Paid Communities Making $20M a Year & How You Can Build One
Paid Communities, ROI, Tiger 21, and Aventa - March 15, 2021 (about 4 years ago) • 19:42
Transcript:
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Sam Parr | Paid communities interest me because I came across this thing called Tiger 21. It sounds lame that I'm bringing this up now after selling my company, but I've been interested in this for years. Do you know what Tiger 21 is?
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Shaan Puri | I've heard about it. What I know is that it's kind of like a mastermind peer group, but it's for a certain wealth level. I don't know if there's an actual cutoff, but it's supposed to be for wealthier individuals, and I think it's mostly older people.
We have a couple of friends who are in it, so I texted one of them today about it. I got a little bit of information, but tell me what I missed. What do you know about it?
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Sam Parr | Okay, so Tiger 21... Google it. I don't know the URL; maybe it's just that.com. But basically, it's a peer group where you have to have at least **$10,000,000** of investable assets in order to join. It's very expensive—**$30,000** a year. I wouldn't call it a mastermind because "mastermind" has a certain connotation, but yeah, it kind of is that.
I logged on to the site. I'm not a member, but I used a friend's login to check it out. There are at least **850** members, according to what I saw on their site. So what's that math? **$24,000,000** a year in revenue.
They have local chapters that meet up, I guess now digitally, and they do things like share one another's portfolios. You have to defend your portfolio, so it's basically rooted in rich people talking about rich people stuff, mainly being investing. But I think it turns into a little bit of therapy every once in a while, like a lot of groups do. But right, what did your buddy say?
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Shaan Puri | alright so I texted our mutual friend keith | |
Sam Parr | and | |
Shaan Puri | He's a real estate guy. He's been on the pod; you can go listen to Keith's episode. Keith's a good dude.
I asked him, "You're in Tiger 21, right?" He replied, "Yes, what's up?" I basically asked him what he thought about it. He said, "It's an interesting group. It's all about investing and preserving wealth. It's mainly for older people."
He mentioned that the typical meeting lasts four hours. You do, like you said, a portfolio defense where you talk about what you're holding and why. Other people get interested in it. Sometimes there are speakers; sometimes it's an external speaker, and sometimes it's someone from the group who speaks. There's also a moderator.
They also do events. If you go to the website, you can see that they hosted a Tiger 21 event at Magic Johnson's house. They're definitely trying to build this kind of "who's who" network, this sort of Soho Club, Soho House vibe to the whole thing. | |
Sam Parr | And, yeah, so they do that. They also offer deals. A friend of mine sent me a deal where, basically, when you're wealthy, you get this thing called **umbrella insurance**, which you pay $2 a year for. It's just general insurance.
The story they tell you is that if you get in a car crash and someone Googles you, they're going to see you're rich and they're going to want to sue you for $5,000,000. This insurance protects against all types of stuff. They give you a discount on umbrella insurance, and by my calculation, I actually would bet that they do **$30 to $40 million** in revenue. They recently sold to private equity, so it's a relatively big business.
I read up on it, and someone mentioned that there's a **90% retention rate**, which is pretty amazing. I've also been following Reddit's **Fat FIRE**, which is a subreddit similar to this, and it's tripled over the last year. So this space has got me incredibly interested.
But this is just one example of a paid community. What I wanted to do was go through a few other paid communities that are interesting. I want to explain why I think they work and then where the opportunity is for other paid communities. Does that sound good? Can I start?
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Shaan Puri | I start with one opportunity: why isn't this just a business model for our podcast?
Like, why aren't we starting Tiger 21 for people that have, let's call it, $1,000,000 of investable assets? So, $1,000,000 of sort of like liquid net worth that you can go invest into something.
And why aren't we starting this now? This seems like the perfect thing to do for a podcast like this.
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Sam Parr | I think that probably there should be something like this. I agree. If you go to the Tiger 21 website, you'll see the type of models they use on their website is like their ideal customer. It's like 65-year-old white dudes who own insurance companies that are quite wealthy, but not young or not like our kind of crew. So, I agree, I think there's something there.
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Shaan Puri | okay fair so fair enough so let's go into it | |
Sam Parr | Alright, so let's talk about where we should start. I've done a bunch of research. How about we talk about... sorry?
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Shaan Puri | Sorry, I interrupt you one more time. The thing I just said, by the way, I think is important. I said, "Why isn't that the business model for this podcast?"
I think way too many podcasts try to just do ads. We've talked in the past about Supercast, which lets you do a paid, kind of super premium version of it for your hardcore fans who pay you $9 a month or $5 a month or whatever.
I started a rolling fund largely off of the audience from this thing that said, "Hey, I've listened to this guy a bunch. I trust him. He has a good track record."
So now that rolling fund is $4,000,000 a year that I get to invest into startups. That's more value than all of the ad revenue that we had before.
I think that more people should figure out business models that are different from the content that they're creating. So I'm surprised more podcasts don't have different business models. | |
Sam Parr |
I agree with you, but we are... it is more work. We're in one of the most lucrative niches there is. I mean, like if you're a comedian, if you're... what's that [show] called? The two women who talk about sex all the time?
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Shaan Puri | call her daddy | |
Sam Parr | Yes, like that's a little bit different. So how do you make money off that? That's a little bit different, and that's actually what we're going to talk about with paid communities.
So let's actually talk about what makes them interesting and what makes them not interesting.
To me, what makes them interesting is that they can grow pretty quickly. You had a podcast, and you do this $4,000,000 fund. Now, building the audience takes a while, but you turned your fund on, and it was $4,000,000 in a matter of months—very quickly. So they seem relatively fast to grow. They're really fast if you have an audience, but compared to a software company, which could take 10 years, I think we definitely could build it in a matter of 2 or 3 years.
Second, they seem pretty fun to run if the interest of your community aligns with your own. If they don't, then it's definitely not as fun. But it's kind of interesting—very interesting, if that's what you care about.
Third, you don't really need a lot of money to start one. You actually need no money; you could just start with a paid Facebook group, and you could have a really lean team to do it.
Finally, they definitely seem pretty profitable because you can have a lean team.
But let's talk about the cons. One, and this is what I've learned with our paid stuff and from friends, is that churn could be pretty high. Did you notice that churn was high in any paid communities you've been part of?
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Shaan Puri | honestly the churn was not high in the paid community that I ran | |
Sam Parr | but you don't measure the year | |
Shaan Puri | Yeah, yeah, yeah, for sure. But that was a monthly fee, so you could churn out monthly, right? For trends, I think you charge annually, so you don't know your churn until, you know, sort of later, unless somebody actively cancels.
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Sam Parr | So, it's not like enterprise software churn where it's a net negative, like a hundred. I don't think that exists in most communities. | |
Shaan Puri | By the way, my paid community had a churn rate of 7% a month. If you're not adding any new members, it doesn't take long for it to go to 0. But I was...
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Sam Parr | I think 7% is 1 year | |
Shaan Puri | no I'll be talking about monthly I was monthly | |
Sam Parr | I know | |
Shaan Puri | churning 7% and so so oh you're saying 1 year for it to go to 0 yes | |
Sam Parr | I think if you have a I think if you have a 4% churn that's 18 months | |
Shaan Puri |
And so, when including my growth, I think my net churn was like 1%. I think I was adding 6% and I was losing 7% basically every month. Can you share anything about trends? What was the retention like?
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Sam Parr | Yeah, so we had some payment issues when we first launched. Basically, we had some issues where if someone signs up on day 1 and on day 366 they get a renewal, the credit card statements... a lot of the banks will be like, "Whoa, whoa, whoa, what's this? That's fraud."
So we actually had a big fraud problem with banks blocking it. But 80% of people were opted in to renew in year 1 or in year 2 in our first cohort. Yeah, ballpark, about 80%, which is pretty good. But it's hard to get new customers on a consistent basis.
Okay, so the second thing is a lot of times they don't scale that well. The reason they don't scale that well is if your community is kind of like trends where you value close-knit connections, or Tiger 21, more people actually makes it worse.
Now, if your community is content-based, which we're going to talk about in a second, it can actually make it way better. But a lot of communities, like YPO, if there are 150 people at your meeting versus 5 people at your meeting, one is worse than the other.
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Shaan Puri |
Right, because the scale gets worse for two reasons:
1. **Exclusivity**: If the reason to be in this group was that it's exclusive, the more people in it, the less exclusive it becomes.
2. **Quality of conversation**: If the value is that "Oh, I really like this conversation, this conversation was really, really nice," but now you get a noisy room of 1,000 people, well, now it's just too noisy. I can't keep up with this. I don't know who these people are. Some of these people are saying stupid things. I'm out of here.
These are the two reasons that scalability hurts.
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Sam Parr | Yes, and it can work, though. Because if you're on Reddit, which is a community—not a paid community—but it's a good community, you want more. You need more. You need way, way more people. If you are on Quora, you need way more people. If you're looking at some of the other examples, you need way more. More people is good, and that's great, but it's not always good to add more people.
So, what I want to talk about is a few communities that I found interesting. Then, I want to discuss opportunities in the space, and finally, we can talk about what I think you need to build a successful community.
The first one that I discovered, and I've actually brought it up here a ton, is called Aventa. Have you seen Aventa? No?
Okay, so Aventa... I know the first example is going to be like, it doesn't even entirely apply because I think Aventa is actually a free community, but you need to apply or get invited. So, it's somewhat similar. But Aventa is a community—a professional group, I believe. It has 18,000 participating members, and it's for executives.
Are you on the website right now?
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Shaan Puri | no I'm on our our notes | |
Sam Parr |
Okay, basically it's for Fortune 500 or Fortune 100 people. It's people like the... I don't even... because I've never worked at a company, I don't even understand all these roles. But like a CIO, what's that? A Chief Information Officer.
So I said CSO... I'm looking at their website... CISO. I don't even... I don't know what CISO means. Is that Chief Information Security Officer?
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Shaan Puri | yeah ciso yeah | |
Sam Parr | So, these are like things that I don't even... Oh, I guess I have CFO. I know what that is: Chief Financial Officer. So, it's basically an executive rep.
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Shaan Puri | he's just turned into a a glossary section for sam to figure out what | |
Sam Parr | the person chro is | |
Shaan Puri | yeah that's basically your hr the chief chief chief hr officer basically okay | |
Sam Parr | I guess that one was the deal how about a a cdo | |
Shaan Puri | I don't know that one | |
Sam Parr | Chief Data Management Officer. Because, come on, a lot of people aren't going to know what this stuff is, but it's a big thing. They have 18,000 members.
Check this out: they sold in 2016 for close to $300,000,000. It was $375,000,000 they sold for, and it was for 12 times profit, which means their profit was $23,000,000 a year. Almost all of that profit came from sponsorships.
So, the way it works is that they would get groups of 10 or 20 people. They would host a talk, like I think it was mostly an online talk, that says how Walmart is going to handle... how Walmart is going to handle...
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Shaan Puri | work yeah | |
Sam Parr | Remote work and 10 people... I'm just gonna guess what's a Fortune 500. So, like, the CMO of Northern Trust... the Chief Information Officer of Northern Trust. I don't know what that is, but it sounds like a huge company. The CIO of Delta, of Chevron, of Nestlé is gonna go.
It's only 10 people at that talk, but it's 10 people who each control 20,000 people. Sponsors will pay stupid amounts of money—hundreds of thousands of dollars—to reach these people. Enough that it makes $25,000,000 a year in profit.
Very interesting. An interesting community. Again, like Tiger 21. If you go to the website, it just kinda looks like pretty old school, mostly older white people. So who knows if it's hip or at least in the know of everything.
The second one that I want to bring up, and I got hold of their deck a year ago, and I could have invested in it, but I skipped it and passed. I think that might have been a mistake. It's called Soul Savvy. Have you heard of Soul Savvy?
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Shaan Puri | it's like a shoe thing | |
Sam Parr | yeah it's pretty interesting it's | |
Shaan Puri | called sneakerhead lover community something like that yeah | |
Sam Parr | So, it costs $33 a month. When I first got their deck, it was basically just a Slack group. That's all it was. I don't know if that's what it is anymore, but there are a lot of kids—and probably grown people as well—who want to get insider tips on when a certain shoe drop is happening.
They somehow game the system. It's called "cook groups." These are groups where they team up and, somehow, I don't know anything about this space, but they get insider information on when a drop is going to happen. They collaborate and scheme together on how they can get access to these certain shoes.
Now, what Soul Savvy is doing is they started with shoes. It was just a Slack group, which I think is stupid, by the way. I think if you're building one of these on a Slack group, that's not the right move. But they have a group of, I think, 5,000 members now, so that's $160,000 in monthly recurring revenue (MRR).
Because they have this contingency of 5,000 really big shoe fanatics, they can probably give them special access to X, Y, and Z. They can do interviews with special people. It's kind of interesting. They raised $2,000,000 recently, and they say that they're adding 400 people to their waitlist a day. I don't know if that's true, but yeah, it's an interesting space nonetheless. What do you think of that?
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Shaan Puri | I think you did good by passing on it. I think it's a cool business for the person who owns it.
It's definitely not as constructive right now. I don't see how that becomes a super large business worth investing in. Why do they need $2,000,000, and how are they going to turn that into a $200,000,000+ company? I don't really see that because, like we said, communities themselves, you know, these chat groups don't scale.
You're looking for diehards who are going to pay. If you're paying $33 a month, that's more than... it's like you're providing more value than Amazon Prime. You know what I mean? That's double, that's triple the price of Amazon Prime.
So, you really have... yeah, the hardcores are going to go for it. But also, the more people you let in, the more people who all have access to the same information, the same tips, the same drops that they're trying to go buy. The harder it gets for you to actually go buy anything that's valuable.
So, I don't really see how this becomes a big, big venture-scale business. But I think it's a great idea for somebody who's a big shoe fanatic to create a community like this. I think that's an awesome lifestyle business to own, and if that's your thing, that's great. I love it.
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Sam Parr | I agree with you so let's talk about 3 ideas | |
Shaan Puri | Can I give you two characteristics I think make it work?
One is **high passion**, and the second one is the **ability to make money** on the other side.
This happens a lot with stock trading groups. There are a bunch of stock tip groups out there where people are looking for additional information. They want to be in a group where the crowd is moving in a certain direction.
You have this for sneakerheads, you have this for NFTs right now, and collectibles.
So, the key characteristic is that it's not just, "I'm a big fan of the Golden State Warriors, so I'm going to join this paid community for them." Typically, that doesn't work as well as if I join this group where I'm going to get tools that are going to help me make more money.
It's a very simple money in, money out calculation for people. I think that's why it works for sneakerheads, trading cards, and crypto, but it doesn't work as well for people who just love *Gossip Girl*.
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Sam Parr | Yes, so there are a few ways I think that if you're going to build this, you've got to think about.
The first is that the amount of money your company is going to make is exactly what you said, which is directly in proportion to the amount of revenue that the attendees can make back.
For example, if you are an enthusiast of RC cars, the equation here is how much revenue the attendee or member is going to make times how many there are. So, members of people who like RC cars... I have no idea, I just made that up, but there's probably not that many of them.
Because it's like a hobby that you don't really make any money from, you probably cannot charge a lot for it. So that probably won't be massive.
That's not to say you shouldn't still do it, but that doesn't mean it's going to be actually that big. So that's the math you have to do: how much revenue is the member going to make, and how many of those potential members are there?
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Shaan Puri | Right, or the one like you said with Tiger 21. So, Tiger 21 is actually like that. When you go and you hear somebody's portfolio, you're going to get investment ideas. Even a single investment idea, a single improvement to your portfolio, if you have over $10,000,000 in investable assets, one good idea is going to more than pay for the $30,000 a year membership.
Excluding the friends you'll make and the deals you'll do together, and that real estate thing you'll buy together, and all that good stuff.
Now, on the other hand, if you're looking at something like the event or whatever, where it's like, "What is the CMO of Nestlé going to do when she meets the CMO of Delta?" They're not going to directly get revenue out of it, I don't think.
That's why I think it's about how hard it is to accumulate this group of people in a room. If it's really hard to reach these people, and these are all high-value individuals, then the membership is worth the value of the people in the group.
So, if it's just a bunch of sneakerhead buyers, each individual member is bringing zero clout to the table. But if it's CMOs of different companies, then it's about how much clout they each bring to the table. That's the value, not so much how much revenue they're going to make. |