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- [00:00]
A
We just copied Warren Buffett, literally everything down to the way we do deals, the way that we structure the businesses, the way that money moves through the companies, I mean almost everything. They've perfected it and it suits our personalities. Me and Chris, my business partner, we don't want to be day to day involved in problem solving and stuff. We'd rather hire really smart people, leave them to do it, and let the businesses be successful without a gun to their head. So it suited us really well.
- [00:32]
B
What is up you beautiful bastards? It is your boy Breakfast Taco AKA Rabbi Canlose, AKA Noah Kakin. In today's episode I talked to Andrew Wilkinson of Tiny Capital. This guy is supposedly called the next Warren Buffett. He's had a wild career where he's.
- [00:45]
C
Helped work with Slack, supposedly which we end up talking about.
- [00:48]
B
He's invested in companies and he's recently taken a company public that's worth almost a billion dollars. If you ever want to learn about buying companies, working in startups and just having fun online, you're going to love this episode. You're going to learn three gigantic things from this. One, how does Andrew actually value these companies and figure out what to pay for them? Number two, he has no calendar anymore and see how that's going. And number three, once you buy a company, how do you actually make it profitable? He owns companies like Dribbble. You're going to learn those three things plus a bunch more ear nuggets along the way. Before we dive into the show, if you have created a book, a course or software, go to appsumo.com sell. We have opened up the appsumo.com marketplace where you can promote any of your products to other entrepreneurs. Over a million of them a month. That's appsumo.com sell. Also, go to YouTube.com okaydork and subscribe.
- [01:33]
C
To our YouTube channel. You probably already have because you're amazing.
- [01:35]
B
Also, a special pre show shout out to listener Juris Cristobans from Great Britain. He left a review saying love, love, love. Noah is kinda super, super honest, super helpful, super friendly. I'm sorry for a lot of super. Or maybe he meant supper. Anyways, Yuris, I love you man and thank you for the amazing feedback. A shout out in a future episode. Leave a review wherever you're listening to this podcast. I check every single one of them.
- [02:00]
C
How are you today?
- [02:01]
A
I'm good. It's a kind of a gloomy day up here in Victoria, but it's actually my birthday today. 35 years old, dude.
- [02:07]
C
35 is a good one. What did. How are you, like, to celebrate your birthday? What's like, your dream birthday?
- [02:12]
A
Honestly, I genuinely like my life, so I like working. My wife was like, do you want to take the day off or whatever? And I was like, no, I'm, like, happier working. The big thing we're doing is just going out for dinner, which during COVID feels like a glass of ice water in hell. But, I mean, I'm a pretty big extrovert, so my ideal would be big party and all that stuff. But can't do that, obviously.
- [02:37]
C
What is your memorable childhood birthday?
- [02:40]
A
Birthdays have never been a big thing for me. I can't think of a specific birthday where it blew my mind. My parents were never the fun parents that do the crazy laser tag or massive pool party or something. It was usually something relatively boring.
- [02:56]
C
I think I always find it fascinating. Like, as adults, it's like, oh, we're gonna have alcohol. And we're all just like. As a kid, it's like, hey, you're gonna have friends over pizza and some cupcakes with Coca Cola. And it was like, no way. Or like, we used to do, like, the ice skating rink. I don't know if you guys ever did that.
- [03:10]
A
Well, it's funny. Like, I went out for a walk with a couple friends two nights ago, and we were just wandering around the neighborhood, and we were all going, man, this is such a flashback to, like, eighth grade when you're just, you know, you can't drink, there's nothing to do, you can't go to a bar. You're just wandering around your neighborhood trying to find fun things to do, going to, like, abandoned parks and, you know, getting scared and, you know, being in your 30s and doing that, it's surprisingly fun. Still.
- [03:37]
C
I admire the childhood magic. And all of it's still so new, right? I think as adults, a lot of the things we experience, it's not as much the first time.
- [03:45]
A
Yeah, totally. I think that's a lot of just getting older. And what's so hard about it is a. You forget how wonderful those things can be, and you've just done everything too much. That's why having kids is so crazy, because you've never done it before and it's such a trip, and suddenly it's like all this new brain chemistry going on and stuff. But, yeah, other than that, there's not that much you can do in life that's truly novel. Once you're in your 30s, there are.
- [04:12]
C
Things, I mean, I'm sure we could both Figure out stuff. My word of the year is joy. Like yesterday I had a very unjoyous day. I literally just played chess for probably about eight hours. But it wasn't happy chess. It was like angry chess.
- [04:24]
A
You're trying to learn, trying to get better. What?
- [04:26]
C
Trying to get better? No, I love playing, but it didn't really bring me joy. And so I was reflecting today about what things bring me joy in a day. So I'm curious what that is for you.
- [04:35]
A
For me, it's anything that gives me a flow state so when I can lose track of time and just be fully present doing something. So for me, often that ends up being tennis or catching up with an old friend, going for a walk, that kind of stuff. Generally kind of boring stuff. But I want to get better at chess too. Maybe I should figure out what you're doing.
- [04:56]
C
Well, I have a chess coach, so the main things I do chess coach once a week. Every other week I do puzzles. So a lot of like tactical puzzles on Chess.com and then I play anywhere between half an hour to a few hours a day.
- [05:07]
A
How long have you been doing it?
- [05:09]
C
Since college.
- [05:10]
A
Wow. I mean, I think like anything is like that though, right? Like, I play tennis. I'm not particularly. I will have a funk. I'll have times where I'll play tennis for two hours and it's my greatest joy. And then I'll have times where I play tennis for two hours and I'm angry and pissed off afterwards. And yeah, I've got some exercise, but I'm just miserable. So I think anything like that, you're. You're always going to have those times.
- [05:34]
C
I think what's fascinating with like chess or some of these things is you see the score, you see your ranking. And then sometimes I get in this like real loser mentality where I start losing my ranking. And this is the psychosis of me or psychotic of me. I'm like, I'm going all the way down. If I'm at 1500 and I'm going down, let's just go down to zero. It's not healthy. Even as a little kid, I was crying at games. I would always be like a really poor sport. And I'm glad I've continued that into my 30s. I was thinking about this morning I'd become an expert. You're becoming an expert, I think in YouTube, as that's where I spend a lot of my time. It seems like you've become an expert in buying companies and someone's even called you the next Warren Buffett. That's a big ass thing for someone to say.
- [06:11]
A
Well, that's actually a curse. There's many, many people who have been called that and then had horrible downfalls where they've, you know, lost a bunch of money. So I don't take it too seriously when I hear that. I started out as a designer and I somehow stumbled into investing and buying businesses. And I never could have predicted that based on my personality. I don't really know if it, it would be logical, but it's stuck. And I, I really, I really do love it. It's, it's been awesome.
- [06:37]
C
So the first thing that made me think about this now is is it better for me to go and kind of invest, give you cash, or try to buy these companies myself? And how did These returns look versus, you know, putting in the S&P 500 or trying to do real estate or alternative assets?
- [06:51]
A
Well, I always think if you're an operator and you know how to run profitable businesses, there's no greater return than investing in yourself. I mean, I have entrepreneurs all the time say, should I invest in stocks or real estate or what? And I always say, man, if you know how to grow businesses, keep growing your own businesses or using the money to start more of your own stuff, or go out and acquire small businesses and just run them better. Because as you know, I'm sure you talk to lots of people, you have a profitable business. You probably know a hundred people that have potentially good, profitable businesses that they just run in a venture way and they just burn tons of money. So if you were wanting to invest your own money and put in some effort, I think that's probably still the best way to do so. That's how we started. We just started diversifying and starting more companies and then eventually we were too busy to start more, so we started buying them and hiring CEOs. At the end of the day, the way we look at it is if a business produces, let's say, $100,000 of profit, we're going to look at that and we're going to pay a multiple of that, and the multiple is going to be higher or lower, depending on how predictable that business is. And so ultimately it's a test of business quality. So if you have a Amazon FBA business where you sell vitamin D, that's generic or rope or something like that, and every single day a new competitor enters and your business could really go away within six months. And especially if you leave, there's a lot of risk. That's a business we're not going to be able to pay a big multiple for because there's a hell of a lot of risk. That's actually not really a business I want to buy now with Dribbble, we looked at it and went, oh my God, this is one of the top thousand sites on the Internet. It has no middleman. So Facebook isn't involved, Google isn't involved. It's literally just millions of designers every single day going and typing it into the browser bar. And they have a network effect like Facebook or Instagram. And so we looked at that and went, okay, we're willing to pay a much larger multiple on earnings. And so we paid the larger multiple. But then we also saw lots of opportunity to grow it. It had been run by a designer and an engineer who were super smart and had done an amazing job on community and product. But they didn't like doing ad sales, didn't like doing marketing. They didn't really think about the business in that way. And so we were able to come in and say, look, sell us 80%, you guys keep 20. We'll come in, we'll hire a new CEO and we'll grow this thing. And I mean up until about a year ago, we'd 6xed it. Now I don't know the latest math, but it's crazy. I think we've 12 or 14x earnings or something crazy like that. It's been a good one for us, but we paid up initially because we knew it was a very high quality business.
- [09:39]
C
So you value it based on a future like, you know, here's the ebitda, here's how many years we think it it'll take. We can pay for that. How did you find them? Do you have like a list of sites that aren't funded or is it Vulture Capital? Not saying you're you are but like, hey, here's funded companies that aren't doing as well, like. Cause I think if other people are replicating it, not that you want to give the secret sauce.
- [09:56]
A
I don't worry too much about competition and stuff. It's a big world out there and not enough people do this. I mean I just knew Dan and Rich, the founders and I, I kept Dennis the menacing them. I'd email them every couple months and say, hey, I love your business. Would you ever consider selling it? And I just knew it was an amazing business and I knew that for years and so I just kept nudging them. Most businesses actually are people that opt in, they might see or listen to a podcast like this and go, oh, you know, these guys sound nice, this sounds interesting. I'll send them an email and sell them my business. So most people actually just see our website or something or a podcast interview and email us. But every once in a while we'll see a great business and we'll reach out and occasionally that that goes through.
- [10:40]
C
How does someone actually create an asset worth buying? Because I think a lot of people are creating different businesses, but it's like what makes an asset valuable versus not. So it's time you said one thing. Like if there's a star that like can like me, let's say I'm not saying I'm the star necessarily, but like if they come with it or not, that's less valuable to you.
- [10:54]
A
I remember we had somebody look at buying one of our agencies years and years ago and we went through this whole miserable process back and forth with this private equity firm and they basically said, andrew, look, you're the figurehead, you're doing all the sales yourself. It's all tied to your personal brand. You're very intermingled. Everyone we've talked to on your executive team said that we talk to you every day and you're so key and that's kind of a bit of a problem. And so when your business is too dependent on you, that's a big problem. And then when your business is too vulnerable to competitors, that's also a problem. So going back to that Amazon example, if you sell rope or sandbags and there's nothing stopping other people from entering the market that could have more funding or venture backing or something like that, then it's much more challenging, it's a less valuable business. But if you can create a business like Stripe, where you've become the dominant payments piping for all of E commerce and no one wants to switch, everyone loves you, there's high switching costs, you're doing a great job, you have a network effect, you have huge contracts with all the financial institutions and stuff. That's a moat. That's something that's very defensible that no one can take away. And so I would be willing to pay a huge multiple of current earnings for a business like that. Because I think that's a 50 year business that will continue to grow over time. And I think a lot of people think investing is about math. Investing is really just about thinking about a business critically and just going like, how long can this go on and how long can it grow, both earnings and revenue? Because at the end of the day, when you're Buying a business, you have to pay yourself back with cash flows or you have to sell it. And one of those has to pay you back more than you put in and hopefully with a return.
- [12:46]
C
Dude, you're inspiring me. I'm like, let's sell Appsumo. Let's go buy all these other companies, all this stuff.
- [12:51]
A
Well, here's the question. If you sell Appsumo, and let's say you get. Let's make up a number. Let's say $100 million for AppSumo, you pay taxes, right? So then you've got 70k. Let's just say, hypothetically, AppSumo makes $20 million a year, right? You go sell it for 100 million, it goes down to 70 because you pay tax on it. Can you take that $70 million and invest it and make $20 million a year? I doubt it. I think that'd be really, really hard. So if that's the answer, then it's no. But if you could sell it for an amount of money where you can go out and you can reinvest that money, or it just gives you security, let's say it lowers your annual cash flows from 20 million to 10, but it's all in stocks and bonds and real estate, and you feel stable and you can relax and play chess all day. I think that's the fundamental trade off that every entrepreneur makes is security versus, you know, excitement and growth.
- [13:45]
C
There is. The idea, too, is like, once you get to a certain level of security where you don't have to worry about money, then you could take more of the risks. Then it's like, oh, let's start a car company or start these. You know, I would.
- [13:55]
A
For every Elon Musk, there's an Elon Dusk who took their PayPal money and did a bunch of silly stuff. And I think that in general, I struggle with this. What's the right balance of making money and being conservative and making logical stuff and then just saying, screw it, let's do it. Let's do all the fun stuff and who cares? And you got enough money. And I think those two. Balancing those two is challenging.
- [14:17]
C
Yeah, we're. We're having that struggle a little bit internally. We have a motto, one of our Sumo isms called Test, then invest. So whatever you're doing, like, test it out, see if you can buy a company if it works, and go harder. We were discussing it last week where, oh, we don't want to lose.
- [14:31]
B
Right?
- [14:31]
C
You don't want to have these failures because, you know, we've been Doing well. And that's probably generally how companies start losing because the things that we did to get there we're not willing to do and so well.
- [14:39]
A
You have lost aversion.
- [14:40]
C
Yeah, we're trying to allocate money and people to say like, you are team losing. I'm just kidding. But your team like long term, which is like, this is shit that we have no clue on. Like let's take some big swings on like influencer marketing. We've never really done a lot of. Or our YouTube channel for AppSumo haven't done a lot of. Or acquisitions for our business. We haven't done a lot of. So we're going to allocate company money and people to say, hey, let's at least see where this can go. One thing I was curious though is a lot of our listeners are poor. If I had no money though, how do I buy a company? Or how would you try to copy your model?
- [15:10]
A
There's a guy who went to Columbia Business School who asked me this recently. He said I wanted to recreate tiny or start investing. What would you do? And I said, well, why are you even thinking about that if you don't have money in the first place? To me, investing is something that happens way, way later. It's like you got to go out, you have to start a company or you have to have a job, or you have to build up enough money that you can be an investor, period. And there's different ways to do that. You can go out and raise a fund and do all that stuff. But I don't really think I would never give my money to someone who's never run a business before, to be honest. Because I think that a lot of investors do something dangerous, which is what I call spreadsheet business. They look at businesses as spreadsheets. Oh, this should move up 20% and margin should be X percent. Without realizing that at the end of the day, businesses are just a collection of people. People are messy, they're hard to motivate. You've got to do a lot of work to get there. And so I like to always recommend that people go out and start their own business or operate in a business or get that hands on experience. It just seems like becoming a coach when you've never played the sport. Think about how clueless you and I were when we started our businesses. The amount of money we squandered, the amount of dumb mistakes we made. Hiring friends, like hiring the wrong people. If I went out and raised money to buy a business when I was 20. It would have been a total disaster. Even if it's just two years of operating experience. But you need to have enough scar tissue that you've made some mistakes and you've learned some stuff. And you just can't learn all that from books.
- [16:42]
C
When you buy a business, how do you actually find the people? Like Dribbble for instance. You found this business, it's awesome. They're not growing it as aggressively as they could. How do you actually find the people? And then what do you look at metrics wise? Like what are the key things that you're looking at your companies to check in with them as you buy more and more companies?
- [16:58]
A
In terms of how we found Zach, the CEO, we actually just knew each other. So I had followed, he had co founded Creative Market and we just kind of been on each other's radar and messaged and stuff and it was very serendipitous. I was down in San Francisco and I just happened to grab a coffee with him and I mentioned we're working on a big acquisition in the design space and he just happened to guess it's dribble and he goes, oh my God, it's dribble, isn't it? And I kind of smirk and he just goes, please, can I run it? And as we looked at him and other potential CEOs, it was just very obvious that he knew how to grow a business aggressively with that mindset, but he actually understood how designers think, how creative people think. He's a designer himself and we needed somebody who the community would like and respect and would be a good steward of that. So we do a lot of thinking not only around what are the qualifications. Like okay, has this person scaled a sizable business? Have they run an executive team in a P and L? Those are nice to have and important. We need to have those. We also need the more nuanced side of what's the culture of this business and the DNA of this community and how do we make sure we don't mess it up? That's really the most important thing we look for.
- [18:11]
C
How many companies do you own? Total?
- [18:13]
A
I think it's like 32 or something.
- [18:15]
C
Now how do you look at the rollup? You know we have AppSumo, the YouTube channel and then our originals team. So it's pretty manageable, you know, with 30, I guess, like what are the KPIs or metrics and cadence to track all this stuff?
- [18:27]
A
I'm not aware of the day to day details. So like, you know, we have, we even own A bakery. Like, we have like all sorts of weird businesses and if you think about it, it's like overnight, like hotel guests get checked in in our hotel in St. Louis, like Bread gets baked. People sign up for dribble, people buy jobs on our job board, like endless numbers of things. And so I can't really track very much. What I can track is employee sentiment. So I try and check in with different people that I know in the various businesses and then ultimately I'm relying on the CEOs giving me roughly accurate financials and telling me when something is a crisis or not. And I'm really only getting involved in very high level decision making. So with Dribbble, I don't prioritize what their features or big pushes are. All I'm doing is saying, hey, I'm here if you need me, if you want feedback, and I'll give idea feedback here and there. But even if I disagree, I won't overrule for the most part unless I think it's really stupid. And otherwise, unless they want to acquire a business or they want to put a large amount of money into a project, I'm not getting involved at all. So I just get a quarterly email from each CEO and often I'll write a quick response to that. But unless they want specific feedback, we actually don't get involved at all. So I don't know what's happening in all the various businesses and if I did, I think I'd have an aneurysm. Just the number of things going on at any given time is so huge.
- [19:56]
C
Well, it's funny because I tell them not to ask me, like, hey, Noah, do you think we should do this? I'm like, if you ask me, I'm going to have some opinion, which you guys do better when you don't ask for my permission. But do you give them goals? Do you have, does each company like at the quarter, is it like, all right, well, here's the revenue goals and this is what we need to be seeing.
- [20:11]
A
I mean, generally, I think if a business isn't growing, it's dying. And if a business isn't growing, you can't promote people, you can't hire new people, you can't take on new challenges. So we are usually looking at it and going, is the business growing at a reasonable rate? Is it living up to its true potential? So like with a business like Dribbble, we knew there was so much built in potential that we expected it to grow really fast. But at the end of the day, I'm usually pretty content. If a business is growing at 15 to 20, 25% a year, as long as the, you know, the team is happy and I think they're delivering a good product. No, I mean we don't really set a specific goal. Sometimes people have bonuses that are tied to, you know, x percent growth. But every CEO is structured different. Every executive team is structured different.
- [20:59]
C
Really, you don't have a thing like, hey, as you guys grow, you get a cut of the upside.
- [21:03]
A
We have various structures like that, but every single one is different. So here's an example. Let's take a business that is more challenging and slow growth. I'm going to comp a CEO very differently on that business where we're not expecting them to launch a rocket into space. And then on a business like Dribbble, I'm going to have much higher expectations and structure it differently.
- [21:27]
C
I mean I like the idea of like as a company performs long term well, you know, the people who are creating that wealth should be catching it. Are there any industries or categories? So like dribble is, you know, marketplace design. You have the work, remote jobs. Is there any industries or sectors that you've been more excited about? Obviously a lot Internet related.
- [21:44]
A
I think of our investing often as like, what, what do we end up getting passionate about and interested in? I've been really interested in podcasting for the last few years. I'm an inveterate listener of podcasts and we ended up buying a podcast player. We've started a few businesses in the space. The biggest thing I'm excited about honestly is subscription podcasting. The idea of people selling access to their podcasts and let's say there are a thousand true Fans, access to AMAs or extended interviews and that kind of stuff for a fee. And we've done this. We have a company called Supercast and we've done this with a variety of podcasters and we've been shocked by the amount of money they've been able to make. It's like 1999 and everyone's thinking the only way to monetize is with ads. And we're going like, no, no, no, no, no. You can like do SaaS software and only a small number of people are realizing that. So I'm super excited about that. I think there's a big unlocking of opportunity coming there and I'm trying to figure out honestly how to tackle that, how to benefit from that. We're looking at everything from could we go to some huge celebrity podcaster and write some big Deal where, you know, we get an exclusive with them or something. I mean we don't, we don't really know at this point.
- [22:56]
C
Interesting. And I guess for you, the main thing you consider is what's the cash flow coming in and then using that to acquire more companies. I mean, kind of what the. Warren, I'm not going to say, I'll say Warren Smuffett.
- [23:05]
A
We just copied Warren Buffett, literally everything down to the, the way we do deals, the way that we structure the businesses, way that money moves through the companies, I mean almost everything, they've perfected it and it suits our personalities. Me and Chris, my business partner, we don't want to be day to day involved in problem solving and stuff. We'd rather hire really smart people, leave them to do it, and let the businesses be successful without a gun to their head. So it suited us really well.
- [23:34]
C
How does that money flow work?
- [23:36]
A
We always want to keep enough money in the business that they can do basic growth and pay payroll and all that kind of stuff. But if there's excess cash in the business that they don't need for anything, then it goes up to head office and we'll reallocate it. Once in a while a CEO will say, hey, I want to spend a million dollars on ads this quarter, can you keep this in? Or hey, we want to go and buy another business. And so if it's logical, we'll always let them do that.
- [24:00]
C
How much of your money is in these companies versus in stock markets or as a part of your allocation? Personally?
- [24:06]
A
Oh man, 90, 99% probably. I have enough money that, you know, in conservative stuff that I could be okay, you know, if everything went pear shaped, I wouldn't be screwed, I would have an income. But other than that, every single thing is in tiny.
- [24:21]
C
You got flack for the Slack thing.
- [24:23]
A
Which is really frustrating.
- [24:24]
C
It's only because like I was like, man, Andrew's so impressive. And then my buddy's like, nah man, he didn't do it. So I was curious your, your opinion on that.
- [24:31]
A
Well, it made me really sad. So basically in 2013, Stuart Butterfield emailed me and said, hey, I don't know if you know, but we have this failed gaming company. You know, we're close to bankruptcy, we've laid everyone off, but we have a couple employees left and we're working on this product which was a chat product that they were calling Slack. And so we collaborated with them. And did you know the original marketing site? We did the original logo, we designed the mobile app we designed the web app. We have all the PSDs and all the work from this. And I made the mistake of tweeting about how I never could have predicted that Slack would become a $25 billion business when they sold to Salesforce. And the way I wrote it, I basically messed up in the way I wrote it. I said, we did the mobile app and web app instead of saying we designed it, which I obviously wasn't intending to claim that we had engineered it all. And so one of their early designers caught onto that and basically used that as a way to basically say, like, fu. All you guys did was choose the color Purple, which is fundamentally not true. And we have all the PSDs to back that up. So it's super frustrating. But I didn't see the tweet for six hours until a friend texted me, and so it gained all this steam, and it looked like I was silent on it, and I was just super bummed. It's one of those things where there was the Twitter mob, and I still get people tweeting at me saying, you're a con artist. You claim to design Slack and you didn't. And it's. I mean, you can go to our website, if you go to metalab.com, you can see all the work we did. Super frustrating.
- [26:08]
C
Well, I want to give you props for just all the things you've done. Specifically, the Slack thing is great, but I'm saying, like, you know, what you guys are building is awesome. I love that you guys are going after it.
- [26:17]
A
I've made a reputation over the last 15 years by being a pot stirrer. Like, by utilizing different things that we've done. Like, we. At one point, Mozilla emailed us about doing their website or working on a web project. We were too expensive for them. And then two months later, they launched a website for that exact product. And it was literally Metalab's website, except they'd changed the logo to Mozilla. I made a huge stink about it. I got it on TechCrunch and, you know, got it on Hacker News. And I was being a bit of a troll, right? Like, yeah, they did a shitty thing, but I was generating attention and utilizing it as a marketer. And I think with the Slack stuff, we did the same thing. We banged the drum, we said, hey, we did this work. And I think that the way I interpret that is just we had an opportunity where we worked on this incredible product and did great work. And while we only did a small percentage of the work because we were Only involved in the beginning. Some of the designers at Slack became bitter because people started saying, oh, metalab did all the design of Slack of all time. And so they were bitter about it. And it's just sad, honestly. Like, I just wish that we could have a nice conversation about it and they would know that those are our feelings. But a lot of people get polarized on Twitter and it's shitty.
- [27:30]
C
There's only so many characters. By the way, also, you took a company public recently. Yeah, because I've thought with appsumo, like, oh, if we went public, like Ticker Sumo, which someone else took. But anyways, is that amazing? Like, tell me about that.
- [27:41]
A
It's certainly amazing as a thing to do to tick off the bucket list and to see the world validate a business that you personally were like, oh, yeah, I know this business is valuable, but to see thousands or tens of thousands of public market investors all voting to say yes, we think this business is worth this is super, super cool. It's a different thing though, when all of a sudden you're like, oh my God, I have 10,000 people all counting on me to do a great job with this versus just you alone. So it's a bit of a trip in that way. But it feels really good and it's great to have all these people along for the ride with us. It's awesome. But the actual process of it, it sucks. Taking a company public, going through all the roadshows and legal documents and stuff is a grind. But now that we're public, it feels really awesome. And yeah, we're totally stoked about it. Well, I think it's a trade off, right? So when we're dealing with our private businesses, especially the ones that we own 100% of, I mean, we literally can do anything. We can buy them, sell them, move money around, we can do anything. And I think in a public company, the trade off you're making is you're saying you have to have a board, you have to have process, you have to document everything via email and be very thoughtful about what you say publicly and that kind of stuff. But on the flip side, you get access to capital. We were able to raise $60 million. That's really cool. And that's an honor to be able to do that and be a fiduciary for other people. But it's also a wait. So I think it's a trade off. And in our case, we just said this is a big opportunity and this is the best way for us to tackle this is to go out, raise all this money and be public. And so, yeah, do I get annoyed sometimes having to do a board call to make a decision I know I could make myself, sure. But I kind of look at that as the cost of the opportunity. I think that it makes a lot of sense to sacrifice a little bit of autonomy for that.
- [29:38]
C
Who do you think it makes sense to do public and who do you think it does not?
- [29:41]
A
I think if you have a big, big growth opportunity, it can make a lot of sense. I mean, we have lots of businesses that could go public, but we go, they don't need access to capital. You know, at the end of the day, the business generates a lot of profits and there's not a short term window where we need to deploy the profits. Whereas with the Shopify ecosystem, it's still so immature and it's so fragmented that we went, you know, what if we have an elephant gun and a whole bunch of money in the bank, we're going to be able to do a lot more in the next one to three years than if we were just taking our profits and continuing to invest them or using debt or something like that.
- [30:16]
C
I mean, I looked it up earlier. Almost $800 million market cap. Here's what's crazy though. It looks like you guys do $20 million a year. That was last year's numbers. $20 million or $15 million last year?
- [30:29]
A
It's something like that, yeah. All the financials are online, but it's.
- [30:32]
C
Just kind of like, holy shit, $20 million a year. Business valued 40x yeah, I mean, I.
- [30:37]
A
Don'T think that people are necessarily looking at just now and where we're at today. I think they're saying, okay, what if these guys can continue to deploy the capital that they've raised and buy a bunch of great businesses and become the acquirer of choice at Shopify.
- [30:51]
C
Oh, that's interesting. So to be clear on that, when you raise money, I've always heard this, I just want to make sure I understand it. When people say they raise money in the, when they go public, is it that you allocated shares from the company as a part of raising capital for the company?
- [31:05]
A
Basically, when you go public, if you owned 100% of it, there'd be no shares to trade. Right. So what you're doing is you're saying, let's say there's 100 shares, we're going to sell 20 of them or 20% into the public market or dilute ourselves by that amount. So you issue new shares, you get diluted by 20% and then you have a float of shareholders, and those shareholders all start trading back and forth on the public market, which is how the share price is established and stuff. So the money that you raise by issuing the shares, just like in a private venture round or something like that, goes into the bank account of the company and then we get to invest that.
- [31:43]
C
Is it wild? Like every day you look at the.
- [31:44]
A
Ticker, it blew my mind. Like the first three days, I was just like, what the heck? This is so cool. Just to see this validation of this thing that we felt. But seeing other people agree with us now, it's kind of worn off. Like anything, it becomes normal. I mean, I'm sure you remember the first time a $50,000 wire hit your bank account. I remember $1,000 coming into my bank account and it was the greatest thing in the world. And then within three months, you're just thinking about the bigger thing and the numbers change and all that kind of stuff. So I'm not letting it freak me out. I'm not looking at it all the time, but it's pretty cool. It's very, very cool to put it together and go, wow, we have over a billion dollars worth of businesses that we control. That's really neat.
- [32:31]
C
Two last things and you can go enjoy your birthday. And I appreciate you come sharing this wisdom, of course. Are you considering now these separate public companies take Dribbble and the remote category and make that a public entity? How are you thinking about that or not?
- [32:43]
A
We're not really sure, to be honest. We've talked about it. I think right now we're feeling out, okay, what are the pros and cons of running a public company? How do we like it? And I think we'll make a decision in the next three to six months about whether or not we want to take more stuff public. But so far it's been a really good experience and I wouldn't be surprised if we do more in the future.
- [33:01]
C
What's your bakery called?
- [33:02]
A
Otavio? It's an Italian bakery in my neighborhood.
- [33:05]
C
Well, I guess is the idea here. You buy some like, shitty textile company that fails, and then you rename that your main company and you literally copy the Buffett thing. You're like, we're Otavio holding company.
- [33:15]
A
We have looked at stuff like that. We looked at buying like, like failed public companies and then taking them over and doing that stuff. But I think we'd probably not do the weird Berkshire Hathaway name.
- [33:26]
C
And is most of the dribble on these. Is it coming Straight from cash flow when you buy it or do you take on funding for that stuff?
- [33:32]
A
Oh, we usually do it 100% ourselves. So to date, basically up until 2019, we never raised any outside capital. In 2019, when we started doing E Commerce and all the Shopify stuff, we never knew that we needed more capital. And so we partnered 5050 with Bill Ackman, Howard Marks, Ryan Graves, Shane Parrish, bunch of other interesting investors who are friends of ours. And that was our first experience ever having outside investors. And it was really positive. So that kind of opened the door to it. And then about four months ago we raised a fund. So we have about $150 million US fund with a whole bunch of great investors in it. And the reason we did that was because with COVID we felt that likely there was some sort of dislocation coming up. Whether it's this year, next year or in two years. We wanted to be prepared to just, you know, basically maximize our opportunity if that was to occur.
- [34:29]
C
And most of the companies you're buying is that the founders or the people that ran in kind of aren't as aggressive or they lost steam even, but the company's still running.
- [34:36]
A
Well, a lot of founders, you know, you talk to them in year one, they're like, I could, I will run this business for the rest of my life. And then you talk to them in year five and they're making good money. They're like, you know what? I have a good life balance, I'm still enjoying it. And then you talk to them in year eight or ten and they're just like, I'm done, I want to go do a new thing. Or maybe their husband or wife is saying, God, it's time we just take some chips off the table and de risk and all that kind of stuff. And so when they go and look at all their different options, they can go raise venture and venture requires building a billion dollar business. They usually don't want to do that unless they're a maniac, a certain type of. And then if it's private equity, it's just this risk of I'm going to have this annoying person on my board and they're going to control the company. They're going to want me to stay there and earn out and all this stuff and they're going to want me to sell the business again in two years and maybe my staff will hate me and stuff. And so we're kind of there to provide that third door, that alternative of we'll hold your business forever. You can still be a shareholder. We'll take over all the operations. And yeah, those are the sort of people we like to buy from, who they value culture and the business they've built and they want to see it persist.
- [35:46]
C
What's the percent of founders that stay versus leave once you guys acquire it?
- [35:49]
A
Almost all of them leave. We've had a few stay, which has been wonderful. But usually the founders, like I said, eight or 10 years in, they're checked out. Not necessarily checked out, but they're just kind of like they want a new challenge or they don't want to be as involved day to day. Maybe they want to be involved tangentially or advise the business or something, but they don't want the day to day responsibility. They want to be able to take vacations and relax.
- [36:12]
C
And then last thing, so when we were scheduling this, I apologize, both of us were back and forth and all this different stuff. This year you moved to calendar less, which at first I was like, screw this guy, I'm not going to try to get around his calendar. And like, hopefully he's so they, you know, for the audience it was just text him or email and if he's available, he's available. Which I actually kind of, I like the fluidity of what's really most important you could focus on. What are you noticing and what's your hope from this experiment?
- [36:37]
A
Well, I found that my days are just getting eaten by meetings. And what would happen is I'd be like, okay, we're only going to schedule two meetings today. And then I'd get random phone calls and people that need to talk to me and it would just turn into my whole days on the phone. And it meant that while I was doing lots of great calls with people, my email inbox was building up and I wasn't really getting the tasks I needed done. And so as an experiment, I just said, well, what if I just told everyone, yeah, you know, let's Talk on the 24th, email me the day before and I'll send you my number. And then we can, you can just call me anytime the next day and if I miss your call, I'll call you back. And so what that means is a half the people don't even ever email me a follow up because they realize they don't actually need to talk to me that badly. Those that do, they can call me and if I'm around, I'll pick up. And if I'm busy and like I'm really focused on a task, I can actually just keep working on the task until I'm done, and then I'll go and call someone when I'm driving or doing something else. And so I've been doing it for just the last two weeks and the jury's out. But I'm really enjoying the feeling of not being time boxed. So right now, usually I'd be like, geez, I've got a call coming up, I've got to prep for it. There's no clock ticking right now in the same way.
- [37:51]
C
Did you read the thing with Andreessen? Did that a while ago where he said he didn't schedule it influenced me. I don't schedule anything. You know, I think everyone's got different experiments. I've experimented with like theme days and I think what I found is just like, minimize meetings, like least amount of required things.
- [38:06]
A
I think the problem is ultimately what you touched on, which is people go, what a dick. Right? There's been times where I cancel a meeting. You know, I've rescheduled a meeting on someone twice. And the reason I'm rescheduling is because I actually really, I like them and I want to be rested and excited to talk to them. I don't want to be fried. And so I'm actually moving them to give them more of my time and energy, but they take it personally. And then you do the calendar list thing and it's like, dude, that's against the rules. Like, you're supposed to be scheduled and calendared and use calendly. And so I think that's the big bummer of it is like every 10th person just goes, fuck this person. But hopefully the productivity gains are better and I can find nice ways to write the email and tune all that stuff in.
- [38:53]
C
Dude, you have a great birthday.
- [38:54]
A
Thank you.
- [38:54]
C
And many more to come, dude. And congrats on public company and all the things you're doing. Looking forward to seeing more of it.
- [38:59]
A
Thanks, Noah. That was really fun.
- [39:00]
C
Awesome, brother. You have a great day.
- [39:01]
A
Okay, see you later.
- [39:05]
B
Well, that is a wrap. I hope you love the episode as much as I did. If you did, go give Andrew some love on the Twitterverse. That's twitter.com awilkinson that's a W I l k I n S o n Andrew Wilkinson.
- [39:19]
A
Next.
- [39:19]
C
Text a friend you love him.
- [39:20]
B
Yo, dawg, let's go buy some companies together. And before you go, tweet at me, Noah Kagan. Let me know what you thought of this episode. And before you get going, go subscribe to my mailing list@sendfox.com Noah I put out exclusive juicy content each and every.
- [39:31]
C
Week just for email subscribers.
- [39:33]
B
That's sendfox.com Noah Finals shout out to my amazing team. Thank you Jason for the podcast work, David, Mitchell, Jeremy and Jen for the dork team for all the magic you do. And finally, special shout out to Andrew Church, who's our support specialist on the AppSumo team. Props for making a customer so damn happy last week he wanted to give his money back to us.
- [39:51]
C
Anywho, I love you guys. Have a delightful day. What's your favorite airline?