Community Businesses Stay Small

Shaan Puri and Sam Parr discuss why certain community-based businesses work better as lifestyle businesses rather than venture-scale opportunities, using a sneaker community as a case study.

• Key Characteristics for Successful Communities:

  • High passion from members
  • Clear ability for members to make money
  • Direct correlation between membership cost and potential member earnings

• Why Most Communities Don't Scale Well:

  • Exclusivity gets diluted with more members
  • Quality of conversation decreases with larger groups
  • Value proposition diminishes as more people access the same information
  • Some communities become worse with scale (like YPO or tight-knit groups)

• Community Business Metrics:

  • Monthly churn can be high (Shaan's experience: 7% monthly)
  • Annual renewal rates can be good (Trends: 80% renewal rate)
  • Getting consistent new customers is challenging

• Venture Scale Limitations:

  • Chat groups don't naturally scale
  • High subscription prices ($33/month) limit mass adoption
  • More members can actually decrease value for existing members
  • Hard to justify large investment rounds ($2M+) without clear path to massive scale

• Better Suited for Lifestyle Business Because:

  • Can be profitable at smaller scale
  • Works well for passionate operators in specific niches
  • Doesn't require massive growth to be successful
  • Can maintain quality with controlled growth

• Success Factors:

  • Works best in areas where members can monetize their participation (trading, collectibles, crypto)
  • Less effective for pure entertainment or hobby communities
  • Need to balance between growth and maintaining value