A Discussion on Sam & Shaan's Recent Investments | My First Million #195

Sam Parr

Props to

Shaan Puri

This guy for doing this, I gotta give him credit. I'm more into this than you are. I kinda love that a guy's dreaming like this.

Sam Parr

So, we just did this other intro, but Mike's got screwed up, so we're going to do it again. We could say what we said even faster, though. We're talking about the startups that we're investing in. I actually put it into a format, so like the name of the deal, why each of us did it, and why it can be great. But I also want to say why it can suck and why it will fail. Yeah, this is like the disclaimer here. We have a stake in everything that we're going to be talking about. I frankly don't care if people use it or not. I mean, this is more so entertainment. I have a feeling some people will use it, but that... and also, this isn't like investment advice. A lot of these companies are very likely going to go out of business because that's just how startup investing works.

Shaan Puri

Yeah, and you couldn't invest in them if you wanted to, most likely. The good outcome of this would be: 1. You hear about some cool startups that are doing interesting things, and it just gets your wheels turning. You might think, "Oh shit, I never even thought about that! That's exciting!" 2. You get a taste of what it's like to invest in deals and how an angel investor thinks about investing in early-stage startups. Alright?

Sam Parr

I just want to say really quick... that doesn't... I don't want people to know. I'll say for me, I'm not necessarily... I'm not saying I'm good at this, but I'm just kind of doing it publicly so people are watching me learn. Like, get in shape publicly. I've probably done 30 deals but anyway... You want to... Alright, let me go first because I have this deal that I have to make an introduction to you because they specifically [asked] for you. It's the top one, it's called Abstract Ops, and I need to know if you want to join this or not. I actually...

Shaan Puri

I just emailed the guy today because I was like, "Shit." When I saw you write this, I was like, "Oh shit, I forgot to reply to that guy."

Sam Parr

did I introduce you

Shaan Puri

you told me about it and I was like I I forgot to ask about it so I emailed him

Sam Parr

Yeah, I offered you him or him. Somehow, you're already in the know, and he said he wants to talk to you. So, I know this guy. There are two guys; I don't know the second one. The first one, his name is Adam Spector. He's one of the founders; I think he's the COO. I've known him since 2014 or 2015. Maybe I've been in a book club with him. There are four of us in the book club, and I invested in the seed round. I didn't have much money at the time, but I think I invested either $1,000 or $2,000. I don't remember, but I got pro rata. What that basically means is when they were going to raise again, I got to invest again. That's how I found out about this. Adam's amazing. I ended up investing around $400,000. I gotta preface this by saying that I use my own money that comes straight out of my checking account. I also have this thing called Hampton VC. So, hamptonvc.com—or is it .com or .co? You can find it where I use AngelList to invest. It's hamptonvc.com, where I invest my own money, and then if someone wants to join, they can. In this deal, I did both my own and Hampton's money, and we invested about $400,000 basically.

Shaan Puri

explain what it is what's most abstract ops

Sam Parr

So, have you... like, if you know what you're talking about a little bit, you would say it's like NetSuite for startups. If you don't know what that is, which a lot of people don't, it basically...

Shaan Puri

know what netsuite is

Sam Parr

So, when you start a company, there's a lot of stuff that I would always forget to do because I'm just an absent-minded person. For example, if you have employees in different states, you need to file taxes in each state or even just register in each state. It's not like a huge penalty; it's about a $100 penalty if you don't do it correctly and you get a notice. But it's important to do it all right; otherwise, it adds up. Another example is certain HR practices and backend practices, like onboarding contractors in a very particular way, getting them to reassign an intellectual property release. There are just a thousand different things. Abstract Ops is software that helps you by basically outlining what all those things are and its workflow, so you can see which tasks need to get done. Does that make sense? It's a little bit fluffy, but does that make sense?

Shaan Puri

That's a little bit fluffy, but I recommend people actually go to their landing page. Not because that has anything to do with the investment, but it's such a good landing page. So, what you see if you go there is... it says, "Stop running from your back office tasks." This is basically like they had a million ways they could explain their business, like "We make it easy to handle your back office tasks or to handle HR, legal, and finance ops." "Stop running from it," I think, is great. It shows me this person understands how founders are, which is like we put the stuff off as far as we possibly can because it's a pain in the ass, and we just don't want to think about it. Then it has this stick figure running away from a tornado, like a little hand-drawn tornado, and I love it. The first subheadline is, "I started a company to do a bunch of back office work." Literally, no founder ever, right? I just get that. I love that they have personality. I think what that does is it makes it way easier. It shows me that whoever's behind this knows marketing, and they're going to have a much easier time recruiting customers and users because they're taking the average mundane things and turning them into little sales moments where I start to love this brand. I think Slack did this extremely well. If you open up Slack, there are like 10 little delightful details that make you kind of like Slack, even though it's a pretty boring work chat tool. So, that was something that stood out to me right away.

Sam Parr

So, I'll explain why I made the decision to invest. The first reason is that I know the founder. His name is Adam, and he had previously sold the company to Twitter. I don't know if it was incredibly successful, but I don't care. To me, it's like, "Alright."

Shaan Puri

It's in what we call the **sweet spot**. Yeah, you know, you did just enough that I don't think you're an idiot, but you didn't get rich enough where I'm worried that you're going to be, you know, some lazy wannabe Steve Jobs visionary type for your next thing. It's like you're hungrier than you were the first time, and you're smarter than you were the first time too.

Sam Parr

Yeah, and so that's one of the reasons why. The second reason is the product. I know, frankly, I think they're still figuring out the product. They have close to 7 figures in recurring revenue, but I think they're still even figuring out what the product is going to become. Frankly, that's the reason why you shouldn't have investors; they're still kind of tinkering with exactly what it's going to be. But I do know that when it comes to the back office of startups, this was something that I failed at for years. I struggled so hard to make sure I filed my taxes in Washington because we had one guy who was working more than 40 hours a week there.

Shaan Puri

yeah

Sam Parr

Like, it was just like a nightmare and it stressed me out. When I was selling my company, there was so much loose paperwork. The things that make me worried, though, are that Zenefits, Gusto, or the thousands of other companies can just... once you start using Gusto or some payroll provider, getting out of that is a pain in the ass. So if these companies are smart—which some of them are, but they're still big, slow companies—then they're going to do a good job of ripping abstract apps off and offering these features as an add-on. I think that could be said for a lot of different companies as well because it's this huge, kind of vague idea. I get nervous that they're not going to be able to sell this to customers, but they've done a pretty good job of getting some of the cooler, hipper companies already as beta customers. So it's incredibly interesting to me. What about you?

Shaan Puri

So, I kind of agree. I guess the one thing for me is that it's not super clear. Even on their website, they have a bunch of these little examples. For instance, it says, "If you're a CEO, we handle and automate your HR, legal, ops, and finance so you don't have to." I like how it says, "Be scrappy, not sloppy," which is definitely a distinction I've failed at many, many times. I've fallen into sloppy but called it scrappy as my cover. They have a bunch of use cases like: pay legal invoices, send equity grants to advisers, set up health insurance, and compose investor updates. I'm not sure how one platform can either do all those things, or if it's just a to-do list so that you actually do this. I don't actually know the product well enough because I haven't used it, but I would say that's one challenge. It seems like it's trying to do a whole bunch of things, which means it's either a very generic horizontal tool or it's a complicated tool. Which one is it?

Sam Parr

I think it's going to be a complicated tool at first. That said, I think that a company like NetSuite, which is similar to QuickBooks, is a good example. NetSuite is like that but with a lot more features. What I've noticed, particularly being at HubSpot, is that if you can be a good enough salesman and get someone to start buying your product, it's incredibly easy to start selling them more and building more on top of that. I'm hoping that's what we can do with AppShack Ops.

Shaan Puri

And one of the kind of question marks here is: Is this automated, or are there just humans in the back end that are helping to do all this stuff?

Sam Parr

a little bit of both currently currently a little bit of both

Shaan Puri

But just, that's the question: can they get it to be more software than humans so that it scales better?

Sam Parr

are you gonna invest

Shaan Puri

We'll see. I want to actually use the product because I'm guilty of this, like I said. I have a company, my personal company, and the back office is kind of sloppy; it's a mess. Our QuickBooks... I don't want to open any of those tabs. I don't want to open Gusto. I don't want to open QuickBooks. It's something I choose to avoid. I'd rather put it off until things break, and then I know it's too late. But, like, I just hate thinking about this stuff. I only want to think about growth if I can. So, I actually think I would be a potential user for this. I'm going to use it and see if this is magical for me or not. That will be the make or break for investing, which is always the best. If you are the customer, it's way easier to invest than in things that you're guessing about.

Sam Parr

tell me about one that you're excited about

Shaan Puri

Alright, I'm going to tell you about one called **Jar**. I think I emailed you this deal because I believe you should consider it. So, what is it? Jar is similar to that app **Acorns**. It's a significant fintech app. Acorns is going public; I don't know if they are spacking or something like that, but they have over a $1,000,000,000 valuation. The genius behind Acorns was that you would buy something, and it would just ask you upfront, "Do you want to be a saver?" If you said yes, it would explain how they could make it easy for you. You wouldn't have to think too much. For example, if you buy Starbucks and your bill is $3.23, they would just round it up to $4. They would round up the savings and deposit that for you. Over time, if you keep rounding up, you'll save. That's how it started, at least, and it's a pretty clever idea. People liked that. Now, what these guys are doing is taking the Acorns model and tweaking it a little bit, but they're doing it in India. Here’s what I like about it: Most apps require you to download a fintech app, link your account, and deposit money. Then, they ask, "What do you want to invest in? Do you want to do a mutual fund or an index fund? What do you want to do?" It’s overwhelming because you need knowledge right away. Then, they say, "By the way, we can't just start investing right away. We have to verify your identity." So, you have to scan your driver's license, hold it up to the screen, and provide a nude photo or whatever else. There are all these steps just to get started with any investing app because that's the law. What these guys figured out is...

Sam Parr

"Dirty" be called "Spenny"? No, are you sure? Yeah.

Shaan Puri

I think they're... I don't remember, Spenny. They didn't mention that. At least it's called... their URL was like changejar.in. So, what they were doing is they were like, "Look, the average person in India..." This was like their story. They were like, "I got my job when I was 21, like most people, but I didn't start saving anything or investing until I was 30." And when I was 30, it was like, "Oh shit, I want to buy a house sometime, and I want to get married, and I really should start doing adult stuff." So, he's like, that lost decade between 20 and 30 is a huge difference in your net results. If you had started saving earlier, like everybody's seen these compound savings charts where if you start at 21 versus 31, you know, you end up with $1,000,000 more because you've been able to save for an extra decade, even in small amounts. So, what they said was, "How do we solve that problem? How do we get you to start investing at 21 instead of 31?" And what they did was, they said, "We're going to simplify the shit out of this. We're going to simplify it so that in 45 seconds, you can have your first investment done." I said, "Well, how do you do that?" And they said, "Well, here's the thing: in India, everybody believes in gold." I know this because my family in India has gold shops; they sell jewelry and whatnot. Gold is like the thing. If you ask a mom there about stocks, they can't tell you a single thing. Stocks are not a big thing there, but everybody has a gold set of jewelry as their safety net.

Sam Parr

that's crazy man

Shaan Puri

Like, if we ever have to flee, we're just going to grab the gold and we're going to run. This has literally happened in India, where there's a split between Pakistan and India. People literally had to flee, so it's kind of baked in that way. They only offer one asset: gold. Everybody already believes in it and they want it. The second thing is, for your first up to a certain weight of gold, you don't have to do all the financial compliance that you have to do for stocks, real estate, or other larger investments or different asset classes. So, there's this loophole where basically we can get you to start saving right away. You don't have to verify your ID, and you don't have to link your accounts to do all this other stuff. I love the simplicity that was in their go-to-market strategy because I was like, "Oh, people will actually do that." If I can, in 45 seconds, get saving, great! Then, once I reach this threshold where I've bought a certain weight of gold, it asks you to put way more information in. But by then, I'm kind of pot committed because I already have my wealth here. Even a small amount, I'll want to protect that, versus a normal app where you just bounce before you even put the first dollar in.

Sam Parr

was this your own money that you invested or the fund's money

Shaan Puri

Well, I put my own money into the fund. But then, all my investments have to go through the fund unless the founder itself won't let the fund invest.

Sam Parr

and so because that's like a like an angel less rule

Shaan Puri

Well, that's the rule I set when I started the fund because I didn't want to have a conflict of interest where I'm doing the good deals with my own money and I'm doing the borderline deals with the fund's money. No, I wanted it to be clean so that, hey, every deal I do, I just do it through this one vehicle.

Sam Parr

how much did you invest

Shaan Puri

So, I put in $150,000, and it's got a $12,000,000 valuation with a 20% discount. They are raising about $1,000,000, and they already have good traction. So, what do you look for? You like the team, you like the product, and then you have to like the traction in the market size. I like the market size because I think this microsavings thing can add up really big in India. There are just so many people. For example, their average user, after I think like 2 or 3 months, has saved $300 already in the app (U.S. dollars). That's pretty significant for a very early stage, just putting micropayment after micropayment in, rounding up your expenses, or just automating and saying, "Every day I want to put in 50 rupees," which is like, you know, whatever, a dollar or less than a dollar. So, it's like, "Every day I want to put in 50 rupees," because my goal is to save up enough to pay for my wedding in 5 years. It kind of sets the goal and then says, "Great, you should put in 75 a day," and you say yes. India also has this crazy thing—I don't know if you've heard of UPI? No? So basically, in the country, you know how in the States every bank has its own clunky software and there are different payment options? You can use Stripe for payments, you can use something else for payments, and there's no country-level payment rails. In India, the government came in and said, "Yo, in the next year, everybody has to move to this new payment standard." It's the Universal Payments Infrastructure or something like that. This will just make it so that anybody who's taking payments can build on top of these rails. We're going to modernize payments in India.

Sam Parr

that's cool

Shaan Puri

Through this, they did that big change, and so that's changed the game. That's why there's a lot of innovation in India right now. This UPI thing was like a pretty major breakthrough. The second thing is they just released this feature called **autopay**, which is basically like a recurring auto investment. So these guys are using that new feature of UPI. I just think the "why now" makes a lot of sense for this. I like the hack they have around just buying gold, so that you reduce all the friction of getting somebody started.

Sam Parr

Do you... are you totally okay with investing in India? Because I don't. I've only invested in American-based companies. I've had investments in Australia and all over Europe, and for some reason, that gap freaks me out a little.

Shaan Puri

It kind of does to me too, but I've been investing in India. When I invest in India, there is definitely some trepidation. So that's my "why." It could fail. I just wrote "India???" It's easy for me to be fooled, right? These guys could be well-known scammers in India that I don't know about. But they weren't, right? They went through Y Combinator (YC), I think. I don't know if they went to YC, but I know the other companies I invested in know these guys.

Sam Parr

And they went, their competitor went to Y Combinator, which is your second. Why they could fail? There's a lot of people in the space.

Shaan Puri

Exactly. So, fintech is just super hot worldwide right now. There's like, every day, there's a new credit card, a new debit card, a new neobank that's popping up. Then there are bigger players that are trying to modernize. I think one way they could fail is that there are probably like 10 to 50 legit competitors to this in India. They are not doing this directly, but they could add this as a feature, pivot into this, or recognize the clever things that these guys are doing and implement them. So, I think those are the two main points: there are a bunch of competitors in fintech right now for every idea, and the second thing is that India is always a little bit of a... It's very easy for things to look good in India because, you know, the cost of customer acquisition is always super cheap. It's like, "Oh man, you're getting users for 80 cents! That's awesome!" But the reality is, not all these Indian companies can be great. So, I have to adjust my own filter for India because I come at it with a U.S. perspective.

Shaan Puri

Of view, having said all that, the two India investments I've done so far are probably two of my best investments. I'm going to keep betting there because I think that the country is in a sweet spot. There's just a lot of innovation, and there are going to be a lot of winners out of this batch. I just need to bet on enough of them so that even if I get fooled by one or two, or if I don't understand the market landscape, I can still get into enough winners. That's my goal. Also, because I'm Indian, I kind of have this advantage where a lot of people in India follow me through this podcast or Twitter. I am able to get into almost any deal. When these guys were reaching out, they said, "We asked only for two introductions: you and Naval." I was like, "Okay, bro, you have one of us in the wrong league there." But the reality is, that's kind of an opportunity for me. I agree, my brand is bigger there, and I can get into any deal I want there.

Sam Parr

I agree. I think it's why Bruno Mars is like the most watched person on YouTube. It's because when you see someone who you recognize in America, who's crushing it and kicking ass, everyone rallies around that person from the outside country. It's like, "Oh, he's one of us." So, that...

Shaan Puri

It's like Manny Pacquiao in the Philippines. He's like the president there, and it's just because he's a famous boxer. They just want to go all out for their guy.

Sam Parr

yeah or bjork in iceland so you're like the you're the you're the manny pacquiao of india

Shaan Puri

I'm saying if I keep betting, then I have a path to do that. But if I'm never investing there, then I can't build that. It takes a stack of reasons why you should be known and respected in a place. I think one of the reasons why you could be known and respected is having invested in some winners, but I gotta plant those seeds now.

Sam Parr

Alright, can I tell you one thing I'm really excited about? I wasn't excited at first, and then I started using it, and I'm like, "Oh, I'm in!" Okay, so the name is bad, and they're going to change it. I think it's called... the name's really bad. It's called "Rumor." So I'm actually highlighting it; you can see the memo that I wrote for it.

Shaan Puri

When you say it, the name's fine. When you spell it, you know it sounds like you got cotton in your mouth or something like that.

Sam Parr

So, I've talked about Bring a Trailer. Bring a Trailer is a website that originally started as a platform to showcase cool cars that were for sale from around the web. They eventually launched their own auction platform. They just did a really good job of editorializing it and making it feel like a community. You can buy classic or even newer cars that fit a certain demographic. Rumor is doing that for houses. And by the way, if you want to invest, Sean, let me know. I've mentioned it.

Shaan Puri

I wouldn't have been interested in this except for the fact that you educated me on how Bring a Trailer is a great business. Then, we've looked into different auctions through the podcast. So now, when I look at this, I see it differently than just, "Oh, just another home buying website." I don't really... I don't see it as different than that.

Sam Parr

Open the door. Cool! Because look at some of the example auctions, and then click on the comments to read them. That's kind of why it's neat.

Shaan Puri

so how do I go to an auction

Sam Parr

Okay, I don't even know if those are fake auctions or what. The founder bought a bunch of homes just to put on that site for auctions, right? So, go to the website.

Shaan Puri

bought a bunch of homes to to see the marketplace

Sam Parr

I think he owns about 20 properties. He's a property owner; he's a landlord.

Shaan Puri

So, let's just explain it. I'm on Ruumr.com right now. They're changing the name, so I go to Washington, which looks to be the only market that's open. I'm there right now, and I'm just looking at this for the first time. I see that there's this house in Washington. There are a bunch of pictures, and it's on sale for **$103,000**. It says that there's **13 hours left**, presumably in this auction. Then, there are some details about it, like all the normal house details. I can log in, I can make an offer, and then I see people who are making offers. But then, I also see people commenting, like, "Is the electric heating system baseboard or something else?" You see replies from, I assume, either the owner or the agent answering questions in the chat while people are bidding: **$100,000, $101,000, $102,000**, and it's currently at **$103,000**.

Sam Parr

auction

Shaan Puri

it's ebay for houses yeah

Sam Parr

And yeah, but it's a little bit different than eBay. It's a little bit different, but yeah, that is one of the reasons why I think this can exist. Let's say you're buying a house for half a million dollars, and they do like a first and final offer process where everyone submits their offer on a Friday. If you're bidding half a million dollars for a house and you see that the winning bid was $505,000, you're like, "Well, if you guys would have told me, I would have bid $510,000, and you would have made more money, and I would have gotten what I wanted," right? So it's kind of trying to solve for that. But let me explain to you why I think this could be cool. First, the founder is pretty interesting. He's a military guy, so I like military folks. He also started Stay Alfred, you know, Stay Alfred.

Shaan Puri

By the way, we should highlight the groups that we are inherently biased to invest in: - Mormons - Military guys - Russians - Jews What else are you guys [thinking of]?

Sam Parr

israeli jews is what we said

Shaan Puri

right you know who else immigrants

Sam Parr

I'm always partial to immigrants

Shaan Puri

Any immigrant, anybody who's lived in the U.S. illegally for a period of time, or anyone who is a single parent... you did the hardest thing of your life, McKenzie. Oh, McKenzie, no, that's a no for me. The other ones that I guess I lean in on, I'm a little bit interested. It's like, "Oh, how'd you... what were you doing when you were younger?" And it's like, "Well, I was flipping cars," or "I was flipping shoes on eBay." Or I kind of don't want to say because I was like this affiliate marketer for these shady dating sites. I'm like, "No, no, no, you don't understand, that's like..."

Sam Parr

shady internet stuff I like

Shaan Puri

yeah shady internet arbitrager

Sam Parr

So, this guy started Stay Alfred, which was like a competitor to Sonder. They would rent out entire buildings and then sublease them for work travel. They got to $100,000,000 in revenue and raised $60,000,000, but then they crashed and burned and went out of business. You know what? That's awesome! I love that. So, that's initially why I was interested. I told them I love Bring It Trailer, and he goes, "Oh great! Their co-founder works here, and so do three other team members." Bring It Trailer sold for, like, half a billion dollars since 2012. I remember in 2012, I was playing around with real estate stuff online, and I thought homes should be bought and sold online just like we buy and sell clothing. A lot of people think that you can actually still go and see the house at an open house, but in my mind, I still think that in 10, 20, or 30 years, it will be normal to buy a house sight unseen, even though a lot of people don't think that now. I think that will be the case. And check this out...

Shaan Puri

So, why would I... okay, let's say I'm a seller. Why would I sell here when I feel like, "Okay, I'm going to have this 13-hour auction"? I don't know what's going to happen. Do I have to take the offers, or can I just reject all?

Sam Parr

yeah you can have a reserve

Shaan Puri

Okay, great. And then, is it because I think I'm going to get a higher price, or because I save money through the fees? What's the reason I choose this over traditional listings?

Sam Parr

Yeah, the higher price—that's the goal. Higher price by creating... like a... but do.

Shaan Puri

they take the same fee as like a normal 5% or whatever agent fee

Sam Parr

They take less because the problem with real estate is that the agents are still integral; they're still very important to the industry. If you cut the agents out, then the agents are like, "Oh, fuck you guys! I'm gonna bad mouth you. I'm gonna make sure no one ever uses them." So they actually get the agent in on the deal and just make the agent's job a little bit better and a little bit easier, right? And so we'll see if it works. But let me explain two things. First, we invested along, and the reason why I was intrigued is that all of Stay Alfred's competitors—this guy's whole company—all the CEOs invested in this company. I was like, "That's kind of an interesting signal from competitors."

Shaan Puri

respect you like I'll bet on your next thing that means something yeah

Sam Parr

And they were all real estate guys, so this is still related to that business. I was like, "That's intriguing." So I invested, and then I get a call. Jordan calls with the guy who's starting this. He goes, "Adam Neumann just put $2,000,000 in." I was like, "Fucking A! Got it." I think that's pretty good. I think that's a good sign.

Shaan Puri

but why is that a good sign because some people would think that's a bad sign

Sam Parr

No, no, no, no. First of all, I'm not saying what Adam did is great. I frankly don't even know the entire story, but I'm pretty...

Shaan Puri

He's the founder of WeWork. Who? Yeah, like none of... whatever. He did a bunch of stuff and ended up walking away, kind of like he drove the company into a weird spot. He was accused of a lot of things, and then he walked away, you know, pretty wealthy as part of his agreement to leave.

Sam Parr

And my thing is, Adam Neumann. Regardless, let's say he did a lot of bad stuff. Let's say he was unethical. Let's say all that's true. I'm not saying it is, but let's for argument's sake say it is. He still built something huge and amazing in a very short amount of time and has access to all types of stuff and sees all types of stuff. So I think if he's interested, it's a good sign. Now, why can they fail? I think if they execute this poorly, it's going to be bad. I also think that, oh, I put... it could be if they raise too much money. I actually don't think that's going to be the case. I think this company is going to have to raise a ton, a ton, a ton, a ton of money. What can make this fail? I don't know, maybe if Zillow offers this.

Shaan Puri

Well, also, I think it's a new behavior. Anytime you're betting on a new behavior, the risk of it failing is that maybe people won't want to buy the house sight unseen. Or maybe people won't want to sell the house in this way; they want their hand held through a traditional process because it's the biggest asset in their life, and they don't want to risk it.

Sam Parr

which is traditionally a lot

Shaan Puri

of homes

Sam Parr

Have been bought. One way you can buy this... you can go. This is not entirely sight unseen, right? But yeah, it's a new behavior. There's a lot of new stuff about it. But my thing was, when I was doing the math, I'm like, you don't need that much volume to build something quite large. Once you have the home on there, you could upsell things like property assessments or... what's it called? Inspections. I think you can upsell a lot. I just thought it was interesting. I think that'd...

Shaan Puri

Be closing. So, one thing that's good here is you don't want all your bets to be logical, clear, good ideas. Because that means your risk profile wasn't right. With startup investing, you need a few ideas that sound like they're going to fail when you invest in them. Then, either they fail and you're like, "Yeah, well duh," or you end up looking like a genius six or seven years later because that non-obvious, contrarian idea turned out to be something people actually wanted to do. It turned out to be a new behavior people were willing to adopt. So, I think it's good to have... I told my team, who helps me with investing, that I don't think we're taking weird enough bets. I don't think we're taking wild enough bets because that's where the big, outsized, crazy returns are going to be—in things that are non-obvious today, you know? Like low valuation, not everybody wants to invest in them, that sort of thing.

Sam Parr

Do you... did you do "sais"? Yes. Does that interest you to talk about, or no?

Shaan Puri

we've kinda talked about them before I

Sam Parr

wanna talk about another one alright

Shaan Puri

I want to do one. Okay, you'll kind of... I think you'll like this one. I think you'll want in on this one, although it might be too late. So it's called "1 Build." What "1 Build" is, is here's the problem as the guy describes. So I talk... so I meet the guy.

Sam Parr

how'd you meet him

Shaan Puri

ben or zach found him and then they really liked him and they were like hey you really gotta talk to this guy so I said okay great let's do it and I forgot I don't know how they found him I think he was like in some yc batch or something like that so so basically I talked to this guy and he's like yeah I I was working at cloud kitchens the the startup started by travis kalanick he's like I was one of the first like 20 people there and my job was like you know they wanted to go build out all these cloud kits all these kitchens around the world and they were like alright you know we wanna build this $10,000,000 project we wanna build this $20,000,000 project and he's like I'm a data guy like my background is like data science and they were like look we need you to like be intelligent about how we're gonna like plan out these builds we're trying to spend this much this year it's a big number so like help us out with the data side of building out so he's like alright no problem how hard could it be and he goes into it and he's like okay great so we have this let's say we're doing this deal and we're trying to build out this kitchen in seattle and the estimate is like 10,000,000 but like it could be + or - like 4 or 5,000,000 and that's a pretty big difference like if it's 15 it's different than 10 which is different than 6 so like which one is it and the guys were like well like it depends like it it depends on what he's like it depends on the cost of construction and he's like okay well what does that depend on and it all comes down to like one one of the biggest variables is material costs so there are many ways that your construction cost can go out of whack like if you don't get the permits in time and so this it gets delayed labor errors but one big one is materials and so what he was like he was like okay well how hard can that be like let's just figure out the material cost and let's just spec it out and they're like no no no it doesn't work like that like here's the spec here's the plan like a construction plan and now to cost this you either you need to hire a cost estimator and what they do and what you would do if you wanted to do this yourself is there's this book that gets printed once a year which is like the this is like the the blue book of like all materials cost like if you want a 3 foot piece of lumber it's gonna cost you this much but like as anybody seen especially during covid like material cost like lumber has like had huge amounts of variance I don't know if you've seen this but like yeah yeah yeah like you know a truck carrying lumber is like like right now it's like a truck carrying bricks of gold it's like if you robbed that truck you would have like so much value right now because lumber was so expensive and so he's like the problem is that there's no real time data and he said he said so that's what I decided to leave and go build is basically an api that will give you real time material pricing for construction so all you do is you upload what your what your your construction plan is so and then it basically gives you an accurate real time cost of it and if that's changing over time you'll see how it's changing week by week day by day

Sam Parr

And companies who are building... I don't know any of the companies, but companies who are building construction companies, who work in the construction business, who are designing stuff - they will use 1build software to integrate with their software. So it says in real time how much this is costing.

Shaan Puri

exactly so so basically you upload the construction plan and

Sam Parr

they're so they're yeah they're selling straight to the to the company

Shaan Puri

They're selling to builders and cost estimators who do this as their job. It's like, "Hey, here's a way to do your job faster." But I think, over time, my sense is that it eliminates the need for cost estimators as a profession. The main thing is, if you're a contractor—whether you're building your own project—you want to know what your real costs are going to be. You want to know how those costs change over time. For example, if we swap this out for that, how does that change our pricing? Then, let's say you're a contractor and you have to bid for a job. If you bid too high, if you put your budget too high, you may not get the job, right? Your sales pitch is, "Hey, I'll build it for $12." If $12 is too high of a number, they're going to give it to some other guy who bid $8. But if the guy who bid $8 is underestimating it and it actually costs him $10, he has to eat that loss. So, bidding for jobs and accurately bidding for a job is basically a huge part of the sales process in construction. Alright, so what do I like? I like that this problem seems real. I talked to a few people in real estate, and they were like, "Yeah, of course, this is a huge problem." The material cost for construction is twice the amount annually of all of e-commerce. It's a humongous market—it's a $1 trillion+ market just for material construction costs. I like their approach; I think they're kind of a leader in that space. It doesn't seem like they have a ton of competition. Unlike what I was saying before about savings apps or credit cards—there are hundreds of those startups—I don't think there are 100 of this startup. They already have some traction; they have seven figures of ARR already booked. I invested in this during their Series A. I think there's also a big idea that I like, which is after you cost it for them—after you say, "Oh, here's your estimated cost for this"—you could also just add a buy button down the road. Then you could say, "Cool, purchase all those supplies," and actually build a marketplace where suppliers can sell the supplies through their platform because the person is already...

Sam Parr

at the at the at

Shaan Puri

the they already have their invoice basically ready ready to buy

Sam Parr

this is amazing the thing

Shaan Puri

It can fail, right? So why would I hesitate? First, the valuation was higher. It was over $50,000,000.

Sam Parr

oh my gosh

Shaan Puri

Valuation. So, you know, I put in $100,000. I don't own a big piece of this, but I want it in rather than being on the outside. The second thing is, I think construction is a pretty old-school industry. It's all pen and paper. That $1,000,000,000,000 of material purchasing is all done just through pen and paper offline right now. So, bringing it online can be a brutally hard thing to do.

Sam Parr

I'm looking at my Metaprop. I'm seeing who all invested in these folks. I think I maybe know some of these people. Who's leading this Series A?

Shaan Puri

you know I don't actually know I don't remember off the top of my head

Sam Parr

wow this is sick this is great

Shaan Puri

is a cool one

Sam Parr

If they're still raising, I would talk to them in a heartbeat. My fear about this, like if I had to say what the downsides are, is: can you easily replicate this? Like, can you...?

Shaan Puri

I don't think so because what they're doing is not just the app that says, "Great, you know, upload your thing and get your cost." It's like, where does that data even live? So this is like, you know, that company Climate Corporation. What they did was they basically organized all that agriculture weather data.

Sam Parr

sold for billions

Shaan Puri

Sold it for billions. Basically, what they offered to farmers and others is, "Hey, we took this unstructured offline data and we made it structured and online." For example, they're first taking all of the materials and turning them into SKUs. If you've ever done e-commerce, a SKU is just like, you know, if you're at a grocery store, a Hershey's chocolate bar is one SKU, a Twix bar is another SKU, and a large Twix bar is yet another SKU. So, they took everything you can buy in construction and turned them all into SKUs first. That's the first step. Then, they have to get the price feeds. How are we going to get real-time price data on all these things when prices vary from supplier to supplier, vendor to vendor? They have to do that, and then they have to turn that whole thing into an API that can be queried easily to get accurate price data. I think that's the real innovation here: being the one to organize and collect all that data. After that, really, anybody can build an app that just asks them, "Hey, what's the price of lumber right now in Tucson, Arizona, for this size and type of lumber?" They should get back an answer. If that changes in three months, they should get that change notification that the price is increasing.

Sam Parr

That's sick! I'm into this. I'm looking at all this now and taking down notes. I think this is amazing. I'm into this one a lot.

Shaan Puri

you wanna do one more you like or one

Sam Parr

Here's a more interesting one... No, let me look for a boring one. Okay, let's do a boring one. I actually included this email in here because I wanted to show it, and I blacked out a couple things so don't read those. But this one's like boring, it's not a seed investment, but I just wanted people to see how this worked. So, my friend **Nathan Barry** started this company called **ConvertKit**. You know ConvertKit?

Shaan Puri

I'm a user yeah I pay them $1,000 a year

Sam Parr

I love ConvertKit! If you Google "ConvertKit revenue," you can see all their metrics and numbers. It's amazing. Nathan is, you know, he's young—he's like 28, maybe.

Shaan Puri

right

Sam Parr

But he comes off as way older. He owns, I think, almost the entire company. So, ConvertKit is like a Mailchimp competitor, but slightly different. I don't... it's hard to explain unless you're an email marketing nerd. But it's just like Mailchimp, it's just like HubSpot, it's just like a lot of these companies, but geared particularly, I believe, towards bloggers. He has grown the company very steadily for a bunch of years. He asked me if I wanted to buy some secondary at a 7x multiple. Their revenue is $28,000,000, and he's raising at 7x that. What's that? I don't even know... $2,400,000,000? I invested... I thought I invested $50,000 of my own money, and the reason why...

Shaan Puri

that I would do that in a heartbeat

Sam Parr

yeah well you want to yeah

Shaan Puri

I do want to that's great it's a no brainer

Sam Parr

alright I'll make an intro hold on let me write this

Shaan Puri

I I I know the guy but yeah I I didn't know the way

Sam Parr

He made it an intro, so I get credit. Yeah, so he owes me one. The way that it worked was, he goes, "Nathan emailed me about a week ago. He goes, funny story. After you and I talked on how secondary liquidity works on my podcast, I guess I could say his name—Dharmesh heard the episode." Dharmesh is the founder of HubSpot, who's going to be on in a few days. He heard the podcast and reached out, saying, "If you could buy X worth of shares directly from our shareholders after surveying former and current teammates who sold or hold stock options, we're putting together a secondary round at 7 times ARR. We're looking to raise $2,500,000 in total, with $2,000,000 already committed." ARR is $28,000,000, net revenue is $27,300,000, which is up 34%. Revenue churn is 3.8%, customers are 36,000, and profit this year is 11% to 12%. He sent me that email, and I just said, "All right, here's what I replied: How will I get liquidity?" He goes, "I'm either going to keep buying more companies and then I'll go public, or I'm going to do more offerings in the future to sell." I go, "Great," and then I said, "In $50,000."

Shaan Puri

right yeah

Sam Parr

that and and so here's my thinking my thinking is I it's

Shaan Puri

Just super safe, right? The odds of this going south are under 5%, easily.

Sam Parr

And so, this is my safe bet. To me, this is not... The way that I'm doing my net worth is: 1. 95% is in index funds (boring) 2. 5% is going to be in angel investing This [investment] is considered private equity, I guess. But it's not angel investing to me, right? It's...

Shaan Puri

more of the boring stuff this goes in your boring stuff budget

Sam Parr

Yes, but it's not quite boring. I can't sell it overnight, but I know Nathan. He's trustworthy, he's ethical, he's amazing. I've been asking to invest in him since he started the...

Shaan Puri

company right

Sam Parr

So, I put **$50** of my own money into this. This is going to come straight from... this is coming out of like the **boring pool**. What do you think about this?

Shaan Puri

You like this? I like it a lot. Yeah, I think that this is a really defensible, stable company. There's a lot of people that are super interested in email software. There are bigger companies and then there are the Substacks of the world that are trying to do things, but I've used all their products. ConvertKit is the best product out there of this batch. Once you're hooked on it, it's hard to stop paying. In fact, I even told my team, "Hey guys, our ConvertKit bill is like $2,000 to $3,000 a year. Shouldn't we find a free option that will let us do all this?" I feel like email software is everywhere. Sure enough, they went to kick the tires of a bunch of different options. They said, "We can switch; we can get it cheaper." But we're going to give up X, Y, and Z. It's like, well, X, Y, and Z all seem like the important things. I don't want to give those up. So, I think he's built a very steady business. Today, I think ConvertKit could sell for more than $200 million. If you wanted to sell this business today, you could probably sell it for somewhere like 30% to 40% higher than that. That would be my guess. It's just going to keep growing, I think, 25% to 35% a year, and there's a world compounding.

Sam Parr

I can see Nathan being the type of guy—and a lot of people say this—but I actually believe if he told me, "This is what I want to do," and he said, "I think I'll run it for 25 years and try to grow it 25% every single year through buying different companies," I'd be like, "Oh, okay, cool. I believe you." I believe you're going to try that, and I believe you're capable of that.

Shaan Puri

And we see pretty much every major creator economy deal. They're all just like... I think you're sick of the creator economy at this point, because...

Sam Parr

sick of it

Shaan Puri

There are just so many creator tools and creator economy startups, and honestly, most of them are not very good. It's like there's more funding in the creator economy startups than there is actual revenue in the creator economy right now. So, there's this... I don't know, overhype in that space. But this is an actual, real business in the creator economy. This is like independent creators using this as their backend for sending emails to their audience—bloggers and newsletter folks. I think that there's a lot of room to run. The thing I would do if I were him is figure out how to go into the ClickFunnels market. I think ClickFunnels is a bigger company; I think ClickFunnels does over $100 million a year.

Sam Parr

yeah but they're churning shit they're churning shit

Shaan Puri

But you know, I think as an upsell, there are a lot of people who use ConvertKit that also create landing pages and try to sell stuff. I think that ClickFunnels is actually one of the better products for doing that. Even though it's really janky, it's very effective at actually converting people. I think that that's the way I would go with this as a route to getting bigger. But yeah, I think this is a pretty safe bet.

Sam Parr

well I already made an introduction nathan it's in your inbox

Shaan Puri

awesome

Sam Parr

you wanna do one more

Shaan Puri

Yeah, let's do one more. Okay, I have a crazy one. Actually, can we talk about that other crazy one that you were telling me about? Let's do that one. Let's do that one.

Sam Parr

Okay, so what... Cam, his name's Cam. I had this guy reach out to me because he was a volunteer at HustleCon years ago, and I've always stayed in touch with him. I love Cam, he's a nice guy, and I thought he would always go places. He emailed me like a week ago... or 5 weeks... maybe a month ago, and he's like, "I got this idea. I'm gonna build a World Fair." And I... you and me, Sean, are way different. Immediately I said, "Nope, nope." How about... like, I was never even entertaining this.

Shaan Puri

ex explain because I I didn't even really know what the world fair is so explain what that even means I'm gonna tell

Sam Parr

You World Fair? Yeah, because it's like... I'm just not imaginative or smart enough to understand these things. You go ahead.

Shaan Puri

So, actually, if you can link me the memo in here, I think it will be useful to talk about. Basically, what I understand is that the World Fair is an event that has happened, you know, 70 years ago and then 20 years before that. It's sort of like the Olympics. It's basically a world-scale event. In the same way that the Olympics happens every four years, it goes into some country and takes over the whole city, bringing tons and tons—millions and millions—of tourists. Here are some previous World Fairs: - Seville 1992 had 42,000,000 attendees. - Shanghai 2010 had 73,000,000 attendees. - Milan 2015 had 23,000,000 attendees. So, basically, this guy is trying to throw an event with 50,000,000 attendees. That's the premise: "Hey, I'm going to build this event, and it's going to have 50,000,000 people attend." He estimates that he can make $1,000,000,000, you know, over $5,000,000,000 per fair that he'll generate from some combination of tickets, additional spending when you're there, as well as the virtual livestream media rights to the event. And forget about the fact that the city itself gets a huge amount of economic activity when you have 50,000,000 people coming to town. That generates a lot of economic activity for the city. So, this idea is basically to go city to city and say, "Hey, do you want this jump start of economic activity? Host the World Fair! Put your city up, put funding up, and put resources up. Let me host a World Fair here."

Sam Parr

so

Shaan Puri

and it's like disney world on crack

Sam Parr

I told Cameron this earlier today, and since he's a listener, I want to let him know that I love this guy and I think he's very competent. I just think this idea is stupid, particularly for a VC-funded thing. I have hosted a... like we're calling this a "world's fair venture" thing. This is a conference; this is a trade show. Can conferences and trade shows make money? Yeah, they can. But to start Coachella... Coachella makes $100,000,000 a year, and they've been around for like 20 years now. Or Lollapalooza, 20 years. Like, right? This is... oh my god.

Shaan Puri

The degree of difficulty on this is at an insane level, I would say.

Sam Parr

an insane level

Shaan Puri

So, that's the reason not to invest. The reason to invest is also that the degree of difficulty is insane. The person behind this is insane, and it's going to compete against nobody. It's sort of this like...

Sam Parr

mean against nobody there's tons of these like like this is what should

Shaan Puri

I do this

Sam Parr

I mean web sun summit did something like this like would

Shaan Puri

you put it dude do

Sam Parr

you wanna compete against the olympics what happened to the olympics last year

Shaan Puri

Yeah, I... that's the thing. Who is competing against the Olympics? Nobody. It's like when Elon goes and competes against NASA. It's like nobody else is competing against NASA.

Sam Parr

There are the Commonwealth Games, World Championships in different sports, and all types of events. There you know who.

Shaan Puri

like entrepreneurial nobody who's who's trying to do it for capitalism basically nobody's trying to make a profit

Sam Parr

It's just there's one person, Ted Turner. He launched the... what did Ted Turner launch? The Goodwill Games.

Shaan Puri

yeah I don't I mean is that even did that work did it not work what do you what do you know about that I don't know everything about ted turner

Sam Parr

If it made a profit, but I know that it was a thing he invented because he needed a programming for...

Shaan Puri

for his tv station

Sam Parr

For TV stations, yeah, I believe it was called the Goodwill Games. Anyway, no, I mean like, do they work? Yeah, they don't not work. It's kind of like, does the American Pageant work? Well, it kind of probably makes money. It's like an annuity; it kind of works like every year for 40 years, and it does only okay.

Shaan Puri

So, what's your criticism? Is your criticism that he's not going to be able to do it at scale, or that even if he does it at scale, it's not going to make that much money?

Sam Parr

It will never, ever, ever happen at that scale. I'm just saying that, like, look... and this is me saying someone betting my own money. I'm not willing to bet my money that it will. I'm willing to bet my money that Cam will do many amazing things. I just think it's literally like... it's just against physics. I think, like... do you know what I mean?

Shaan Puri

So, the most relatable version of this is the Summit, right? The guys who created Summit then bought the mountain, and they're like, you know, doing that. I think that's sort of like the closest analog that I know and I've personally seen.

Sam Parr

and it's not a good business

Shaan Puri

that that was not a great business

Sam Parr

it's a horrible business

Shaan Puri

it was nowhere near well okay why are you saying it's a horrible business

Sam Parr

they ran out of money multiple times it doesn't make a profit

Shaan Puri

the event part or you're talking about the mountain part

Sam Parr

The event... both? What are you talking about? Ryan will tell you for a sec. Ryan made all of his money selling trade shows and ads for a real estate newsletter and trade show business. That was a killer business. Then they invested it in this other thing, and it was just okay. Like, would you want to have invested your... like, I just... it boggles my mind. I have only a few dollars to pick between X, Y, and Z. This like doesn't even come up on the... like, I'd rather go all in on abstract docs. Just give me some boring-ass software that's just gonna make money for 50 years.

Shaan Puri

So, I agree with you from that point of view. If I'm going to invest, I'm not personally going to invest in this. However, I think from his perspective, the guy who's building this, you could be a lunatic and do some amazing things. You can really exceed where others have gone. For example, I know Paddy, who started Web Summit, and you know him.

Sam Parr

that's cool what's he like

Shaan Puri

Awesome, awesome guy! You know, he should be the whatever of Ireland someday—Prime Minister, President, or whatever they have over there. He's amazing; he's a really amazing guy. But at the same time, if you are trying to build a huge conference, you're going to approach it very differently than trying to create a World Fair or trying to create something like the Olympics. So, I think it is really not that much harder. I think maybe it's harder, but it's not that much harder than pulling off what Paddy did over 7 years at Web Summit. The good thing with Web Summit is he was able to iterate. He was able to start super small. Like, "Oh great, I got 100 people to come to Ireland for this conference." Then the next year, I got 1,000. The year after that, I got 10,000, and then I got 100,000. He was able to step it up. Whereas, I don't think with the World Fair thing, there's no like tiny World Fair. I don't think so. I'm not sure how he's going to possibly do this.

Sam Parr

yeah

Shaan Puri

His two phases are: **Phase 1:** Host 25,000,000 guests. **Phase 2:** Host another 25,000,000 guests.

Sam Parr

I I don't wanna

Shaan Puri

I gotta say props to this guy is he like young I hope he's young

Sam Parr

he's 26 he he props

Shaan Puri

To this guy for doing this, I gotta give him credit. I'm more into this than you are. I kinda love that a guy's dreaming like this. I also think it's insane and slightly, you know, impossible.

Sam Parr

to do you don't put your money in it

Shaan Puri

I will not put my money into it, but I did put my money into something slightly crazy. I put a very small amount, $25,000, into a startup, which is below what I would invest in any other startup. It's a guy trying to build a startup city. I think that has better odds of succeeding than this World Fair, I guess.

Sam Parr

because you have rent every month

Shaan Puri

Yeah, well, can I talk about that real quick? I know we're late for the other thing, but basically what this guy is doing... So, we've heard about startup cities. Balaji came on this podcast and he kind of said, "I think the 2010s were about crypto, and I think the 2020s are going to be about startup cities." Balaji also invested in this. So, it's this thing called Praxis. Basically, what they did was create this social network, or like kind of a club, in New York, LA, and San Francisco with just a bunch of cool people—like founders and people from entertainment, like Hollywood and New York stuff.

Sam Parr

circle type shit

Shaan Puri

Yeah, just like, you know, Soho House type stuff. They host cool parties, and they've just been hosting these events. Basically, they were like, "Awesome! We have this seed community of dope people." A city is basically just like... if you want to create the next Hollywood, you need all the aspiring actors, filmmakers, and whatever. If you want to create the next Silicon Valley, you need the funds, the VCs, the entrepreneurs, and the engineers to build stuff. So, this guy's premise is basically like, if you're going to build a new city, you need to have a network effect of dope people who want to be around each other. He’s been curating this community for a while. Then, they're going to the Mediterranean and approaching countries like Croatia, saying, "Hey, can we get a piece of land that's ours? Give us this beautiful land by the ocean for free, and let us come up with our own financial regulations and rule of law. We're not going to follow Croatian law; we're going to create our own law. Just give us total sovereignty, and in exchange, you own a piece of equity in this land." They're going to bring the best American talent to this startup city to come live here. Basically, it's a real estate company that's just building buildings and renting out the office space and all the residences to the cool kids.

Sam Parr

Theoretically, I'm into this. I would have to... I would want to know, are the people like buttoned-up real estate people, or are they like people from Burning Man who wear Coachella hats all the time? You know, like leather shoes and leather pants? I need to know what they look like and what they're about. If they're buttoned up, maybe you...

Shaan Puri

said want it both you want it both

Sam Parr

I agree guy who's

Shaan Puri

He's just going to be out there recruiting the community. Then you need the real estate guy who's like, "Yeah, yeah, yeah, go do your thing. Let me actually set this thing up so that it works."

Sam Parr

Right, so, by the way, on their website for practice, Cameron Weiss from the last company started blogging about the World's Fair on March 16, 2021. I linked it to you.

Shaan Puri

Yeah, he's a member. That's the kind of dreamers you'll get in this community. So, I put a small amount of money into it because I'm really interested in learning. This is a wild idea that, you know, I think the portfolio has to have some wild ideas. It cannot just be things that are easy to understand and easy to imagine working because I think we'll miss out on the large outlier winners.

Sam Parr

so alright pimp your can people still sign up for your rolling fund

Shaan Puri

Yeah, go to AngelList. Just type my name in, and then you don't even need to email me. You can just subscribe to my rolling fund, and then I'll email you. You can invest with me. We're doing about $4,000,000 a year, and we invest across about 30 startups.

Sam Parr

And for me, I don't do a rolling fund; I have a syndicate. If you go onto AngelList and type in "Hampton VC," you'll find it. I named it that because I used to live on a street called Hampton, not because I'm from the Hamptons. You can visit hamptonvc.com. If you just go there and click "Learn More," you'll be taken straight to the AngelList page. From there, just click "Apply." Whenever I have a deal, you will be notified, and you can choose to invest or not. It's up to you.

Shaan Puri

and sam's memos are dope so you should go subscribe

Sam Parr

well thank you by the way everyone's saying great stuff about power writing

Shaan Puri

Oh yeah, they love it! I'm putting my heart into it. I was too embarrassed if it sucked, so I really, really tried.

Sam Parr

well everyone's saying great things sarah's class is going live soon but they're saying great things about it

Shaan Puri

alright we'll talk

Sam Parr

to you soon