#101 with Ryan Begelman - How to Succeed Applying Private Equity Structure to Startups

okay what's up we got ryan back dude back to back episodes pretty much this is great yeah i'm excited about it it's been it's been amazing how much feedback i've gotten i've got i gotta out buried in in all kinds of emails and i was interesting to see what people wanna to know what was the what was the best and worst email you got well there was a handful of people trying to sell me their their company but they were usually too small but there was a couple interesting ones and yeah people out there wanna email me they can just go to ryan v dot com and if they have a company with three hundred thousand or more profit i'm interested in buying it or if they just wanna you know jan out or or ask me a question i'm happy to help and a lot of people asking me about the concept of like how to structure your business to minimize risk and upside which we talked about you know like joint venture waterfalls and structuring separate llc and some interesting some some invites with some other podcast podcasts so you guys are you guys are kinda like king makers i guess whoa what podcast podcasts music to my ears you know to be honest only listened to like three podcasts and and didn't listen to it for a while so i didn't recognize the podcast but but you know i don't know one of them had like gary v and some other interesting people like looked pretty much legit nice brian when i was i don't know if you guys happen to see when i i tweeted about how i thought buying a home was a horrible idea i pissed off so many people i i agree with you by the way i mean historically i think historically like home values have grown like two or three percent and obviously in some areas that if you bought at the right time and did done better but yeah i mean i was a renter for a super long time because i felt i could do better at my capital yeah to eat a huge loss on my san francisco condo so i'll never buy again as far as i'm like this taste will take seven years to wash out of my mouth how much will you have lost the significant amount yeah i think i'm gonna lose like i think it's gonna sell for two hundred thousand less than i bought it for so that's a straight out of my down payment and then you know it's a the agents the agent fee is like five percent right so i went with like a real not like a discount broker because i was like shit it's gonna be hard to sell i think i actually need somebody who's good and will hustle for this but five percent of a two million dollar house is like you know that's a hundred hundred grand right there so so on top of the loss i'm then gonna pay the hundred thousand fee for for my for the pleasure of of of losing money on my house but whatever it's okay when when some other places i lost on this one that's okay well what one of the ideas i brought today is how to make money on your ass oh okay yeah let's start with that then yeah because i did that well it was you know it was it was along the concept i was talking about on the last show about holistic entrepreneurship and now you can live better lives through entrepreneurship and and so like one idea that i i love n on is like you buy a house outside of a major city and in a destination people wanna go like hudson valley new york and then you you turn you you renovate the kitchen and you make it a chef's kitchen and you you give high end cooking class experiences i've i've done a bunch of these myself but you know i was doing the math on it and if you do two classes a day five hundred bucks a person and you have ten people per class and you and you do that five days a week fifty weeks a year it's about two and a half million dollars of revenue and you could just generate probably at least thirty percent margin that's seven hundred and fifty grand a year and all while you're just like tending your garden teaching coaching classes and frankly i i at thirty percent i think you could actually hire a couple of people to teach the class for you you'd would want those people in your home though you get build like a kitchen for him basically it's not even a home okay well fine you build you build one of those little pop up like you know manufacturer's modular homes in the backyard you do it there yeah who's pay are you you pay five hundred bucks for cooking class is that what is that a thing people do yeah i mean well you could turn it into yeah if you could turn it into like a half day experience yeah i've paid that much and frankly i think for you could have a higher end offering that's like a couple grand and we actually do this at summit so we've hosted all kinds of weekends we've we've you know about a hundred and fifty people come out to a weekend and it cost about two grand and we experimented with a culinary weekend where it was like all different kinds of chefs and you know tasting different kinds of things and you know making things and peep people love it i feel like with summit you have this both an amazing perspective because you sort of did the impossible and have this like really unique unique set of experiences another you have this really skewed view of reality because it's like the people who go to summit are people who are of a certain you know level of success and then they they they basically get wrapped up in the summit like world i feel and they it's like a casino in the cloud and like they're like yeah okay take me on this helicopter ride alright cool you want me to buy this a piece of this a patch of this mountain that doesn't isn't undeveloped right now over a million bucks okay take my money you know i think you get people into this so it's so immersive that the sales on you know the on premise sales are like you know bar none compared is it's comparable to like what i think most people are ever gonna be able to to to deliver because you've built equity with people and you get them in the moment where they're like i do need to live my life yeah like i do wanna be around these people more yeah i do need to be out of the city and out in nature and like i think people made great decisions when they're in that state before we even get into that shall we remind people who you are yeah sure sure so ryan i'll do it for you because that's what i do ryan started or help start biz now media a company that did a newsletter in events business did twenty million in sales and about six million of profits sold it for fifty million bucks then what sean's is referring to is summit he and four other guys i believe bought a mountain for fifty or forty million dollars and then turned it into a resort and they do summit series which is this a bunch of a series of events for i don't know who do you say industry leaders artists yeah artists academics scientists and all kinds of entrepreneurs not nonprofit leaders etcetera i think you said it right on the last podcast sam where you were like it's like ted but cool again like kinda maybe how ted used to be it's like ted if ted was done by like you know twenty seven year olds who like wanted to have a lot of fun and ryan you don't know this but i've used you as an example so many times i've not never i've never even been to summit but i heard y'all story i read it i read about it because i was who's behind this and it validated this theory i have which is you get no rewards pretty much for attending the party or very little rewards for attending the party but you get all the rewards if you host the party and sam you did the same thing with hu khan where if you do the sweat to organize and you can convince just that first couple people of legit players to come in there becomes this domino of legit people who will come in you know even though you have no track record no nothing no no claim to fame in that regard and by being the one who invited everybody you get this like amazing rush of goodwill and opportunity and relationships with people and i've seen sam do this with hu khan i saw you do this with summit series and then the other example i always given is patty who created web web summit and f dot anders or whatever i don't know if you you probably know patty because you guys are kind of in that world yeah know patty did an amazing job of web summit and no you're absolutely right summit started with just nineteen people you know we cold called them and those nineteen then invited their friends and then they invited their friends and and it just snowball and those was you know a few thousand people getting together and who who is the most interesting first like domino to fall of like legit person who was gonna attract other people but they had to be the first one onto the dance floor like you know with twitter ashton or whoever who was the first celebrity that doesn't really come on the platform and legit who was y'all first in that back those are like the tom shoes guy or something yeah i mean blake mike galaxy from toms definitely and i would say tony shea was it was instrumental from zappos tony was not only one of the first sum but we hosted this event at the white house where we were introducing basically the white house cabinet to silicon valley entrepreneurs and and tony came to that event and at dinner after the meeting with the white house he came up to us and he said is there anyone here who like you wouldn't invite over to your house like meet your parents and we were like yeah of of course like there's some really incredible venture capital some people are that we think are kinda dicks but you know they're here because everyone wants to meet them and he was like nope they can't come back he's like if you wanna build serious culture and you wanna have people that you know like hold the values of this then you need to only have you know this certain a certain kind like you need have kind hearted participatory people and had not became then you know our second you know kind criteria for who comes did who's the most interesting entrepreneur you guys have met or a couple of the most interesting where you're like this person is going this person is is all they're cracked up to be well i mean look it's controversial to say but i told you this when we were together sam i think adam neumann is someone i spent a tremendous amount of time with at certain key points and we works run up and although you know obviously he may have his shortcomings and and and but it was incredible to see how quickly he could learn how good he wasn't at negotiation at real estate at design designing space designing the website i just think it he's been now underrated in how dynamic he is in in many respects so like in terms of just like pure execution can you tell sean and listeners any of the stories that you told me an example would be i would go into his office and i was just always impressed by he'd have this huge screen up with all his kpis and and he was on top of like how many people were asking for the air conditioning to be turned down in and in their we work and you know how many tours happened that day which frankly like as someone who pride himself on building his businesses around kpis like i i had a hard time building that level of transparency into my business and i had been doing it for even longer than him at that point so i don't know there were lots of little nuances like that that i was impressed by so i got a question for you so last time you were talking about structure and you were talking about like having a hold c that license the brand to the to the individual like kind of operating entities and this is kinda controversial because this is what the like sam when i was listening to it i was like sam you gotta ask about we work we worked did this and it was super controversial right because like well i i i know that ryan and adam had a relationship and hit ryan and i were shooting shit about it and i just didn't know where i was gonna let ryan decide if you wanted to get there okay so i'm gonna i'm gonna ask you more directly so that structure made a lot of sense to me and i think there's a ton of merit to it but then we work was kind of an example where from the outside it seemed like maybe that had gone too far where he was licensing back the we work name for like seven million bucks and he was the master owner of the leases and then they would lease from him and so it kinda seemed like a double dip for the founder in a way that was not well received by the like kind of startup up community and investor community what do you think is that an example of no that was legit or yeah maybe he took it too far or that's this is completely misunderstood here's actually how to think about it so i i think in some ways it was understood and in some ways it was not executed quite right and and i can't speak to why but this is very common in hotels so marriott and hilton originally develop their own buildings own the buildings with investors each building would have different investors maybe one set of investors doesn't wanna invest in their dallas hotel but did you wanna invest in the houston one so and then they would have a holding company that owned the license to you know own the brand and had and and actually employed the people that are on the ground in each hotel managing those and and for that they they would earn like seven percent of revenue so they'd have economics in the building and they have economics in the service that's being provided from the holding company so this is and then over time marriott decided that it was not advantageous to own the real estate because real estate is a slow burn business because it's very capital intensive you can only open up so many hotels in a year if you have to go about it about it so they sold off the real estate and they said look let's just double down on the lag or on the management company and in that way they were able to open thousands of hotels very quickly so you know i think adam was dabbling in both right he was owning real estate with like joint venture partners and private equity and other sources of capital and then he had we work that was venture backed by another group of investors some of who might be the same investors in the real estate and they were then you know doing these deals where they were leasing the properties that they owned and you know one way to solve that so that everyone's aligned is you raised capital from the same investors for both llc so you say you know one entity is going to buy buildings and develop them and red them and lease them to we work and the other entity is gonna be we work and it's gonna own you know the technology and and the brand and the and the know how of how to actually operate these he's on the ground and and it's gonna lease them from them so i think that that's one way you could do it the challenge though is that most that those are two kinds of different investors the kinds of people will invest in real estate and the kinds people will invest in venture are rarely the same people and so i'm guessing that's one reason he was struggling with that is that the investment community didn't really under stand like the profile of these of how these two things could be synergistic but how do you do that with like a software company or a media company i mean like with more traditional internet based stuff so like you know an example for a media company it'd be to follow the virgin model where you build up a media brand you develop the brand and then you you license that brand so take like bar in you know instead of them you know being bought by penn gaming i think it was they could have licensed their brand to pen penn could have spun up you know an app for sports betting and bar stool maybe take seven percent of it and in addition to that bar still maybe gets paid for advertising so that they advertise you know the new app and and in addition to that if they wanna take it a step further they could even raise like a a venture fund and invest in the new joint venture so that they're basically taking a piece of the pie on every on every leg and and on a great example if someone who does this really really well is is barry stern like to create a star with property group which is a publicly traded company that owns you know star and and lots of other brands like saint regis but he also you know i think the l realize realizes this he also owned star capital right so he also is a private equity fund and he also owns the one hotel and he also owns the background like okay here's a great example of this so alright today's episode is brought to you by tempo tempo dot fit is the website i actually use this i've used this for a few months now and it's this machine that has a screen in this three d sensor and what it does is they give you weight it's like a hundred and fifteen pounds of weights and it's for strength training so what it is is it measures your body and it sees how much weight you're lifting it sees how many reps you're doing and how much effort you're 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out i use it if you look me up on twitter you'll see i'm always filming videos where i'm talking to that company say i'm trying to crush their employees on the leader board because i actually love this thing and i and i use it all time so check it out this is genius he buys the ba rock crystal company it's been around forever he then takes that brand and he he creates a hotel company off of it and he licenses the hotel brand to a development company that builds a skyscraper in midtown and manhattan called the ba rat you know hotel he fills though ba crystal which he buys from his own factory and then you know his private equity fund is like is the equity behind all these operations and and you know he's playing in like so many different facets of this business why would the skyscraper want the brand of the that diamond factory if there's no brand yeah i mean it's just a name well ba crystal has been around for you know whenever a long time and is really famous and the target audience that's buying like thirty million dollar condos that are buying from russia china latin america or i've been buying ba rod crystal for you know generations and so he uses his brand like everyone knows ba means you know it means luxury so it's like a it's just a really smart way and then on top of it he owns the ba rat company which is you know hopefully just like decent investment on in its own right so so this makes total sense to me because when whenever you're doing a new venture if you can but i i always think about hijacking trust so like i did this with the podcast in a way where i was like okay cool i can start this podcast on my own and build my own brand and build my own distribution but build all this but like hey maybe there's a win win here right sam has the hustle the hustle has a big audience they have no audio contents i'm willing to do all the work i think i can do pull off a great operation on the podcast but if they put their name behind it and they put some distribution behind it we'll get we'll both get there faster and for them they got basically a very low cost free option to build a whole new vertical of their business and and capture some of the value and so like sam what you should be doing i what i'm hearing from ryan is what sam should be doing is saying is the hustle of good brand if if if you put three four years into building the hustle which has some level of equity with millennial business oriented people and then you hear me talking about cool i wanna build basically a new education company i'm gonna do courses i'm gonna do all this stuff well you should be doing to say cool this is now hustle university i'll give you the brand you give me six percent you go do all the work and you know that and as long as sort of like your brand is not being diluted by the efforts right so if you're partnering with a good operator or and ba rat case like a high end developer that's gonna make a good quality hotel then you're getting free expansion of using you know equity that you already have that you're currently not tapping into because we're that just gonna go do it on my own right and so you capture no value and i have to build trust in a slower fashion because i have less of a brand than you know the hustle is kinda like a tiny tiny tiny version of virgin so let that that sounds great when it works out it works out let's talk about the downsides of that because i don't want people to think like oh this is obviously the answer let's talk about the downsides but i mean like the other the other the other side is that is as you go do it on your own the other side of that is that you do it and it and it sucks so that would if barry didn't so what's his name barry barry sterling he's he's been very str yeah he's yeah he's because i've i've heard him talk he's pretty amazing i mean ryan what what are the downsides of this yeah i mean you mentioned it like oprah decided to be vertically integrated and owner own magazine and owner own network and martha stewart went the other direction martha stewart said i'm gonna license out and and you know there's gonna be my clothing is gonna be sitting on racks at target and someone else is gonna manufacture that and the prop the challenge you can run it down of course like you mentioned is someone dilute your brand they damage the brand or you know you you kinda dilute dilute your efforts because you're probably spending some amount of time and energy on on spinning these up you know i don't know i think you you you probably also have like trademark and legal cost because like version as a whole team of people that are just fighting like trademark issues globally for them it's a it's a it's an amazing story company also by the way for virgin is i think they have launched two hundred companies and sixty of them are i think are around today so like just like a venture studio you're gonna have failures so yeah there's definitely there's definitely challenges now one way to manage those challenges is through your license and through control so you either want to control the brand as best you can through your license so making your license have like maybe they have a brand committee that has to approve like you know marketing collateral and things like that for the license fee another way to manage that is is to either raise a fund or have the money to own a majority of the company as well so you're not just getting seven percent you're also controlling the company maybe you have three out of five seats on the board and so the ceo of the the new company is doing kinda shady stuff or you know is it running a while you terminate them and replace them everyone talks about virgin and few people i think understand how it works i think i don't understand entirely i think you do though right yeah i i'm really into virgin and i i think in general people don't under i i think so here's what i've observed private equity people don't understand startups ups and startups don't understand private equity totally you understand both both sides of this of these coins then you become like it just you can be become infinitely more flexible and creative at how you can go about creating value for you know customers and and shareholders and so yeah virgin is one of the few companies at scale they clearly understands both of these things and they have a group in in in london i think it's like three hundred employees and basically what they are is they're like a startup up studio meets a private equity fund you know they they spin up companies from scratch or they joint venture with existing entrepreneurs who are gonna build companies that underneath their brand or they buy companies and put their brand on it like they they have a lot of different ways of getting the cap ultimately it's a brand it's like a branded berkshire hat they they wear four sides right they have innovation like a startup up they have private equity style business operations as well so they understand both of those but then they have a brand like coca cola and nike and then they have operations like in a way that those those companies you know so so they have these like sort of four four dimensions that they got to world class level at and then you get sort of outs size returns but where did the cash come for all this so virgin originally was a record store and then a studio and then like fifteen years in it was an airline so like where does the financing for all this come did did it come for the they they they sold a record label for eight hundred million dollars is was that this the huge seed funding yeah so originally it was a magazine when he was a teenager and then in the back to the magazine he put like oh like a mail order for records and then he became a a record label and you're right he made a fortune on the of the record label yeah mean he also even created a gaming company they made video games you made a bunch of money so in his case you know it's the family office that's doing this but my point is you don't have to be rich to do this you could create a fund or bootstrap a company and then use the cash from that business like like andrew you know will considers been on your show use the cash from a own operation to start buying other companies and and and of course you could also then and as as tiny has now done raise a fund and so yeah you need you need like you need the right you know kind of components you need operations you need a fund that those two things alone will allow you to do this as the third thing that allow you to go step further is to have a brand and you know like obviously the hustle as a brand version as a brand someone as a brand and then you can start to do really interesting things i mean in the case of stern like he didn't he didn't even have a brand he bought the ba out brand and then and then he also proved that he could do it by starting a brand he created the one hotel for example from scratch and so he's done it you know in both ways it's it's this that's really interesting that's awesome and ryan when we were so we talked on the phone last night and it was a great first date it you know i was blown away you had a bunch of interesting thoughts and the thing that i thought was kind of unique about you because i talked to a bunch of people who know a lot about business and they have a cool success story but i thought you had a very good i don't know point of view or set of wisdom around a style of entrepreneurship that most people don't don't talk too much about i know you you were talking about a little bit on last podcast but but i thought you might you might have some thoughts or wisdom around you know creating wealth while still having sort of a great life and not just this like extreme olympics level commitment and sacrifice all other areas of your life of approach of business yeah yes i've i've been trying to think about how to best describe this and know i i was talking last the last episode about holistic entrepreneurship and you know maybe another way of putting it i was thinking is you know instead of thinking about disruptive companies you know lead disruptive lives and so you know i left like the the kind of true the traditional path of working at the carly out group and being a private equity for this kind of entrepreneurial journey that took us on this crazy adventure and the idea was to like disrupt the norms and and and to get to a place where we could you know kinda zoom out and broaden our focus from just achievement of status and money and instead like broaden our our focus to creating real wealth and i think real wealth is about freedom and it's about the freedom to fully express yourself to be creative to use your imagination to to you know to avoid commuting to work if you don't wanna commute to work and and so of course you know making enough money to support your livelihood and i think along those lines you know i have i've learned a few things that you know i'm i'm happy to share yeah let's let's do it yeah one thought was you know build skills that that will allow you to make money around your passion so you know learn all you know learn sales learn marketing learn digital not not just to get rich but so that when you have a a passion idea like you know exactly how to execute on it and so i'm always trying to to master these skills of which which happen i'm listening to shows like yours watching youtube channels and like learning you know just taking online training taking taking you to classes taking online courses calling founders which is a lot easier to do that than than you might imagine i i'm constantly cold calling founders have you heard of ic guy i have yeah yeah yeah so basically is it japanese it's a philosophy or i don't know what how you categorize it but i think it's japanese and it's like there's it's like four circles that kinda look like the olympic rings and it's like basically what does the world want what do you wanna work on what can make money and what are you great at and it's like the the whole premise find out something right in the middle of all four of those things i i think that's what it is yeah you can even eliminate one of those because if you if you do something the world wants the money will come and and so i think you you could simplify because that diagram makes it look like you have to become flower or it's like is it confusing what that is but it it it the real simple version is just you know what do people want what do you enjoy doing and what do you actually could at and if you find the intersection of those three that's the zone of genius you wanna like operate from and it sounds like ram what you're saying is like there are some master skills to pick up master skills like communication like sales like persuasion like you know digital literacy some something's things like that that if you have sharp at your disposal then if your hobby is ferrari you'll know that you can spin up a free newsletter and create a paid membership on top of it and you could be those guys who do two million dollars a year on their ferrari newsletter talking to other ferrari nuts yeah exactly like right like i i know i've mastered you know events and info products and experiential and so boom like if i get into cooking i get create a culinary school and and so you know and my other thought was think small you know venture i think like the world is dominated by this like an venture you know big you know total addressable market sort of thinking and i really like this thought of like minimum viable market like what's the smallest market that you need to generate the income that you're trying to generate and and often you know part of one way of thinking about that is think expensive think cheap so like i could offer my cooking class for five thousand dollars and make it extremely high touch and then i might only need you know whatever ten people a month to make to make a small fortune or i could charge you know fifty dollars and then you know i've gotta build like a much bigger scale to kind of venture company well okay but sounds good i am interested in that but let's play the other side of this which is two points the first is if you're only making five hundred dollar classes like that's not fantastic for the average joe and like there needs to be walmart and the biggest thing in the world is or i don't i mean it doesn't matter what's the biggest a big thing is is louis vuitton a big thing is walmart the second thing is the people who you're saying you admire barry stir and you also said you admire adam neumann do you think they thought that way well first of all i i'm saying i admire their skill set i'm not saying that i admire their well be so there two different things i i and i'm not saying you know i don't i i don't know them intimately enough to know their we're well being but what i'm suggesting is that we don't all have to build like billion our companies they're you know good good for the sam walton out there and the out of newman like let's let them go solve that luckily there's seven billion people on the plan and someone's gonna step up and sacrifice their whole lives and their family and their hobbies and their well being to make these insane incredible billion dollar companies i i'll be happy just to build something that you know makes me a nice income and it's meaningful so i just i i just i just hate when we we we get into these discussions me and sean do with a lot of people and they say things like that and i always wanna make clear because to the audience it's like what our guess and what we are saying is that this is just one way to get it done and i think that far too often people say like you have to raise money you have to raise money you have to do this that's cool and then other times like andrew and you and me and sean talking about the this like no fuck that you could live this other life and in reality we have to understand that there's so many ways to get it done but but that's the point of a podcast right we're gonna have people on who are like y this is the way because they believe it they live it they've had success with it and then if you listen to ten episode episodes you're gonna be like wait i heard this is the way ten times oh what that really tells me is that there's ten ways and i should pick and choose the one that resonated the most with me totally and maybe it changes in my twenties versus my thirties versus my forties and you know i'm i'm cool to be flexible with that over time i completely agree and i'm not criticizing criticizing at all with ryan's saying i'm just wanna make it i always i hate when people like i always do this and i hate when i it is when i say like this is the answer and then i always was like no i gotta make it clear that there are many ways to get it done and so i i wanna know more about ryan about your way so who's somebody you admire that actually has blended let's say they're entrepreneurial their ambition with without letting it overcome them and overtake their life where they're you know your elon musk you got seven kids three wives and you know you sleep in the factory two hundred days out of the year so who who's blended it well well give us an example well i i started talking about this last time but you know like one friend and that's of his joel holland who owns harvest host yep he loves in va colorado he's got this great company it makes plenty of money for him and his wife he loves rv he likes to go around in rv it's actually his job is in part is to go around what he loves drones and rv to go around and film himself and enjoying wine in his rv which actually becomes his facebook advertising to promote the membership for joining the rv membership that he sells so i i really like it out that's like one of my favorite examples lately so let me ask you a different question let's talk money for a second so you made a good amount of money off biz now before that had you done something that you were well off with or you just had a good paying job or something or what we're where were you at before that well i had a i had a well paying job in banking and then at the carly group and private equity but but it was like you know i what is that what what do you make when you're in private equity at a at a if you're what's a well paying doc is that like a hundred fifty k a year is it a hundred k is three hundred k what does that mean like at the level i was at you'd make like three to four hundred grand and you'd be quickly on the path to making over a million a year okay and so you walked away from is that the ceiling is that the ceiling on those guys no the ceiling is making like hundreds of millions of dollars like like per fund i mean so here's the math right like we get a three billion dollar real estate fund that i was in there's like ten people on the acquisitions group but a bunch of people in asset management three billion if we return two times which is like kind of the bare minimum for success over five years then we we keep twenty percent of the upside so we basically we return three billion into six that's three billion of profit twenty percent of that is six hundred million we split six hundred million amongst the ten partners of the of the fund yeah i mean i don't know exactly how many partners there were but yeah something like like there's probably ten partners but there's also been the holding company of carl language which probably takes like you know half or more of them right okay so you had you had a good job and then you had a path and then you do biz now and that's great that has a good exit summit has done well like culturally i don't know if financially which one's better for you personally was it biz or was it summit well this kinda gets so biz now was was more financially successful than summit it by by by a lot some it was never really meant to be like a financial success or at least hasn't been thus far i it was it was more about probably be something really enjoyable and and awesome for the world and for the community that we were building which gets to by the way my solution for sam does sam and i've been debating this idea sam loves sam is is partially driven by doing epic shit right and then like he wants to go and do really cool creative projects that you know have a cool impact on the world and make him excited to make him wanna wake up every morning and work on them but he also you know i i i i'm speaking for you sam but also wants to make a few dollars right so one thought is have your fun company and then have your serious company and i think that you know i'm i'm somewhat living proof of this i don't know that we've done it perfectly and i and and and really my part partners were running some it mostly day to day so i can't say that i was as much involved day to day for many of the years but you basically spin up a company you get you get it to like making a million a year or half a million or whatever you need to to to make enough and then partners you you know you you launch your moonshot company in a separate llc or a separate c corp that's what a lot of do that or you yeah go a lot of a lot of people do that and it's got great results i mean a lot of people get wins early in their career or even mid in their career and once you get that win you you can get after it that that's quite common but there's a of parallel versus in series right so like are you doing them at the same time versus you get your win or you you put the first five years in where you're you don't not even thinking about your side projects you're just making your main thing actually work and then as it starts to work you either hire your ceo replacement or you sell the company or something and then you now have a cushion and you have a buffer and you have whole bunch of experience and sharpened up skills that you could apply to more ambitious projects are more fun projects so my personal take is that it's nearly impossible to do that in parallel i don't know if you agree fine i i would also i don't know if don't think it's possible because it's definitely there's examples of people doing it odds i know that if i tried that shit i would get smack by the market i know that that reality would smack me and say oh you thought you could do both like you know at the same time like that's not how the world works but ryan you're it sounds like you're kind of saying you can you you believe you can do them sort of at the same time not no i still look we we started summit in two thousand eight and i and i basically bought in the business now in two thousand eight and we scale them at the same time wow part the way that we did that was as i focused on business now and my business partners focused on summit for the first three years i i worked till like two three in the morning working on both every day like seven days a week so it was it was like know i working kinda like like i was you accustomed to doing in banking so it was pretty brutal however what another way to do it is about i think five years in the business i had replaced myself with another ceo who i had groomed i hired out college who's still there running the company and at that point i was able to i had a lot more freedom now one thing that i was doing however was i was trading growth in that company for doing other things at at that at at juncture so like i could have doubled down i could've have been me and my ceo spinning up lots of new things was or i could have like slowed growth a little bit which is what which is essentially what we did so that i could spend a little more time doing other things and we hear that this advice a lot and this is something that silicon valley doesn't actually talk about a lot which is hiring replacing yourself as a leader i kinda did that what i noticed is that there is very little discussion on this out in the world and it's so hard to learn it's so hard yeah we've we've done it now a few times and it's it is extremely difficult we've i've definitely done it i've definitely failed and succeeded at it i mean for me i had this guy will friend come live with me for nine months i slept on an air map actress i gave him my bedroom and i i it was right out of college and i trained him on literally like he was an apprentice i i you know you everything i did we we i used to call it like need to need training like you're not gonna learn this if you don't like literally see my computer screen and see exactly how i'm building my spreadsheet like i taught him not to use any key and not to use this mouse gonna use this keyboard you know like i taught them like every nuance of everything the way i think the way i make decisions and so over time he learned the way i did things now look the way i did it though is i had like five people that was doing this with and one of them emerged that was the obvious leader it wasn't it wasn't so clear initially some people were really good at pro management but then sucked to managing people some people were really good sales but then couldn't manage the sales team and and you some people could do one thing but they couldn't innovate so it it it's definitely challenging i mean one thing is if you're really good at being innovative and being like the zero to one guy you know you can just be like a very active adviser just someone else who's a stronger integrator and operator or if you're a really good operator like maybe go find yourself more a visionary zero to one sort of person so you know i i that that was that was kind of part of my my approach there and you text this before that you go i got a bunch of frameworks around getting rich and having fun slash happiness which i think is what everybody wants so yeah so so rattle off a few of those before i know sam has jet i wanna i wanna get to some of these goodies while sam's here before is just starting a business think about the egg the eggs exit multiples of that business i wish i had done this when we start wanna we got involved in business now i if i had known the trade associate like trade expo sell or twelve times but newsletters you know sell for less and conferences sell for somewhere in the middle unless you you know i have a caveat on there newsletters at scale you know can can sell for more but the i i just didn't realize that and so i and it's not so much that you're trying to sell your company it's at high exit multiples mean something they mean that the company is probably more enduring has higher barriers to entry is as more diversity of of suppliers more diversity of customers and so you wanna replicate businesses that have higher multiples if you're gonna put five years of the they're like spending night day building a start build a startup that's that's that's hard to to disrupt to that that that'll adore and the way to do that is to look at a high exit multiple sales which you can generally find through just like reading stories and talking to founders and figuring out the for every industry there's like the low multiple business and all the way up there's a continuum them up to the high multiple and so i would try to understand where you are in that industry as you're thinking about your idea that so that's my first point you just saved a thousand thousand entrepreneurs listening to this like you know you just saved them like a aggregate of a hundred million dollars easily because somebody's gonna do that somebody's gonna say like actually that makes a lot of sense to be should i be building a saas company or should i be building information product or whatever right like and each one of these has a different return profile and look if you're looking for what's gonna be the most successful and what's gonna get you the most value then that's a good thing to work backwards with from what else you got yeah okay second one take multiple shots on goal because most ideas don't succeed but you don't wanna take multiple shots on gold that are very different because now you're having this stress in the you're spending yourself too thin so like i'm not saying start the boring company and start you know tesla at the same time what i'm saying is with biz we launched a newsletter business and we tried twelve different flavors of that business we tried a newsletter for lead for lawyers and another one for real estate entrepreneurs it was the same editor different writers but same processes same best practices same learnings you know i i've seen go do a good job of this as golden hip who you interviewed craig clement do a great good job of this and direct to consumer you're basically using the same infrastructure the same learnings the same systems but you're trying different perm mutations of a similar concept and and then whichever one works you gotta know when to cut the other ones and then double down on the one that's working which is kind of all that's actually part of the hard part how long did it take you to test each one and what was your process we took way too long and we're not very good at it at the time i if i was doing again but basically we would spin them up they were very quick and easy to run you know you'd to hire one writer you build an audience up to ten fifteen thousand subscribers you would start producing the newsletter and then you would launch your first conference and then maybe you'd launch like a job board and you would play around with that you'd sell your first ads and then once it was got up to like you know and then i would say hire a salesperson get up like a hundred grand of revenue some of them scale to a million of revenue some of them scale at five hundred grand and then we figured out oh wow commercial real estate for all kinds of reasons i had no idea going into it is way better than the other verticals and that went up to like twenty million dollars of revenue so i think you just really quickly wanna get a sense of like the audience the profitability so how long was that for you i mean this was over the course of like four years that we tried a bunch of different verticals we didn't start them all at once and you know some of them we would spin up and cut in like you know three to six months and some of them we had a hard time deciding like we had one for federal technology that was doing like over a million in sales and was profitable and we kept that going for probably like four or five years before we got it craig on our last or a few a while ago craig this guy runs his multi hundred million dollar company golden hip he said that the most expensive thing is a mediocre a mediocre success when they're spinning stuff up yes yes yeah yeah yeah i i was loud i was smiling when i was listening to that long because he's so dead on that that was like the hardest one to cut it was just so such a tough call yeah i i i also really like you know i've been thinking about this idea that building a portfolio of of activities is another way to go about it instead of becoming like the you know night day ceo of your company you could build up a portfolio of consulting and coaching and maybe you doing an online course maybe you speak maybe you author through a book and you could basically piece together i've seen the number of my friends do this you know where they pieced together you know i anywhere from three hundred thousand to a million dollars or already more a year doing some combination of those things you know the downside of that is you're not building like an asset that creates money in your sleep but the upside is you know you freed yourself from working for an employer and you're not like up all night worrying about your your startup up as as much perhaps yeah that's a that's a good one i have a different way of phrasing that same thing which is sell your product this is an example from the thirty seven signals guys in chicago who they you know they bay they they made a company that made base camp and then they would work a certain way and then they started selling books just explaining how they worked to the basically their business you know served a bunch of small businesses small business owners and so then they sold the book to those business owners about like hey here's how we run our business and just selling their byproduct generated millions of dollars and even more in new customers who like to hear how they worked i'm i'm i'm dabbling with this too now and i'm seeing very interesting interesting results do you wanna know my favorite byproduct king ford coal or charcoal king or is that was called king ford what's the famous charcoal brand yeah i think it is king ford or something similar yeah that was started using the leftovers of making a ford car that's amazing yeah little sometimes literally that it's like orange juice was like leftovers right like and then sometimes it's more leftovers of like your time or your expertise or your you know just giving people access to what you're doing you know there's different other ways to sell your by product yeah tony shade did a great job of this you know he he became famous for company culture at his company and then he created a separate i don't know how many people realize this but he actually created a company that teaches other companies how to build happy cultures and did that by spinning up a book and going on a book bookstore and i think he even bought like dave matthews bus for the tour which was like fun little side note and and then he actually he only hired a woman who who runs it and they actually sell this to to companies and yeah it's like a it's it's an amazing little you know side project bar stool does a good job with this too where they they just film their pro their office and they film like hey we're hiring an intern cool put a camera up and this is gonna become like you know content that's worth x dollars and we're just we're hiring this person anyways let's just make it entertaining it'll be more fun for us and it'll generate attention in revenue so like why not we're doing the product anyways yeah i i i love how bar does that it's so it's so brilliant i i wish i had real i had thought about years ago alright ryan so i wanna leave it open to you because i think you were one of the rare guests who thought about what you wanted to say and i was like hey i got like some gold i wanna get out and so i'll let you kind of jump around you said there's a couple of areas one was you know these frameworks some was you know wisdom on on kind of the health wealth balance you talked about ways to finance without venture capital three ways and you said you had a couple of ideas so i'll let you go where you think there's the most gold and then we can we can always have you back alright i'll i'll dive into one more i i i one is financing you know i again like i think too many people raised venture that they don't need a raise like i talking to an entrepreneur just recently who is starting a new company and he was about to go out and raise a million why why why are you gonna raise a million there's there's let me give you like all these ways so you i started thinking of these ways so one is you can if you're if you're building a subscription product let's say you can build a lifetime membership to this product which the airlines used to do in the early days of their rewards programs and you know maybe you don't make a lifetime maybe make it ten years but you say to somebody look i'm gonna give you my a wifi lifetime access to this thing that's soon gonna cost you know i don't know a thousand a year i'm gonna give it to you for five thousand dollars a year now they'll never have to pay for it again and on top of it i'm gonna give you all these extra benefits you're gonna have like you know inside looked on everything first or whatever it's gonna be you know kind of like the backstage pass to this to to this community of this product whatever it is and and then that do you do sell you know whatever fifty of those at five grand you're bringing in a quarter million dollars and boom you're you're started and i i think another thing that that elliott my my business partner used to say to me that always thought was interesting was when you we would hire a writer i'd be like man this writer is like you know a hundred grand a year and he's like no no this writer is like a hundred grand divided by twelve we just need to get started like if we can sell ads in month two then we might be able to pay for ride the writer you know in month three four and five and so we kinda like we'd look at it kinda of month to month which i always thought was kinda clever and help me think through things kinda like eating an elephant bite by byte so yeah one is selling a lifetime membership a second idea is if if you have more of a service business then you can sell the first clients before launching so like with biz now whenever i would launch a new market like say i gonna launch chicago newsletter for commercial real estate i would fly to that market two or three times or now we could use zoom and i would sell i'd say the law firm hey we're only gonna have one law firm i'm gonna give you all the inventory all the inventory for the first six to twelve months at it's thirty grand and i'm only gonna have one accounting firm and i'm gonna have one of this one of that now i would go to five competitors and be like only one of you is gonna get this for the first year and then i would bring in about you know a couple hundred grand up upfront i would charge them about a quarter of that just gets going and then that would find the first rider in the first salesperson and then they would start to fill in all the sells for for year two so i love pre sales obviously you know kickstarter is kind of like you know turn that into our popular idea and i was saying yeah third is you can do that of course for manufacturer product you look at kickstarter right you you you just launch kind of the concept of the idea you get a fan base around it you get them to commit put down of deposit or even pay for the whole thing and they get access when it when it comes out first and then finally my fourth way is if you can't do any of those things start a consulting company and then use the consulting company and use the revenues from that to kinda keep the lights on while you're building you know the real product that you're excited about yeah i love those and also you know at this now we launched an event called escape which was basically like summit for it was like a five thousand ticket item for people that are the ceos of real estate companies and i went to the first forty people and said if i do this will you come and it's five thousand dollars by the way and i went to those first three i went to the most impressive first three people that i could get a meeting with and i got them to say yes but they'd only say they said only yes if the other people on my list came i actually handed them in a spreadsheet i was like here's here's forty crazy names if i can get you know half of these people to come will you come and i said yes to contingent on that then i went to those crazy people want and said hey these amazing people said they would come if you'll come will you come if they come and then they all said yes and then i went back to all of them i said okay alright i i got forty of you to say yes you all said good to four five grand and then before i locked in the hotel i took deposit on on a portion of the five grand and then i contracted the hotel and then i put down my deposit on the hotel so there's there's ways to do this where you don't have to raise capital and and if you do have to raise capital i thoughts on that too but but i i just think that it's it's it's fun to and and could lead you to a more meaningful life if you don't have the the the stress and pressure of venture and let's end on this because a lot of people i know understand they understand this and when i advise them hey this is what you should be doing they get shy around either a selling or b specifically selling a high ticket item because i think what often happens for people is they're like well we haven't made anything yet or this is just my time why would somebody pay me five thousand ten thousand dollars for for this you know like i think people are really afraid to sell high ticket items have you experienced this or what's your advice to the person who's afraid to go ask for seven thousand dollars when there's nothing made yet so one is that people value their talk especially people who have means are running a business especially corporations their time is more valuable than than a few bucks and and if you especially when you're thinking b to b you know corporations obviously have bigger budgets than individuals generally and so if you can create something you know sell on value not on price right it's like a it's like a typical kind of sales one zero one best practice and and be willing to endure awkward like there are awkward moments in phone calls that i would have where i'd be like people hate to talk about price i managed to a couple different sales teams and they kinda like they shy away they wanna they wanna talk about it like the last second or they don't talk about it at at all or they wanna just send it into proposal because it's too ic to talk about like i'm just gonna oh well i'll just put it on page three of my proposal and i'm like never first of off never do that never email our proposal i'll always schedule the next call and walk the person through the proposal and and walk them through price and be proud of your price if you think you really have you know real value to offer then you know lean into that and and and and be willing to ask and and one thing i'll do is before i ask that i will ask people how what is valuable to them if i if if i could do this would this be of great value to you how to get to know like what their problems are and where where or what they're trying to solve and what value those problems have so like for the real estate conference people were trying to do like multi hundred million dollar real estate deal so for them to source the deal and meet other people that could help them find a good deal was worth a lot of money to them once i understood that it was it was clear to me that a five thousand dollar ticket was was was like kind of a rounding here great this is this is i think that that last bit i think is gonna help a lot of people who i'm thinking about my friend who have been telling this you know too for a long time and he's just like has all the symptoms you just mentioned he has and i hope that he that he listens to i'm a sudden him this clip at the end and have him listen to it dude mind this is great i think we're gonna have you back again probably which we're trying to do it where when we find people who are good at jamming out on new ideas or kind of high level frameworks that can apply to a lot of ideas we're trying to create this like sort of friend of the house vibe where you know me and sam we only know so much but like you know we we wanna have really great people coming in and it's surprising how many successful people don't have the ability to hang in conversations like these because they're just like they they know their thing but they don't know how to sort of generally teach and talk to to a whole bunch of people but you definitely have it and so you know i'd love to get you kind of in in the friend of the house loop where you're coming on with some regular maybe once a month for every a couple months yeah i i love that i even like the idea of coming in and just like arguing the people on your show sometimes sometimes i'm listening sitting i'm like oh like oh no there's a counter point here i'm right let's bring in the devil's are the the devil's aren't yeah yeah definitely alright we're we're out of here i hope everyone has a good one wait a man