Asking A $100M/Year Founder For Profitable Business Ideas (#413)
Sawdust Data, Niche Markets, and Spotting Scams - January 31, 2023 (about 2 years ago) • 01:07:05
Transcript:
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Shaan Puri |
I love how even though I tried to pick a non-nerdy data one, it actually, underneath the hood, was a nerdy data one. You're like... you're a data hammer and the whole world is just little nails that you're trying to hammer with your... you know?
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Sam Parr | but dude this is the best business there is | |
Shaan Puri | In the data, like a vacuum, you're the data Dyson that's just taking in this data from everywhere you can.
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Sam Parr | Man, founders are often not good at explaining what they do to those who may not understand. So, can I do it? Alright, I'm going to make you look cool. I'm going to be your wingman. Here we go.
So, you run a... I don't know if you call it software or a data business, but people pay subscriptions. Your company, CB Insights, is now getting close to $100 million a year in revenue, which is a huge accomplishment. You have hundreds of employees as well.
Basically, and this is the part that's kind of hard to understand for someone like Sean and me, because we haven't run really huge companies, but when a company with 1,000 people has to decide what software to buy—let's say it's just some customer support software or payroll—they need to do tons and tons of research. They want to make sure that the vendor they choose will stay in business or be around for 10 or 20 years, among other things.
You have crawled through what you call "dirty data." All this data exists out there, but you put it into bits of software that make it really easy to digest and understand. This way, a person can make a right and smart decision. They pay you like $30,000, $50,000, or even $150,000 a year to access all that. Is that right?
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Anand Sanwal | sounds about right yeah | |
Shaan Puri | And more importantly, a fan of the show and a prolific idea guy. Before this episode, he sent over a Google Sheet that has 77 rows of random startup ideas, which just tells me you are one of us.
This is great! You made our job really easy. We have a bunch of ideas we can go through. There are a few interesting CV insight stories that you've blogged about in the past. I want to talk about those at the end because I think the ideas are going to be a lot more fun.
Sam, new favorite of the wars.
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Sam Parr | Sean, yeah, one of the reasons why he's fun... You said that he's one of us because of the idea thing. That's true. He's also fun because even though he comes off like this polite guy who's introverted, he's a shithead. Anand's a shithead too.
His Twitter is hilarious. He writes this famous newsletter to like 500,000 people now, and he signs it with "I love you." In his Twitter bio, it says, "Please buy a CB Insights subscription, I owe people money."
He always does like... he kind of pokes the bear a bunch in his stuff. So he's got a really cool attitude. But hopefully, we'll get that out of you.
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Shaan Puri | yeah yeah exactly yeah my my | |
Anand Sanwal | my kids were my kids were excited that you called me a shithead so I appreciate | |
Sam Parr | that one | |
Shaan Puri |
You're welcome. Alright, so here we go. Sam, you put your favorites on the sheet, I put my favorites. What's interesting to me is we have almost no overlap. You only... maybe 2 out of the 10 that you put down there were my favorites. I had completely different ones. I'll tell...
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Sam Parr | you why | |
Shaan Puri |
I say we take turns, alright? Where we say, "Tell us about..." [followed by] the little three-word tagline, and he gets to pitch it. Let's react and let's try to get through a bunch of these. We might go on random tangents or drill down, but in general, let's try to go... an inch deep on each one of these for now.
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Sam Parr | You want me to go first? Yeah, you go.
So the reason why I highlighted everything is that CB Insights interests me. Basically, you're not coming up with any new data; you're just organizing data that already exists in really easy-to-understand ways. Then, you're selling it at high fees. I think that's like the greatest business model on earth.
You've listed out a bunch of ideas, including like 6 or 7 that were more of these data things.
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Shaan Puri | data yeah | |
Sam Parr | So, you had one in there called "sawdust data," and you have examples. You're like, you can look at what the government does. The government has all this data, and you can make that clear and easier to understand for people. Both the sawdust data as well as the government data products. What do you mean by all that?
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Anand Sanwal | Yeah, so sawdust data is when people create products, and sometimes the residue of that product is actually really interesting data. Right? So that's the sawdust from the data, and it's basically taking that exhaust.
I'll give you a couple of examples. You have, just, and I don't know if these are businesses already, but you know, OpenTable and Resi have all this reservation data. I wonder if you could take that data exhaust and sell it to real estate firms.
They'd be like, "Hey, reservations are down. This area is not as hot. Maybe this retail space is going to be on the market soon because this restaurant looks like a dog."
That might be one area. You know, I think I met somebody who has dog collars, like a Fitbit for dogs, right?
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Sam Parr | fi | |
Anand Sanwal | Yeah, right. So you could take that and probably sell it to pet insurance underwriters, right? It's like it's not your core business; it's this residue that comes off of your business that I think you could do interesting things with.
It's another example, like a procurement management system. So, kind of this esoteric enterprise-y thing, but if you have all this spend going through this procurement management system at your company, could you go and sell that to hedge funds? Like, "Hey, this company's average contract value is going down," or "It's getting a lot more seats sold this year," right?
So can you take, again, not your core business? I don't think companies are really good at monetizing this on their own. So it's basically building this platform that goes to these companies and builds these data products off of their sawdust.
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Sam Parr | Makes sense with the business that Sean and I are in. We're in the newsletter business. People have all these questions, but it's kind of broken down into just a few things.
First, figure out what content you can give people that they want to read every single day. Then, figure out how to acquire users profitably. That's basically 80% of the business.
What's the 80/20 rule for these data businesses? Is there an 80/20 for making messy data into clean data and turning it into a product that people like? | |
Anand Sanwal | The messy data to clean data thing... that's just like you have to have a pain tolerance. That's all that is, right?
I think this is actually why CBI has done well. We've had a bunch of Valley companies come in and they want to splash machine learning on it. But you just have to get into an Excel spreadsheet and clean the data. That's just it. If you're not willing to do that nasty work, you're kind of dead.
I'd say the businesses that work are... I think my framework is variable SKU, highly opaque, and high consideration.
So, I'll break that down. **High consideration** means like somebody's taking a risk or putting a lot of money out there, right? It's just like there's some skin in the game. **Opaque** means it's just hard to find, you know? If you go into Slack groups and people are like, "Hey, does anybody know X?" that's usually an asset class that's opaque. For example, "Does anybody know who a good vendor is for this or a good software provider is for this?"
Then the last one is **variable SKU**, which is like a car is a high consideration software purchase, but it's not really variable. It's got a set of features you can compare on a grid, and the internet's really good for that.
I like businesses where the variability of the SKU is significant because you can't just put it into a table. You can't say, "An iPhone's an iPhone's an iPhone." But we launched Yardstick, like, you know, radiology software that uses AI to read radiology images. Those are totally different.
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Sam Parr | right | |
Anand Sanwal | That's like the framework I use. When it meets those three criteria, I think that's an interesting, messy, hard business. It's going to be a lot of pain, but you could build a moat around that. | |
Sam Parr | alright sean you wanna do it | |
Shaan Puri | Oh, sorry, go ahead.
One of your columns... so, I told you, you have 77 rows. Those are the different ideas. But then you had some columns. One of them was "frameworks" or "inflections," and that was one of your things: opaque variable skew, high consideration.
The other one you had was "tiny but growing niches." Like, it might be time for that to grow. Is that your other one that you look for in ideas?
We can give an example here. Let me grab one. Like, you did this representation media. So you said, "extend the Rebel Girls book for other communities," and then your framework was "tiny but growing niches."
So, talk about that idea and explain it with that framework.
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Anand Sanwal | Yeah, so *Rebel Girls*. If you're a parent of a daughter, you might be familiar with it. We bought this book when my daughter was about 3 or 4. It's just like 1 or 2-page stories of famous women in history, such as Amelia Earhart, Marie Curie, and Maya Angelou.
It's great! It's a really inspiring book with really cool artwork. That book has sold, I think, 5,500,000 copies at around $20 each, which amounts to about $110,000,000. That's probably a dated figure, but I think there's this idea of what I call *representation media*.
I bet you could extend that to, I don't know, Hispanic entrepreneurs or autistic scientists. People want to read about and see examples of success in their communities. So, I think you could extend *Rebel Girls* across a bunch of different topics.
I think that niche is growing. People are forming these micro-communities that are actually pretty large and would love to read about themselves and receive good representations of themselves.
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Shaan Puri | That's a great idea! I've had a similar thought because we get gifted some books that are like Hindu religion books, but they are the kids' version or something like that.
It's like, "Oh yeah, if I'm going to read whatever, you know, *Clifford the Big Red Dog*, is there something that adds a little bit of something from our culture or religion?"
I want to give them something meaningful while still being entertaining and accessible. The truth is, there just isn't much out there for that.
So, I definitely think if you added up all those little different issues, that could be quite significant.
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Anand Sanwal | Yeah, I mean, I think if you... it's kind of un-PC. If you found a story where the protagonist was like a little white kid, make it a little brown kid or a little black kid. You know, like modify the story a bit, and that's a winner, right? Because kids love seeing, "Oh, that kid looks like me. That's dope!" Right? So, like, you're off to the races there. I don't think it's that nothing's hard; it just takes some work. But yeah.
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Sam Parr | Dude, that's why my wife loves Kim Kardashian. She sees them and says, "Oh hey, look, they got fat asses too."
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Shaan Puri | dude I fat | |
Sam Parr | fat in a good way by the way fat in a good way | |
Shaan Puri | When I met the comedian **Hassan Minhaj**, he was doing his live shows. He asked me something like, "Oh, what would you do with my business if you were me?" I told him, "Dude, I would stop this live touring thing that comedians do. This is so painful! You're on the road like 40 weeks out of 52 in a year. I wouldn't want to do that. You gotta create a Broadway show. Create like the next *Hamilton*, and then that goes on tour."
Touring is a great business, but you just don't want to be the guy sitting on the stage. I said, "Use your creative and comedic genius to do that." That was my big idea for him. He said, "Alright, what's the show?" I was like, "Ah, dude, I don't know. Now I'm out of my right."
Then, a week later, I sent him a voice note and said, "Aladdin, but Aladdin's Black." He replied, "What?" That was my whole voice note. I explained, "Remember the Broadway show thing? It's Aladdin, but it's not like Jasmine can't marry Aladdin because he's a poor guy. No, Jasmine can't marry him because he's Black. Her family doesn't approve."
He said, "Okay, so it's just he's Black instead of poor." I replied, "Hey, look, when you say it that way, it doesn't sound that good. But I'm telling you, there's something to this idea of him overcoming and they fall in love, and love wins." He said, "Alright, yeah, yeah, I'll add that one to the list." | |
Sam Parr | that to the list yeah that's what he's he's like stick to podcasting sean but yeah representation media I'm sean | |
Shaan Puri | well yeah representation media | |
Sam Parr | Alright, can I ask you about this? This is actually really fascinating, and I think it could be a bigger business than a lot of people think: a daily executive briefing email.
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Anand Sanwal | Yeah, I don't... I'm not sure how big this one could be. I think I... I don't know if I put in the sheet I sent you, like a dollar column, which is kind of like my indication of how big it is. I think this is like a great side hustle business.
So, when I worked at American Express, every morning our CEO would get a briefing from his chief of staff. You know, "Here's what Capital One did, here's what Citi did yesterday, here's what Visa did," whatever. It was basically that person's job to scour the internet and look at financials, product launches, and all this stuff.
There was a company that Cision bought called Bulletin Intelligence, which I don't think... I don't know how much they're doing with it, but it was basically that idea. It was going to be like your morning chief of staff email.
I think this is an awesome business that someone smart and industrious can build. If you go niche, meaning like go into financial services, because if you get Amex, the CEO of Citigroup cares about... or Citibank cares about mostly the same company. So, you can reuse a lot of it.
It's not just the CEO; it's all their division presidents and their geography heads and all that stuff. So, yeah, I think this is like... and you know, I'm sure with generative AI and stuff, you could make this really efficient. But yeah, I think this is like tens of millions of dollars business.
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Sam Parr | No, I think you're way off. Have you heard of... you guys know Politico, right?
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Anand Sanwal | yeah | |
Sam Parr | It's like Politico is a news website for D.C. It's all about politics, but it's not from a CNN or Fox News perspective. It's more so for people who work in politics; they read Politico.
Whatever, that's not interesting. What's interesting is that they recently sold to Axel Springer for over $1,000,000,000, and they got roughly 9 figures—so $100,000,000+ of recurring revenue.
What they have is this service called Politico Pro. Have you guys heard of it? Have you heard of Politico Pro?
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Anand Sanwal | no I mean I know that's their premium offer I don't know what's in it | |
Sam Parr | So basically, I think it's like $1,000 a month. I forget the pricing, so someone's going to get on me about that. But they have this pricing structure, and it's basically for lawyers or anyone working in D.C. who needs to know what type of laws are happening in real-time. For example, if the Senate is thinking about changing something because we heard a senator say it in the news, yada yada yada.
Well, anyway, they have these things called "pro briefings." They send at least one a day, but sometimes more than one. These are really fast, short emails that serve as your briefing for what's happening that day, focusing on a very niche area.
For instance, they have a segment just for pharmaceutical companies. So if you're in pharmaceuticals and you want to know right away what's happening with new laws, or if you want to dive deeper and read about research, or even have a conversation with an analyst, you spend $1,000 a year—tens of thousands a year—and that's basically what you're getting: this briefing along with a few other things.
They scaled this business to over $100 million in recurring revenue, and it's pretty fascinating. There are a few others doing something similar. I think if you could actually pick the right niche—whether that's pharmaceuticals, legal, or different types of finance—you could build a really interesting daily briefing business. You could even allow users to specify which companies they want to "spy on" a little more than normal, and I think you could charge tens of thousands of dollars a year for a subscription like that.
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Anand Sanwal | Yeah, you can charge a lot for this. These folks, as long as you deliver quality in the morning when they need it, have sort of massive budgets. I think Bulletin had Bezos as a customer for a while, so he was reading the Bulletin intelligence briefing every morning. | |
Shaan Puri | so | |
Sam Parr | what's that company called bulletin | |
Anand Sanwal | bulletin intelligence cision bottom many years ago | |
Sam Parr | Dude, the reason why I like talking to you is that you and I are some of the few people who nerd out on this. There are all these data businesses out there.
So, you and I, for years, have talked about companies like Informa, which has a market cap of about $10 billion. It's basically a data and trade show business. Then there's Euromoney, which we've discussed, another publicly traded company.
There's also Cision, which is just kind of an older company that no one really talks about. These companies are huge, but they're just not sexy, so they're not discussed in our circle. However, they're crazy fascinating to learn about because their margins could be huge.
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Anand Sanwal | Yeah, it's a... I mean, it's a build-once, sell-multiple-times kind of business, right? So, like, once you build that data asset or that info asset, you can keep selling it.
So, yeah, they're great businesses. They're unsexy, which is always good because then you don't get all the smart people trying to come in and, you know, take your lunch money.
So, yeah, I like these businesses a lot. | |
Shaan Puri | You had one on here also that was the pricing data. So it was like, "Go extract the pricing data from every SaaS tool." You know, go to their website, find the prices, and organize all that information.
For things that require a demo or quote, like, I don't know, send a $5 an hour employee through that process to collect the pricing data. Now you have it, and you can make that visible where they are hiding it on their website.
Basically, you have a giant search engine or a database of, "Okay, if I want to use some email send software, here's how the prices compare across them." Is that what the idea would be for that one?
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Anand Sanwal | I think the idea here is that you start with public SaaS pages and figure out how to crawl them, or you just, you know, use MTurk or something.
Then, you look at email service providers: what's the pricing? What are the features?
I think the real killer here, which is maybe borderline, is that a lot of enterprise companies don't put their pricing on their page. So, you hire somebody who goes and pretends to be a customer to get the pricing. That's really, really valuable, right?
Because pricing is like a dark art in B2B. You're like, "Yeah, sounds good," right? Everyone has opinions, and nobody has data.
So, I think you could actually do something really interesting there long-term if you called companies and got that pricing or talked to their customers to get their pricing.
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Sam Parr | That's actually the tagline. It was the tagline on your website, which is "Without data, you're just another idiot with an opinion" or something like that, I think.
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Shaan Puri | dude that's great | |
Sam Parr | it was great right I don't know do you guys use that anymore | |
Anand Sanwal | We don't use that anymore. I think we still use "In God We Trust; all others bring data." So, we'll use that in some contexts.
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Shaan Puri | Who comes up with this stuff? Is this you, or is this someone on your team who's like the witty copywriter?
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Anand Sanwal | these are just stolen from other people | |
Sam Parr | who are it's like a quote the idiot wants a quote I think right | |
Anand Sanwal | I think both of these are like, you know, somebody, like some luminary. And, you know, we footnote them in small print and give them credit.
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Sam Parr | Do you think that you guys being kind of silly is a leg up, or do people criticize you?
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Anand Sanwal | Yeah, I mean, we get some criticism, but honestly, B2B is so mind-numbingly boring that it's great as a way to stand out. I tell the team, "You know, love us or hate us, you should have an opinion on us."
That's the general theme, right? Because most of it is pretty vanilla and just kind of jargony. So, yeah, it's been, I'd say, a net positive for us. But we've lost some customers over stuff we've said that offended them and whatnot.
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Sam Parr | like what | |
Anand Sanwal |
You know, we did a ranking of VCs once, and we said a specific firm was losing in the ranking. It was just an objective thing, and they were like, "We're canceling our subscription immediately!" Right? And...
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Shaan Puri |
What a loser move of them. It just proved my... Oh, you don't want access to data now? You got your feelings hurt and you canceled your own data pipeline.
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Sam Parr | you're like you're down another peg yeah | |
Anand Sanwal |
So we've had... you know, that. And some people don't like... You know, I think when Trump hysteria was going, we'd sometimes put an infographic with him in it. We didn't have an opinion, but it was just like... You just [mention] him and Elon Musk, if you mention them, it's just like lunatics come out, right?
And so it's good for engagement, but it is definitely a little bit... it can be odd. Like, you say something and people just... they've, you know, it's a cult and people go kind of crazy.
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Sam Parr |
Like, I... You're a really good writer, or whoever's writing is really good. You guys always use things like... your headlines are really good, but then there are just phrases all over. It's built into your culture.
In your annual review, we're like, "Hey, we did pretty good for a company that isn't lighting money on fire like the rest of the VC world." They're just like little phrases like that. It just makes it stand out, and I think that gives you a voice. You guys are actually pretty good at that.
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Anand Sanwal | Yeah, and I appreciate that. I mean, I think it's partly for the external market and partly for the team, right? Like, you're selling B2B software, and sometimes that can be, you know, if you're 22 and just out of school, it's like, "Hey, that's not super inspiring," and I don't know exactly what that looks like.
Then once we can show them we can have personality, we're in the tech economy, which is interesting. So, yeah, it works. You know, we screw up a bunch of things, but that's been good for us.
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Sam Parr | If I was going to go out there and do what you said—getting all the data, hiring people to call, and actually getting quotes—who would I sell that to?
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Anand Sanwal | On the software pricing, yeah, I think you go to product teams at software companies and say, "Hey, do you know how you came up with your pricing?" You know, and here's what your peers are pricing at. Give them like a snippet and give them a taste. Then be like, "Hey, and we have all this other detail behind."
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Sam Parr | how much would you charge | |
Anand Sanwal | I mean, I don't think you start anything with like costs at big companies. You start at, you know, $20,000 to $50,000, right? It's easier to go low than to start high and go low.
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Sam Parr | We just... you just handed someone listening a pretty solid idea, right? I think that.
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Anand Sanwal | I think the thing people do is they underprice. We did this in the beginning. Our first CB Insights subscription when it started was $395 a month.
What you actually got was a bunch of people who didn't know how to use data, who were a pain in the ass, right? It was like your worst nightmare. It was people who churned quickly, who paid you little, and who were blowing you up on chat all the time for support.
Then I remember meeting a management consulting firm, and they were like, "Hey, can you add a couple zeros to the price? Because, one, your price will look like a joke internally, and two, I don't want to wait behind the guy paying $3.95 a month for service."
So, price is an indicator of quality. It's an indicator of other things beyond just the core value of the product. That was eye-opening to me. I was always like, "Oh, you know, price low and do all that." Now we're orders of magnitude higher than we were when we started.
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Sam Parr | that's awesome sean what do you got | |
Shaan Puri | let's do some non data nerd ideas so | |
Sam Parr | I'm gonna pick a different one rankings 1 | |
Shaan Puri | Yeah, yeah, let's do the college rankings.
1. What'd you call it? "Broke and Busted" college rankings.
Okay, so what's the insight here?
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Anand Sanwal | So, I think *U.S. News and World Report* is sort of like the preeminent college rankings. There's been plenty of coverage about how that's a basic con, right? Universities do all this sort of finagling to try to get higher in that, you know? I...
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Sam Parr | look how's that work | |
Shaan Puri | how yeah they pay or what what is what's the I | |
Anand Sanwal | Don't think it's that they paid. I think it's that, like, you know, you've got these subjective criteria, like the student-to-teacher ratio. Universities will massage that data so it looks good.
It's a limited set of factors, and it's unclear how causal those factors are to actually getting a good education. So, I think you turn that on its head.
Well, I think U.S. News and World Report, you know, in like 2013, was doing like $40 million in revenue, and now it has, again, LinkedIn, 500 some odd employees. So, I gotta believe it's doing $100 million+ in revenue, and I'm assuming college rankings is the number one thing.
So, I think the thing you do here is you actually go to graduates of the school and just ask them for their W-2s. You're like, "How much are you making?" You just took on a bunch of debt. Does this place actually get you a job that pays, or are you, like, you know, a server in a restaurant with $200,000 in debt?
I think you reach out to alumni, get their W-2s, and basically put a ranking together of, "Here's how much I paid, and here's how much I make when I get out." If I'm a parent, I'll care about that. I'll be like, "I don't really want to send my kid to a school where their prospects for employment are garbage."
So, I think it's a very singular characteristic. It doesn't take into consideration social life and all that other stuff, but I think it's pretty important, especially with all these people leaving school with tons of debt.
That's the way I would do it. You'd probably have to pay those students or ex-students a little bit, but I think it's pretty cheap. You'd probably start with New York colleges—start niche. Don't try to be everywhere right out of the gate. Then build out from concentric circles from there. | |
Sam Parr | Do you understand? Like, I don't know about you, Sean, but we're talking about some nerdy stuff here. I find it crazy fascinating because it's very clear to see the opportunity here.
But what's shocking is when you say, "Oh, I'm gonna go get the data." Someone like me would be like, "Well, I gotta go Google it and find a database." And you're like, "No, I'll just hire someone or I'll just use Mechanical Turk," as you said earlier.
Or I'll just make a ton of phone calls. By doing that, I can get interesting insights. Is that really how a lot of this works?
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Anand Sanwal | And the beauty of that business is that 99 out of 100 people won't do that work. So, once you've built the data asset, most people will think it's cool, but they just won't do it.
The other example I like, which I don't know if I put on the page, is that I was trying to get a pool built at my mom's house. Pool pricing is just opaque, highly variable, and requires a lot of consideration. I have no idea what to pay for a pool.
Some kids should just go door to door at every person's house that has a pool and ask, "How much did you pay for your pool?" They could get the specs and then find out what people pay per month for cleaning and whatever else. I don't know what a pool requires, and they could literally build the database of that information. | |
Shaan Puri | that's a great idea | |
Anand Sanwal | pools in north jersey here's what it costs so let | |
Sam Parr | yeah | |
Shaan Puri |
Because that's what people Google too, right? Like, "pool cost" and then my city. That's a term that people will look for. Or even if they're just looking at "pool cost," but you have their city in the headline, they're going to click that one over the next one.
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Anand Sanwal | And then you go back to the pool people and you're like, "Hey, listen, I got this pricing. Next time you want to bid, you probably need to know what your competitors are bidding." So, like, you can sell the data to both sides, right?
It's definitely a perfect side hustle. It'd be like a thing that I hope my kids will just go do, like door to door, and go get data.
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Shaan Puri |
I love how even though I tried to pick a non-nerdy data one, it actually, underneath the hood, was a nerdy data one. You're like... you're a data hammer and the whole world is just little nails that you're trying to hammer with your... you know?
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Sam Parr | but dude this is the best business there is | |
Shaan Puri | In the data, like a vacuum, you're the data Dyson that's just taking in this data from everywhere you can.
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Anand Sanwal | Yeah, I mean, I love that business. And I actually think, not to get off on a digression, but I think this whole GPT thing is actually going to make private data that much more valuable. Because, you know, before it was like, "Oh, I'll give you my data and you'll just link to me and I'll get Google." But like, that's all going away, I think.
So, having access to private data is going to be really valuable. So, I'm extra bullish. | |
Shaan Puri | And do you look at, like, for example, the pool one? That is a good one because the pricing is probably not changing all the time.
Whereas maybe the college one, you have to redo the data collection every year in order for it to be accurate.
For example, in the content game or the media game, which Sam and I think a lot more about, is that if anybody could do really well with evergreen content, that's so much better than someone doing what we were doing—daily emails that are disposable. You have to recreate the product the next morning; otherwise, there is no product.
So, do you think about that when it comes to data? Either the ease of collection or the longevity of the collection really makes the idea more valuable versus less.
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Anand Sanwal | Yeah, I mean, I think you probably want data that, maybe counterintuitively, requires a lot of refresh, right? Because that's what keeps people subscribing. If I can get the data once and it's good for 3 years, it's like, "Alright, I'll get it. I'll churn and come back to you in 3 years when it changes."
When there's actually a little bit more volatility to it, it's like, "Hey, I need to know what's going on because my business might suffer," or what have you. In the case of the pool, when the pool owner is only going to buy it once, right? But you know that, and that's okay.
Because you could sell those leads to pool people. You could sell that to pool cleaners. You could do all sorts of interesting things with it, right? So, it doesn't have to be just selling the data. You could build advertising, lead generation, and other businesses off of it for sure.
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Shaan Puri | Okay, I got one. There's no way this can be a data one: a McCormick's spice competitor.
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Anand Sanwal | Yeah, I don't have a lot for this one. I think I have a column called "Zone of Excellence," and this one's out of my zone of excellence. McCormick's is like this multibillion-dollar spice company.
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Sam Parr | oh I recognize that | |
Anand Sanwal | If you open up your spice cabinet, there are probably some spices with a red top, right? That's all McCormick's.
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Shaan Puri | $24,000,000,000 company wow in sales | |
Sam Parr | in sales in sales market cat wow | |
Shaan Puri | public company | |
Anand Sanwal | Yeah, so it's just like... you know, why isn't there like the, I don't know, the Apple of Black Pepper? I don't really know how to do this right, but like... what's the... what's like... well?
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Shaan Puri | I think for this one, you're right. You can go either higher end or just the more fun look.
It's all about branding, packaging design, and influencer marketing. Most importantly, who is the, you know, the Martha Stewart of YouTube that you can partner with? Who can be the face of a brand like this?
Who has that kind of brand and gravitas that can get into Target or the store shelves at supermarkets to compete with something like this? I think that's the way I would go if I was going to do this.
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Anand Sanwal | Yeah, 100%. I think the thing that's interesting about this—and I don't know anything about McCormick's—is the bundling.
Like, you know, if you buy salt, you need pepper. If you need pepper, you might need oregano, and you might need whatever flakes that they sell out there, right?
So, yeah, you could just keep stamping this out across every spice category. But yeah, this is not one; this is outside of my zone of excellence. So, I'm doing this one, but I like it.
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Sam Parr | They own everything. I didn't realize this. Have you guys ever seen this protein bar at gas stations called "Tiger's Milk"?
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Shaan Puri | no | |
Sam Parr | have you ever | |
Shaan Puri | seen that's fair | |
Sam Parr | Yes, they own this bar. It's the worst looking thing; it basically looks like a label. It looks like it was drawn by Kenny Powers, or like if the Power Rangers ate a protein bar, this is what they would eat.
It's called Tiger Milk, and it has a face of a tiger on it. It's a protein bar. They own that and a bunch of different stuff. This is awesome! I totally should have... hell, they own Frank's RedHot, which is my favorite.
So yeah, what a company! I didn't realize that these guys were what they are. That's wild, man. They were created in the 1800s.
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Anand Sanwal | Yeah, I mean, they're just... you know, brand recognition. Everybody knows. I mean, if you go to the spice aisle, it's all of them. They just own the whole thing, right?
So, you gotta come up with a distribution hack here. But that's, you know, Sean, that's probably more your world than mine. But yeah, for sure.
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Sam Parr | Can I ask you a quick question? It's different from my ideas but about money. So, I'm not gonna... you can say it if you want. I'm going to assume that you own a chunk that is, on paper, worth mid to high, low to low, to high, $100,000,000. Have you taken any money out of your company, or has your only income for the last, I think you said, 10 years you've been running this just been like a normal, mild salary?
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Anand Sanwal | Yeah, so I didn't pay myself for the first four years. When we raised money, I basically took my back salary. Since then, I've not taken any money off the table.
So, yeah, I'm foolishly long or brilliantly long on CB Insights. We'll see how things play out, but yeah, I'm all in.
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Sam Parr | were you wealthy before you started the company like did you have banker wealth | |
Anand Sanwal | So, just no, no, no, no. I just, you know, I got married right before I started the company. I told my wife when we were dating that I didn't want to work at a big company anymore and that there were going to be some lean times. She was down for it.
So, I just saved religiously. We didn't go on vacations with friends, and it was always awkward because they would ask, "Oh, do you want to go somewhere?" and I would say, "Oh, I'm super busy." But really, I just didn't have the money. So, yeah, I just saved like crazy.
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Shaan Puri | I'm busy. I'm busy being poor right now, so I can't go. Sorry, I'll check the calendar when I'm not poor. I'll start going then.
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Anand Sanwal | I just saved a ton of money. For the first two years of CBI, I paid for a small team out of my pocket. Then we started generating revenue, but...
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Shaan Puri | Wait, why haven't you taken a few $1,000,000 just off the table to make your life a little bit better? It wouldn't have any material output. Okay, yeah.
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Sam Parr | I, and by the way, just so we have numbers, you basically have only made, I imagine, in the middle of $100,000 of $1,000,000 a year in salary. Is that right?
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Hubspot | Yeah, I mean, I now get paid like a fair CEO salary, right? So I'm not like one of these big public company guys. But, yeah, I think we've been really focused on the business, and I just think it's a giant opportunity.
Candidly, a part of the reason we didn't raise in the beginning was because I don't think I'm good at pitching. I also worked in venture, and I didn't want to work for my investor, right? That was always a very guiding principle of mine.
When I look at S-1s of companies that go public, and I see the founder owns like 5%, I'm like, "That's just a backwards calculation." Yeah, probably, you know, should have could have taken money off over the course of time. Right now would not be a good time to do that, given where the markets are.
So I figured we'll just keep growing out of this current sort of malaise that we're in, and then, you know, opportunities tend to present themselves. Even our fundraise was like a customer sent us a term sheet over email.
I can't find this client's info. Have you heard of HubSpot? HubSpot is a CRM platform, so it shares its data across every application. Every team can stay aligned—no out-of-sync spreadsheets or dueling databases. HubSpot: grow better.
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Shaan Puri | Tell the story of the guy who offered you $100,000,000 via DM. How did that go?
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Anand Sanwal | Some, you know, I get some interesting DMs on Twitter. Somebody offered $100,000,000. I think this guy was broke as a joke, but it was still funny. I said, "You know, not interested, not looking to sell."
I think then the email chain kind of devolved from there, where he was like, "You know, I'm going to build a competitor and put you out of business."
Yeah, it was good, you know.
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Sam Parr | what's his name | |
Anand Sanwal | I don't recall. It was like you blurted something out of the thing, but blurred it out, yeah.
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Shaan Puri | So, he sends this DM. You posted the DM screenshots. It starts like, "Hey, here's who I am. I'm really interested in partnering or in acquisition. Let's talk. Please call me."
And then you're like, "Thanks." Not even "Thanks," just "T H X," right? Just the short "thanks."
You say, "Not for sale." Nice. And then he goes, "How about a partnership?" He just keeps going. He's like, "How about this? I'll give you $100,000,000 for the business. You know your fiduciary responsibilities; you have to present this to your board. You know that. Let's go."
And then you go, "Okay, interesting strategy. Best of luck."
He goes, "So, do you accept the offer?" Then he devolves into, "Alright, then I'm going to create a competitor."
Have you seen this competitor launch? Is he eating their lunch yet or what? Surprise, surprise.
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Anand Sanwal | weird yeah we're tracking religiously to see when this launches but yeah not not nothing yet | |
Shaan Puri | You should DM them back. Be like, "Hey, how's it going, man? I'm curious about the launch details."
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Anand Sanwal | Yeah, that was atypical. I think most of my DMs are nice, but that one was a little out there.
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Sam Parr | what would you do with the money now if you sold | |
Anand Sanwal | I mean, I think the thing I do is I want to build a school of engineering. I think education is broken. Kids should just learn how to build businesses and not go to college.
That's what I do. I think there are a bunch of colleges that are struggling, and I could go buy a plot and build a dope campus for a bunch of high-achieving kids. We'll just go figure it out.
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Sam Parr | how how much would that take | |
Anand Sanwal | I have no idea... I have no idea. This is like, but you'll have it. This is my distant dream.
But yeah, I think I just read a great book called *The Case Against Education* that kind of breaks this down, and it's really interesting. I think there's an interesting thing to be done there.
And then, yeah, I'd love to do some stuff in India along those lines. But yeah, this will be my last true startup.
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Shaan Puri | I've looked into a bunch of colleges for sale because I had a similar dream and idea at one time. I now don't want to do this, but it's amazing. You can buy full college campuses for sometimes single-digit millions, sometimes just like $10 to $15 million. It's crazy!
Which ones? It has to be less than the replacement cost of just the buildings and the land in these places. I'm not sure why, and these are accredited universities. A lot of them start as just doing one thing, like cosmetology or whatever. Those are really cheap; those are like $1.5 million. You can have a university or a college that does that, all the way up to a campus in New York for this small liberal arts college that's not doing so well. For $15 million, you could take the whole thing. I'm like, is there...? | |
Sam Parr | like a marketplace for that is there a zillow for bankrupt universities | |
Shaan Puri |
There should be, but there's this one website called DealStream that happens to have most of them that I see. DealStream will send me emails of... like, you know, "multicampus beauty school, here you go." I just got this email 2 days ago.
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Anand Sanwal | what made you sour on this idea sean | |
Shaan Puri | Just like the lifestyle component, I was thinking, "Would I actually want to do this?" It was like, "Okay, I'm going to basically go be the dean of the school, and this will be my baby. I will make this great."
Then I realized, it's a lot easier to just have a business I could run on my phone and laptop, you know, for four hours a day. I wouldn't have to worry about this, and I could just hang out with my kids and have fun.
So I thought, "Okay, yeah, there's an all-in version of entrepreneurship that I'm no longer super interested in." That would require a lot of commitment. Same thing with speaking; I'd rather do this podcast than go speak at events.
In the last three years, I got invited to speak at maybe 150 events, and I've only said yes to two of them. You know, you could make good money and grow your audience doing this, but it seems like a lot of work. I think I'll try to just win the way I want.
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Sam Parr | Sean, have you ever read the blog post that Anand made years ago about your father or someone in your family getting sick? They couldn't run their factory in India anymore, and you had to go. Did you have to run the factory? I have.
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Shaan Puri | to run it right now his dad | |
Anand Sanwal | Yeah, my father passed away in April 2017. He had a chemical business in India, and he built it over many years. I thought, "Alright, I can't just let it go to zero." So, I ran it while I was running CBI for about 18 months.
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Shaan Puri |
The title of the blog post is "How to Manage and Sell a Company in an Industry and a Country You Don't Know." It's kind of great; it's like a full-length, sort of "here's the whole thing" post. Do you want to tell like the short version of the story, and then people can go read the blog?
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Anand Sanwal | Yeah, I mean, he died on April 17, 2017. As we were going to cremate him— we're Hindu— this worker from the factory comes up to me in Hindi. My Hindi is pretty weak, but I understand it. The worker was basically like, "You know what's gonna happen to us, right?"
I was like, you know, I'm a mess, but I was like, "Alright, I guess." There is this thing. My mom and he basically built this business over 20 years, you know, kind of like a small chemical company. Nothing... what?
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Sam Parr | that mean | |
Anand Sanwal | gargantuan in terms of size | |
Sam Parr | no or chemical what's a chemical | |
Anand Sanwal | Oh, it was like... it was in a sector called fine chemicals. It was a raw material that goes into perfumes, flavors, and fragrances, right?
So, he built it. He was one of three manufacturers in the world that could make this product. It's a really finicky product. I'm like, "Alright, I guess I gotta run this." My dad was like a mad scientist—off the charts smart—and I'm like, "I'm not that."
So, I'm like, "Okay, what do I do here?" Because if something goes wrong in the factory, I can't help. The only thing I can do is probably try to bring in more business.
I just went online and cold-called every large chemical company that's in this space. I was like, "Hey, we make this product. If you ever need it, come talk to us."
We had our best couple of quarters ever when I was running it.
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Shaan Puri | you were doing outbound and he he wasn't doing any or he just wasn't doing it well | |
Anand Sanwal | My dad was just like... he was a sign. He was like a product guy. So he's like, "The best product will win," right?
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Shaan Puri |
Put this picture up on the YouTube channel or the blog post. It's the side of a building, it looks like, and it just says on one side "Good Quality" and then there's a giant equal sign, and then it just says "Good Business". That's like... it looks like it's on the side of the building as you approach to walk in. It's just like, "Hey, reminder."
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Anand Sanwal | I was entering the factory yeah | |
Shaan Puri | **Good quality equals good business** in like Times New Roman font.
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Sam Parr | oh my gosh this is awesome | |
Anand Sanwal | But yeah, I was just like, I can try to go sell because I can't help on the technical side. The team he had assembled was awesome. They kept the factory running, you know, had good salespeople, and kept reaching out to buy it.
A lot of them, like, you know, when somebody, once a proprietor dies, a lot of bottom feeders show up. So I was just trying to make sure that these weren't those people because I want to make sure the team landed on their feet.
Then, yeah, I just navigated through it, met a banker who was representing the buyer. They were above board people. After 18 months, for a while, because I'm like insanely ambitious, I was like, "Oh, I'll have CBI as the data arm and I'll have this industrial arm, and we'll build that." And then, like, you know...
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Sam Parr | you'd be a fucking tycoon | |
Anand Sanwal | Yeah, well, I mean, I was telling my wife, "Yo, we gotta have more kids." Because if we want to build, you gotta have a lot of kids to take all these arms of this industrial conglomerate up. And she's like, "You're insane."
Then, yeah, like 10 weeks here, or 6 weeks here, 10 days in India... I mean, yeah, that was brutal. So then I was just like, "Alright, I gotta sell this." I was fortunate to sell it, and the team's still all there. You know, everything worked out.
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Sam Parr | so what did you sell it for | |
Anand Sanwal | I can't disclose | |
Sam Parr | a good I mean like a good amount | |
Anand Sanwal | Yeah, it was... you know, I wasn't optimizing for the dollars. I was optimizing for a clean deal to a person who would not fire everybody that my dad built the business with.
So, you know, I'm sure I could have gone to somebody else who would have torn it down and, you know, done other things with it. But I felt really good about these guys.
So, yeah, I think it achieved non-financial objectives that I think were more important to my mom and to me than maybe the financial objectives. | |
Sam Parr | This is a really, really good blog post that you have, and it kind of got lost over the years. You guys gotta share this again more.
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Anand Sanwal | Yeah, I mean, it was... you know, the team at CBI, I gotta give them credit. I was kind of an absentee CEO for a little bit, and they kept the trains running on time. So, yeah, it was a good thing to accomplish. I was glad to get it done.
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Shaan Puri | You had some takeaways on the M&A process. I'm going to read the headlines, and you can decide which one of these you think you have a strong view on or a strong message to deliver.
So, you said, "Should I have hired an investment bank?" and you're like, "I didn't have one. I represented myself. Maybe I should have."
You also mentioned, "Don't let lawyers run the process." Lawyers are often trying to mitigate risk, but it's easy for everyone to get entrenched in risk management and not actually have the deal go through.
Another point was, "Don't sweat the small stuff."
Finally, "The industry standard" is a phrase to watch out for.
So, give me your thoughts on one of these.
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Anand Sanwal | The industry standard one, I think, is like the one that I hate because people only use that when they can't justify the term. They just say, "Oh no, no, but that's just industry standards."
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Shaan Puri | how we do things we always do things that way | |
Anand Sanwal | There's no such thing as an industry standard, right? If it's good for you, then it's what you should aim for. That, you know, is somewhat counter to the "sweat the small stuff" thing. You don't want to negotiate on every little thing, but when I hear "it's industry standard," my ears always perk up. It's like somebody's trying to get one over on me, or they're just trying to sweep this under the rug.
I think that's an important point. You know, sweat the small stuff, but also put some items in that you want to negotiate on, that you don't care about, and that you're just willing to give on. Just don't make the negotiations super painful in all regards.
Regarding bankers, I think for this deal, it didn't make sense to use a banker. I have a bunch of data on what comps are with CBI, so it was good enough. It wasn't a big enough deal that I wanted to cut in somebody for, you know, 5-7%. If CBI was doing a deal now, we would absolutely have a banker because I have definitely seen the value of what a great banker offers.
But yeah, I mean, I think the industry standard stuff is probably the thing. Anytime you hear that, I think an entrepreneur should wonder, "Okay, why are they just pushing for industry standard in this particular area?" Because usually, it's always industry standard to the benefit of the person across the table. It's never industry standard and good for you. So that's one I would definitely push on.
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Sam Parr | Can we... one thing happened over the weekend, Sean, that you and I had talked about. I actually think it's a good time to discuss it now because I have a feeling that Anand's going to know a little bit about it.
Do you remember, probably two months ago, we talked about this guy named Gautam Adani? I think that's his name. You know what I'm talking about? You were like... I mean, you're not to blame. We were just using the news, and you were like, "This guy's amazing! Look at what he's doing." He kind of looks like an Indian Mario guy, and he's doing all this cool stuff where he doesn't really care about looking cool, and he gives his money away, yada yada yada. And now he's like the third or first richest man in the world.
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Shaan Puri | The news was that he, I think, had gotten to be the second or third richest man in the world. I didn't think most people knew his name. I said, "Hey, there's this guy Adani. Here's what he does."
I think we even said it. I don't really remember saying this, but a lot of people DM'd me saying, "You guys called it," because news came out that there was some fraud going on or whatever with their company.
I guess we had said something that was like, "You know, either this is just amazing or you never know because of whatever." I don't... we have to go back and listen. I'm not sure what the clip was, but a lot of people are like, "You guys called that."
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Sam Parr | which yeah people were saying that too and I'm like I said thanks but I don't actually remember us | |
Shaan Puri | I don't remember calling that. I do remember when I was reading about it, a lot of people were like, "Hey, this is kind of a shell game."
Like, he's basically raising money in one company, using the basic borrowing against another company that he owns. That company is borrowing against another company that he owns. He had so many entities that were each sort of like the justification for the next in terms of either the valuation or borrowing money or whatever it was.
I don't... I mean, this was a couple of months ago. I don't even remember what the details were. But I think we just said that as a footnote. It's not like we were calling him out on anything. I think people are giving us a little more credit than we deserved on that one.
So, sorry to interrupt you, Sam. So we've...
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Sam Parr | Always said that the back... that's the background. So, I think on Friday, Hindenburg Research, I think they're a short seller. They short companies but they produce scathing reports. They've done this a dozen times.
I can't... I'm sure Anand, you probably know some of their examples, but they're just known for these really good reports where they'll write and say, "This company, we think, is total bullshit. Here's why," and then it tanks. Obviously, they are financially incentivized for it to tank.
But as far as I'm concerned, I think some of the research is actually kind of spot on sometimes, and they have a good track record. But Anant, have you followed this?
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Anand Sanwal | I followed it a little bit. I mean, I like Hindenburg because I think we live in the age of grifters.
You need people, and I don't know if Adani is one, but I think you need people like Hindenburg, or Coffeezilla, or Wendover Productions, or any of these folks that are out there, even on YouTube, who are trying to hold and at least shine a light on some of the griftiness that's out there.
So, I like what they do at a high level. I don't know if their case with Adani is a good one or a bad one, but yeah.
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Sam Parr | Yeah, well, basically they said that the entire company has a bunch of weird things going on with it. They listed all these companies, and each person that runs one of the companies is one of his relatives or former executives. So it's all kind of like his cronies are running everything.
He's loaning money from other companies that he owns, and he's making the valuations of each of those companies really high. It turns out it's basically like a little FTX-esque situation, where similar entities that he owns are loaning money to other entities, with the collateral being a company that he values himself, among other things.
Anyway, I thought you guys would have an interesting take on this because I know you spent a lot of time in India and you're in the finance world. I wasn't sure if you had an opinion there.
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Anand Sanwal | Yeah, no, I don't have an opinion on that. I will say, when you see organizational structures that are really convoluted, like you know, FTX or Adani or Enron before that, people always, in the moment, are just like, "Oh, these guys are geniuses. They figured out how to move stuff and do X, Y, and Z."
Then, when you look back, it's always like, "No, it was just a giant shell game." You know, Sean said that's an interesting lens to look at companies through. It's like the innovation isn't the product; the innovation is the capital structure or some weird thing.
It's like, "Okay, that's a kind of a weird business to build," right? Where that's what you're innovating on. It's like companies that innovate in HR. I'm always just like, you know, they're doing all these weird things. It's like, "Don't you have to build a product? Why are you doing like 3.5 days of work and all this weird stuff?" It's just like, "Why don't you just work and build a product?"
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Sam Parr | Have you been able to capture or catch any scams? Or like, make any right predictions based on the data that you guys have?
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Anand Sanwal | Yeah, I mean, we don't publish that stuff. We usually send it to the media, right? Because we're not like a media outlet.
But we'll find stuff where we're like, you know, this company raised... I'm not gonna name it, but there was a company recently that raised at a $4 billion valuation. When you looked at the founders and the number of employees, everything seemed off, right?
So, you know, we would send it to somebody and say, "Hey, this looks odd. You should go do what journalists do and dig into it."
We'll find stuff that's a little odd at times. And then, you know, I think the more interesting thing sometimes is you'll dig into filings of companies after they've been acquired by a public company. You see, this isn't like a scam or anything, but you see a hot company that says they got acquired, and then you actually see how much the public company paid for them. It's like, you know, one-eighth of what they raised.
So, it just sort of shines a light on what was a real success versus what isn't. I think that's probably what we tend to see more. You know, people who want to commit fraud or, like, if they're good, they're hard to catch.
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Anand Sanwal | Right like it's just not something that and it's not where we spend our time | |
Shaan Puri | Also, some of these things, like the same exact signal that later you look at and say, "Oh man, we should have known something was off," are a sign of the genius of what's going on.
Like I know with FTX, there were a bunch of things that now people are like, "Wow, those should have been red flags." But at the same time, those are the things that in stories were being described as kind of the remarkable aspects about them.
For example, they all slept in the same house on beanbags, and whatever. Now it's like, "Oh, they had this weird, inappropriate sort of group dating thing going on." But before that, it was like, "These are just 20-something-year-olds living in this hacker house, making it happen."
It's one thing on one hand, and then, after it's exposed, it becomes labeled as another. I've seen this many times.
For instance, Sam Bankman-Fried was portrayed as this quirky genius, and then he turns out to be this sort of drugged-up liar. It's the same behavior he exhibited before, where he was taking whatever, you know, Adderall or whatever he was using to stay up and trade.
These guys were fueled by Red Bull and whatever, and they were just working. They were geniuses outsmarting everybody in the market, but they were also gamblers who were reckless and not making good decisions because of their lifestyle choices.
I've seen this happen before. I remember with Tesla, there was a...
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Shaan Puri | In a time when I think Tesla had like 10 or 15 different CFOs, my friend told me this because I was reading a lot of stuff online about how there might just be some... you know, there's a lot of smoke. I don't know if there's a fire, but there's a lot of smoke about Tesla not being in good financial shape.
What do you guys think about this? Am I overreacting to these conspiracy theorists on Reddit and Twitter? He said, "Well, I noticed something interesting. I always have this phrase: follow the CFOs. The CFOs know the health of the business."
What you never want to see is what was happening with Tesla, which was like a revolving door of CFOs that would come in for 3 to 6 months and then leave. Secondly, the new CFO is like this shy 24 or 26-year-old who's now Tesla's CFO. Wow, he's amazing!
The same thing happened at FTX. I remember when they were sponsoring us for something, and the guy who was paying us was their head of strategy. I didn't go on the call, but I asked Ben later, "So, was he super sharp, or what was that guy's story?" He said, "Yeah, he's 23 or 24 years old, and he started as whatever, and now he's promoted. He's the head of strategy for all of FTX."
Again, it was like, "Wow, that's crazy! I guess they're just a real meritocracy around there, and it's a land of equal opportunity. This guy just proved his worth." Or it's like, "No, this is his college buddy. He's not going to ask too many questions, and he could just trust him to do whatever and say whatever."
Right? These things from the outside... I remember reading articles about this wonder kid, and then later it's like a bad thing.
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Sam Parr | and you were right about the cfo thing with tesla at that time weren't weren't they on the brink | |
Shaan Puri | Well, people don't talk about that much now, but it did seem like they were on the brink or, you know, just narrowly survived—either properly or improperly. I'm not sure.
But later, I remember one interview where Elon finally admitted it. He was like, "We were 6 weeks away from, you know, the show being over for Tesla" when they were having the Model 3 production ramp.
He had also said something in a separate interview that alarmed me as well, which was about some... what's that famous green clean energy thing that Obama funded?
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Sam Parr | like the green new deal or something | |
Shaan Puri | No, it was like **$600,000,000** to Solyndra... Soylent... soy... whatever. I don't know, some company that got a bunch of money and it failed. Up until the day they declared bankruptcy, it was like, "We're good! I don't know what you guys are talking about."
And Solyndra, that's exactly right. They asked Elon about that, like, "Does clean energy get a bad rap because of the problems with Solyndra and others? People say it's hard to make new tech work and all this stuff."
He said something in a separate interview where he was like, "What are they supposed to say? As soon as they admit any weakness, the stock would tank and it would guarantee their demise. They have to say it's all good. You guys are nuts," whether they are or aren't.
Because the other one is, it will tank their stock and they will die for sure. It'll accelerate their death. So then I was like, "Well, you can't believe anything this guy says about how Tesla's doing if that's his mentality."
When I'm reading these things about how they might be on the brink, he's saying they're all fine. But he even says that that's the CEO's job in this situation.
So now you know what to do. And that's a long story short about why I sold my Tesla stock too early.
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Anand Sanwal | Yeah, I do think there's a signal that I look for. It's not in the data; it's like the narrative. When it's a crazy founder narrative, like they were in Southeast Asia living in a monastery, and they talk about their clothing choices, that's always a weird one, right? When it's like, "We're not going to talk about the business; we're going to talk about how they wear some moleskin T-shirt made from..." you know?
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Sam Parr | dude but it it worked with zuck | |
Anand Sanwal | yeah but he wasn't like he built the product to start he wasn't known for his like weird | |
Shaan Puri | I think it's the key thing when you can't see the product or the financials, right? For a lot of these things, it's like, "Is the product legit? Are the financials visible?"
But even then, you can't... you know, FTX was a real product that people used, and the financials made sense at the time. They were obviously making money on every trade, right? People were doing a lot of crypto trading. How could they not make money? It seemed like it would work in both cases.
Another example on the FTX side: they had 25 engineers. I remember reading stories about how he was just like, "Yeah, we're not like these Silicon Valley companies with all this bloat." Coinbase has thousands of employees, but we have a whole engineering team of 25, and we do more volume than them because we hire 10x engineers. We go for extreme operational leverage.
Later, it was like, of course, these guys had terrible security practices and all that stuff. They didn't even have... they refused to invest in engineering, right? It's like the same story—two sides of the same story—once you know the result.
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Anand Sanwal | Yeah, 100%. I do think there are signals. When I don't think of fraud, there are signals right now that companies are not doing well.
For example, you'll see companies raise at a $1,000,000,000 valuation, and when we dig in, we see that the liquidation preference is 3x. But that stuff doesn't get reported.
Or you see the Chief Revenue Officer (CRO) or the Chief Marketing Officer (CMO) leave every 6 months, kind of like Sean's on the Chief Financial Officer (CFO). That indicates there are problems.
It's not fraud; it's just like, "Hey, this company is not killing it the way outsiders might look at it." I think fraud is a tough one. I think underperformance and companies that are not doing well—that's a lot easier for us to figure out.
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Shaan Puri |
What's a company that's impressed you that most people don't talk about? Because you guys see a bunch of companies that are interesting, what's a company that kind of flies under the radar but secretly crushes it?
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Anand Sanwal | I'm like, it's gonna be... it's probably gonna end up in the data world. So let me think about that.
I don't know if anybody... I will say, like, the area that I like right now, and I don't think these are great businesses, but I think they are interesting, is the folks that are analyzing the grifters. I really love this space because I think there's something to be built here. They're more media companies than they are great big tech companies.
There are a couple that are digging into pastors and the whole evangelical pastor world, and it's phenomenal, the stuff that they do. So that's probably the area I would go down a lot more in.
Then, looking at the businesses of folks like Andrew Schulz and people like that, you know, because I think there's a lot to learn from how they do marketing and how they build an audience. So I tend to look at businesses that I think we can learn from versus just random sort of businesses that are out there.
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Sam Parr | what what what can a boring company like yours learn from andrew schultz | |
Anand Sanwal | so the thing that so I think the thing that he's done really | |
Sam Parr | But I was purposely insulting you in order to make the average listener feel like, "Oh yeah, I'm not that cool." I can...
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Anand Sanwal | I think the thing that he does really well is he doesn't just interview other comedians. I think he interviews other people who are kind of adjacent to him.
What he does then is he keeps expanding his audience. Most other folks, like, you know, I like Theo Von, and Theo Von's like interviewing other comedians.
But he interviewed Neil DeGrasse Tyson, and I bet you that brought him a whole bunch of new people.
So I think that...
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Sam Parr | but it was very funny | |
Anand Sanwal | Yeah, it was awesome.
So this sort of like Schultz strategy of adjacent folks, I think, is really smart. It brings in a Venn diagram that is not as heavily overlapped. I think he keeps building that way, which I find really interesting.
For us, it's always about who has an audience that's not exactly our audience but has maybe a slight overlap. Would those people kind of like us if they knew about us?
It's kind of like thinking about partnerships there, whether it's newsletter partnerships or whether it's research that we do, whatever it might be.
So yeah, I think looking at what's happening in the consumer side of media is always interesting because that's where the innovation tends to happen. It doesn't usually happen in B2B.
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Sam Parr | well dude I appreciate you doing this you're fun to talk to sean what do you think | |
Shaan Puri | And we only got through maybe half of the shortlist ideas. So, if people like this, we should do a part 2 and explore more of the ideas.
Thanks for coming on, man. This was fun, and I appreciate that you've been, you know, tweeting about the show for a while now. I really appreciate that.
That's one of the cool moments of doing this for us: when people we respect like our stuff too. That gives you a little extra juice, a little extra wind in your sails to keep going. It's different than just seeing the numbers go up. The numbers don't have that same kind of pull as someone you think is cool liking your stuff.
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Sam Parr | And by the way, Adnan, it's your fault. It's kind of my fault, but it's mostly part your fault.
Basically, I get lots of messages a day, but like 5 of them are usually from a young man in his twenties. He'll just message me and say, "Let's fuck." That's all I get.
The reason being, one time I was either on my way home or en route to the airport. I hate flying, so I take a lot of Xanax. That's the only time I'm ever inebriated. I was very high and I messaged you saying, "I'm in your hood, let's fuck." You replied, "I'm down, like here's a restaurant, meet me there," or something like that.
I told that story, and now because of that, I get a bunch of men messaging me.
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Anand Sanwal | living living the dream sam you're living the dream | |
Sam Parr | Someone's dream. Not my dream, but someone's dream. Yeah, I'm living a person's dream.
So you're in a play for that, but I appreciate you coming on. This is fun. We'll talk soon.
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Anand Sanwal | alright thanks guys bye |