← Startup Stories - Mixergy
Loading summary
Transcript104 lines
- [00:00]
A
Hey there, freedom fighters. My name is Andrew Warner. I'm the founder of Mixergy where I interview entrepreneurs about how they built their businesses. Joining me is an entrepreneur who is building an email newsletter company. And to be honest with you, when my partner in bootstrap giants, Jesse, told me about 1440 and he kept getting excited about having had them as a client, I said, first of all, the name makes no sense to me. And second, why are you so excited about a newsletter company? This thing has existed forever in newsletters, it feels like since the beginning of the Internet. And what he kept saying to me was, this is different. It's, it's bigger than you realize. It's the, it's an example of what a bootstrap giant's company can be built sustainably, built in a way that's growing, built with, with heart and clarity and not this idea of let's raise a lot of money and try to figure something out and have a small chance at something that would work. And so I looked into 1440 and it's such an interesting business. It's a fast growing fact focused newsletter, curates the day's most important news. And the revenue is really exciting. But mostly the story behind how it's, how it's been built I think is inspiring for what's possible. And so I invited the founder, Tim Huelskamp to come on here and talk about how he's doing it. And Tim, since my. I'm known for asking people their revenue, I'll start off by asking you, what is the revenue at 1440?
- [01:23]
B
First of all, thank you so much for. Absolutely awesome to be here with you. We do over a million in revenue per employee and we have 22 employees. Wow. We don't. How about this? We don't do 2 million revenue per employee. It's between 1 and 2 million and we have 22 employees. So I can let the readers do the math.
- [01:41]
A
It's huge and it's profitable from what I understand.
- [01:45]
B
Yep, very profitable.
- [01:46]
A
Several million dollars is what I think I'd read in Ad week.
- [01:49]
B
Yep, very. Yep, Very, very much so.
- [01:51]
A
No outside funding.
- [01:53]
B
So we did take a little bit of like revenue based financing and kind of like debt like features early on actually, if you're a fan of Shark Tank, you know how Mr. Wonderful is always like those royalty deals he talks about, he basically took like an equivalent of that early on and what it did, it allowed us to. I'll just give the five. It was $500,000 and basically at the time I think we had something like 10, 20,000 subscribers. But we can figure out our unit economics. We could see them already working, right? Like, we had retention, we had open rates. You could see it all working. And we're like this, this business is working. Let's pour some fuel in the fire. So yeah, we raised this $500,000 round and the way it was structured was we got $500,000 and we paid back starting a year later. So it allowed it to like, you know, the flywheel to spin a little bit. We paid back 5% of our revenues until the investor got 3x return on their capital. Wow. And then they, then they got like a slight little equity kicker as well in case, like for schmuck insurance, like if we are worth hundreds of millions of dollars, they won't be like, oh, how did I miss that? And only give them a royalty based financing. But yeah, it was actually this really cool company. I always forget the name of it. It was out in San Francisco. And they basically realized that there were a lot of companies kind of in no man's land where like they were, they had great unit economics and they were profitable businesses, but they weren't big enough for private equity. But then the venture capitalist looked at them and said, you guys aren't like a Decacorn or a unicorn. Like I need 50x my money. So they're kind of stuck in no man's land. And they came up with a solution which provided, provided funding to founders and also for the investors, which was nice. What's nice about it is, you know, a lot of times with like early stage investing, you either get a donut, like zero or like some return, but like seven to 10 years later with this structure, it actually allowed you to start getting returns earlier. So like a year in, they started getting 5% of our revenues. And it's, it's, it's flexible too because like we wouldn't. It's not like a piece of debt where you have a guaranteed payment. It was based on as a percentage of your revenues, which is really nice too.
- [03:54]
A
I'll follow up with you to get the name of the company. The thing that I've been discovering in this whole bootstrap world is today there are other funding options. Jesse, for Unbloat. I forget the name of the company. Oh, it's called Settle. He used to settle to get money based on sales that they were making. And there are all these different ways to have cash without selling equity. And I've been trying to accumulate them, but there's not an easy way to Put together a list of all the possibilities. Let me ask you this though. How big can an email newsletter get? I mean it's so competitive, it's so mature. And you're not doing a topic like AI with the cutting edge latest thing that's coming out tomorrow or what came out a minute ago. It's more news based. Why is there big potential in that?
- [04:40]
B
Yeah, so our whole thesis and when we started this, we actually got a lot of feedback from a bunch of advisors and say like this is not going to work. Because what they told us was like that whole thing, there are riches in the niches, right? So like basically what we heard was you got to go niche. That's the way that media works. What are you guys doing? This doesn't make any sense. We heard that over and over again. But the whole reason we started though is I was in private equity for a decade before this. My co founder is a PhD scientist, super brilliant guy out in D.C. and we're like, yeah, we hear that. But like at the same time, you know, he's in the, in the political world, science, political world, I'm in the finance world. And we're intellectually curious people, we love learning. We want to know everything across all the different verticals. Sports, politics, culture, technology, all these different things. AI but like it's so hard for the reader to go to 20 different sources of 30 different sources. And you're also trying to build your career as well. Most people are parents, they don't like time. And like we felt like to be an intellectually curious person and like have that inch deep, mile wide view of a little bit of everything. Like no one was really providing that. And that was our whole thesis is basically that market like where you get, you, you help everyone with like you know, as an example, doctors read our product, engineers read our product, lawyers read our product. Doctors are going very deep on the science stuff elsewhere and they're reading the New England Journal of Medicine and like, you know, our private equity readers are going out Dan Primac and Fortune Term sheet and all these things. But then they come to us for what's going on in Hollywood and what's going on in the science world. And what's going on.
- [06:11]
A
Essentially this is what the New York Times used to be about or the local paper it's giving I guess maybe not the local paper, but the New York Times used to do this and that's what we used to turn to them for. Give me an understanding of everything that's going on in technology and politics. And business. And then if I'm really deep into business, I might read the Wall Street Journal too. And I think that's what you're saying. It's.
- [06:30]
B
Yeah, exactly. Yeah. I think it got like the. I think it got over Nichi and then like a white space opened up to be like, someone can come in and fill that. Yeah, that, that inch deep, mile wide provider for the intellectually curious people. I'm like, that's who we're filling. So we have four and a half million readers now. We think it's like over 100 million people is our total addressable market. A third of them have a graduate degree. They're 50, 50 male, female, they're a third. We also try to be really just state what happened and to be like a fact focused source and not do like the opinions and the bias and the left right thing. We think more and more Americans are getting. Are struggled with that. Struggling. Excuse me, with that as well. So our audience is roughly a third Democrat, a third Republican, and a third Independent. So you, you look back and you're like, oh, wow. We have like the college and grad school educated class of America. That's. That are busy professionals that are intellectually curious and love learning and no one's really helping them. And like, that's who we serve every day. And that's, that's who Drew and I are and were. And we're just basically, we're serving ourselves. And then we like, we launched to 78 friends and family. Like, you know, we weren't sure if people were gonna like it or like, had that our thesis was right and everyone was telling us this doesn't make any sense, but we just leaned into the gut feeling like, no, but what. All of us can understand the same thing, right?
- [07:47]
A
I want to understand this. Let's get into the story and then at the end, let's do a little bit of analysis of what, why this worked and what other people can take away from it. So before we even get into the 78, I'd like to go a step back for a moment here and talk about what was that company called, when in Rome that you launched? This is. This is the business that you had before that didn't work out. What was when in Rome?
- [08:08]
B
Correct. Yeah. So I was in the private equity world for about a decade and then I left. We actually got acquired by a larger private equity fund. I was a principal there, so pretty high up for my age. And they basically said, you know, you could stick around, but it's probably not Going to end well for you, like, or here's a pretty cool exit package if you want to go start something. I'd always been very entrepreneurial and, like, you know, did angel investing and was kind of, like, puttering around with ideas on the side. And at the time, I think I was 32, I'd been on a bunch of boards, had been like, you know, seen a lot of cool stuff in finance and building companies and investing in successful businesses, and basically said, like, they're literally like, the universe is paying you to start a company if you don't do it now. Like, screw you, Tim.
- [08:48]
A
How much money did you get from the exit package? How much money did you get on the exit?
- [08:52]
B
It was like a year and a half of salary, basically. Like, sorry, it was. It was like a year and a half of Runway is, like, what my calculation was.
- [09:01]
A
Got it. Meaning with savings and what you'd gotten, you could just.
- [09:04]
B
Just from the. Just from the. The package.
- [09:06]
A
Just from the package.
- [09:07]
B
My rent and, like, everything. I was. I wasn't married on. I am now. I wasn't married. I don't have kids. I was spending money on rent and beer at the time.
- [09:14]
A
Right.
- [09:14]
B
And, like, basically, it's like, I basically have 18 months from this package to. To figure this out.
- [09:20]
A
Okay. So you say, I'm going to go and figure this out. You come up with, when in Rome. When in Rome is something that I've wished existed. And so I don't know why that didn't work out. That seems like a more innovative product. Here's the thing. I want to go on vacation. I don't want to go and figure out, where am I going to go, what am I going to do? Usually what I do is I leave it up to my wife to figure out, which feels unfair, or I leave it up to an assistant to figure out, which also means that I'm not getting anything customized to me. And so you created a tool where I forget what the price was. It was like, 29. I saw it on the Internet Archive. Real human beings will create a tour for me, a package. Andrew flies to this place. He does this experience. The whole thing is taken care of. That feels like a decent price. If I'm going to spend $3,000 on a vacation, $29 makes a lot of sense. My one issue with that is, where's the continuous revenue in that? And maybe you were thinking, I could book, I could get booking fees, but I get the idea, why didn't it work out?
- [10:14]
B
Yeah. So, yeah, I wish I would have Found you a couple years ago. You can remove our customers. Yeah, no, you said. Exactly. So basically the big thing, the reason why it didn't work out and the big learning there for me personally was so when I was in the private equity world, we did late stage venture. And what I didn't realize at the time was most of these companies coming to US already had 50 million in revenue and they had figured out the unit economics of their businesses. And then we were just giving them money to pour gas on the fire and like grow faster. What I didn't realize at the time was I always say startups are three things at their core. It's the search for product market fit. Right. Everyone focuses on that. As you should, because as Mark Andreessen says, if you don't get that, nothing else matters. And it's so true. And I think a lot of founders don't always f focus on the right things there. But that's a different story. The second one, which is what we hit at when in Rome, is basically the search for repeatable, profitable, scalable growth, like they call it product channel fit as well. Can someone give you a dollar and can you turn that into $3? And generally speaking, if you have unit economics, your lifetime value over your cost per acquisition of three to one, people will give you money. Venture capitalists will give you money to scale the business, which is the third part scale. So it's product market fit. Do you have profitable unit economics? And if you have those two, you can scale the business into a big thing. And what I learned very quickly was, well, what. It was awesome. It was a great learning experience. I learned how to build a company and like, how to build a product and like work with developers and that whole thing. But then very quickly we learned to your point, it was $29. We were splitting the commission with the local concierge. These were guys, like, you know, guys and girls at like the Ritz in Seattle. And like, they were wonderful.
- [11:51]
A
They knew their, like, literally a concierge at the Ritz.
- [11:53]
B
Literally. Literally the. Some of the best concierges in the world. Right, right.
- [11:57]
A
So you're splitting the money with them.
- [11:59]
B
Say again?
- [12:00]
A
So you're splitting the money with them.
- [12:01]
B
That's a problem with them. And then we're taking, you know, we're paying the strike fees and all that. So I think we made $12 in revenue, like for a company. And then to your point, maybe people go on vacation once a year. Right. A lot of people would use the thing one time and then not come back so we're like, our lifetime value was 12 bucks. Maybe for a salesperson or someone on the road all the time, you know, more a higher frequency. But the lifetime values call it $12 on average or maybe a little higher. 50 bucks. And the acquisition cost was couple hundred. What, what I learned so quickly was, you know, there were, you know, if you think about, you said a $3,000 trip or a $5,000 trip. Like so many people want that customer. So like if you type in, you know, what things to do in Seattle, Hertz wants that customer, Marriott wants that customer. Right? All these local businesses want. So they have, and they have much higher margins. The hotel guys are making a couple hundred dollars in margin and we're making 12. So like the unit economics were upside down and like we would acquire customers on Google and Facebook, It'd be like 200 bucks. So the thing I learned there, it was a blessing in disguise. It's very painful, but the blessing there was we had to go down every marketing channel to see if it would scale and none of them worked. So basically ppc, SEO, the referral. I was, I would go to like door to hand to hand combat at hotels that didn't have a concierge. Like, let's be your white label. We literally did Every, there's like 25 ways to grow a company, essentially marketing. We tried every one of them. None of them worked. And Peter Thiel always talks about this going back to my three things. So like we had product market fit, people were using it. We had a couple thousand dollars in revenue a month, or maybe it was a thousand, like people were using the product and really liking it. But then we ran into this buzzsaw and the unit economics where it was like, we're paying $200 to acquire a customer that's, that's worth $12 to us. And it's like, that doesn't work. And like, you know, after I went through it, I read more about it and I was like, yeah, you know, he's right. Like a lot of these companies, if you look at them, most companies have like one or two really strong growth channels and like that's really it how they get very big. And most company, a lot of these startups, like, they'll get through the product market fit stage and they don't find this, they don't find the, the unit economics. They go into business. Right? So that's what happened is I basically I, I walked into that buzz saw and was like, oh my gosh, this is, I, we can't Scale this thing. It's not going to make it. So we basically, at the time I was like, hey, you know, I was a year into it or nine months into it. I'm like, this isn't, you know, respectfully, it's not worth my. Not with my time. The smart move was like, we're like, we just, we shut it down because it wasn't going to make it.
- [14:39]
A
Meanwhile, in email newsletters, the economics are the opposite. Tim I graduated from college. I still somewhere in here have my business plan for an email newsletter company, which I did start. It grew bigger than even the business plan. So it's one of those situations where the business plan had a hockey stick, but the hockey stick was even bigger. And what I loved about it was if you put, if you put it out on a spreadsheet, it makes so much sense. I assumed I would pay 10 cents per email subscriber. It turns out it might have been closer to a buck or so, or maybe even more. But you still make money on that subscriber every day. You will have like, in 1440, you'll have a weight loss, weight loss ad, which I clicked over into, or you'll have a finance thing. And you're making money on those subscribers every day because you get to keep coming back to them. And the economics are fantastic. When I talked with Sam Parr of the Hustle, I said, where'd you come up with the idea? He said, I was listening to mixergy interviews. You had interviewed all these people in newsletter spaces over the years. And he said, I see the math here. All I have to do is copy this and bring it into the business world with my taste. Where did you get your idea, Tim?
- [15:43]
B
Yeah, well, it's funny you say that because actually a lot of it was from Sam. Like, I'd watched him and seen him on YouTube videos and was talking about the business model. And I was like, the Hustle was.
- [15:52]
A
Already established at the time.
- [15:54]
B
Yeah. So when we launched the Hustle's around for maybe like a year and a half before then skim was around 2, morning brew had just started, I believe. I think we launched very similar time to Axios. So it's kind of like before Axios or right around Axios. But yeah, we were looking at, at the Hustle and like, wow. Like, to your point, Andrew, I just come from a business that had literally upside down unit economics was like, wow, these, these newsletters, if you can find white space and delight a user and like, know what you're doing. And like, to your point, it's all about retention and having them come back to you. There's a big business in here. And so, like, we got a lot of inspiration from. From Sam and the Morning Brew guys and the skim. The skim team. So what's wild is actually came from, you know, there's a theme there. If you study, like, all the founders through history, they all borrow ideas from each other. So I think, like, you saw the same thing, same thing here. But, yeah, I looked at that and I was like, wow. Like, you know, Sam's business, I think he was making. Making back. I don't remember the exact numbers. I think he was making back the. The. The return on investment, like, in three or four months, right. Like, you just saw how his business was working, and then he was fueling it, fueling the flywheel. So I saw that I had my own. Drew and I, my co founder had our own pain as, like, again, intellectually curious, busy professionals. And then we looked at the white space, and we're like, the big opportunity is actually up here, right? So, again, like, we love the hustle. They taught us so much. But there's something. I'm swagging this number, but there's something like, I don't know, 6 to 8 million, kind of like finance tech bro enthusiasts in America, right? Like, there's something like that. So the skim does millennial female. So that 20 to 35 females, that's 30 million or 20 million. So there's all these little pockets, if you think about, like, a white space, right? But then we kept them. Like, who's this? Who's the one up here that covers everything? And no one does that. And that's why we launched it. So, like, we were very calculated. Like, we weren't sure if it was going to work, but we did go in being, like, the unit. Economics on these businesses are incredible if you can build them and delight the customer. And we're not going niche, we're going, like, the opposite. When everyone's going niche, we want to go as big as possible. And, like, as Most of the VCs teach you, like, one of the biggest mistakes you want. One of the biggest benefits of, like, a big market is you can make a lot of mistakes there and still have, like, such a big market. So, yeah, we think there's 100 million people, plus that's our TAM to addressable market. And we think, like, we're just kind of getting going, and we already have four and a half million of them.
- [18:15]
A
Okay. And so you said the first thing you did was you emailed 78 of your friends and this was you seeing does the format work? I remember that Sean, who created the crypto newsletter the Milk Road. Yeah, the Milk Road, which I freaking loved, he did something similar and I think he might have even sent it to them in a Google Doc to get feedback. But I don't remember what's the way that you got feedback and what did they tell you?
- [18:40]
B
Yeah, so we just, we were using mailchimp at the time. I think it was, I think it's free. Up to 10,000 people or something.
- [18:46]
A
Something like that. Yeah, yeah.
- [18:47]
B
So it's free. And I give Drew a lot of credit here. So we had like a thesis for what the product should have looked like. And Drew was so awesome. And he's not from like the, the startup world. He's a scientist, which is a different type of startup. They're all about experimentation. And he was like, let's just write it and ship it out tomorrow. And I was like, yes. Right. So he like got us going and we, if you, I, I should pull it up, but if I could find it quickly. But if you look at the original email, it's probably design, it's a little different, but 85% of the same thing that we have today. Right. So it's a very similar. Like we knew what we wanted as frustrated consumers that weren't, you know, we're going for the, the inch deep, mile wide news. And it's pretty, I mean, there's been some iterations to it, but it's pretty close when you look at like the actual job to be done and the product that we're delivering in the newsletter. So. Yeah. And then like we just shipped it out to 78 friends and family. Literally. It was like my groomsmen, my uncles, like our friends from high school. And then we basically said like, hey, we're working on this pro. I think we sent like a day before we said, we have this thesis for this project. We're working on this email. I'm going to send it to you tomorrow. Act like nothing. Just, just chuck it out and let me know what you think. Because we didn't want like people to overthink it. And they chucked it out and they. So we got some feedback. Why is this? What? That doesn't make any sense. Right. We took it iterated on the next send. So we were doing that once a week, but even while we were doing it only once a week, we could see the, the, the product market fit. Like early signs of product Market fit. Because we always said two things because there's so much benchmark data in this space. Like literally you can see everyone's open rates and click rates and growth rates. So we said, hey guys, if, if we don't have a 40% open rate in a 5% weekly organic growth rate so people like it and then ford it, like we shouldn't spend time on this project. I just, you know, at the time I was like, I just got burned on another one that took a year of my life. Like, we're not going to do that here, like if it's not there. But we had like a 60 something percent open rate, which we still have today. We've always had a north of 60% open rate. And then our 78, by the time we sent out the next one, the next week had 91 subscribers. So we didn't ask anything, but people were like, check this out, right? And we're like, wow, that's really good signal. I remember saying that to Drew. Like, there's something cool in there. Like, keep going. And then the next week we had, I think it was 104 and then it was 122 or something like that. And then we just kept on taking all the feedback and iterating on it and just going, going, going. We spent the first two or three quarters just doing nothing but that.
- [21:14]
A
Do you remember some of the early feedback that you got?
- [21:17]
B
Yeah. So, okay. We actually still get not crap for this, but our newsletter is all words. Okay. And most people look at it, a lot of experts look at it and they say, not gonna work. There's no pictures. Where's the pictures? This thing's not especially.
- [21:34]
A
I mean, I think on the web version you have istock photos. But like I'm looking at today's email draft day arrives. That seems like something that's juicy and meant for a photo. YouTube turns 20. It feels like there's some photo that you could include. Yeah. So keep going with that.
- [21:48]
B
No, no. So agreed, Agreed. However, when you talk to the users and actually ask them what they're looking for, if you break down what we do really well, we curate 50 links across the Internet. What's going on in the Middle East? The latest company IPOing the NFL Drafts tonight. Fall foliage schedules Michelin stars. The best Airbnbs in the world. Like, there's so much knowledge in our newsletter. But what, what we wanted and what our users want is basically they don't want all this stuff to get in the way of the knowledge. They want to see These different. Like, they want a menu of information and quickly scan it and be like, I want to learn about that. Don't care, don't care. I want to learn that. Right? So what we find is actually, like, I still see this all the time. And again, like, if it's a. If it's a. An art newsletter, like, of course you have to have pictures of art. But I actually open a lot of newsletters and it's like, like, this picture is in the way. Like, I'm just trying to read. Why is that my way? And that's what our readers told us is like, we. So we had a bunch of pictures in there, and they, like, the pictures don't help me put knowledge efficiently in my brain. Get rid of them. So we actually took pictures out. So a lot of people look at it and like, you guys are lazy and you're not, like, adding photos. It's like, no, it's like we actually had them in there. We did the work and actually understood what our customer wanted and then took them out accordingly. And like a lot of people, we still get. If you respond to any email, they'll still. They still come to me. I read every email or seed, and a lot of people love us about that. We do get one every once in a while. Where from younger people, like, how do you not have pictures in this thing? But most people, like, I love how it's like, boom, boom, boom, boom, boom. You know, knowledge, knowledge, knowledge, knowledge. I get to choose my own adventure. That's what I'm looking for. Thank you so much for cleaning it up for me.
- [23:32]
A
You know what? I. I had a different assumption in my head when I looked at it. I said, they probably can't get copyright clearance for it. And for everything else, what they. And you could. At this point, you're big enough to. I figured maybe it was an early day thing. At what point did you start hiring people to edit the stories? I mean, it's. You're not. You're not sending out reporters into the field, but you do need somebody to summarize it properly. And this was before A.I. you launched, what, 2017, if I remember.
- [23:58]
B
2017. Yeah, yeah, yeah. So Drew and I basically started it, and then we hired a, like a biz dev salesperson probably a year in. And then if you break down our business model, it's three things. It's write a wonderful newsletter every day, which, as we said, I have a 65% open rate, delight the reader, know exactly what they want. We sell ads to the. To the because we have this audience of, you know, a third of them have a graduate degree. They like to be healthy, wealthy and wise. They love learning about finance products. Better for you wellness products. They like. They have a lot of money to spend so they like learning about new products. So we sell ads to our partners and then we take a majority of our revenue and we reinvest it back into growth. So we've been doing that over and over again for six years. When we started we were adding 2,000 subscribers. Now we're adding 300,000amonth. So our. From. From zero to one. Those three things that's all we focused on. And basically Drew was writing the thing. I was doing our business section and helping out a little bit, but he was writing most of it. We had a co founder doing the business and the selling and then I was doing the growth and like the CEO stuff basically. So that was just that over and over again. And we did that until we got up to. So Sony is now our editor in chief. She's amazing. She's from. She was from Bloomberg, previously brilliant news writer. So we hired her four years ago, I want to say. So she was like one of our.
- [25:31]
A
Early hires which allowed us writing it for four years.
- [25:35]
B
So Drew was. So the first year and a half, maybe two years. No year and a half. Drew talk about Gray. Like I. Every off site we have as a company I mentioned this. Drew had a full time job and was waking up at 4 in the morning to finish our newsletter and ship it out before he went to his work at in. In D.C. and like you talk about grit and believing in your vision and mission. Like Homeboy, I should say homeboy. But he, he was doing that for a long. Right?
- [26:04]
A
He was.
- [26:04]
B
He believed in our vision and like most people would not have kept going, right? Like are you kidding me? Like getting up at 4 in the morning to ship a newsletter to 500 people. Like who would do that? Right?
- [26:14]
A
Why not hire somebody earlier? Writers are not that expensive.
- [26:17]
B
We had no money. We had no money. We're going to hire with.
- [26:20]
A
How long did it take you to reach the first hundred thousand in revenue?
- [26:24]
B
In revenue roughly on a month. We didn't monetize until we were like a year and a half.
- [26:32]
A
So for. Why not?
- [26:34]
B
Just what? Because we.
- [26:35]
A
Why not?
- [26:36]
B
We had 500 subscribers for the first quarter and then we had 2,000 subscribers.
- [26:41]
A
So you were in the below 10,000 for over a year.
- [26:44]
B
We got to. I gotta check the numbers, but it was the first quarter or two. We were doing nothing but Just iterating on the product and understanding what the user wanted. That was the first two quarters. Then it was, okay, we have something here. We have evidence of product market fit, huge retention rates. People like our product. They're forwarding it now. How do we disprove, going back to our three models, how do we disprove? How do we. Excuse me, de risk that? Can we grow the thing? So then I started dribbling capital in as our angel investor with Facebook ads to prove that we could go from whatever it was, 2,500 subscribers to like 20,000 subscribers. So we did that work and basically we were getting to your point. Subs for like a dollar or whatever it was back then. Now it's like 2:53 bucks. But back then it was a dollar and it was like, okay, can we acquire them? Are we retaining them? Same thing. So we proved that out. And then once we had the retention proved out and the growth proved out, then we tried to prove out monetization when we brought on our third co founder to do that work. But you know, we just. We were trying to. Drew One is a brilliant writer. He likes what he does. And yeah, we like also, like, we didn't want to give it to someone we couldn't afford Sony at the time. So we didn't want to like outsource it to some. Excuse my friend, shitty writer. That was going to ruin our product experience. So basically, Drew kept on going. He still writes for us today. He doesn't do the daily as much, but he's writing all of our. Our. A lot of our content. He loves that. So we just leaned into those three. Three things and said, like, focus on the product, prove we can grow it, prove we can monetize it, and then let that flywheel spin as much as possible.
- [28:18]
A
That's so shocking that that's where it was. Speaking of ads, you figured out ads yourself in the beginning. Because I know ads from talking to Jesse are huge for you on the.
- [28:31]
B
Like the acquisition side or the.
- [28:32]
A
Oh, sorry. Buying ads for acquisition.
- [28:35]
B
So we. We were doing it very early on by ourselves, and then we quickly realized we needed an agency to help us, and then that's when we partnered with agencies.
- [28:43]
A
Okay, all right. I could have sworn that I saw. Here it is. I saw that you're adding now 300,000 new subscribers a month and retaining about 150,000. Is that a good number? I'm trying to get a sense of what. What the economics look like.
- [29:01]
B
It's. It's actually a great number that, that we've been trying to get that, you know, what's your long term retention rate on newsletter subscribers numbers? From a lot of people. It's not widely shared, but from what we've heard it's one of the top if, if not the top in the industry. So the way we see that is it's actually really cool. You can see it in our retention curves. So about 2015% of people like either we don't do double opt in. So sometimes it's bad emails, sometimes you don't get through. So about 15% of emails never open. And then from 85 to 50 you see some, some loss over about a quarter. So people are feeling us out. Some people read it and they're like, not for me. And they unsubscribe right away. So people take some like two or three months, but you see the curves flattening and then they hit about 50% and then like they're pretty flat in perpetuity. So it's something like, even our cohorts from like 2018, something like 40% of them are still around. So there's a little degradation. Like you have spam issues, you have people like changing jobs. So people fall off. But yeah, you get like the first quarter and then it levels out. So yeah, that's a wonderful number. And the way that we think about that is on the revenue side with our partners, now that we're scaled, we make about a nickel every time someone opens our email. If you break down the CPM for each person, each person opens an email, we make a nickel. Now we have to del. We have to deliver for the customer, the, you know, the advertiser and they're looking for returns, whether that's signing up for a credit card or a mortgage or a new vitamin or whatever the, you know, the product is noon seems.
- [30:35]
A
Like a big one.
- [30:36]
B
Yeah, that was, that was in today's. But yeah, so basically they pay a nickel every time someone opens the email. Again, we have to deliver for them. But so you start doing that math and it's like, okay, we send 25 emails a month. We have a 65% daily open rate. So call it 15. The average person that opens 15 emails a month, we make a nickel every time they do it. So they call, call it 70 cents a month a user, we're acquiring user for like 2 or 3 bucks depending on the channel. And then half of them go away. But so it's like, you know, that five to six month payback period and then after that it's just all revenue that we can just reinvest back into growth. And you start stacking those on top of each other. And that's where you go from again like 2000amonth to now we have 300,000amonth because we're spending over about a million bucks a month on growth from our flywheel model.
- [31:28]
A
You know, Jason Calacanis was trying to create a newsletter. You know, I forget what it was called, but he was. What, what is it?
- [31:35]
B
Inside dot com.
- [31:37]
A
Right. And the thing that he was doing was he was the opposite of you. You want to go broad. He wanted to go niche, as niche as possible. And then he would even have people vote on what the next newsletter was. It seems like one of the things that you had done was by going broad, you could reduce your costs per acquisition. And then by mastering, by mastering ads, you could get really good at bringing people in consistently. I don't know that he ever did advertising especially well, but he definitely was not going into that, into that broad market. He wanted as niche as possible.
- [32:08]
B
Yeah, yeah. It was brilliant, their strategy and launching it. I thought it was so, so smart. To your point. Like they had wait lists and then once they got over.
- [32:15]
A
Right.
- [32:15]
B
10,000 or 25,000, they would start building those. Yeah. I'm not in their boardroom and I don't want to. Want to speculate, but I have some ideas on.
- [32:25]
A
Yeah, you know what? One of my favorite parts of going to business classes in college was the Harvard business case. Because it forced you, even though you couldn't make the decision for the CEO who you were, like reading the case study on it forced you to think about it, to then, you know, strengthen your thought muscles. What would you say as someone who's in the space without any inside information? What do you think about this space? About the way that they're doing it or the way that they did it? It looks like now it's a coming soon page. Analyze the business without. Without having any deep insight. Deep insight.
- [33:00]
B
I think the strategy was brilliant, which doesn't surprise me. He's like one of the best angel investors of all time and like, very forward thinking dude. I think the problem was the product quality. So if you look at it like, I think they hired writers and they paid them hourly. And I don't think there's love in the product. I think that was one of the big, the big challenges. We talk about this every day. Like people. You mentioned the beginning of the call. People have so many places to get news and information that you have to like, pour your heart and Soul and put your love into the product. And like, we do that every day at 14:40. It's one of the reasons we only have. We're working on another product now that's going like we're swinging for the fences. But it's one of the reasons we have. We've been very disciplined and focused and said we are not doing 50 products because when you start doing that, you get mediocre. Mediocrity. Excuse me. So we just have the one product our whole team's thinking about every day. Our whole team's looking for awesome resources to add to it for tomorrow's newsletter to delight our reader. And again, I'm not in their boardroom, but from what I saw from the outside, I think it was, you know, I was paying people like an hourly rate and a lot of the, I think a lot of the writers that were doing it were kind of like part time people. They didn't really care very much about it. They were just kind of shipping the thing. And I think that's why their open rates were relatively low. I could be wrong, but that's my, that was my take from the outside. But I think the model was brilliant. To your point. It's like, yeah, exactly the opposite of us. It's like there's all these niches. So like, go create these little niches. You add them up and then you get like a very scaled company. But I just don't think there was enough in the product.
- [34:38]
A
I think, okay, I get that. And they were pretty spread out. Just Jason's a killer editor and a great writer and I can't imagine if.
- [34:46]
B
He was writing what it would have crushed. Right. But like, I think, did he hire the right people? That's, that's my question.
- [34:52]
A
That would have been interesting, actually if he would have just done a startup only newsletter where he had a lot of deep insights where he can write it or have somebody he knows write a daily and he can edit it. All right, I'm with you on that. Let's then shift to just analysis of the business and why it worked. I have a couple of notes here. Number one is old ideas. I think Cody Sanchez is killing it online right now, talking about how you can buy boring businesses. And there are a few people like that, but a lot of them are talking about how do you buy a laundromat? And I think Cody Sanchez literally owns a Laundromat somewhere here in Austin. I think, well, you're taking old business ideas that are online and have the ability to scale much Bigger than in person businesses. That seems like one of the big takeaways for me. I'm looking at your face and I don't know if that feels as exciting to you as what as some of the other takeaways that you have.
- [35:46]
B
Yeah, I think that's, that's who. Yeah, like we, you know, digital businesses can scale like near infinitely and these tams are massive. Right. And I think that's one of the reasons we like our, our business model. We don't have to go pick up quarters and clean up the laundromats. Right. We just have to deliver a wonderful product in bits and ship it out to people every day. And yeah, there's a lot of advantages.
- [36:04]
A
To that model, but I don't see a lot of versions of this that a lot of online businesses that will work forever and are as easy to launch like you just started with a mailchimp email. I wouldn't be surprised if Sam also used mailchimp in the beginning and others did too. If I'm thinking about CRMs, that we might all need CRMs and maybe you need a personal CRM and a CRM for car dealerships and so on, but they're definitely not that easy to create and they get more and more competitive and so it gets harder. I can't think of another online company or type of company that has the same economics as newsletters that you can keep coming back to and have it be easy, can you? Not easy, but still have it, still make sense.
- [36:47]
B
Great question. I have to think about. I agree. And that's when we studied this space before we got into it. That's one of the reasons we really liked it. Right. So like we weren't sure if the product was going to work in the white space and the, you know, the, the anti niche positioning. But I looked at it like a VC with my old private equity VC hat on. I was like, man, if you can, if you can deliver, these things are beautiful businesses. So yeah, we, we knew that coming in.
- [37:16]
A
The only other thing I might take that's similar is agencies I will be interviewing if I want to. I can interview agency owners for the rest of my life who are doing tens of millions in revenue. But you know, the work that they do keeps changing. So I might, five years from now, interview someone who started in an AI agency back in 2025 and I'll go, how did you do it? And we'll, we'll get the whole story. All right.
- [37:41]
B
So that's, I think there though. I think the downside There is. You're always singing for your supper, right? Like, you're always like, is there's a renewal? Someone's always coming for you. I think, like, the long term, the lifetime value, a lot of those customers is pretty low. So with us, it's like, I mean, we have the same challenges, but it's like if you deliver for your customer every day, like, they look for you in the inbox and you create a habit with them and then.
- [38:02]
A
Right again.
- [38:02]
B
That's why we have some of our readers from 2020, 2018. That's still. Forty of them are still with us.
- [38:08]
A
Okay. The other one is the focus on one. What a dramatic focus. I really did assume that I hadn't discovered some other 1440 news. And as I was skimming around and talking to ChatGPT, I couldn't find another one. I think on your homepage, it looks like there are different topics, and it gives me the impression that there are a lot. But it's still, from what I'm hearing from you to this day, just one newsletter.
- [38:31]
B
So it was until about a couple months ago, and now we have a new product we're going after. But, yeah, to answer kind of the spirit of your question, yeah, we looked at other, like, launching, like, you know, Drew's a scientist. We could launch a science newsletter tomorrow. We could have done that four years ago. Yeah, we always did the math on it. It's like, okay, because our TAM is so big again. I know I keep doing that, but it's like, it's such a big tan. It's like we have the advantage that a lot of, like, the hustle and those guys, like, they hit their. They got to 2 million, which is like, what, 30 of that market? And then they kind of hit a ceiling, and they didn't grow anymore, so they had to go outward with us. We had the advantage of, like. Because we're going into this massive tan, like, we could just keep going. So we were like, you know, we'd look at. Should we launch a sports newsletter, a science newsletter? And you start doing the math on it, and you're like, okay, so maybe you get to a couple hundred thousand subscribers. You have to add an editor, a seller, a marketer. You, like, rebuild your company, basically with 10% of the revenue. And it's like, okay, so maybe that thing does a couple hundred thousand dollars in EBITDA in year three. It's like, who cares? I hate to say that, but it's like, why are we thinking about this? It doesn't matter. Like, why don't we take all that energy and focus on something bigger? When I was in private equity, one of my favorite stories is we had a candy company called Necco. You know those Necco wafers that have like, the I love you hearts on them? Okay, now, but I'm looking at sweethearts, they're called.
- [39:49]
A
Okay.
- [39:50]
B
They have a little, you know, the, the little, like, I love you hearts that they taste like chalk. We own that company. And we were interviewing new CEOs, and we interviewed everyone from Hershey's and Mars and all these wonderful companies. And I remember we had something like 40 SKUs, and most of the SKUs did under a million in revenue. And all the. And we were always fighting to try to get a little bit more. And I remember the, the eventual CEO, who was very senior at Mars came. He's like, what the f are you guys doing? He's like, why do you have 40 skewed? And he's like, he's like, you know how we think about this at Mars? Or he's, he's like, so you have, you have Reese's that does 600 million in revenue. I'm totally making up these numbers or something like that. And you have bit of honey that does 10 million of revenue. Which one do you want to grow 20% next year? Get, get rid of bit of honey. And that's why those brands, they sell off those, those little brands to private equity because we don't want to deal with that. Like, why is that? It's, it's just taking away our focus. So I just think a lot of companies, I learned that in private equity firsthand, they just, they focus on too many things that aren't that big, like, don't have a big upside. And it's like, why. Not only does it, like, it makes your organization more difficult, you have to hire all these people. Like, it just. I just don't get it. It's like, so our whole thing is like, do one thing. We're. We're now doing another thing. I can get it to in a second, but do one thing. Do it really well. Keep it simple. Less is more the power of saying no. Focus, focus, focus. When you do that, like, magic happens, I think. And I think a lot of companies, and we've seen this in our industry too, like in the newsletter industry, a lot of these companies, like, launched all these products. They didn't work. They fire 50 people and they lay off another 100 people. And it's like, like, I think they, like, did they. I don't know that was gonna happen. Like, did you not see that? So we just basically said, we're not gonna do that here. We, like, we're gonna focus on what we're good at and have, like, discipline and say no. And then also, like, you know, at the end of the day, this is all about, like, it's a people game and it's a talent game. And, like, we haven't. We've lost one employee in four years, and it was a good. A good exit on both sides. But, like, I want to be able to hire the best people in the world and, like, pay them very well. And everyone has equity in our company and, like, want them to be happy and, like, doing awesome work. And if you're laying people off all the time, like, if you're the best person in the world at growth, are you going to want to come to a company that lays its employees off every. Every year? Like, no. Like, you're afraid of that. So we've never done a layoff. Layoffs are not in our vocabulary. We do, like, a million in revenue per employee, and, like, we want to keep the thing lean and mean and control our own destiny. And I think that's one of the beautiful things about bootstrapping, is if you do it the right way. The key thing here that not a lot of people talk about is you control your own destiny. We have a board, and they're wonderful, and they're really helpful, but we can do whatever the hell we want. It's such a powerful move. Like, most companies, if they want to do, like, a little bit of a thing or try something new, you got to go to your board and, like, no, get out of here. That's not what you raise money on. With us. We can, like, do whatever we want. It's such a cool advantage to have.
- [42:41]
A
What's a cool thing that you think an investor wouldn't let you do? What's a cool thing that you think an investor wouldn't let you do?
- [42:48]
B
No, I'm saying we don't have that problem.
- [42:50]
A
I know, but do you have an idea that's so wacky that an investor wouldn't let you do it?
- [42:55]
B
So, I mean, so not wacky, but, like, our product that we're launching right now, our new one, which, again, yeah, one of our. One of our principles is swing for the fences. So again, like, we don't want to launch, like, a little newsletter that can do a million in revenue. If we're going to spend our time with something, let's go big. So Our new product that we've launched, it's basically so okay. What we hear from our readers over and over again is they see things in the news every day, like the gut microbiome, crispr, inflation, Burning man, the city of Chicago. Right. They want to learn about these things and they have this huge pain. It's not too dissimilar from the pain Drew and I had when we started this, which is they go in a search engine, they look for what is Burning man, and they get this SEO clickbait junk layer of the Internet that doesn't teach them anything. So they might go to a social network looking for a video. There's good stuff on there. There's also crazy Russian propaganda on there. You don't know what to believe. It's a. A doctor with three kids just wants to know what the hell Burning man is like, literally. That's all. Like, I just, I hear about all the time. I want to spend a few minutes learning about it. Why is this so hard? So we hear that over and over again from our readers. And then on the flip side, because we're, I would argue with our open rate, the best curator in the world, we're constantly seeing all these wonderful resources. So, for instance, like, if you want to learn about CRISPR, MIT has this 12 minute 101 video that's the single best place that you can learn about CRISPR, but no one can find it. It's on the 80th page of Google and it's buried deep on the Internet. So what we're trying to build is this. Like, originally we called it Pinterest for knowledge, and that's not totally fair. But now we kind of say it's like if Reddit, Wikipedia and Pinterest had a baby for knowledge. And what we're trying to do is basically all these terrific resources that are buried so deep on the Internet, we're trying to bring those into one place and just connect the intellectually curious person with all the best resources in the world so that they can efficiently learn about these topics. And then what we do so well is we not only curate it, but we explain it to you. So, like, here's a couple hundred word summary on what Burning man is and what the 10 core principles are and what black the city looks like, and some awesome videos of like walking through the. The Playa and all these things, right? There's, there's all this wonderful content, but like, people bang their heads against their wall, the wall trying to find them. So we're trying to bring it together and create like the best place in the world when you want to learn about a topic is on our website. So that's what we're doing. But like, you know, if we, so if we nail that, which we, we will, it's going to take time. It's like that's, that's a big company. It's like a Reddit or a Pinterest or Wikipedia. So like we want to be saying, like, if we're going to do another product, it shouldn't be a $500,000 revenue product. If you're going to take a swing, if you're a focused company, if you're taking a swing, it better be a big swing. So we've been patient and studying this for a long time and that's what we're going after. But we're using it with our own profits and we're investing with our own money. And like, that's the huge thing.
- [45:49]
A
So I see that this would be an issue for an investor because what you're really doing is they'd be like.
- [45:53]
B
Bro, what are you doing? Get back to operating the business.
- [45:57]
A
You're creating human curated search engine where the responses are. All that explains why when I go to Creator Economy on your site, I see a background on it, history, social impacts, future of it. I see references that you used and then on the right, a newsletter. I assume that was for SEO purposes so that people read the best thing that you can create on it and then it links. Then there's a box to get them to sign up to the newsletter. That's not what it's about. It's not. It's not your SEO play.
- [46:25]
B
We're building this ecosystem. It's called Topics. We might change the name shortly. But yeah, this Reddit meets Wikipedia of our job to be done that we want to serve is anytime you want to learn about a topic, it's the best place in the world to do that. We know that AI is coming. We know that everyone asked that question to God ahead of it, like, but one of the things that we've learned is in, you know, I use perplexity every day. It's, it's amazing. It's replaced Google for me. And we all use chatgpt between all these different sources. But even then, like, if you want to learn about venture capital, right, you type in what is venture capital? It gives you an answer and then you do that and we feel like it lacks the human serendipity of like, hey, here's venture capital. Here's some of the key themes. Here's how carried interest works. Here's what the Midas list is. Here's Marc Andreessen, here's all these, like, big. Here's the. Arguably it was invented in the whaling industry. Venture capital or Queen Isabella in the 14th century from Spain. Right. All these awesome resources that, like, if you don't know what to ask a Q and a search engine, you're not going to come across them. So we're trying to actually be like, proactive, which is what we're really good at as a company and being like, okay, someone went down this knowledge the rabbit hole. They learned about venture capital or burning man for 30 hours and they came back and they're like, this is what I learned. Here's some of the key insights and here's the 30 to 50 best resources. Podcasts, data visualizations, articles where if you want to go down the rabbit hole as well, they're all right there for you and they're all world class and they're all fact checked by a human. So you do not waste any time in your knowledge journey at 1440, where on all the other sites you just like, why am I sifting through shitty videos?
- [48:05]
A
A risky, bold bet. I mean, you really are going the opposite of where everything else is going. Where everything else is going towards AI content. You are going towards human content where it might be about the community coming in and pitching in and adding information, like the Reddit example or Pinterest example. You're saying, no, we're going to have a real editor come in and do this.
- [48:29]
B
Correct. Yeah. So we're using the human editors are using AI tools to be more efficient at their job. But yeah, at the end of the day, it's human curated. We think there's a lot of beauty in that because there's human serendipity. Like, when you go down the rabbit hole, it's like, wait, why does this thing keep coming up? And what is this? And connecting the dots, like, the human mind's amazing and AI is coming for everything. But we think there's like a real beauty in like, yeah, leaning into the humans. And that's what we're. Yeah, that's what we're working on next.
- [49:00]
A
All right, I'll close it out with something I probably should have opened up with. The reason the company is called 1440.
- [49:05]
B
Is it's the year the printing press was invented, when knowledge was exploded to the masses. So we're a knowledge company and we're trying to lean into that. It's also the number of minutes in a day. So that's our whole thing is like, knowledge and time. Knowledge efficiently. That's where our name comes from.
- [49:20]
A
All right. Right on. Thanks so much, Tim.
- [49:23]
B
Yeah. Thanks so much for the opportunity. Appreciate it, Andrew, so much.
- [49:26]
A
Hope to see you in person. Bye.
- [49:27]
B
Thank you.