting people and talking about cool stuff. Um, but I love deals. I love figuring stuff out and finding opportunities and rooting them out and learning about new industries. Uh, and so I started buying businesses about seven years ago. Uh, now I'm up to about thirty that are wholly owned.

• 6:24Speaker 02

  Me and my business partner own control of thirty businesses. And then we also do a little bit of minority and venture investing. Uh, in total, we've invested in over seventy companies, ranging from little tiny startups to companies like SpaceX. Um, and I get to do it all from Victoria, Canada, uh, which is kind of the middle of nowhere.

• 6:44Anthony Pompliano?

  I love it. So one of the things I want to do on this episode is kind of really unpack the why behind some of the businesses you own or that you've bought. Um, and I think everyone kind of now understands, okay, Andrew has a very specific view on the world of like what he's doing, right? This almost like Berkshire type model for internet businesses. But why you've made certain decisions is really fascinating to me. And so let's start maybe with just the service businesses, right? You started out with MetaLab. You've now gone on and acquired a number of other agencies. Most people in the tech world think services are, you know, not a great business to be in. They actively work to get out of services and build technology and products. Why are you so kind of in love there or enjoy owning businesses that are true service businesses?

• 7:30Speaker 02

  Well, it's not that I'm in love with them necessarily. It's that I started there and I got really lucky. I always say that everyone should have a launchpad business. What I mean by a launchpad business is that everyone should strive to create a business that earns them between a hundred and two hundred thousand dollars a year. It doesn't need to be a business that's going to be the next SpaceX or change the world. It just needs to be a business to give you economic freedom. Because I think if you think about happiness, the most important thing is getting seventy-five K or so a year, being able to live your life and not stress out, right? So for me, uh, I quit my job. I was trying to figure out what to do and I wanted to move to Silicon Valley. But I was dead broke and living in my parents' basement. And so I decided that I

• 8:15Speaker 02

  Freelance and I had one great insight, which was if I pretend to be an agency, hey, I can probably win more work. And so I pretended to be an agency. I came up with the name Metalab. I designed a very slick looking website. And I started cold emailing CEOs of Silicon Valley startups because I figured, hey, maybe if I work with one of them, I can go get a job at their company. And I realized none of, none of these startup businesses were being serviced by agencies. Back then, this is in two thousand six, two thousand seven, there was a lot of venture funding coming back. But there wasn't anyone specializing in design of digital products, so like web apps, iPhone apps, that kind of stuff.

• 8:58Speaker 02

  Um, and back then it was an afterthought, like nobody thought about design at all. You'd go, you'd raise ten million dollars, you'd hire thirty developers. And then maybe three months before launch, you'd throw together a website and a logo and stuff. It's not like it is now where design is like the DNA of every startup. And so I became the go-to guy and the go-to agency in Silicon Valley to help them design their products. So, uh, you know, we worked with Pinterest was one of our first clients before they were even called Pinterest. Uh, worked with Uber, Slack, uh, you know, all sorts of Tumblr, all sorts of big now, you know, multi-billion dollar businesses. Uh, as well as lots of startups, but I just never ended up going to get a job.

• 9:43Speaker 02

  So I fell into this industry and um, I started making money. And I was, you know, three or four months in and I decided, well, why would I go and work in Silicon Valley? I'm making so much money doing this that I just don't need to. And one of the really interesting things uh, about my business in particular was that agencies are usually terrible businesses. So normally you're making five percent net margins, ten percent net margins. I was making eighty percent net margins. I didn't know that wasn't normal. All I knew is my bank account kept getting bigger and bigger and bigger. Uh, and I think that, you know, I got lucky. I'm a designer who

• 10:25Speaker 02

  Can also sell and talk and negotiate and do all those things. Um, but the big thing in my uh in my court was that I was based in Canada. I could pay people incredible salaries up here. There was tons of talent, no competition. And then I could sell those services down to Silicon Valley. So for me, it was an incredible launchpad business because it made me millions of dollars a year. Within, you know, a couple of years as we scaled it. Um, but that said, I did not enjoy running an agency. There were elements that I liked, you know, I liked getting to meet with cool CEOs and I loved traveling down Silicon Valley and connecting with interesting people and helping them with their businesses. But at the end of the day, uh, it was hard.

• 11:10Speaker 02

  Services is a very difficult business, um, and there are people that love it. I did love it, but I just couldn't do it long term and I knew that. And so within a year or so, I started diversifying into other worlds. And I was just obsessed with making money while I slept. I just saw these SaaS businesses that, you know, had recurring revenue and I said, I want that. And uh, so I started moving out of it. But we've always owned these original services businesses. We still own Metal Lab and we own many others. And I mean, the way I would describe it is that, um, it's a great business if you can do a couple of things. One is that you can build demand.

• 11:54Speaker 02

  Right? So you can build a personal brand and a reputation so that you're not out there having to advertise or sell to get customers because you can have much higher margins that way. Uh, you want to be located somewhere where you can deliver the service at a good rate so that you can be very competitive on cost and you can also make good margin. Um, and you need access to talent, obviously, which is just, you know, really hard. We were able to do all those things. So at the end of the day, we have an incredible business. It grows at twenty or thirty percent a year. It still has pretty solid margins. It produces a lot of cash flow. Um, there's all sorts of benefits to owning it. I mean, I still get to interact.

• 12:35Speaker 02

  With really interesting people, I get insights into new companies that are launching and can invest in them before they go live. So there's a lot of pros to owning one of those businesses. And the best part is there's people who are like lifelong agency people. They love services. They love running these businesses. They love working in them. And there's a lot of young people where they get thrown into the business and they get just unlimited experience. You're working with a startup one day, a Fortune 500 the next. You're doing all sorts of different marketing sites, websites, you know, web apps, whatever. So it's a great business, but it's not, it's not the perfect business because it doesn't scale endlessly.

• 13:15Speaker 02

  And so what we've done is we've basically taken the money that we've made doing that and diversified. But at the same time, we've also bought other businesses in the vertical, mostly because we have more demand than we know what to do with. So we went and acquired a business in Spain that had an incredible agency team. And we said, okay, you're now Metalab's baby brother, Z1. And anything that's too small, or sorry, too small for Metalab will go to Z1. And then we ended up starting another agency below that called 8020. Anything that's too small for Z1 goes to 8020.

• 13:53Speaker 02

  So we've really kind of verticalized that and just said, look, we're going to try and maximize the demand that we have. It'd be foolish not to. But we don't necessarily want to go out and make a big investment. I wouldn't start going and buying services, businesses, businesses left and right at this point because they are so difficult.

• 14:11Anthony Pompliano?

  Yeah. What's interesting to me, I think in our first conversation was unlike some kind of conglomerate type strategies where there's lots of integration between the portfolio companies. And that's part of the investment thesis. You basically let most of the businesses kind of run on their own. And if there's some natural value that they can help each other with, you know, that plays out. But you don't necessarily try to buy companies that you can merge or bolt on to and things like that. One of the things that's interesting though is what happens when you've got that vertical integration or kind of that vertical ownership. So you kind of have, you know, a very large agency, a midsize and a small. I'm assuming then that there is at least sharing of leads, maybe also like best practices as well, or is that less intentional even though

• 14:56Anthony Pompliano?

  it's still vertical specific?

• 14:58Speaker 02

  I mean, we're really careful with synergy because it just pisses people off, right? So suddenly the CEO of MetaLab is going, oh, man, like, why do I have to refer to this person or whatever? So all we do is we try and create an incentive, right? So the incentive is they're a known quantity, right? They have a deep relationship with one another, you know, not operationally, but they trust one another and they've delivered. And then also they have a better referral fee than any of the other agencies they could do. And they're definitely going to get it because we control both businesses. What happened before was MetaLab would get a lead that's too small for it, it would refer it out, the agency would be flaky, they might embarrass MetaLab, so they'd stop referring. And then if there

• 15:40Speaker 02

  was a referral fee or a kickback or something, it often wouldn't get paid or whatever. And it ended up creating competitors. So as we would refer more work to small agencies, they'd grow, they'd start competing with MetaLab. So there's a lot of benefit to it. But yeah, we don't integrate the businesses at all. They're all totally separate still. They have their own CEO, own accounting, own management.

• 16:02Anthony Pompliano?

  Absolutely. And another services related type business is the Shopify ecosystem. Why did you guys initially kind of go all in or spend a lot of time building for that ecosystem? Was it something where you said, hey, look, we know Shopify is small today, but we kind of see the vision of the founders and this is going to be a massive multi-billion dollar company? Was it more kind of just serendipity? How does that play out?

• 16:26Speaker 02

  Total serendipity. I mean, it was totally random. I wish I could say that we, you know, we'd seen it all and it was obvious to us. We were actually so stupid that we got out of that business and then bought it back. So what happened was in 2009, I was friends with David Karp, who's the CEO of Tumblr, and he came to me and he said, look, we're launching premium Tumblr. Do you want to be one of our first partners? And I said, you know, sure, I guess, you know, we'll, we'll do it. Uh, thinking it would be something where we'd make like five, 10 grand a month. And we got into it and we were like, holy crap, we're making like a million plus a year on these uh, themes. And they were super high margin. We'd build a theme for 10 or 20 K.

• 17:09Speaker 02

  And we'd sell it for three or four years and make, you know, 500 grand in some cases. And so it was a really exceptional business and the only cost after you sell the theme is support and bug fixes. So that got us into the world of digital goods and themes. And Shopify took notice. Back then Shopify was like 10 people. And Harley Finkelstein, who's now the president, uh, reached out to me and he said, hey, I love your design work on Tumblr. Would you guys be willing to do the same thing for us? And so Pixel Union, our theme business, became the first theme partner at Shopify. Um, and to be honest, I mean, I was giving Harley advice about running a company because my company was 30 people and he was just 10.

• 17:55Speaker 02

  Or, or whatever it was. I mean, it's crazy to think about the growth. I had no idea. Um, but very quickly, once we moved over to Shopify, it was clear that was a much bigger business than Tumblr. And we ended up really focusing on that. And over time, uh, it grew and grew and grew. And what happened was in 2013, I was running five businesses and I was losing my mind. I was stressed out. And uh, I went to a mentor and said, look, I'm, I'm totally miserable. Uh, I'm making tons of money, but I'm not happy. What should I do? And he said, look, why don't you just sell one of the businesses, take some pressure off? And the business that was easily the most saleable, the most separate from everything else was the Shopify business, Pixel Union.

• 18:38Speaker 02

  And so I sold it in 2013, not realizing that Shopify was going to become, you know, a billion dollar behemoth. Um, and thankfully, uh, four or five years later, I was able to buy it back. I paid up, I paid up big time. Uh, but I bought it back and now we've continued to buy great businesses in that space. Um, in terms of, you know, There's a lot of components of that business in that space that I like. So there's the, the theme business is one, and that's digital goods. So let's say you're starting a Shopify store and you want to have a template or a design. You might pay us 250 bucks in a Shopify premium theme store. Um, and same deal, you know, we sell you the theme and then we have very limited cost after that.

• 19:22Speaker 02

  We have support and bug fixes. Uh, the other, uh, vertical in that business is apps. And those are basically, uh, SaaS products that add, um, you know, additional functionality to your store. Maybe a discount code, email marketing, you know, whatever. We own a whole bunch of them. Um, and then services. And to be honest, services is not a focus for us necessarily. But because we were working with so many different Shopify brands on their themes and apps, they would naturally start asking us for services. And so we were like, okay, well, this is like, we have a, a sawmill and we have all this sawdust. We might as well turn it into wood pellets. So we ended up starting an agency there and that's been very successful.

• 20:06Speaker 02

  So, I mean, it's really three businesses, three kind of different businesses. But the best part about that business is that Shopify is on a massive uptrend, right? So e-commerce is set to double or triple in the next decade and it's benefited massively from COVID. Shopify is certainly the best business in that ecosystem. I can't imagine any other platform you would want to use to start an e-commerce store. Um, and Shopify goes out and A, it's naturally growing from e-commerce, but it also does a ton of marketing and spends hundreds of millions of dollars on growth. And we naturally benefit. So if a hundred people join Shopify and start a new store, let's say five of them will always buy an app or a theme or a service from us.

• 20:51Speaker 02

  We'll just keep naturally compounding with them. So, uh, while I don't often like to own businesses that are in someone else's ecosystem, this is one where I know, respect and trust the management team, love the business, think there's a rising tide and just the business model is really phenomenal. Um, so we're making a big bet there over the next 10 or 20 years.

• 21:12Anthony Pompliano?

  Yeah, and in 2018, you guys started WeCommerce. You partnered with Bill Ackman. And there's some sensitivities here because there's a transaction that's happening that's been publicized. So I know you can't say too much, but maybe talk about, once you saw Shopify growing and you realized, hey, this is a really good business to be in, we do trust this management team, and like, we think it's only going to get bigger and bigger. How did you think through the either the mental framework or the decision-making process of like, we should step on the gas pedal and not just try to grow Pixel Union, but we should actually go and try to start other businesses or acquire other businesses and kind of get as big as possible within this ecosystem? How did you think about that?

• 21:52Speaker 02

  Well, I mean, with Tiny, what we realized, so the story of Tiny is basically that in 2013, when I sold Pixel Union, I suddenly had a whole bunch of money. And I was like, oh, man, I guess I need to learn how to invest in stocks, you know, conventional stuff. And so I pick up a book about Warren Buffett, who's, you know, I don't know anything about this guy. He's just some guy who buys stocks and everyone says he's really smart. And when I read about Buffett, I was like, holy shit, this guy is going out and he's buying all these businesses and letting other people run them and do all the work. And then he sits around reading and doing what the hell, you know, he wants every day. Amazing. And he also does deals in like, three weeks,

• 22:35Speaker 02

  whereas everyone else takes a really long time. And I had been through a lot of sale transactions in various businesses, and it was always a miserable experience. It took too long. It rarely worked. Often, I was ground down by private equity, and it was just a miserable experience. And so I looked at Buffett and was like, nobody has really done this for small and medium-sized tech businesses. I should do this. And that's when we started buying businesses. And our pitch to these business owners is that we are founders ourselves. We know all of the things you're worried about. And we've been through all this crap with private equity. So we're not going to waste your time. We're going to make an offer in 48 hours. We're going to try and get the deal closed in three or four weeks. And we're not going to mess with

• 23:20Speaker 02

  your business, so your staff hates you. I think a lot of founders are scared of selling their businesses because it's their baby. They don't want people to be mad at them. You know, yeah, they want to cash out, but they really don't want to sell it to somebody who's just going to mess up the business and piss off their employees and stuff. And so we realized that that was, you know, an opportunity in the wider world of tech. But we also saw an opportunity for that exact same strategy within Shopify. And we knew that if we tried to do it as part of Tiny, uh, we just didn't have the resources and we didn't want to grow. We'd rather make a focused platform, um, that's a hundred percent focused on Shopify. And so what we did is we went out and we raised, uh, some money from, uh,

• 24:05Speaker 02

  Bill Ackman, who we'd known socially and, you know, really liked and thought was smart. Uh, the Marx family, so Howard Marx and his son Andrew, uh, Ryan Graves from Uber and a few other friends of ours. And we had actually never raised money before. Uh, I, I today, you know, basically up until 2018, I'd never raised a cent for anything. And so it was a total experiment for me and I was terrified of it. I was getting all these big impressive people involved. And so the way I structured it was that there'd be no fees, no carry. It was a hundred percent a partnership. And I was putting in 50%, me and Chris were putting in 50% of the money and the investors were putting in 50%. Um, and so, uh, we did it and it's actually been awesome. So we've built out a team dedicated to M and A.

• 24:51Speaker 02

  Uh, my business partner, Chris, has been running the company. We hired a great CFO. Um, and yeah, as you mentioned, we're in the process of doing our reverse takeover in Canada to take the business public. And I can't really speak to it. I don't think I'm legally allowed. Um, but I can say I'm super excited about it.

• 25:07Anthony Pompliano?

  Yeah, it's, uh, it's pretty amazing to watch kind of as you've done this because basically it looks like what you've done at Tiny, you basically professionalized in it with a very specific focus, right? Kind of this M and A strategy, um, and, and kind of moved very quickly. And, and really it's a capital allocation decision at that point, right? And, and it seems like you guys have gotten very, very good at doing that. Um, one of the other themes, uh, that you've kind of stayed true to is design. So we Talk about the service businesses. You've also started to acquire businesses that service the or have built products for the design community. So Dribbble is probably the largest one. Talk through a little bit about what was the catalyst for staying true to the design community,

• 25:49Anthony Pompliano?

  but moving into more product-based companies rather than just the service agencies?

• 25:55Speaker 02

  Yeah, so when I first sold my business and I read about Buffett, Buffett talks about moats, finding these great businesses that have a competitive advantage, that keeps competitors from competing with them. And I was thinking about, okay, what are the sites that I use the most? What are the tech products I use the most? And Dribbble kept slapping me in the face. So Dribbble is the largest social network for designers. It's where designers go to post what they're working on, to get feedback from other designers. It's kind of a way to like, it's like a leaderboard for design, right? You can really find out who's cool and what people are doing and get inspiration. And then also find work on there. And I had found a lot of my early clients on Dribbble and I worshiped the founder,

• 26:40Speaker 02

  one of the co-founders, Dan Cedarholm, who's also a designer. And so I just started calling Dan. I would call him every two months and say, please, can I invest in Dribbble? Can I buy Dribbble? I'll do anything. I just love your business. And what I had realized about Dribbble was that they had what's called a network effect, which is kind of like when you think about Facebook or Instagram, you're going to go where all of your friends are, where there's already a social network. You're not going to go to somewhere with, you know, 10 or 20 people on it. And I realized that Dribbble had become the Instagram or the Facebook of design and that someone could come along. If Microsoft spent a billion dollars trying to recreate it, they couldn't do it.

• 27:24Speaker 02

  It was too cool and unique and they had this engaged community. And so I realized it was a great business and I just kept Dennis the Menacing, the two founders. And finally, they called me up and they said, look, we've been in this business for 10 years. We're exhausted. All the other buyers. Kind of freak us out like they're Wall Street people or you know they're startups that want to offer us a bunch of stock. And so, you know, we really like to sell you the business. And so I flew to Boston, we hashed it out in like 24 hours. And we got the deal done and it's been absolutely incredible experience buying that business and. You know, in terms of design, that's really been the thread that has run through all of our businesses.

• 28:07Speaker 02

  If you look at all the products, all the companies that we're involved with, they all have great design teams and really great products. What I think is really interesting about design is that designers are often not business people. And there's a lot of designer entrepreneurs. And so we love to partner with those entrepreneurs. And buy their businesses. Sometimes they keep equity, sometimes they don't. And then help kind of implement business best practices and help them actually grow more aggressively. And so often in design, there's just tons of opportunity for optimization and stuff. Because fundamentally, designers don't think like business people. They always want to improve the product first, redesign first.

• 28:49Speaker 02

  Not go out and do growth packs and marketing and other stuff. And so we've been very successful. Buying these kind of businesses were designed as the DNA, but then expanding on that and implementing best practices.

• 29:02Anthony Pompliano?

  Yeah. And what's so interesting is you kept calling, right? And saying, hey, I want to buy this. I want to buy this. They kept saying no. What did you learn through that process? You know, some from kind of the courting phase and then the negotiation happening so quickly? And getting a deal done. What were like some of the takeaways that you had or things that maybe you've used in? You know, future acquisitions, but you learned during that deal?

• 29:26Speaker 02

  Well, I think the big thing is speaking the language of the person whose business you're buying. And in our case, the only reason we can do it is because we're founders. I think if some Wall Street investment banker. Who decides to go work at a private equity firm and approaches a tech founder. You know, he or she is not going to be able to speak the language of the founder because they don't understand the pains. They've never operated a business. Frankly, they look at their business as a spreadsheet that's all about IRR and stuff. And so we can, you know, we can come in and I can say, look, Dan and Rich, you know, the founders of Dribbble, I'm a founder. I know all your pains. I've been through all your problems. I'm actually a designer too, and I know exactly how to manage a creative

• 30:09Speaker 02

  team, right? And when they hear that, they're like, oh, my God, you know, Andrew's going to be able to come in, hire someone who's going to be great and understand our baby versus, um, you know, someone who's going to come in and just view it as a spreadsheet. So that's a big thing. The other thing is just persistence and reminding people you exist because one of the things I've learned about, uh, deals is that it often is just about always being top of mind. And that's why we do podcast advertising. That's why I do interviews like this. That's why we write so much and on Twitter so much and do ads is because I want somebody to go, I need to sell my business. Oh yeah, that Andrew Wilkinson guy. I want to be like Squarespace or MailChimp with, uh, you know, with just

• 30:53Speaker 02

  always being in people's brains.

• 30:55Anthony Pompliano?

  Yeah, that, that, that's awesome. Uh, you also bought a business from the Basecamp founders, uh, around remote work. Uh, I think it's called We Work Remotely, which is, uh, not associated with WeWork, the, uh, the space sharing company. But tell us kind of that story and what you learned there.

• 31:14Speaker 02

  Yeah. So, um, I, I guess I, I described my experience of owning an agency and then lusting after recurring revenue. That was really because of Jason Fried and David Heinemeier Hansen from Basecamp, formerly 37Signals. Um, those guys built an incredible SaaS business, probably one of the best businesses in the world, super profitable. Uh, you know, I don't know any numbers, but massive SaaS company. And, um, I had just struck up a friendship with Jason over the years. And, uh, one day I emailed him and I said, hey, what's your plan for this job board that you own? And basically they had written a book. About remote work. They've run their company remote for over twenty years.

• 31:59Speaker 02

  And I think it was in twenty twelve or twenty thirteen, they wrote a book called Remote Office Not Required. And as part of that book, they created a job board. And the job board was very small. The book was, I think, like a moderate success. And back then, that was a wacky idea, right? Super, super wacky. You're not going to have an office. This is insane. Um, so what had happened was the job board had become, you know, reasonably popular in the remote community. And Jason and David owned a business that was a hundred times bigger. And so Jason basically said, I'm getting super annoyed. I don't want to have to deal with all these support requests. It's not making me very much money. Um, do you want to buy it? And Jason's funny. He doesn't negotiate. He just told me a price.

• 32:44Speaker 02

  And I knew, you know, it was going to be fair because it's Jason. And I said, sure, I'll buy it. And so we ended up buying it. And it was quite a small business. Um, but what we loved about it was that we were very excited about remote work in general. We thought that was a big upswing. And while job boards are not necessarily the highest quality business, because at the end of the day, they compete with social networks like Dribbble and LinkedIn and stuff. Um, it had very high margins. It was under optimized and it was in a growing space. And so, and we bought it at a price where, worst case scenario, we could probably get our money back. And what we did there was we just came into this business that was incredibly under optimized.

• 33:26Speaker 02

  And we grew it massively. I mean, I think we six or seven X earnings over the prior five years. Uh, the business has continued to grow massively. Um, but it was a lot, a lot of it was just kind of like,

• 33:40Speaker 02

  um, doing base hits, right? It was SEO, pricing, um, you know, blogging, doing a podcast, all that kind of stuff. So that's, that's one of our businesses where we haven't had to be geniuses. Uh, I love to buy a business where, you know, if I lose, I lose a little and I can, if I win, I win big. And that I'm not going to have to do anything too creative to get a great return. So an example would be, um, With WeWork remotely, I knew that if we just increased the price to be market price, like we looked at a bunch of other job boards and they were all selling for $2.99 a job post, they were only selling for $1.99. Well, the day I bought it, I jacked it up to $2.99 and the job board, the volume didn't change.

• 34:23Speaker 02

  Boom, I just paid myself back in three years instead of five years. And then on top of that, doing a bunch of other simple stuff. That I can count on and it's safe. What I wouldn't do is pay up for a startup that could be a billion dollar business, but I'm gonna have to be a genius and push a rock up a hill, do a bunch of crazy R and D and, you know, be hyper-successful in order to make a return. I'm always looking at what the bird in the hand is versus the two in the bush.

• 34:52Anthony Pompliano?

  Yeah, and so when you buy that business, you talk about like basically not having to be a genius, right? So the pricing is one piece. You mentioned SEO. What else did you do, right? Did you bring a team in? Did you keep their team? Kind of walk us through, because that to me seems like a down the fairway type, you know, situation for you and the tiny strategy, right? It's like you found the perfect type of business. You know that if we do the right things, this will grow, we'll really get a return on our money. But what else did you do there to make it work?

• 35:23Speaker 02

  Well, I mean, the number one thing is always hiring great people, right? So, and then getting the incentives right. So we went out, we hired a guy who was an exceptional growth marketer. Basically said, okay, this business has historically grown at 15% organically over the last three years. And we're gonna, we, you know, he wanted a high upside or whatever, right? And so we said, this is gonna be a compounding 15% hurdle. So your goal is always gonna be 15% higher, but you're gonna get a cut of the profits every year and you're gonna have a very low-based salary. So he was put in a position where if he killed it, he would make a lot of money. And we loved that. We were happy to pay him a lot of money because we were making a lot of money as well.

• 36:08Speaker 02

  And so that was the number one thing. That's always the most important thing in any acquisition for us is finding somebody who has the right skillset to run the business and incentivizing them. All the different component parts of everything he did, I mean, there's probably like 40 different optimizations and experiments he's run. But at the end of the day, the most important decision that I personally made was hiring the right person to take it over.

• 36:31Anthony Pompliano?

  And you've done this over and over and over again. Now you've got 30 businesses. You've kind of hired multiple times for some of these businesses, different roles. How do you understand, we just bought this business, we work remotely. Okay, this person who's got the skillset of growth marketing. How do you know that that's the right person? Is it some sort of referrals and kind of back channeling that you're able to do? Is it, hey, they've done this somewhere else for the same type of business? And so it's just kind of replicating their experience. Like, how do you kind of pull away all of the, I always call it like the marketing bullshit of somebody's trying to get a job, right? And like actually have confidence or a high probability of like, this is the right person to come do this here?

• 37:13Speaker 02

  Yeah, it's funny. I mean, when every CEO starts hiring, they always hire their friends or people with potential. And I always say, if you were going to renovate your house, would you hire the general contractor who you think has potential? Or the person that's done it a thousand times? You know, you're going to hire the person who's done it a thousand times because this is much more expensive than a home renovation and the cost is much bigger. So I've learned that lesson the hard way. I've hired CEOs who I just love their moxie. That works out one in five or one in 10 times. What I've found that works is finding a business that's similar. It doesn't have to be the exact same industry, but the kind of best practices or strategy has to be similar or the method of monetization.

• 37:57Speaker 02

  And usually I like to try and find something that's double or triple the size. And then I'll go and poach the top executive at the businesses I've identified. And we have started using recruiters for that just because we're buying so many businesses that we need people to delegate that to. And then from there, it's all about incentives and making sure the incentives are aligned. We've had funny things happen where in one business, we had a CEO who had stock options. So we felt he was very aligned with us and we knew it was a hyper growth business. And we were getting so frustrated because the business was very profitable and building up cash. But every quarter, he'd always have some plan. Hey, I have to use, you know, I know there's a million dollars in the bank, but I have to use it for this.

• 38:41Speaker 02

  Big growth strategy that's coming up and we're just going crazy. We're like, dude, like dividend the money back to us. We need to go invest it. And we didn't really buy into the growth ideas. We realized that his incentive was he had a base salary. And he had stock options and the stock options were going to get increasingly valuable. But when he dividendated a dollar to us, he didn't actually benefit in any way. So he changed his comp to he owned five percent stock options. Whenever we got a dollar of dividends, he would get five cents. As soon as we did that, behavior totally changed. He didn't want to build up the cash. He wanted to dividend it. So, so often, uh, you know, incentives drive behavior. Show me the outcome. I'll show you the incentives.

• 39:23Anthony Pompliano?

  Yeah. And, and how do you kind of broach that? Like, one of the things that's interesting to me about your business is you're constantly having what could be hard conversations, right? If you hire the right people, um, you know, hopefully it's a 20 minute conversation. Hey, this is what we see. This is why we're changing it. That person says, okay. But I'm assuming that you've got to have a lot of these hard conversations. How do you kind of broach that topic around compensation for somebody who has this kind of unique role of they're running a business, but also they're owned by you, your partner and Tiny.

• 39:57Speaker 02

  Well, I mean, we've realized there's this whole world of executives who aren't, they're too risk averse to start their own business. But they want to take some risk and they also don't want to work at a Fortune 500, be a worker, drone or whatever. They don't like that. And in, if you look at the universe of all the different businesses you can work at, you know, you can go work at a venture business, take a lot of risk as an executive. You can go work at a private equity backed business and know that in two to four years, you're going to have to sell to someone else and be stuck into an earn out and kind of have a gun to your head, have a lot of pressure. Uh, or you go to a public company and you just have massive regulatory scrutiny and stuff. Working for us is a dream in a lot of ways because at the end of the day, we hire a CEO.

• 40:42Speaker 02

  We incentivize the CEO and then we don't talk to them unless they call us. And the only time we have a conversation is if they call us and they say, Andrea. Want your opinion on something or if they want to spend a large amount of money. So if someone wants to go and spend $2 million on R and D or an acquisition. Yeah, we're going to approve it or not approve it. But when it comes to the actual day to day strategy of operating the business, we don't have much say. And it's to the point where one of my CEOs called me up six months ago and he had uh what I felt was kind of a harebrained scheme, uh you know, opportunity to be identified and they said, here's my opinion. I don't think this is that smart, but I'm not going to hold you back from doing it because otherwise you won't know. And you know, what I've realized is if I stop someone from doing something,

• 41:28Speaker 02

  uh they end up resenting me and they actually have a story now that I've prevented them from hitting their target to their bonus. And so unless someone's doing something that's going to be self immolation and ruin the business, I'll allow them to do anything pretty much. Um, and I think that buys us a lot of loyalty from the CEOs because at the end of the day, they have a great gig where they really get to run their business as if it's a hundred percent their own.

• 41:52Anthony Pompliano?

  Yeah, it's really funny you say this because I was recently listening to an episode of acquired, uh, the podcast and they were doing kind of a deep dive on, uh, on Oprah. And, uh, at one part of Oprah's career, uh, there was a guy who came from the cable network. Uh, he was basically sent to the Chicago market and his job was to fix that market, right? So kind of very similar to kind of you having a CEO to run a business. And his grand plan, uh, he came back with was we're going to give Oprah a daytime, uh, TV show. And she broke the mold of every single recipe for success that, uh, kind of cable television had seen. Um, and so, you know, very similar, the kind of corporate management, if you will, was like, well,

• 42:33Anthony Pompliano?

  I don't know if this is going to work. Uh, we wouldn't do it if we were in your shoes, but like, we sent you there, you're responsible for making this successful. So like, sure. And obviously, you know, Oprah goes on to be Oprah and it was wildly successful, et cetera. Um, and so it, it, it's almost this unique balance between, uh, having the self-awareness that like you're not there every day, right? You, you're not in that customer meeting and you see somebody raise their eyebrows or you know, like all, all that kind of stuff. But at the same time also, uh, you do have experience, right? And across a lot of different companies.

• 43:04Speaker 02

  When you own a conglomerate, the hardest thing is not being tempted by synergies or getting your hands on the tool, right? I mean, I'm an operator. For 15 years, I ran a business, right? Or, well, really 13. But, I mean, like, I love getting involved and solving problems and stuff. And so, there's that challenge of seeing all these sexy businesses and wanting to chime in. And I call it the swoop and poop. You want to call up the CEO and give them a bunch of opinions and tell them what to do. So that's tempting, and that's hard not to do. But I've pretty much gotten to the point where I don't do it. The other thing is just being tempted by synergy and opportunity where you go, "Hey, there's 30 businesses and they're all customers of Amazon AWS. What if we grouped all these together?

• 43:49Speaker 02

  Or what if we told this business to work with this business in this way? Or gave them free advertising?" And I was really lucky. Last summer, I got to have dinner. Me and my business partner, Chris, got to have dinner with Charlie Munger in a small group, and we just got to pepper him with questions. And I asked him about this specific issue. And he said, "They basically completely remove themselves from anything like that." And that at any given time, there's probably billions of dollars of opportunity where Warren or Charlie could, with one sentence email, you know, one declaration within a business, increase their free cash flow significantly. But they don't because they hold true to this idea of having a decentralized conglomerate, leaving the CEOs to do it, and they don't want to lose trust.

• 44:34Speaker 02

  And so, I figure if they've been doing it for, you know, 60, 70 years, they probably know a thing or two. And I've heard that repeated over and over and over again. So, I really think that's the way to run this. I think as soon as we become GE and we start synergizing and integrating, we get ourselves into a lot of trouble.

• 44:53Anthony Pompliano?

  Yeah, I love that. You've obviously done very well in terms of the acquisitions you guys have made and able to really kind of, not, maybe not perfect, but get good at the process, the identification, the acquisitions, and then kind of continuing. One of the other areas that you've recently started to focus on is more philanthropic-type activities. And you recently tweeted, maybe a couple of months ago, that you started a foundation. Maybe talk to us a little bit about that. And I'm interested in kind of how you're thinking about, really... Capital allocation, given that that's what you do, you know, day to day in a for-profit manner, how you think about it in this this new structure?

• 45:35Speaker 02

  Yeah, I mean, it's been fascinating. I've been thinking about philanthropy for maybe five years and, you know, giving away money in all the conventional ways to Red Cross and different charities locally and stuff, but I decided to really try and point and put a flag in the ground and step it up. My way of doing something or making myself do something is to have consistency and commitment kick in. So I basically designed a website, created a brand, said what we're going to do, and then I tweeted it out, and that was a way of me just forcing myself to do it. And I think, you know, we've probably given away a couple million dollars at this point. So we're early, like compared to other foundations,

• 46:15Speaker 02

  we're really tiny. But my thinking on it so far has been, we've really had two strategies. So one is, when there's something that we're passionate about that is probably not going to be able to deliver any kind of profit, and what I mean by that is, this is not going to be a self-sustaining organization that can make money, then we'll just make a donation, right? So an example of that is, you know, I'm really passionate about esophageal cancer. I have many friends who've been affected by it. I have risk because I have acid reflux and some other issues and stuff. And so it's an area that we want to put some money into.

• 46:59Speaker 02

  And we've been funding a research center at UBC. That's something where I don't see any way for that to become a self-sustaining organization that can make money. At the end of the day, I'm going to have to give them money, they're going to extinguish the money and use and basically build a body of research that'll benefit science globally, right? So that's pure donor model, which I'm happy to do. The approach I've taken with science has been that at the end of the day, I'm probably not the best person to vet most of the opportunities. And so, and I have a lot of great friends who are super amazing scientists and doctors. So what I've done is just given them

• 47:37Speaker 02

  Money. So I've given Peter Attia a hundred thousand dollars. I've given Ron, Dr. Ron DePatrick a hundred thousand dollars. And I just say, tell me where to, where to send it. You know, here's the money. You tell me where it goes. It can go to your own research. It can go to somebody else. Um, and we'll see how that goes. I mean, the studies they've chosen are quite interesting. Um, and uh, on the flip side, there's things that I think can be sustained. And to be honest, as a capital allocator, as an investor, as an entrepreneur, I find it really, I'm allergic to this idea of just money being put in a bucket and then disappearing. So, um, you know, I'm really passionate about journalism, for example. Um, there's a, uh, organization here in Canada called Canada Land,

• 48:22Speaker 02

  which is one of the most successful independent media organizations and podcasts in Canada. Um, they needed money to grow. I gave them a million dollars, but I said, I'm a shareholder. The foundation is a shareholder and any profits that flow back to us will come out as dividends back to the foundation, but I promise that I will reinvest it in other journalistic efforts in Canada. So that's an example of something where we're making a for-profit investment, but it stays within the foundation and it'll continue to do good. So I think that is kind of the route that I'm going to take a lot of my giving. Um, on the science side though, I haven't cracked how to

• 49:03Speaker 02

  make it profitable. Um, you know, certainly if the cancer research group discovers a drug or something, maybe there's an opportunity to patent it or something like that. Um, but I'm very early on my journey. I think, you know, we could have a much more interesting conversation in a year or two. Uh, once I've lost a lot of money on dumb donations.

• 49:24Anthony Pompliano?

  The last question I have for you is, uh, it's very obvious kind of how to measure success in, uh, the for-profit businesses that you own, right? There's everything from revenue, valuations, cash flow, and that's pretty well understood. How are you thinking about the measures of success or what, you know, data points are you kind of watching to see this is trending in the right direction or wrong direction when it comes to the nonprofit and philanthropic stuff?

• 49:48Speaker 02

  I think it's really, really hard. I mean, I'll be happy. Certainly, I can measure the investments, the kind of for-profit investments I described or whatever, in dividends coming back eventually and being able to do that. I don't really know how to track the science because the research that we're doing, it's so basic, it's so fundamental, that it's not going to be commercialized. And to be honest, I don't know if I'll be able to measure how it's perceived in the scientific community because I'm not a scientist myself. So I would say, you know, if it's cited a lot on Google Scholar, that'll be a positive outcome, but I haven't yet set KPIs or anything like that for this stuff.

• 50:30Speaker 02

  One of the benefits we do have is that we have some pretty incredible, we're calling them fellows, the people that we give money to, and we have some incredible fellows with a big following. And so I think as the science comes out, they'll be able to promote it and talk about it and hopefully give it more of a boost than if we had just funded some, you know, nerdy scientist in a lab who's, you know, going to publish it in a journal but not share it in the wider world.

• 50:55Anthony Pompliano?

  It is not lost on me that in the for-profit business world, you basically are putting your trust and faith into CEOs to run the businesses. And in the nonprofit world, you're basically putting your trust and faith into the fellows to help direct the capital, right? So it's a very similar model when you look at it through that lens, but obviously two different outcomes and two different purposes.

• 51:15Speaker 02

  Well, it's also, one of the weird things about it is, you know, I've gotten to talk to a lot of scientists as a result of this, and they're lacking in the skills that they actually need to take their research somewhere. So all of them say, if I just had another million dollars, I could do X or Y or Z. And I say, well, what's your plan to get the million dollars? And often they go, oh, well, I just kind of go to the university and ask them to introduce me to donors or whatever. And I'm just like, oh, my God, like go on podcasts, like build a Kickstarter, like, you know, call up John Arnold or, you know, Bill Ackman or any of these people that are donating billions of dollars to science. It's not that hard to get on their radar.

• 51:57Speaker 02

  But none of them think like marketers. They're just like sitting there. They're doing this incredible work, but they're sitting there going like, okay, well, I guess someone will come along one day and give me money. Um, so I'm thinking a lot about that as well of like, how could you create a Kickstarter of science? Or how can we start to shine a spotlight on some of these people? Because the work is incredible and there's all of these potentially life-saving opportunities just sitting there. And they're limited 100% based on the amount of money that they can get.

• 52:26Anthony Pompliano?

  Yeah, it's absolutely crazy that, uh, you know, we spend a lot of money on a lot of things, but, uh, science is probably not that high up on the list and probably.

• 52:34Speaker 02

  Well, it's not, it's not sexy, right? It's one of those things where, um, you know, Bill Gates, for example, does a good job of this of figuring out like, if I invest a dollar, what's the maximum number of lives I can save? And it's really boring stuff. It's like, uh, rehydration tablets, it's malaria nets, you know, very, very basics, better toilets, um, very basic stuff. But I think finding a balance between funding those kind of, um, boring, uh, treating the symptom kind of stuff versus the basic research required to eliminate that, versus trying to do something locally in your own community that you'll feel good about.

• 53:14Speaker 02

  Uh, you know, there's the people, Charity Water, where you fly to Africa and you see the stuff you're doing. And I think all that stuff, you feel really good. I think that's the best for you as an individual to feel the maximum result. But at the end of the day, there's a question of, is that the biggest potential outcome that you could achieve? And I really, at the end of the day, do believe that science is probably the best way to achieve a large maximum kind of outcome. Because if you have a breakthrough, that can affect millions or billions of people.

• 53:45Anthony Pompliano?

  Absolutely. Well, listen, I'm a huge fan of what you're doing on both sides of the house. So, well, please keep it up. Where can we send people to find you on the internet or find Tiny?

• 53:54Speaker 02

  Uh, they can find Tiny at tinycapital.com and I'm on Twitter at A Wilkinson. That's kind of my primary means of talking to people.

• 54:03Anthony Pompliano?

  Absolutely. Well, Andrew, listen, thank you so much for, uh, for coming on again. And, uh, we will have to do this again in the future.

• 54:09Speaker 02

  You bet. That was awesome.