Lead Gen Businesses, Islamic Finance & COVID-19 Virality | My First Million Podcast 03-10-2020

Shaan Puri

Boom we're here coronavirus and all

Sam Parr

The streets of San Francisco are empty. You could have walked down the middle of the street and would have been fine.

Shaan Puri

Yeah, and we're in the studio. Sam's just coughing up a storm, which has got me concerned. So, allergies... this may be my last podcast. You don't know allergies.

Sam Parr

the type of allergies that you can catch and kill you alright

Shaan Puri

So, this is for all the students of Stanford, Harvard, and Syracuse who have been shut down. They're at home, certainly just listening to the podcast in quarantine. This is for you. This one goes out to you.

Sam Parr

yeah good luck

Shaan Puri

alright what do you wanna talk about we got a bunch of words on the screen they all look interesting where do you wanna start pick 1

Sam Parr

can we talk about well I wanna do 2 things before we jump in

Shaan Puri

yep

Sam Parr

are we doing a plug of jordan harbinger's podcast

Shaan Puri

yeah but I think we wanna talk to him about it right like we want him to be talking to us as the plug

Sam Parr

okay so we're gonna be promoting his podcast and he will be doing it to us

Shaan Puri

yeah scratch our back

Allan MFM

we scratch his back that's how

Shaan Puri

it goes

Sam Parr

So, if you hear a plug from him, go and listen to his podcast. He's actually helping us a ton. The second thing is, I read every review for the podcast. We have maybe 600 reviews.

Shaan Puri

794 just check this morning

Sam Parr

Let's say 800. They're all 5 stars except for about 5.

Shaan Puri

yeah

Sam Parr

and that's cool I like lip reading the positive reviews

Shaan Puri

and those 5 were from early on when you weren't even on the pod so really I take those I take those out

Sam Parr

no there

Allan MFM

were 2

Sam Parr

I appreciate the 5-star reviews, and I like listening to negative feedback. I don't follow all of it, but some of it I do. The first piece of feedback was that the sound for the guests was bad. I agree, that's fair, and we will listen to that. The second piece of feedback, which I hate to say, is that we were called "bros." I don't really care about that because I don't understand how that's supposed to be an insult. I don't think it's bad feedback, but it does bother me a bit. What does it even mean?

Shaan Puri

Yeah, it's an insult for sure. To be clear, it used to not be an insult, but being called a "bro" is now an insult. I don't know... Is it the way we talk? Is it what we talk about? Are we using the wrong words? I'm not exactly sure.

Sam Parr

I don't take offense to that, even though people mean it to be offensive. So, I don't care if people say that.

Shaan Puri

Yeah, I'm not a bro. I'm a lover, not a fighter. You know, I got multiple angles. I got gears.

Sam Parr

what does a bro mean

Shaan Puri

I don't know henry what's a bro we we need the get get get

Allan MFM

Here, I don't think it's... come on, bro. Yeah, come on, bro. It's definitely not a good thing, especially if you're over the age of 20.

Shaan Puri

Maybe we have to replace Henry with a female, and then we'll get more credit for not being just a "bro down."

Sam Parr

no I don't care about being called a bro

Allan MFM

friends like you bros you just go back and forth

Sam Parr

so then it's a compliment

Shaan Puri

yeah kind of I don't know whatever I'm not trying to be liked I'm just trying to be me

Sam Parr

No, well, here's what I'm trying to do. I'm trying to be me, and I'm trying to create stuff people want. If it's predominantly something people think is "bro-y," but they love it, I'm okay with that.

Shaan Puri

Yeah, like for example, I listen to the Joe Rogan podcast. Joe Rogan talks about his carnival, all-meat diet, you know, working out, UFC fighting, cage fighting, hunting. You know, these are his topics because that's what he's genuinely interested in.

Sam Parr

I like talks about and he

Shaan Puri

talks about other things too

Sam Parr

everything else

Shaan Puri

And I like when people... I like listening to stuff where people are interesting and they're interested in certain topics. For me, the test of this podcast is: "Would I want to listen to this?" At the end of the episode, I just sort of think, "Would I be interested in listening to that podcast?" If it's appealing to me, then I'm sure it's appealing to other people. It's not going to be appealing to everybody.

Allan MFM

for sure and then the last bit

Sam Parr

Of negative feedback we got, which is we focus too much on the San Francisco Silicon Valley scene. I'm from Missouri by way of Tennessee, and you're from everywhere, including Colorado. I love San Francisco, and I hate it at the same time. I'll be the first to make fun of it, but I also love all types of cool things going on throughout the country. So yeah, that's probably fair.

Shaan Puri

For you, it's interesting. Let's talk about it. In fact, I actually think—personally—I think we skew a little too far in the kind of low-tech ideas. I believe there's a lot of interesting high-tech ideas that don't require a high-tech entrepreneur. For example, I don't know how to code, but I've started tech startups in Silicon Valley, taken venture capital money, and worked with the engineering team where I'm the only guy in the room who doesn't know anything about engineering. You can do that. So, I actually think that there's plenty of cool stuff that we're not talking about, and I'm going to be bringing more of it. So, if you don't like the Silicon Valley stuff, I'm sorry. I'm going to try to bring more interesting technology to the table because there's a lot of it out there, and I feel like we haven't been talking about it as much.

Sam Parr

The way that I describe San Francisco and Silicon Valley is, to me, it's kind of like Hollywood, but only if you're trying to make a big blockbuster hit. I believe that you can make those anywhere. It might be a little bit more helpful if you are physically in Hollywood, not because the chances are necessarily higher, but because you'll be around other people who have similar wants and dreams, and your baseline becomes a certain...

Allan MFM

yeah

Sam Parr

thing for sure but you can certainly make it from anywhere

Shaan Puri

Absolutely, it's been proven. Alright, let's talk about some of these things. Let's start with the Sequoia memo. Did you read this?

Sam Parr

no I avoided it on

Shaan Puri

purpose nice denial the best the best approach

Sam Parr

yeah I we haven't raised venture capital so it's a little bit different

Allan MFM

it's not

Shaan Puri

as applicable okay

Allan MFM

why don't you explain

Shaan Puri

Let's just explain what it is. Sequoia is one of the biggest venture capital firms here in Silicon Valley. They're famous for, back in 2008, I want to say, they released this presentation called "RIP Good Times." They basically called an emergency meeting of all their portfolio companies. They invited them to this dinner, locked them in a room, and put this presentation up on the screen that was basically like, "Hey, the good times we've all been experiencing are about to end. Here's why." Most of you entrepreneurs have not been a part of these cycles. We've been investors through the dot-com boom and the bust, and then this new boom. This was right before the sort of financial crisis of 2008. They told them, "Look, money is about to become hard to come by. We are going to have a giant financial crisis that will have ripple-down effects to you guys, to your customers, to your clients, to your investors. So you need to start tightening up anything you're wasting money on. You need to stop wasting it. If you haven't raised money, if you don't have 12 months in the bank, you need to go raise money right now to sort of be able to endure a downturn." They just released another one, which is the new Sequoia memo. So that was 2008. Now they've released a new one, and they basically were like, "Look, this coronavirus stuff is a once-in-a-100-year virus." It happened in China, which is like when you shock China, you shock the global economy.

Allan MFM

supply chain and also now that travel is gonna stop

Shaan Puri

a whole bunch of supply chain and also now that travel is gonna stop a whole bunch of business

Allan MFM

is gonna come

Shaan Puri

... to a halt. The stock market's going to go into a panic because we've been in a 10-year bull run, and that's about to sort of end anyway. So they told them the same thing: 1. Change your spending habits 2. You need to tighten up 3. Raise money if you have an offer out there 4. Take it, don't worry about valuation 5. Just take it and get the money in the bank And you know, you need to go into sort of survival mode. You need to change gears. That's what just came out, which I think is very interesting. Have you made any adjustments to your business?

Sam Parr

Not yet, but I live like this anyway. I'm kind of a cockroach in the first place, and I actually think that me living this way has kind of been a...

Shaan Puri

a consequence

Sam Parr

It has hurt me more than it's helped me, actually. Mhmm. I think it made it so I wouldn't spend enough money. If you have a machine that turns a dollar into more than $1, dump the truck... your money truck.

Shaan Puri

like what ad spend or what do you mean

Sam Parr

Yeah, I mean, look, if you have a funnel or a product where if you just spend more on marketing, or spend more on engineers, or spend more on content creators, and it turns that new customer into more than what you acquired them for, right? Then if anyone had a little machine that turned $1 into $1.01, the name of the game is to throw as much money into that machine as you possibly can.

Shaan Puri

as fast as you can

Sam Parr

And I've had those machines, and I didn't capitalize on it. I've lived this way all the time, and I think it's actually hurt me a lot. But in times like these, bring it on.

Shaan Puri

yeah you don't need to adjust

Sam Parr

we haven't changed how we've done things just because we're always tight

Shaan Puri

Yeah, and your company is in a good position. Just now, before this, we were looking at a company's P&L, and it was like cash in the bank: $220 or something like that. It's like, "Dude, you're a couple of months away from insolvency," you know, if that was the case. Whereas you guys are in a much better position.

Sam Parr

Yes, I do. I have a little fear. I don't know how I feel about this corona thing and what it means for business. I do think that I'm on the side of believing it's bad, but I don't think it will be as bad as I originally thought.

Shaan Puri

right

Sam Parr

I guess I just have faith. I have a lot of blind faith that it will work out, which...

Shaan Puri

So, I've been on the other side of this. When we were doing our idea lab, I worked with this guy, Michael Birch. Michael Birch is known as, if you just Google him, he's one of the top growth guys in the world. He sort of invented viral marketing before "viral marketing" was even a term. He did it because he didn't have money back in the day. He built one of the first address book importers for a company called Birthday Alarm. He was like...

Sam Parr

and I think he did it before that at rick marini's company I forgot what that was called

Shaan Puri

**The birthday alarm was before that.** So, the birthday alarm was the first one where he was like, "Hey, I want people to send this to their friends. What if I just imported all the addresses from their Hotmail and then made it easy? Push this button to send it." He literally told me at his house, "I thought that 10 days later, like, there's no way they let this go for more than 10 days." And he's like, "It's now been 15 years and this thing still works." So, he was working on viral marketing because he just didn't have a budget. He said, "I gotta use my customers to get me more customers."

Sam Parr

And to explain that, you didn't explain it totally clear. But someone signs up for your thing and says, "Do you want to invite your friends? Here's your Gmail contacts. Click 'Select All' and send an email to all of them."

Shaan Puri

and so in this case for birthday alarm it was I make a calendar where I'm and I'll invite you I'll say hey sam can you add your birthday to my calendar I I don't wanna forget your birthday this is before facebook existed by the way and so you would add your birthday to my calendar and they would hey it would say hey sam don't you wanna remember sean's birthday that'd be nice like reciprocate and you'd be like yeah sure and then it would say hey sam you got one birthday on the calendar but you surely got more friends than one so why don't you invite some other friends here let me make it easy for you would you like to import all your friends from hotmail and you're like yes and then and he added one thing at a time to make it more viral so he he would add a prefilled message he's just like oh there people are stopping because they can't think of what to say right so here's a prefilled message that I know works and then I just say send and so then he got this thing super viral so you know birthday alarm grew to 50,000,000 members with 0 paid marketing 50,000,000 and and then he's done this again and again since then with his social network bebo and others so when I worked with them the name of the game was viral growth and so we did a charity campaign they're trying to raise money for charity:water well we made a story a website that was just telling a story of this boy john bosco with no water and then we said can we get this to go viral and so we did the same thing import import emails get people to send the story to their friends and raise money for the cause and we got it to go viral so I've literally been been at where like nothing nothing nothing you'd come into work nothing no growth no growth no growth and you would just tweak the right thing and then all of a sudden you know between overnight something would have doubled and the next morning it doubled again next morning it doubled again and I remember it just going from 0 to 5,000,000 people signing up for this charity thing within like you know 2 weeks it was insane and so I've seen viral growth and how counterintuitive it is like you don't think you know well yesterday we had 4,000 people so today we're gonna have I don't know 5,000 6,000 it's like no you're gonna have 16,000 then you're gonna have 32,000 and it's gonna you know it's gonna go up to the millions within a few days and so I've seen viral growth when you're talking about it in the good sense from a product perspective now it's viral growth of an actual fucking virus and so and you could see actually in the us somebody did a great graph where they mapped italy where everything's on lockdown because italy has started spreading like crazy and they showed italy day 1 us day 1 italy day 2 us day 2 number of cases and the bar graphs are like identical and the thing is we're just in like whatever day 6 and you can see by day 21 where this thing gets to if you don't like lock everything down right away so I am very fearful because I've seen viral growth I've seen viral spread and I know that it doesn't work the way it breaks our brains our brains think things go linearly but this goes exponentially

Sam Parr

And it's really hard to just comprehend an exponential spread and to take the story a different way than coronavirus. The stuff that you're describing, that Michael Birch thing, you can actually still get all these stupid cool plugins that automatically allow people to share a prepopulated message to all their Gmail contacts. We used it, and people still share.

Shaan Puri

Yeah, and the math works out where, you know, you would think I would never do that. I wouldn't email all my contacts.

Sam Parr

we had a lot of people doing it

Shaan Puri

But people do it, and what happens is, you know, 1% or less will do it. If you look at the math, 1% of people do it, and on average, they have 326 contacts. So for every 100 people that come in, you get 326 people blasted out.

Sam Parr

it doesn't work as good as that time because the email open rates are much higher then yeah but

Shaan Puri

Now, people are like, "Oh, I don't know. I never talked to Sam, so if he's sending me this, this is junk. This is spam." People filter it. But in certain countries, it works. We were growing; we could do this like clockwork in India. In India, people still open it like they did in the U.S. 10 years ago. They forward it at even higher rates. They don't care; they forward everything to everybody. So, India, Turkey, and all these little countries are where we would see this crazy growth that you couldn't get in the U.S. or U.K. anymore. They kind of suck because the monetary value ends up, you know, the value per user is lower there. But it does still feel good to get a discount.

Sam Parr

works and people are shocked by that

Shaan Puri

Yeah, we did one through SMS, I remember. Over the weekend, it went viral. During the week, Monday through Friday, everything looked fine; it was growing, but not at a crazy pace. We didn't realize the viral coefficient was 2. So, over the weekend, it took off and started compounding on a big number. We racked up a $120,000 bill in SMS messages.

Sam Parr

holy crap

Shaan Puri

Going through Kazakhstan, I was like, "We didn't even know we're going to grow in Kazakhstan," and it went crazy. Turns out texting in Kazakhstan is super expensive, and so we had to pay off $120,000 in 2 days.

Sam Parr

That's crazy. It sucked. Well, we needed the texting stuff, which we haven't... Do you want to talk about Zumper?

Shaan Puri

mhmm

Sam Parr

Okay, you want to scroll up for me or down, or whatever you want? Okay, okay. Zumper, I think it's zumper.com. What did they just raise? Was it $40,000,000 today at a $400,000,000 valuation? Total, they've raised $150,000,000 in valuation. It's a cool service.

Shaan Puri

if you're a consumer how does it work

Sam Parr

yeah so go on ever use zumper

Shaan Puri

If you're trying to find an apartment, you'll probably run into Zumper because it's a search engine to find apartments to rent.

Sam Parr

Yeah, and typically for these new guys, San Francisco isn't the major market. It's typically more in the middle of places where they have high-rise buildings, which we don't have a lot of here. But basically, if you Google "Chicago apartments" or "moving to Chicago" or something like that, Zumper or Apartment List, the place where I used to work, or a bunch of other things like that will come up. It'll be like, "Here's 843 apartments available in Chicago. Click here to get information and submit your information." Okay, great. Here's how they work, which a lot of people have no idea about. Henry, I'm going to explain to you how they work, and you tell me if you've ever heard this. Okay? So, they're lead generation companies. You know what a lead gen company is?

Allan MFM

no

Sam Parr

okay the way it works is

Allan MFM

and

Sam Parr

A lot of people are shocked by this, and it's actually way easier to start than most people would realize. So the way it works is there's... I don't know how many there are who do this, but I know that there are for sure 4 or 5 big names that do this. And so...

Shaan Puri

just in the apartment space

Sam Parr

Just in the apartment space, there’s Apartments.com, I believe there’s Rent.com, and there are maybe two others that are quite large. Then, there are dozens that you don’t even realize exist; you’d have to Google them and find them. What they do is work with all the big apartment buildings. For example, there’s Greystar, which has probably millions of apartments. Then there’s CoStar, which has a bunch, and then there’s every apartment building that you have, World Star...

Allan MFM

what are what are the other ones

Sam Parr

Greystar, and then there's Avalon Bay, I think they're called. There's a bunch of them, and they have millions of units. What they do is they go to Rent.com or Apartments.com, and they say, "For every person who signs a lease with us or who calls our phone, we're going to give you $100." So what Zumper can do, or probably how they started out, or what anyone can do is they say, "Hey, Apartments.com, you guys are getting $100 per call. Will you give us $10 per email that we give you of people who are qualified leads?" What Zumper did, I imagine they did this when they launched, and I'll explain why I say when they launched. They went to these places and said, "Alright, give us a cut of the revenue per email." The math works out that if we send you 5 emails from people who said, "Here's my email address, here's my phone number, I'm interested in a 2-bedroom at this particular building," Apartments will be like, "Alright, we'll give you $10 for that," because we're pretty confident that for every 5 of these we collect, one of them will become a lead. So now we make $50 in profit.

Shaan Puri

mhmm

Sam Parr

And so what Zuppert does is they create a different funnel where they learn how to rank really high on "moving to Chicago" or "find an apartment." They are able to have really good Facebook ads, and they get all these leads. That's what their margin is. The margins for these businesses, I know this firsthand, could be 60 to 70% gross margin. Which means, let's see, what's the math behind that?

Shaan Puri

You receive $1,000,000 through the door. You paid $250,000 on search engine marketing.

Allan MFM

yeah

Shaan Puri

But you know, the rest is because there's no cogs. There's no physical product you're selling. So you have a very high margin product—67% margin. Plus, whatever content staff you have internally, that's your other cost.

Sam Parr

So, it's just a lead generation company. Yep. The interesting thing is, I've known a lot of people who have these lead generation companies. I knew a guy who had a lead generation company for swimming pools. So, if you wanted to buy a swimming pool, you'd Google "swimming pool repairman" or "indoor in-ground pool setup California."

Allan MFM

right

Sam Parr

or something like that

Shaan Puri

he's number 1

Sam Parr

and he would he would be number 1 you submit your information and he would sell it to these people who go in service

Shaan Puri

who actually do the thing

Sam Parr

Who actually does the work? You're a middleman when you're a lead. Now, there are pros and cons to this business. The first pro is that you can set these up really cheaply, and you can start making cash flow very quickly. If you were able to spend one month just building the site and creating a relationship with this person, you could the next day go out and start making cash, so long as you were profitably acquiring a customer. That's great. The second great thing is you can do this for almost anything. The best way, I think, to figure out how to do this is to determine what has the largest total market size, the largest possible cost per lead, and the least amount of competition. You can create a grid for this. For example, I've been bullish on truck drivers. The reason why is that I think there are a whole lot of truck drivers in America. The average truck driver makes a good salary—let's say $50,000 a year. Therefore, recruiters would be willing to pay around $100 per lead. So, I was like, "Can I send leads there?" Or you could do it for local services. For instance, if I need a landscaper or irrigation work done at my home, someone will buy those leads for, I don't know, $50. You can do this for anything.

Shaan Puri

right you

Sam Parr

just have to optimize for what

Shaan Puri

So, my father-in-law is in the senior living business. He owns a couple of facilities, and the biggest thing for them is that his business looks great when he has high occupancy rates. It looks terrible if he has high vacancy or low occupancy. There are companies out there that do this for seniors. If you start Googling "memory care" and "Alameda, California," there's a company that will pop up right at the top of the search. They say, "Hey, we've reviewed the top 15 facilities here. Come read about them," or "Hey, are you looking for this? Talk to our consultant. Just put in your email address here, and we'll help you get landed in a spot." These companies will pay lead generation services a high amount because someone who goes into a senior facility is paying $8,000 per month, and they're usually there until the end of life. So, you get a very high lifetime value of that customer. Therefore, you're willing to pay $1,000 per qualified lead who's looking in your area.

Allan MFM

I don't I don't know if

Shaan Puri

it's that exact number but high high price

Sam Parr

I have firsthand knowledge. I know someone personally, and I understand the financials of a senior home living or senior living lead generation business. It made hundreds of thousands of dollars a month in revenue with a very good profit. I know someone who did it for rent-to-own properties. I know people who have done it for, like I said, swimming pools. I know people who have done it for apartments. I know a guy who did it for local home services and generated about $60 to $70 million a year in sales.

Shaan Puri

right

Sam Parr

And so, that's the name of the game. I also know people who have done it for jobs. Jobs is another good one. Now, like Rig Up has done this; they've raised money at a $2 or $3 billion valuation, and they've done it for oil workers. The way the math works is there's actually way more oil workers in America than you think. It can be 100 out of 1,000. Those oil workers have a relatively low barrier to entry; you don't have to have a master's degree in something, so anyone can do it—or a lot of people can do it. The salary is quite high, around $100,000 a year in some cases, so they're willing to spend a lot of money. It's a really interesting business, and a lot of people don't know that's how it works. Now, here's the downside. The downside is lead generation companies can be very transactional, which means as a business, you only capture value and make money the more leads you're bringing in. Often, that means you only make money when you're spending money. A lot of times, they struggle at building brands. So, like I said, you could spin something up really fast, which means it can likely go away just as fast. For example, if you create a URL like "homeseniormlivingcalifornia.com," that is not likely to attract many visitors. Maybe someone will just Google that, and they'll see it one time.

Shaan Puri

so that you're making it

Sam Parr

yeah and then they're gonna get there and they're done they're never gonna think about you ever again and

Allan MFM

so to

Shaan Puri

pay for them again and so

Sam Parr

if you want more customers you gotta pay again

Shaan Puri

right

Sam Parr

And so, that's quite hard. If you can build a brand around it, then that's where it gets really interesting. The second thing is that you are dependent on the person buying a lead. In my case, I worked for a person who was doing lead generation. They said, "Alright, there's a cap on this. We can only make a certain amount of money giving leads." The way that we become a huge business is by building a relationship directly with the apartment buildings and going straight to them. Now, the reason why that approach didn't work is because the person buying the leads thought, "Oh, you're our competition now," and they cut it off. Their revenue goes away immediately.

Shaan Puri

right

Sam Parr

And so, what Thumbtack did... I like Thumbtack. What they've done is they've built a direct relationship with the people. So if you Google "San Francisco wedding photographer" and you see a wedding photographer on Thumbtack, they've built that relationship with them. That wedding photographer will pay Thumbtack directly for a lead. That's great because there's no middleman to cut out. Now, the downside with that is it costs a ton of money to do this. This is like a really big problem.

Shaan Puri

to build a marketplace

Sam Parr

and so you likely have to raise money or figure out some scrappy way to get it done

Shaan Puri

right

Sam Parr

but that's my rant on zumper yeah

Shaan Puri

and the the big version of these if you take it to its absolute max is like expedia or booking.com yeah

Allan MFM

right

Shaan Puri

So, what they're doing is saying, "Okay, cool. You want to book a flight? I will become the best at ranking for how to search for flights, find a good flight, and here's some recommended trips." Then, the airlines pay us a commission and an affiliate fee for every lead we're sending them.

Sam Parr

and that is a notoriously difficult niche

Shaan Puri

Yeah, they've done well, but they're hyper-competitive and it's always contentious.

Sam Parr

And then hotels is another one that's quite challenging. If I wanted to make money really fast, I would find a relatively boring one like trucking jobs, which I find interesting but most people do not. So they want to enter that, but flights and travel is a lot sexier, and so it's a lot harder.

Shaan Puri

I'll give you another niche example. I have a friend who created a business called ApplyBoard. What he was doing was helping international students. You know, I went to high school in China, and when I was graduating, everyone wanted to come to the U.S. to study. Everyone wants to attend U.S. colleges. So, internationally, students from India, China, Indonesia, and Malaysia, the best students all want to come to the U.S. if they can. However, they don't know where to start. They don't know what the schools are, how to apply, or how to translate their scores from all these aptitude tests in Malaysia to what U.S. schools want, etc. So, there's a barrier there. The U.S. schools love foreign students because they pay more. For example, a foreign student attending Berkeley will pay double the tuition of a local student—not just an in-state student, but even a U.S. out-of-state student. The international student pays double. And Alan, that was you; you paid double.

Allan MFM

I paid more than double. I went to school in Australia. I think the average per semester is around $5,000 to $6,000 for a local student. I paid about $45,000.

Sam Parr

a semester

Shaan Puri

Okay, so, alright, great. So, you paid like **nine times** as much going to school? That's insane! So basically, what he was doing was going to colleges. You have all these small colleges that just need applicants because they don't have a brand name. A lot of schools like Stanford and Harvard, they don't really care because they're getting so many applicants anyway; it doesn't matter. But like San Jose State, you know, they were like, "Hey, we will pay you **$1,000** per admitted student, **$3,000** per admitted student." So he was getting **$3,000** per admission in contract with all these different schools. Then he just had to do lead generation on the other side for students who want to go to school in America, which is actually a big market of people who are searching for it.

Sam Parr

and what happened to it

Shaan Puri

He's still going. I don't know; I haven't checked in with him lately. But I hope you're doing good, Martin. I hope you're doing alright.

Allan MFM

Universal. I used to work at the University of Sydney as a part-time job. I remember getting an email one time where they were describing the strategy for the year. Yep. So if you go to campus right now, it's literally just like...

Shaan Puri

international students ever

Sam Parr

Yeah, I went to the University of Sydney as well for a little while. It was crazy. We should actually talk about that another time because there's an interesting story there. But to get back to this lead thing and wrap this up, there's actually a lot to discuss, and this is way bigger than people think. One of the biggest aspects is credit cards. Credit Karma, I don't know what they do in revenue, but they just sold for $8 billion. I bet they did $1 billion in sales. Their hook was, "We're going to get you to sign up for a free credit report, and we're going to recommend credit cards for you to use." They make $100 per credit card affiliate they get you to sign up for. Now, think about credit cards: huge market, huge referral fees, and very competitive. NerdWallet does the same thing. They bootstrap, I think. I don't know.

Shaan Puri

multi 100,000,000 yeah

Sam Parr

I mean, I think they bootstrapped to like $50 or $60 million in sales, then raised money. So it's quite good. Now, here's another company, and here's one more interesting thing: you know the Penny Hoarder?

Shaan Puri

mhmm no I don't actually I don't know what

Allan MFM

to say

Sam Parr

The Penny Hoarder, thepennyhoarder.com, is a great success story. Kyle spoke at HustleCon; he's a cool guy and still is. He started The Penny Hoarder by writing about his experiences when he was poor and didn't have any money. He would say, "I didn't have any money. I was trying to pay my bills." To make ends meet, he would do things like drive for Uber or clip coupons, and he blogged about it. Whenever someone saw an article he wrote about driving for Uber, he would make $2,000 per Uber driver. He thought, "Oh, this is cool! I should blog about all the ways I can save money or make extra money." He explored various methods, like websites where you can fill out surveys to earn a few bucks. His target audience was mostly middle America moms who would see his posts and think, "That's great! I'll make money on the side and sign up." He would earn an affiliate fee from these sign-ups. Kyle scaled this business from $0 to $60 million in sales, completely bootstrapped, in just six years.

Shaan Puri

I love this

Allan MFM

that's great

Sam Parr

But here's the problem. There's this other company called **Fluent Media**. Fluent, I think it's called **Fluent**. Fluent is a publicly traded company, and they are performance marketers, which means they do what I'm describing but across tons of niches. So, someone will say, like **DirecTV** will come to them and be like, "Hey, we'll give you $80 for every customer you send us." And they go, "Great!" They spin up these landing pages. **Fluent Media** does this with trucking as well. They do a bunch of stuff. It's a big business, publicly traded. They saw Kyle's website and how much he was killing it because he talked about it a lot for PR, which I mean, it's...

Shaan Puri

good and bad

Sam Parr

Good and bad. They just... they ripped them off completely. They created something like "Dollar Saver" or something very similar to "Penny Hoarder." They just copied the website, copied the articles, and then they threw it on Facebook. They drove traffic to an article that said, "Here are the 100 best ways to save money." They did the math so they could get a click for a penny or a dime. Each person who came would make them $0.20 because that's the conversion rate of people who would sign up. So, Kyle at Penny Hoarder—this is all public; you can Google it—sued them. What they found out was that Fluent Media, according to the lawsuit, hired one of the Penny Hoarder employees. They said, "Yeah, here's how we did it." So, they just spun this up, and it made a ton of money right off the bat. Yeah, and so these are the pros and cons.

Shaan Puri

win the suit

Sam Parr

I think it's ongoing ongoing it's ongoing but

Shaan Puri

for kyle

Sam Parr

But this is why this is interesting. I think that The Penny Hoarder, among its crew and audience, has a great brand. NerdWallet actually has a great brand as well. At first, NerdWallet was simply a site where you would Google "best credit card," and we would show up first. You would never remember us, but now they're doing all this advertising and commercials. People are turning to the nerds; it's working. That's a commercial. So, it's a really interesting business model. I like lead generation, but a lot of people didn't realize how that worked. Henry, was that interesting? Did you learn how it worked?

Allan MFM

that was great yeah

Shaan Puri

Alright, I got another one for you, Manzo. This is cool! This is one of my favorite reasons to do the podcast: interesting people just reach out and tell me about their business. So, Manzil, this guy Sam reached out. He listens to the podcast.

Sam Parr

what's his last name

Shaan Puri

sam mulaco halako something like that tweeting

Sam Parr

at me too

Shaan Puri

And so he was like, "Hey, I got this business. I would love some help with it or just would love to chat." I said, "Okay, let's chat." So I get on the phone and I end up blown away by what these guys are doing. They teach me about something I've never heard of, and it is now very, very fascinating to me. What they do is Islamic financing.

Sam Parr

oh we've talked about that

Shaan Puri

What's that mean? We talked about it, not on the podcast, but we talked about it offline because I was pretty interested in it. So, Henry, do you know what Islamic financing is? If you didn't know lead generation, I don't think you'll know this one. So, are you Muslim? I'm not; I'm Hindu. Well, I'm neither, but my family is Hindu, so I didn't know about this. But basically, in the Muslim faith, there's actually sort of the advice against traditional loans. Interest, which is known as "riba," I think in their faith, is frowned upon. So, a traditional mortgage, where you go to the bank, you have your down payment, you take out a loan, and you're paying interest, is actually not compliant with their faith and their law.

Sam Parr

and which is actually common in a lot of other different religions

Shaan Puri

is that true

Sam Parr

Yeah, so I'm Catholic Christian, and I was raised that way. There are definitely rules regarding handling money and interest and things like that.

Shaan Puri

Yeah, and I think the fundamental basis... I'm gonna kind of butcher this, so I apologize, but I'll just try to explain it as best as I understand it. So, apparently, you know, money—sort of fiat currency—which is just not pegged to anything, it's just a made-up concept. The belief system is that money has no inherent value in itself. Therefore, you should not be charged interest for borrowing money, which is this sort of abstract concept. So, they have loans or they have agreements that can work as long as both sides are taking shared risk and getting sort of shared upside, shared return.

Sam Parr

some way so there's there's is sam islamic

Shaan Puri

I believe so, yeah. His partner, Mohammed, is also involved. They were explaining to me that there's this big thing called **Islamic financing** and these **Islamic challenger banks**. If you've ever heard the term "challenger bank," check this out—it's pretty cool. We know that banking has been around forever. There are these big bank brands that are in every country, and there are big banks that are worth billions of dollars. Recently, over the last let's say 5 to 7 years, there have been these things called **challenger banks** or **neobanks**. In Brazil, there's a bank called **Nubank** (N-U bank), and Nubank is worth **$10 billion**. It's one of the most valuable startups in Brazil. In the UK, there are challenger banks... oh my god, I'm going to forget the name of that.

Sam Parr

challenger just means a new one that's a

Shaan Puri

start up bank

Allan MFM

yeah

Shaan Puri

and they're they offer different things so what what these guys did was better digital access so mobile apps quicker ability to get sort of credit cards and and debit cards spun up and so there's you know there's a couple of them that are huge now few different multibillion dollar startups done this what these guys have done is they've done this for a faith based bank which is basically say there's a set of customers out there in this case muslims who are not being served well by the generic banks and we can make a bank that serves them better and the way we're gonna do it is you wanna take a mortgage out you can either take a sort of a mortgage out traditional mortgage which is not compliant or you can take one out that's compliant with your faith we've come up with a mechanism that is blessed by sort of the the village elders you know the the sort of leaders in the in the community that says yes this is you know I think charnia law is what it's called it's saying it's compliant with charnia law and then on the other side this is this will this works as a mortgage you can actually buy your home and so these guys have this have this concept and in other countries this is apparently really big so in africa indonesia places where the muslim population is the dominant population they've already solved this problem but in places like us canada where it's just a minority of the population is is muslim they don't have these banks yet so I love this startup idea because how are they doing so how they're doing so they're they've they spent a lot of time making sure that they can get it to be compliant and actually get the financial mechanism to work that took them a while over a year maybe 2 years now they've gotten that to work and they have basically they have two sides of a marketplace on one side they have people who are investors because you know if you're gonna issue mortgages their average mortgage is like $500,000 so it takes a lot of capital to start this business they don't wanna be the 1 they don't wanna go raise a $1,000,000,000 and then start issuing these loans they want on one side to have investors who will put in the capital to fund these loans and on the other side they wanna have the borrowees who are trying to buy a home who can pull from this pool of you know sort of halal financing you know this this financing that's compliant and so they have $10,000,000 committed on the on the investor side 1,200,000 in their bank 10,000,000 total and then and they're just every week they're trying to close more of those checks

Sam Parr

I think we

Shaan Puri

Which is a small amount, but this is just inbound interest. They haven't really done anything yet. But $10,000,000 will let you do... if you just do half $1,000,000 loans, that means they can do about 20 mortgages right now. Every mortgage has a certain value, so it's worth about, I don't know, $20,000 a year to them, just in their fee that they get on top of it. On the other side, they have all these applicants. I think there are about 1,000 applicants, and these are what they call "super prime" applicants. These are people who are doctors, lawyers; they have good jobs. They have the money and the means to afford their homes. They're just looking for a solution that doesn't force them to compromise their faith. So, I really like this business. There's a working model in the UK, there's a working model in Africa, and there's a working model in Indonesia. However, there's nothing in Canada where these guys are, and there's nothing really in the US either.

Sam Parr

many muslims do you think there are in america

Shaan Puri

I think there's... look this up. I think there's like a couple million, only 22,000,000. I want to say roughly.

Sam Parr

That's pretty interesting. I like that. I think that there are a bunch of weird rules around banking. I mean, they're not weird; they should be there. Starting a bank, I think, is almost nearly impossible.

Shaan Puri

it's very difficult so what all the neobanks do all the charter banks do they're

Sam Parr

not real banks

Shaan Puri

They're not real banks. They sit on top of BBVA or they sit on top of these other banks, and they're just the app. They're the consumer-facing layer, but the banking happens with their underlying partner. It's sort of like the lead generation model that you're talking about. They go to these banks and say, "Hey, I can get you a whole bunch more customers. I'm going to spend all the money doing the marketing. They'll be banking with you, but we own this sort of relationship."

Sam Parr

Yeah, and that's actually pretty common. I use this thing: my debit card is Simple. Have you heard of it? I've heard of it. Yeah, this is my debit card. It's pretty cool. I like it because the customer service is great. I can just text them, and they're easy to chat with. They answer 24 hours a day. They were acquired for $100,000,000, and I was like, "It's like a freaking bank!" That's it. Yeah, and I didn't...

Shaan Puri

a bank yeah

Sam Parr

and it was what's it called bbva yeah that's who they use bbva compass I think it's

Shaan Puri

Exactly. They're under... they're under... there's a few that are underneath all these. Now, the very first... there's now one of the challenger banks that got their very first banking charter, banking license, which is very rare. I forgot their name, but they just announced a couple of weeks ago, or in the last two weeks, that... so now it's very interesting. Once that seal broke, because it was so hard to apply for this...

Sam Parr

I think we and

Shaan Puri

They all want it. Robinhood wants their license, Brex wants their license. It's just very hard for them to get this.

Sam Parr

I think you need 5 per or what is the number I think you need 10%

Shaan Puri

in reserve

Sam Parr

yeah you need a certain amount of reserve

Shaan Puri

That's not even the problem. It's just that there's no incentive for the government to give these out. They're like, "You kind of highfalutin, you know, tech startups. Do I really want to give this to you? You've only been around for so long. I don't know if I have the trust in you." So now the seal is broken; the first one got it. We'll see what that means. But what I like about these guys is they're not a bank. They're not taking your deposits; they're just doing loan issuance. So on one side, they have the reserve cap, the investment fund.

Sam Parr

but they're using other people's money

Shaan Puri

OPM on one side, yeah. Other people's money to make the loans. They're the broker, and they take 1 to 2% of the transaction fee. People are willing to pay a premium to have halal financing, just like people are willing to pay a premium for halal meat or for vegan or kosher meat. You know, whatever. People are willing to pay a premium for things that are compliant with their faith. So, I think this could be big. And you know what's interesting? I think that they've had a hard time raising money from traditional VCs because this is...

Sam Parr

didn't understand it

Shaan Puri

Hard to understand? Yeah, you have to, like, you know, most VCs are old white guys. It's the sort of cliché. I know they do look into it, but I think there are natural challenges with any high-aspiration startup. They have those problems at any ambitious startup, but then they also have the issue of needing to educate you about this problem. Like, you saw how I stumbled through this explanation, and I talked to these guys for an hour. You know, and that's where I am after an hour of really trying to understand it.

Sam Parr

but you and you read this by furkan your your best

Shaan Puri

so I ran

Allan MFM

yeah

Shaan Puri

I ran it by him. I introduced him yesterday. I said, "Hey, Furcon understands this. He's Muslim, he's an investor, he's a technologist, and he's an entrepreneur. If he doesn't like this, I don't like this."

Allan MFM

he

Sam Parr

and what did he say

Shaan Puri

And so, he’s like, “I’ve looked into this.” He said, “A lot of my friends really wanted this. I tried to look at what options are available in the U.S. They suck. They have really super high premiums.” Is he practicing? Yeah, like, you know, to an extent, yeah.

Sam Parr

like what I wanna know is do really like like

Shaan Puri

he doesn't pray 5 times a day but he doesn't eat pork right

Sam Parr

so he's like culturally

Shaan Puri

he drinks but like his dad runs the mosque in san jose and you know like the it's

Sam Parr

so even people who are like culture who aren't incredibly devout are into this

Shaan Puri

If he had the option, he would prefer halal financing over not, if it was convenient. He's like, "The problem with all the existing options is they're not convenient, they're not easy to use, and they have very high premiums." He's like, "If these guys did it conveniently, I think this could be big." So, he's going to talk to them. We'll see.

Sam Parr

I'm not a practicing Catholic anymore. Are you guys Catholic? You're Catholic for sure, right? Do you eat meat on Fridays during Lent?

Allan MFM

yeah I've been bad about it honestly I went to like all boys catholic high school

Sam Parr

So, me too. I went to an all-boys Catholic high school. I don't practice anymore, but that's another thing. I don't eat meat during Lent on Fridays, so I try not to. It sounds like that's what it is, kind of like where...

Shaan Puri

it's yeah people it's a spectrum

Sam Parr

it's a you prefer it but not yeah

Shaan Puri

You prefer it, especially if it's convenient for you. Louis Henry just said that there's a lot of guilt there, like, "Yeah, I should, but I don't." So, if you can make it where people do what they want to do without lifting a finger, then they'll do it. You know, it's great.

Sam Parr

that's pretty cool

Shaan Puri

this is opportunity

Sam Parr

I like that. I like that angle of finding because I don't know anything about Muslim culture. I don't know anything about Hindu culture, which is where you're from. You probably don't know too much about Catholicism either. It's kind of an interesting way to look at how other religions do things, right? Another thing that we should talk about—though not today because I don't think we know what we're talking about, and we definitely don't yet—is building things on top of banks. I think that's super interesting.

Shaan Puri

but what do you mean by that

Sam Parr

so like what simple did and like what the what what's the name of this company

Shaan Puri

manzil

Sam Parr

manzil spell it

Shaan Puri

m a n z I l

Sam Parr

Manzil, okay, kind of like what Manzil did: building a front end on top of someone else's back end, right? Which is the bank. I think that that's really interesting. Simple.com is my card. I didn't know they did this at first.

Shaan Puri

This is kind of what drop shipping is. You build the layer that says, "I'm going to get the customer to a landing page and they buy." Yep, but it's just going to place an order with this other manufacturer, and they'll ship it directly.

Sam Parr

To them, it's super effective. I like that with banks because it's simple. They did this all... I mean, it's a little different. The card is all white and it's just slick looking. Yeah, and their app is really good. So, it's kind of interesting. I think this is kind of what Brex is doing; it's the corporate credit card.

Allan MFM

yeah

Sam Parr

They're layered on top of Mastercard. I really love these things. Let's talk about how many minutes we are in.

Shaan Puri

we're we're about an hour in

Sam Parr

okay you wanna a little bit wait a minute we can answer some questions or what do you wanna do

Shaan Puri

Let's do one of these fun ones. So, let's do the rebranding words. This was in the Hustle group, Hustle Trends, the Trends Hustle Facebook group, which is like a source for entertainment and gold.

Sam Parr

which go to trends dotco and sign up and if you use the phrase million

Shaan Puri

1,000,000. You'll get 50% off. Is it a million or is it a promo code?

Sam Parr

both both will work trends.co / millionortrends.co and

Shaan Puri

you guys have this thing where you can sign up for a dollar which is pretty dope yeah

Sam Parr

and it's working I love it

Shaan Puri

I love it! Okay, so, can someone in the group scroll up? I don't remember if I have their name. I should have their name. [Scrolling up] Yeah, there you go. Okay, we don't have the name. We should find it. Al, will you find the name of the guy who wrote this? I want to give him credit. So, somebody was just talking about how funny it is that people just rebrand stuff and give it a whole new meaning. He was talking about MSG, saying, "Oh, MSG has this really bad reputation as a food additive," but it's just been rebranded as umami. Now it's this foodie word that sounds good. Somebody came into the comments with a bunch of really funny examples.

Sam Parr

you wanna know another food one aioli

Shaan Puri

aioli it's mayonnaise

Sam Parr

love it aioli is mayonnaise it has a little garlic flavoring look it up

Shaan Puri

I don't think that's true

Allan MFM

I'm pretty sure it's better for you than mayonnaise

Sam Parr

look it up aioli is flavored mayonnaise look up aioli versus

Shaan Puri

just Google is aioli mayonnaise

Sam Parr

I'm telling you, **aioli** is mayonnaise, but there's like way more. You have to do it in a separate tab.

Allan MFM

yeah you can't you can't do this because we have to do it

Sam Parr

Here, it's right there. What's the answer? Say it. It says it right there. What's the top result? What's it say? Is aioli any different than mayonnaise?

Allan MFM

aioli is made from garlic and olive oil mayo is made from egg yolks and canola oil

Shaan Puri

Am I off? Alright, Henry wins. Okay, it's not exactly mayo, but I like the intent. Alright, so let's go back to the doc.

Allan MFM

chilean sea bass is actually called patagonian toothfish toothfish

Sam Parr

yeah that's awesome

Shaan Puri

Yeah, I love it. So, this guy had a bunch of them for business, which I like. So, or nerves.

Allan MFM

you

Shaan Puri

I know when you skip... I don't know, I'm like this. I skipped breakfast for years because I'm just lazy. I didn't wake up early enough. And now it's intermittent fasting. It's like this health trend. It's like, "Oh, I'm fasting till noon." It's like, yeah, you skip breakfast.

Allan MFM

by marlon montgomery

Shaan Puri

Okay, Marlon. Marlon was the original post, and then who posted all these comments? Jeffries. So, Logan Jeffries had a bunch of them that were fired, and I liked that. That's the reason I put it on here. Okay, so when you just quit your job because you want to travel, now that's called "dispersed retirement." That's hilarious! When you're a grossly underemployed writer or marketer, now you're a digital nomad because you have to go live in some low-cost area.

Sam Parr

or a coach

Shaan Puri

When you just like to eat beef and cheese because it's delicious, and now that's called the carnivore diet or keto.

Sam Parr

I used to call the salami and cheese redneck charcuterie

Shaan Puri

Sleeping around, online dating... I don't agree with all these. I'm just relaying Logan's good ones. When you quit your shitty business idea that was bad all along, and everyone told you it was bad, it's called **pivoting**.

Sam Parr

I like that failing fast

Shaan Puri

When you have a fear of commitment and therefore do not own anything and do not settle down, you're now practicing minimalism.

Sam Parr

I love that

Shaan Puri

So, these are great. And in general, you know, funny stuff aside, I think there's a lot of power to this. I think as a leader, you often have to rebrand things so that they're more palatable to your team and/or to your customers. **Packaging**... you have to frame things and package them up in a certain way. We did this with our sushi restaurant, where we realized that if we just described things better or differently, with better words, people would buy more and we could charge more. People wanted to have sushi that was more sophisticated. So, when we called it, you know, "Atlantic Salmon with blah blah blah" rather than just saying "salmon," that was better. Or if we created a whole new word altogether and put a little trademark next to it, that was even better than using common words.

Sam Parr

Every once in a while, I like to use certain phrases that are generally accepted in a positive light. However, I prefer to use a word that means the same thing but is generally regarded as negative, just to mess with people. For example, instead of saying, "We're going to get the customer to do this," or "We're going to influence them by doing this," I like to use the word "manipulate." So I'm like, "Yeah, let's manipulate them and get them to do this." Like, where is that by definition wrong, right? Just to kind of...

Shaan Puri

what happens if we call it what it is

Sam Parr

Yeah, let's just say we're going to manipulate... like I'm going to manipulate this person into liking me. And they're like, "Well, how do you do that?" Well, I'm going to be nice and charming and listen to what they say. But if you use that word "manipulate" instead of "influence," it messes with them, and I love using that just to screw with people. Like, when political people say, "Well, they have an agenda," I'd be like, "Yeah, well, so look guys, I'm here to talk to you about my agenda, which is to do what's right."

Shaan Puri

of course

Sam Parr

I have an agenda. I'm trying to get you to do stuff. I'm like, "Yeah, you're targeting someone who has a political agenda."

Shaan Puri

duh they should

Sam Parr

right yeah they should have a political agenda I love using those words

Allan MFM

so

Shaan Puri

So, Henry, if you scroll up for a second, that's the end of this episode. Thanks for listening! Tell your friends, make it all happen, and leave us a review. We like that! Give us the real talk in the reviews because we read all of them and we appreciate it. Or tweet at us! Sam's got 12,000 Twitter followers now; he has surpassed me in the Twitter rankings.

Sam Parr

11,300 11,300 counting

Shaan Puri

so so he's winning great alright we're out of here

Sam Parr

thank you