← The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
20VC: Grindr: The Most Insane Story in Startups | How the Chinese Bought and Lost Grindr | The Successful IPO with $300M Revenues and 40% EBITDA Margins | How Grindr Built a Free Cash Flow Machine
00:56:36
George Arison is the CEO of Grindr. The app that results in 40% of lesbian and gay marriages, the average user uses the app for 1 hour per day and sends more messages on Grindr than they do Whatsapp. The company will do over $300M in revenue in 2024...
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- [00:00]
George Arison
Second thing that I think Silicon Valley showed and has learned is that there's insane inefficiency in each individual that you have working for you. Because there's very bad management. Management does not mean micromanagement. Grindr has less than 150 full time employees. We are very, very efficient. You know our revenue per head is very high. It's over 2 million bucks per full time employee. We shouldn't be just comped to dating apps. When they talk about what the multiple on the stock should be, that we should be comped as much as to social network products. As much as we come to dating products.
- [00:33]
Harry Stebbings
This is 20 VC with me Harry Stebbings. And today we feature the truly incredible story of Grindr. A company founded by a non technical founder that was a cash printing machine for years before he sold it to the Chinese. The US government then forced the sale of the company from the Chinese to a US private equity house who took the company public. They installed George as CEO and today the company does north of $300 million in revenue with 40% EBITDA margins. It is one of the best businesses of our time. Truly insane story. And joining me in the hot seat is George Arison, Grindr's CEO. Before we begin, one of the easiest investment decisions I have made over the last three years is investing in 11X.
- [01:16]
Narrator
Their digital workers don't just automate tasks.
- [01:19]
Harry Stebbings
They transform your business. With 24. 7 operations, multilingual capabilities and human like intelligence, they are revolutionizing how work gets done. From prospecting to closing. 11x is the all in one platform that allows you to reduce costs, increase pipeline and boost conversion rates. And that's why companies like Pleo, Handshake, Sauce, Groff and more are customers and lovers of 11X. Check them out today at 11X AI. You will not regret it. And speaking of incredible products, I want to share something interesting about the private market. There are many ways to buy and sell private stock today. But Hive is the only platform that provides a one stop liquidity solution for private companies and their shareholders. It not only provides provides access to a deep pool of investors, but also allows companies and boards to control key elements like buyer approvals, seller eligibility and even pricing. Offering liquidity on their own terms. What's more, Hive's end to end transaction execution service allows companies to easily monitor all past pending and upcoming transfer requests at no cost. Visit hive.com that's hive with two I's and see why they're the fastest growing liquidity platform in the world. Hive Markets Limited is a broker, dealer and member of FINRA SIP IPC Investments in private stocks are risky. Only accredited investors may buy through Hive. And just like HIVE transforms liquidity, Tiguas transforms How we gather insights for Investing When I invest in software today, I think software is valuable when it saves time and makes something easier. But when it enables the user to do something they simply could not do without it, then it's insanely powerful and valuable. That's the case with tigas. I literally could not live without them. When I'm investing in a company, TIGAS lets me see the most incredible reference calls with X experts in a space who work at a competitive company or incumbents. These calls and data provide the most incredible insight that really shapes my opinions and thoughts and investment decisions. And I can then share snippets from calls with team members. This is a tool that will change how you work. Honestly, you cannot imagine life without it once you've experienced how powerful it is. And you can check them out today by heading over to teagus.com you have.
- [03:32]
Narrator
Now arrived at your destination. George I am so excited for this, my friend.
- [03:36]
Harry Stebbings
I've been such a fan of the.
- [03:37]
Narrator
Grinder business for a long time, so thank you so much for joining me today.
- [03:41]
George Arison
Well, thanks for having me. I love your podcast. It's done really well and I'm really impressed with what you've built. So psyched to be here.
- [03:48]
Harry Stebbings
It's amazing how far a British accent.
- [03:50]
Narrator
Can take you, literally. My question to you is, for those that don't know, what is Grindr and how did you come to be CEO of Grindr, the public company today?
- [04:00]
George Arison
Yeah, happy to discuss that. So Grindr is the largest network of gay and bi men in the world. Started out as a product for hookups and casual dating. In 2009, took over the gay world in a very viral way. I remember when I first saw Grindr on a friend's iPhone in 2009. I was building a company on BlackBerry so I didn't have an iPhone. And the next day I went and got an iPhone because I'm like, whoa, this is like way too good. I have to have this. And there's some estimates like Grindr sold half a million iPhones in the first year. It was around, etc. In early adoption. And over time it grew bigger and bigger. I mean, we're at over 14 million active monthly users now and so we have a much broader spectrum of audience now than just people who are looking for a hookup. It's now the largest source of gay relationships in The United States. Four and ten gay relationships start on Grindr. People spend on average an hour a day in the app, which is really remarkable. And we had 125 billion approximately messages sent in the app last year. That's about 50 messages per person per day, more than WhatsApp messaging in a given day per user. It's become like a very critical network for gay and bi men all over the world. And by 190 countries and territories all over the world.
- [05:19]
Narrator
Do you know what's insane is I think the average status, like one in two heterosexual relationships is started over the Internet, mobile or. And you have 40%.
- [05:29]
George Arison
Yep. It's really awesome.
- [05:31]
Narrator
That is insane. And an hour a day, do they not work?
- [05:37]
George Arison
I actually won when I first heard it. I'm like, what do you mean? Like a week? But yeah, it's a remarkable thing. And then as far as how I became CEO of Grindr. So Grindr has a very unique kind of founding story and how it got to where it is today, and I assume we'll talk about that. But there's an ownership group that owned grindr as of 2020 and they had a temporary management in place, knew they wanted to take the company public and wanted a long term CEO. They really wanted a product driven person who had built a company from scratch and who had run a public company and who was ideally in the community, which kind of leaves you a very few set of choices. They found me and made a really strong pitch. I was like, man, I've built three companies. I never thought I'd run anybody else's company. But the argument was really strong that this was a really amazing business and kind of once in a lifetime chance to do something really special. When do you get to run a business with 40 plus percent EBITDA margin? And I saw a huge opportunity to take this community that we have and build a lot more stuff for them and become more of a super app product for the user base. That got me really excited. And so I took the job.
- [06:42]
Narrator
I'm still in awe of the stats you just gave me, but I'm fascinated because you mentioned there the super app element. But then we also have the specific word that you said was hookup app. And I remember I had Sean Rad from Tinder on the show and there was this visceral objection to any, any hookup app from him. It was like, do you mind being a hookup app and how do you think about that? Like hookup app to super app transition.
- [07:05]
George Arison
Totally. So look, in gay culture, sex is A really critical part of who we are. Even, like the term homosexual. Like, the reason we are different than the majority is because of sexuality. And I think we are far more open about sexuality. We are far more willing to engage in sexual activities with people and then be able to have, you know, friendships with them. Like, it's very not common for people to hook up and then develop a friendship in the straight world. It's very common in the gay world for that to be the case. And so the way we look at sex is very, very different. But it's a very core part of who we are. For that reason, that makes Grindr very unique, because that's the thing that people really want to solve for in any given day, and Grindr lets them solve that. So we have actually no qualms about being viewed as a hookup app, and we actually are leaning more into it. The really big product we're going to be launching, you know, worldwide sometime towards the end of next year. It's now live in two markets today. It's called Right now, which is actually making the hookup experience better and more easy for a user to access. This is a way for people who are looking for a right now encounter, whether it's hookup or otherwise, can kind of get into that right now mode. And then they're only talking to people who are in that mode as well. Right. Because we have people who have different intentions in the app. And one of the things that we hear from users is, hey, make it easier for me to find the person who wants to have a right now occurrence. And so we are leaning into that massively and will continue to. But in gay life, a lot of friendships, social connections, even networking and relationships originate with a hookup. And so that gives us a chance to kind of do all those other things as well for people on top of the thing that makes Grindr going to, at its core, be this interconnection product for the community.
- [08:54]
Narrator
What are the other things on top of, like, the insertion point of the hookup app? That's a really natural extension that you can overlay.
- [09:01]
George Arison
Totally. So two things that Grindr is already really big in small ways, but plays a really big part. One is travel. 25% of Grindr users. So one in four is traveling in any given week, which is a really remarkable thing to think about given that, you know, in the US average person takes two vacations a year in a car to Visit, like family 60 miles away or something. But it makes sense, right? Like, we have an audience that is high disposable income that is usually single, or if not single, doesn't have children. And so travel is a big part of their life. So there's a lot we can do in that, whether it's, hey, let's allow somebody on their profile to say, I'm going to Coachella this year, and let's start connecting about the fact that we're all going to be at Coachella together right in the spring, or whether we're going on this cruise together. And let's kind of all connect about it before we get on the cruise. Cruise to Here are the top 50 hotels that people really like to stay at when they go to various cities. And maybe we do a deal with those hotels and create special packages and experiential ways for people to stay in them that right now are not available. The second area where there's a lot of connection already is health. Grindr really did an amazing job way before my time at educating people about PrEP, which is a medication that you can take and it prevents you from catching hiv. Prep really changed life for a lot of people in a very fundamental way because it. If you're on prep, the single biggest fear that so many people have about having sex, which is, hey, I might catch hiv, is gone. Right? Like, you're not going to get it. But it came out a while ago, and for a long time it was not getting an uptake in the community that ideally you'd. You'd have. And only when Grindr added it to its profile page and allowed people to say, I'm on prep, and then did a massive effort inside the app to educate people about the benefits of prep, did PREP start to take off. We do other things in health that are similar. A year and a half ago, we started working with the CDC to allow people to order an HIV test to be shipped to their home to get an HIV test. We've sent out about half a million tests since then, which is really incredible. And more importantly, 30% of people who are getting that test have not had an HIV test before.
- [11:16]
Narrator
I'm so sorry to sound like such a venture capitalist, but do you then make margin on the prep that you provide on the tests? Is that not an amazing.
- [11:26]
George Arison
We don't make money on HIV tests because CDC actually sends those to people for free. And we don't make money on prep because we don't sell prep. There are companies that do sell prep. We just do education and marketing for them. But my point on that is, like, we already play a role in healthcare for People. And so there are things in health and wellness that we can build on where we will make money. Totally hypothetically, you know, you can imagine that a lot of gay men use various compound drugs that are quite popular these days, whether it's ED medications or hair care products or skincare products. One area for example, that we can play in where we can provide our users with a really good experience and the margins are also really great.
- [12:06]
Narrator
Which will have a more impactful hit on revenue or addition to revenue travel or healthcare, do you think?
- [12:13]
George Arison
Look, these are both zero to one products, right? I don't know if they're going to work and I say this to investors all the time, like if they work they can be massive. But you got to understand that we're starting at scratch and they might not work with that caveat. I think if healthcare works it will be very large because if you just do the math on it, right? Like a compound ID medication costs 100 to $130 per month subscription. And people, I think average lifetime value of a user is six months. That's a pretty for hims because himss is public. So it's a pretty significant dollar value in a year on that subscription. So if those things work, I think from the revenue perspective they'll be pretty significant.
- [12:54]
Narrator
Can I ask you, when you think about like market adoption and breadth versus depth and penetration within existing market, how do you think about the balance between we need more Grinder users just period versus we need to get deeper adoption for the products we have from the existing customer base.
- [13:12]
George Arison
Totally. So our MAO has been just naturally growing. We grew Mao like 7ish percent last year. We're on track to do something similar this year based on public data so far through Q3. So we don't really focus on MAO grow frankly at all. It just kind of happens. We do know that there are a lot of users that we can add that are not using the product. Today we have a 95 plus percent name recognition in the US in a lot of countries abroad it's closer to a 60%. 60% is still amazing when you think about it, but 95% is just totally remarkable. And if people don't know us, they can't use us, Right? So there's a lot of room in a lot of places internationally to gain more adoption by just getting better brand recognition. And that's something we are going to start working on in the coming years. We kind of view international as a mid term opportunity for us rather than immediate. Meanwhile enabling more features and more products that our users can pay for today is something we were working on every day. Our payer penetration is about a little over 7%. You know, our peers, again, public data and not anything confidential are viewed as like 15ish percent for Tinder, for example. So there's a lot of room to have a lot more paying users in this business. We don't need to be at anywhere near Tinder's pay penetration to hit our, say, three year financial targets. And so we think there's a ton of opportunity to go deeper with paying products for our users today.
- [14:38]
Narrator
It's a tough balance because if you have the Tinder app, it is a hard monetized product. I mean, it sucks. It sucks, isn't it?
- [14:45]
George Arison
And they've dramatically, radically underinvested in the user experience, which is, I think why they're suffering so much. And it's not just Tinder, it's also bumble, but basically happened, I think with those products is they had a hit, right? Like they had a thing that worked really well and they just spend years monetizing, only not really adding anything new to the user experience. And that I don't think is a really right approach. And so we, from the very beginning, kind of even before I took this job, like when I was thinking like, what do we do with Grindr, my sense was there's so many features that have not been built on Grindr yet that people really badly want. And you know, there's an incredibly long running list of things that we need to create. Our job should be to build those things, create value for users through those features and products. And if you create value for people, people will pay for those. And so we have a very, very robust free product and we're going to keep that to be a very robust free product.
- [15:38]
Narrator
I mean this with total respect to you and other colleagues in the industry. There's been relatively little innovation in the market, I think over the the simple swipe functionality or cross and tick, but other than that segmentation on customer groups. Would you agree with that or am I being harsh?
- [15:55]
George Arison
Yeah, I fully agree. Whether it's for us or for other companies, innovation has been dramatically limited, except for maybe Hinge, which has had a little bit more innovation kind of along the way. I built an AI company in 2019, 2020 and then sold it. And so I had some AI experience coming into this job. And that was one of the more exciting things about what was possible because we have so much rich data about our users, whether it's from their behavior patterns in the app or their chat history. And so only obviously with their consent. But if we use all that data to create better matches for them between what they want and what we know other users want, we can really reshape how dating happens, at least in our community.
- [16:41]
Narrator
I saw Whitney say that we would actually have kind of extensive inventions of ourselves, robots that would kind of date each other in a virtual world.
- [16:49]
George Arison
Yeah, I said that six months before she did. So I think it's totally gonna happen.
- [16:53]
Narrator
You think that's gonna happen? Can you just envision that world for me?
- [16:56]
George Arison
Yeah. So I don't think that people are want, will want to have synthetics, robots, agents, call them whatever you want, doing the whole conversation. Right. But one of the things that I think is very constraining to dating, and it's particularly true for, for gay men because of of density issues, is that dating mostly happens by geography. Like you normally end up settling down with somebody you meet in the geography you live in. And that makes no sense because the idea that the best person for you is necessarily in the city that you live in or in a town you live in makes like no logical sense. Right. The reason it happens that way is because the cost of, hey, I'm just going to like, you know, date anybody anywhere is prohibitive from both time perspective and money perspective. But if I could give you an incredibly transparent and rich recommendation for five people around the world who are the right matches for you based on your behavior patterns in my product, based on your entire chat history, maybe even pulling information from outside of Grindr that you give me, and match you with other people for whom I have the same rich data, and then on top of that, expose it to where, okay, George and Harry are the right match and their synthetics spend some time talking to each other about a set of questions that they really care about and gave each other the answers. And then you're provided with like a write up of like, okay, these are the things we talked about and these are the things that make a lot of sense for us. And this is why I think it's okay for you to pack a bag and fly to London to meet him. That'll make people a lot more open to meeting people further away. And so I think for our community in particular, where density is a huge problem, other than maybe in New York City, London and San Francisco, maybe la, you don't have a huge number of people to potentially partner with. It'll be really game changing. And I can't wait to, to make that available to users.
- [18:48]
Narrator
You mentioned the 40% EBIT at the beginning. I mean, it's extraordinary. George, I said at the beginning what a great business it is and what a fan I am of it. But I think it's 120 million of free cash flow and 300 million of revenue, give or take. And I might be getting this slightly wrong, but how are you so efficient when everyone else isn't?
- [19:08]
George Arison
Yeah. So there's like three things that make us, I think, very different. One is we don't spend any money on marketing. And the reason is we don't do any acquisition marketing. Our marketing is focused on brand building and we do a lot of stuff in social narrow casting to again, gay and bi men. But it's a lot of storytelling. But we don't do pay our user acquisition, we don't have to. All our user acquisition is through word of mouth and kind of the brand building approach. Number two is we have a tiny team. I'm a really, really big believer in super lean organizations that get a lot of stuff done. We have a very audacious mission and my expectation is that people who are here work super hard to deliver results. Grindr has less than 150 full time employees. We are very, very efficient. You know, our revenue per head is very high. It's over 2 million bucks per full time employee. And that's something I'm really proud of. We are actually nowhere near the peak capacity we were at when I joined. We had 225 people at the very peak when I first joined and we had some transition on staff and we've seen a ton of productivity improvements in our team and I think there's still a lot more to be gained. Right. So, like, I'm a huge believer in using AI in work and I want us to be, you know, in a world where a lot of our code is written by AI and our engineers are actually overseeing that process rather than necessarily being the first ones to be writing that code. And so there's still a lot more leverage to be had with the team that we have. So it's like the second really kind of big thing. And then thirdly, our cost structure is pretty simple. Like we have, we pay Apple and Google, we pay Amazon and we pay people, but there's really nothing else that we kind of heavily spend money on. And so that's how we end up with a really good EBITDA margin. But amazingly, it's still actually a lot of leverage. Right. Because we're a public company and all the costs that public companies have, we still have to have. And we'll have them at 300 plus million and we'll have them at a billion in revenue. And they're mostly going to be the same. Like the accounting team is not going to grow that much from where it is today as we grow. And so there's still a lot of leverage in the business for us to actually improve our margins over time.
- [21:11]
Narrator
Drill down on number two, which is like the efficiency and the lean focus. When does a focus on efficiency and leanness impact growth negatively?
- [21:20]
George Arison
Yeah, it's a good question. I'm asked this question a lot in a lot of different ways. You know, we just did our earnings on Thursday. So I've been doing a lot of investor calls and this like comes up in every investor call, like hey, could you spend more money and do more things? And the reality is actually no. I think what Silicon Valley showed in the last 10 years or so is the idea that just adding more headcount to do more stuff actually is not the right thing because you end up spending a lot of money on a lot of stuff that doesn't work and probably shouldn't be getting as many resources as it needs to. You can. We're going to launch a bunch of new stuff this year, but a lot of it's going to be done through partnerships with one or two people working on those things. We'll learn our way into them. If they work, we'll put more resources behind them. But we don't need to be having teams of five, six, seven people launching these different products that we're working on just not now necessary. Second thing that I think Silicon Valley showed and has learned is that there's insane inefficiency in each individual that you have working for you because there's very bad management. Management does not mean micromanagement. There's a big difference. But being able to have really strong accountability is really critical and I don't think we have it in the tech world today.
- [22:31]
Narrator
Can I just dive in and ask why do you say that? Why do we not have the accountability do you think?
- [22:35]
George Arison
Because in the beginning when companies are built and look I'm a again, I built companies, I built three companies from scratch. So like I'm a full on founder in every way, right? Like we hire people who have a ton of self accountability. Most founders have incredible self accountability. They work all the time like they're, you know, like animals. I'm going to get this done. And they hire a lot of people like that. So your first 20, 30, 40, whatever number it is. Employees are all like that. They don't need management. That's why so much gets done at very early stage companies. But eventually you end up hiring people who are not going to be like that for one thing, because whatever equity grant you give them is not going to be large enough to justify that level of work. Right. It is not possible. You hire more normal people. That's totally okay. Like the world you're in at that point, you need management. And by management primarily I mean sets culture, sets goals, sets clarity around how to achieve them, and holds people accountable. Unfortunately, most people who work at startups in the first phase are really bad managers because they never learn how to be managers, they don't want to be managers and they don't like to make people feel bad or they manage in the way that kind of, you know the stuff that you'd hear about Uber and like the culture that Uber had in 2016, 17, 18, and that does not attract to people either. And so the result is very bad management across startups. Startups that succeed, succeed because they either have really amazing margin and they just kind like pour more people at problems and have massive inefficiency or through kind of cultures that are just not very healthy. And I think there is a better way to do that. And I think lean organizations with really good management, where everybody is in founder mode, is kind of what I classify, but we still allow for good integration between life and work is how one should build businesses.
- [24:22]
Narrator
This is a hypothetical situation. I'm a young CEO and I do not have your years of wisdom. You are an angel investor in my company. If you were to teach me how to be a good manager, what would you say I should know from the 20 years that you have learned?
- [24:39]
George Arison
Yeah. So I think there's a difference between being in the details and micromanaging people. I stay really, really close to details and I need everybody else on my team to be really close to details. Like if someone comes to me and says like, I don't actually know this number, that raises a lot of red flags for me because I'm like, that's a pretty crucial number for you. Like, how can you not know it? So being in the details on the numbers and what is happening in the business is different from letting other people make decisions. And I think it's really crucial to let other people make decisions and guide them to the right decision. If they're not making the right decision, but not to micromanage them.
- [25:16]
Narrator
How do you guide them without micromanaging them?
- [25:20]
George Arison
You ask Tough questions. And you, you raise the hypotheticals of what could happen if the decision that they want to make happens and get them to understand what the problem might end up being. Because ultimately you as the founder and the CEO, know the full picture and they don't. What you can bring to the table is they want to do X. They don't understand how that X impacts Y and Z over here that they're not thinking about. Only you can do that. But that does not mean you tell them, hey, you're wrong, and this is the answer. I think that's like a really big kind of factor. Secondly that I think is really crucial to kind of, of how I would do things differently now is you've got to know what you're not good at and get the right people around you. That's different from, oh, man, I'm really bad at this. And so I need to change this. The idea that a grown adult is going to change everything about themselves is very low probability. Like, it's probably not going to happen. You can pick, like, one thing you really want to change, and I'm going to work on this really hard. But, man in a series, a company where cash is running out and your product market fit might not quite be there and your team is causing problems and your investors are yelling at you, like, trying to change everything about yourself is not going to happen. Even changing one thing about yourself is really hard. But you can put people around you who catch your blind spots, and you need to be comfortable with them coming to you and saying, hey, George, you do this a lot. You are really stressed right now, and you're doing the one thing that causes a lot of problems. And I'm going to straight tell you that to your face, and you need to listen to me. And sometimes they're right and sometimes they're wrong. But if you don't have people around you who can kind of of catch those blind spots is a huge problem.
- [26:54]
Narrator
Can I ask a weird one? What did you think you were good at that you turned out to be bad at? And how did that show itself?
- [27:00]
George Arison
There were a lot of things that I thought was not very good at that I actually am really good at. Like, I thought that I was not very good at recruiting engineers. I was terrified of recruiting engineers. After I started my company. The first engineer outside of the CTO that I went to recruit, like, I was literally scared to death. I have a huge fear of snakes. And this was, like, the second most thing I was scared of. Like, how am I going to talk to this guy about engineer problems I know nothing about about engineering. Turns out I'm actually pretty amazing at recruiting engineers. And engineers really like transparency and I'm super transparent. And so having very transparent discussions and being very honest, like, hey, I don't know this and this is why I need you to come and help me here. Really works with them. They actually appreciate that instead of it coming off salesy, they actually like, oh, here's a business guy who like is willing to say, I don't know X or Y. And that was a huge learning. I was a business person working in the tech world and you can't be successful in that unless you're very good with engineers. But it was challenging for me to believe I could be good with them. Big learning that I became quite good. Another one I had to learn that's really tough is it's okay to be quiet because I respond to things really fast. And a lot of engineers are actually very different. They probably have an opinion on whatever you said right away, but they spend a lot of time thinking through what they're going to say before they say it. And for like an extroverted dude who talks all the time, that's really difficult, right? Because you kind of like need to get comfortable with silence. And that silence, silence can last like one or two minutes. And you want to fill that silence with content, but you just need to shut up and wait. That one was a really tough for me to learn, but I think has served me very well.
- [28:32]
Narrator
You said as a manager, but many people don't want to make people feel bad. Do great managers make people feel bad?
- [28:39]
George Arison
So I have a really hard time with this one because I'm told by everybody on the I love feedback. George, tell me, give me feedback, it's okay. But if I have to give them developmental feedback, even though they might be selling, telling me it won't make them feel bad, I believe it. I'm going to make him feel bad. And that's really tough. Not everyone has this issue, but I do. And it's probably my single biggest challenge in being a leader. It's the one thing I've picked that, like, I have to work on this because if I don't become better at this, I cannot go to the next level. As a CEO and as a leader on an individual level, being in front of somebody like, hey, you are not doing this very well is really hard for me, especially if I care about that person. Person. So there is a level of like, if I care for you, it's difficult for me to be giving you direct feedback when something is not working, when things are working really well, totally not a problem. So, like with very high achieving people, I have no issues with giving them feedback, but when there's development feedback, it's really tough. So, you know, I've learned how to do it and it's painful, but I write everything out. So I give people like very long written documents that are like really detailed and then I like send it to them in advance and then I sit down with them and go through them, which is not the ne. Maybe necessarily the best thing for them because usually it's better to do it in person, but like to be able. For me to be able to express fully what I think, I have to do it in writing because otherwise I will like not tell you the full story because I again will feel like I'm making you feel bad and I won't come there. Yes, it's 100% true. Like, I actually don't give a what people think about me in the broader sense, but on an individual level, it's something I kind of run into problems with.
- [30:15]
Narrator
Has it ever hurt you on a broader level? I saw also there was like some tweets that you sent, like, upset people. Does that really get you into trouble or is it like people get over it?
- [30:24]
George Arison
I mean, people get over it, obviously, and you have to have right people behind you. You know, when I was taking this job, I actually told the big shareholders at this point, Grant was still private. So that kind of the owners like, look, I'm a conservative guy. I'm Republican. I'm also gay. I'm very social on these social issues of being gay, I'm very liberal and libertarian. I'm libertarian on some other issues as well, but on a lot of stuff, I'm pretty conservative. And I don't think there's a conflict on those things. And people knew that and they were okay with it. I also knew that some people are gonna have a problem with that and we need to be prepared for that because unfortunately we are in a world where people are not willing to appreciate differences of opinion. Right. Like you have to be exactly down this line. And that's true on both sides. Like, you have to be all in on this side or all in on that side. Nothing that makes any sense.
- [31:14]
Narrator
Do you think we have freedom of speech? I had the founders of Anduril on the show recently and Intercom, we talked about it. Do you think we are in a society where freedom of speech is present?
- [31:23]
George Arison
Look, I grew up in the Soviet Union, where literally like if people knew what you believed in, you could go to jail. I remember evenings where my great grandfather, who like had fought in World War II, and he was a general in World War II, would turn on a radio and try to find Voice of America on the radio to listen to what actually was happening in the world. And we all knew that if anyone ever got hand on his radio, he'd be arrested even though he was like a 75 year old Soviet hero. Right. And so I know what not having freedom speech truly means from that perspective. Obviously that is not the world that we live in today. Has there been a little bit too much self censorship and or censorship from other sources in the last decade? Yes, absolutely. I think the pushback against it has been pretty strong and I think we're going to end up in a pretty good place. I don't like saying I'm a free speech absolutist, but at the same time, as much as I despise the idea of burning the American flag, because I think this is the greatest, most amazing country in the world that has ever existed and probably will ever exist. And part of my mission in life is to do everything I can to perpetuate that people have the right to burn the flag. I can't stand that idea. Like, it makes me want to puke. But if people want to burn the flag, they have the right to do that. They shouldn't do that, but they have the right to do it. I need to accept that on my level. And somebody hearing something that somebody else says they don't like, that's totally okay. They need to be comfortable with that as well.
- [32:43]
Narrator
Do you not worry that you will offend your stakeholders being the customers? If you think about it, maybe a more Democrat audience in terms of your user base. Do you not worry that maybe, like I have LPs, I'm a fund manager. I'm always wary of saying something that might upset my stakeholders.
- [32:57]
George Arison
Oh, totally. And look, the decision I made when I took this job was I do not make political statements today at all. It is not my job. My job is to be the best CEO I can be for Grindr. And things I might say that distract me from being doing that job and providing my users with the most awesome experience in the app and outside of the app are not the right things to do. That would be distracting to my shareholders. It'd be distracting for my employees and would not be good for my users.
- [33:24]
Narrator
What do you think Wall street doesn't get about Grindr?
- [33:27]
George Arison
The biggest thing we are really focused on educating people on today is that we shouldn't be just comped to dating apps. When they talk about kind of what the multiple on the stock should be. That we should be comped as much as to social media network products, as much as we come to dating products. Because people are using Grindr for dating. Yes. But they're also using Grindr for all these other social experiences that are more akin to a Pinterest or Instagram than a dating product.
- [33:55]
Narrator
Okay, if we take that, then they are powered by advertising engines which are incredible free cash flow machines. Does Grindr become an advertising engine like they are?
- [34:04]
George Arison
Well, we have an advertising business and we'll talk about that in a minute. I also think it's actually pretty cool that we are a social network that has a monetization engine that's subscriptions. Right. Because that's pretty unusual. We do have an ad business. The ad business actually is how Grindr got started. So Grindr was profitable from day one because it was a bootstrapped company that one founder built from scratch and he always made money on it. And ads were the primary way he did that in the early days. So we always had an ad business. In 2018-2022, period, there was a big underinvestment in our ad business. And so. So it was not growing really. Well. We started to change that in 2023 and those investments actually helped helped us to have a really strong year in the ad business. This year. Ads are about 15% of our revenue in total. But obviously on margin basis they're even higher percentage because it's a very profitable part of the business and we don't have to pay the Apple and Google taxes on that revenue. But we want that business to be bigger and we're going to continue investing in that today. Most of our ad business is what we call third party ad ads, meaning we use networks like Appfolio or Google, et cetera, to source those ads. We do have some direct ads as well where we partner with brands to market directly in Grindr over the long term. I want us to have a much bigger direct ad business, but we need to do a lot of work inside the company to get ready for those types of partnerships. That's work inside the product specifically. Right. We need, we need to have better ads. We need to have more ad formats. We have to have better data access in terms of how the ad is performing for our advertisers. And we need a much better approach to how we sell better relationships with the agencies. So that's all going to happen in the future. But in the near term kind of we can do a lot more with the third party ads as well. So I think ads can be a much bigger business. What we've said publicly is we want it to be growing at the same pace to stay at that kind of 15% or ballpark part of our revenue story. If we do really well, maybe it does better.
- [36:02]
Narrator
Okay, so we comp you instead of to dating apps, we comp you to social networks.
- [36:07]
George Arison
As you said combo. Both dating apps and social networks. I'll take that too.
- [36:11]
Narrator
What does that mean for how perception is changed? It's just an increase in revenue multiple. What does that actually mean for the sub?
- [36:18]
George Arison
It would be an increase in the EBITDA multiple. Right. Where we are valued of ebitda. And you know, the reality is that Facebook's EBITDA multiple is much higher than dating products even multiple. But I think just thinking of this business as purely a comp to a Tinder or a comp to Bumble is not the right approach. Just because users also don't use us that way. I mean, people are in the product way longer. They do way more in the app. They stay with the app over time for much longer time periods. Even when they are in a relationship, they still stay in the app because it's this social network for them. So just thinking of us as Tinder doesn't make any sense.
- [36:49]
Narrator
What happens with Tinder and Bumble?
- [36:51]
George Arison
I don't buy at all the notion that young people don't want to date off online channels like they do everything else online. Like they don't want to date online. That doesn't make any sense. They want different experiences in the products than what is offered today. But that's different from they want to do things online. And so I think ultimately they'll figure things out or new online dating products will arise that will meet users needs. I don't know if if Bumble and Tinder will be able to figure that out. You know, clearly Hinge is doing a lot of things really well and is growing super nicely and both in revenue and in use attraction. So there is a way to build online dating products for straight people that work. So I don't know what Tinder specifically and Bumble will do, but I'm very bullish about the online dating opportunity as a whole. I think it'll continue to do very well.
- [37:37]
Narrator
What have you done in your Grindr tenure that you wish you had not done?
- [37:41]
George Arison
That's an Interesting one. I think when I came in, I didn't fully appreciate how different building trust with people who were already there would be versus ones that I had hired. So this was like a big aha moment for me that, I mean, hey, because I never had any trust issues. Like, I've had plenty of issues and people have lots of things to say about George to do differently. But like my employees, trusting George was never an issue. But then I realized though, obviously, because if you're a founder of a company, no one's going to join that company unless they trust you. So then like, implicit part of their, like, decision making process to come to work for a company that's led by a founder is that they trust the founder. And I didn't appreciate how difficult and different, let's say different more than difficult it would be to build trust with employees who are already present and there. And so I wish I had done more in explaining to them what my approach to things would be. I started to do that a few months in, but I didn't do as much of that in the very beginning. Now some of this was driven by just kind of the time I showed up in. I showed up in October and we're going public in November. So there was like a really big focus day. We got to get the de spac process completed and go public. We also didn't have a lot of other people on the team. Like, it was me, chief product officer and the CFO kind of were like the leadership. And then everything else needed to be built out. And so there was like a lot of building the plane while we were flying it. But. But I heard from people, hey, like, we need to hear more from George in terms of what's his vision for where he wants to take the business. And I had a very strong vision and I thought I talked about it, but not anywhere near enough, it turned out. And so that's one thing I would have done differently in the first 60, 90 days. If I have to redo that again.
- [39:22]
Narrator
Can I ask, what would you do if you knew you couldn't fail in doing it?
- [39:27]
George Arison
Have two more kids?
- [39:28]
Narrator
Why would you worry about failing in doing that?
- [39:30]
George Arison
That. Well, kids are really important to me. So, like, I'm a very unusual gay guy in that sense. Like, I always knew I wanted children. Frankly, coming out was partly difficult because I'm like, wow, what's it going to mean to my ability to have kids? Because when I was going through this whole coming out process, like, surrogacy was not a thing yet. Gay men. Having children was not that common. And so having kids was a very big deal to me. And you know, what my husband and I agreed on is if we're past 45, we're not going to have more children. Children, because we just felt like you're too old after having two kids. And given how much time we spent on our children and how important they are to us, like, I am probably the only Russell 3000 CEO that like, regularly shows up at school. Is that, like, almost every dinner with my children, like, 6 to 7pm is like, massively sacred. And yes, sometimes I'm not there, but like, 90% of the time I'm there. And so they're really critical to me. I don't know if I could do that with two more kids. Kids, because kids are a lot of work. I just don't know if I have more in me to be able to give as much time to my two kids I already have to. More children I would want to have and be as good at the job I do. I don't know if there's enough of me for that. And so that's kind of what I mean by could I do it all? But if I was younger, 35, I could wait for another five years, have my kids be 10, and then have more kids, but that's not an option. So that's kind of what I mean by, like, I could.
- [40:51]
Narrator
Is it possible to be a really good CEO, a really good father, and a really good husband?
- [40:57]
George Arison
Oh, that's a tough one. I try to be a really good husband. My husband tries to be really good to me. But we definitely are focused on each other a lot less today because so much of our energy goes to our children. But that's, again, a choice that we made. Right? Like, part of us being a couple is that we wanted to be really good parents and we wanted kids. And frankly, I would exclude a lot of people as potential partners because they didn't want to have children. Like, it was a very early conversation topic on any date I ever went on. Because if you didn't want to have kids, we might have everything else going for us, but it wasn't going to go nowhere. So you definitely give up a lot if you want to be a really good dad. I probably am not as good of a husband today as I was before we had children.
- [41:37]
Narrator
Did having children change how you think about the style with which you lead?
- [41:43]
George Arison
I think what I would say is the opposite. The way I think about my employees and what I learned from them really Shaped things about how I approach my kids. But things I learn about being a dad also do shape how I think about my employees. Because so much of our behavior patterns are formed when we're young and we don't really appreciate that. And so I sometimes notice things about my team members in their behavior patterns. Before, I would have never thought about it this way, but I'm like, oh, they must have really picked this up when they were young. Because I'm noticing my kids pick certain things up now when they're really young. Or I read about how. How XYZ behavior of our parents results in this type of behavior in children, and I'm like, oh, this is probably what's happening with my employees as well. So that I've definitely kind of learned on. And I have a totally new appreciation for helping my team members understand their behavior patterns and where they came from and how we can work around those. Right. Because again, I don't believe you can change everything about yourself. You can change some things, but not all. But you need to build structures around each person to make them be successful. Successful.
- [42:46]
Narrator
Going back to the business. And I thought, when you're throwing off as much cash as you are, George, what do you do with it? Do you do, like, dividends? Is it buybacks? Is it acquisitions? What does one do when you have this free cash flow machine that you do?
- [42:59]
George Arison
One thing I can say is very clearly we're not going to hoard cash for acquisitions. If there are acquisitions that are interesting at some point that we want to do, we'll deal with that at that point. But I don't think it's the right thing to do to kind of just hoard cash and. And hope that something happens. We really believe there's a huge organic opportunity here. And that's what we are really focused on. And we're going to kind of look at what is the right approach to get cash to our shareholders at the time when we are doing it. We're not quite there yet. We have debt. We're paying down that debt. We want to get down to 1.5 to 2x EBITDA on the debt. We'll get there soon, and then we'll kind of at a board level, make a decision on what is the right. Right approach. But in general, you know, we've never kept a lot of cash on our balance sheet, and I don't think we're going to choose to keep a lot of cash for no reason.
- [43:46]
Narrator
Can I finish with a bit of a story time? The business has this Unbelievable kind of story. It's gone public. It was owned by a Chinese company, I think it was. I used to love story time at school. You know, when it's like, hey, kids, sit around. Can we just do a bit of that?
- [44:02]
Harry Stebbings
Which is like, it was bootstrapped by.
- [44:05]
Narrator
One person who built it to being owned by China. What happened?
- [44:09]
George Arison
So, by the way, Joel Simkai, who founded Grindr, like, what an incredible story, right? Like, this guy is not an engineer, has this idea, builds this company into something massive and a global brand. So he wanted to create liquidity for himself after having built this business, ran a process, I think had a bunch of offers, but best offer came from a company called Kunlun, which is a Chinese conglomerate. And he took that offer. Offer was in two parts. They bought 49% first and then had the right to buy majority. And then as soon as they were able to exercise that right, they exercised it, and then they fired him, and so he was out of the business. But right away, when they had 50% plus control, CFIUS, which is the US government committee that manages international investments, came and said, whoa, you never cleared this transaction with cfius. And we don't believe it's okay for a Chinese company to own a company with this much important data. And they were 100% right. Kudos to US government for doing what they did. It was a great move. And so they forced a divestiture and was like the first CFIUS forced divestiture and definitely the most prominent one that had ever happened. So Kunlun knew that they couldn't own Grindr for the long haul. Unfortunately, significantly disinvested in Grindr during that period of time in terms of product investments, business investments. And in 2020, ran a process to sell Grindr. There were a bunch of bidders, but the winning bid came from these three individuals that came together into an organization called San Vicente. They kind of oftentimes described as, like, private equity. And there's some private equity there, but they were not really kind of private equity people. And they bought Grindr from Kunlun in the middle of COVID signed the term sheet before COVID lockdowns happened, and closed the transaction in June 2020. Pretty remarkable when you think about it. And even more crazy, the entire engineering team, which was at this point was in Taiwan, quit when the transaction happened. And Grindr's code base on the back end was all a monolith at this point. So, like, one mistake could shut down the whole product. So it was a very precarious period. Super impressive that these Guys then said, okay, we're going to really focus on the Grindr for the long term. Brought in a temporary management which hired lots of engineers, and a lot of work was done to increase the stability of the product, make the code base a lot better, dramatically invest in kind of this technical debt improvements that need to be done. And then they went looking for long term management and public company management. And that's how they recruited me and then public. So the individuals who bought Grindr from Chinese ownership really saved this company in a pretty big way and was a really remarkable film. I think in one of your questions you were kind of asking like, was it a distressed asset when they bought it? No, not at all. Because the product was still actually growing. User base was growing, revenue was growing. There was like very little investment happening in the company. But it was not a distress at all. It was actually a very successful business. It just was made into even more successful business over the last four years.
- [47:05]
Narrator
What an amazing story, huh?
- [47:07]
George Arison
Yeah, it is a really incredible story.
- [47:09]
Narrator
Final one before the quick fire. What would it take for Grindr to be a $30 billion company?
- [47:13]
George Arison
Hopefully US being really good at execution and building out these new use cases, the what we call gaborhood expansion use cases, healthcare and wellness travel. I think there are others that we are thinking about. I think networking and jobs is another really big opportunity. Building those out and becoming successful in them. And then it's just math, right? Like, if we continue growing our revenue and we maintain really good ebitda, market, cap will kind of take care of itself.
- [47:38]
Narrator
George, I've absolutely loved this. I'd love to do a quick fire with you. So I say a short statement. You give me your immediate thoughts. Is that, okay?
- [47:44]
George Arison
Well, do my best.
- [47:46]
Narrator
The heaviest things in life are not iron or gold, but unmade decisions. What unmade decision weighs on you most, George?
- [47:53]
George Arison
I make decisions all the time. Like that's my entire job, right? And I do that at home all the time too. So I actually don't have a lot of decisions I've not made. Because guess what? If you don't make a decision, that's still making a decision. One of my team members said, yeah, sometimes, like, I'll ask you three questions and you answer only two. And I've learned that that means that you're like thinking about something. I'm like, yeah, but I also realize that you need an answer. And when I don't give you that answer, that's basically telling you, no. Most I made decisions are no's. And so I don't really have that many that I can kind of like speak to.
- [48:22]
Narrator
I get you. It reminds me of actually kind of a statement that those who know they can and those who know they can't are both probably right. Right.
- [48:28]
George Arison
Yeah. Makes sense.
- [48:29]
Narrator
What have you changed your mind on in the last 12 months?
- [48:32]
George Arison
So I believe that AI is going to be more at an infrastructure level layer as a solution rather than at a. At a product level, if that makes any sense. Like, I think application layer companies and products ultimately are going to be overtaken by an infrastructure solution because there's going to be a universal AI that does a lot of things for you. But in terms of how you think about the product and that, I'm not changing my mind on that. I think I've had that point of view for a while. But how we get there is going to require small pieces of AI to come into our lives at various points in our product experiences, all over products that we use, because we are not going to quite get to that ultimate goal for quite some time. And I think I've adopted how quickly I believe we'll be getting there and that building these like small experiences makes more sense than trying to kind of have one big AI that does a lot of things all at once for user.
- [49:24]
Narrator
Got you. So just so I understand, you don't think that infrastructure models basically your OpenAI, your anthropics will subsume the application layer long term.
- [49:34]
George Arison
I don't think you're going to need an ASANA with AI. You're going to just have an AI tbd how you engage with it. That's going to tell every many other AIs what to do. Right. So you can have a lot of agents that are specific and there's going to be one agent that's kind of telling all the other agents what to do, and you're going to be talking to that one agent, but it's going to take a while to get there. My initial perspective was, oh, like, we'll be able to get to like that one agent quickly and like, and let's go work on that. But actually I think you're going to need these like, smaller agents first that are more narrow in their nature before we can go to the one big agent. So as an example of kind of how to think about this from Grindr perspective, we're going to have more success building a feature like that summarizes your chat history with somebody and gives you a really nice summary. Okay. Like you've talked to this guy for six months and Here are all the things you learn about him that are helpful for you to have as a summary versus a bot that is able to talk to a person for you. It's going to take a lot more time to get the latter done versus the former. And there's a lot of benefit to kind of launching these smaller features that will be benefiting users with AI while we work on kind of the more transformative AI features that it will take longer.
- [50:42]
Narrator
What's your favorite consumer brand and why?
- [50:45]
George Arison
You know, I kind of like stick to things I like and don't change and then I discover something I like and I will stick to that for a long time. So I discovered Vori about three and a half years ago. Actually I didn't discover my husband discovered Voree about three and a half years ago. Now all my pants except for one pair of jeans are Vori. Even like when I wear suits, I have like a black 40 pants that I wear because they're so much better. And the reason is because they're so comfortable on your hips and your waist because all these other pants are not as comfortable there because they're not as stretchy and these guys are. And I like really love that you.
- [51:19]
Narrator
Can be CEO of any other company for a day. Which company do you choose?
- [51:23]
George Arison
I believe that impossible things are possible and I really, really believe that like it's like my core mission or knock up core like value statement in life is doing possible things things. It's a thing I've taught my kids from the very beginning. And so when like my son who loves Legos, you know, he like, he built this LEGO behind me even though he's only five and that's like 18, 18 year old Lego. He like, he does them and sometimes like, oh, can't do this. Can you help me? I'm like, no man. What's our motto? He's like, nothing is impossible and they kind of go do it. So whenever I think like when I think about that question, like, okay, like if I say this, like what's the company actually would want to go after and like be a CEO of and, and I don't know. So I'm going to answer the one that's actually impossible, which is I would probably be want to be president of the United States for a day and that's actually impossible because I was not born in the United States.
- [52:06]
Narrator
Well, it's a good answer though. Final one, what question are you not often or ever asked that you think you should be asked?
- [52:14]
George Arison
It's surprising to me how Little people talk to me about my upbringing in the Soviet Union. I learned this when I was first starting to raise money for companies. Kind of talking to VCs I saw this bifurcation 10 plus years ago. And so VCs were like older and kind of were young adults in the 1980s. Had a very different thought about my background versus VCs who are younger. Younger VCs never lived in a world where there was a real tyranny that they were like confronted with. There are real tyrannies in the world. China is a complete and not a tyranny, obviously, but we don't think of it that way because it pretends to have free market economics, which it really doesn't, but people think it does. But people who work of who are older and who saw the Soviet Union and remember it realize what real tyranny is like. And so they have, I think, a different appreciation for people who like grew up in that environment and both like what it means to have left that environment and be in a free place now and what it takes to do that, but also just like how it shapes your brain and the choices that you make. So that's the piece where like it's a really big part of who I am and how I make decisions. But a lot of people I think don't fully get and don't ask me as many questions as they probably should.
- [53:22]
Narrator
What specifically about it do you think they should know?
- [53:26]
George Arison
I think when you grow up in fear of a risk of what you might say really hurts you, you have a very different perception for how important freedoms are. I come from to everything from like, okay, we gotta be protective of freedom point of view versus like not right. And that's not instinctually I think how everyone else thinks.
- [53:45]
Narrator
George, I've so enjoyed this. I think you can tell from my kind of wavering around the schedule that we had prepared. Thank you so much for being such a fantastic guest and I've just loved having you on the show.
- [53:56]
George Arison
No, thanks for having me and I had a lot of fun too. This is a really good conversation.
- [54:01]
Harry Stebbings
Now if you want to watch that full conversation on YouTube, you can find it by searching for 20VC. That's 20VC on YouTube. For more there. But before we leave you today, one of the easiest investment decisions I have made over the last three years is investing in 11X.
- [54:15]
Narrator
Their digital workers don't just automate tasks.
- [54:18]
Harry Stebbings
They transform your business. With 24, 7 operations, multilingual capabilities and human like intelligence, they're revolutionizing how work gets done from Prospecting to closing, 11x is the all in one platform that allows you to reduce costs, increase pipeline and boost conversion rates. And that's why companies like Pleo, Handshake, Sauce, Grof and more are custom customers and lovers of 11X. Check them out today at 11X AI. You won't regret it. And speaking of incredible products, I want to share something interesting about the private market. Let me share one more exciting development from Hive the Hive 50. It's the first live index of large cap private securities generated directly by customer orders and transactions on the platform. Over 70% of the US based Decacorns have traded on Hive, and the Hive50 ranks the 50 most liquid securities in its marketplace based on transaction volume and liquidity. The index equally weighs the top 50 stocks, effectively acting as a barometer for the market's direction and momentum in private tech company investments. Go check it out@hive.com hive50 that's hive with two eyes to see how they're shaping the future of private market investing. Hive Markets limited Is a broker, dealer and member of FINRA sipc. Investments in private stocks are risky. Only accredited investors may buy through Hive. And just like Hive transforms liquidity, TIGAS transforms how we gather insights for investing When I invest in software today, I think software is valuable when it saves time and makes something easier. But when it enables the user to do something they simply could not do without it, then it's insanely powerful and valuable. That's the case with tigas. I literally could not live without them. When I'm investing in a company, TIGAS lets me see the most incredible reference calls with experts in a space who work at a competitive company or incumbents. These calls and data provide the most incredible insight that really shapes my opinions and thoughts and investment decisions, and I can then share snippets from calls with team members. This is a tool that will change how you work. Honestly, you cannot imagine life without it once you've experienced how powerful it is. And you can check them out today by heading over to Teagus.
- [56:30]
Narrator
As always, I so appreciate all your.
- [56:32]
Harry Stebbings
Support and stay tuned for an incredible.
- [56:34]
Narrator
Episode coming this Friday.