Andrew Wilkinson: The Hardest And Easiest Businesses To Start

Podcast Summary

• Learning from Business Experiences: Gain insights from starting and running businesses, regardless of success or failure. Honesty and authenticity are crucial in entrepreneurship, and learning from failures can lead to growth and success.

  Starting and running businesses comes with its fair share of challenges, and the experiences gained from these ventures, whether successful or not, can provide valuable insights. Andrew Wilkinson shared his journey of starting numerous businesses, some of which failed, and how these experiences helped him learn and improve. Agencies were identified as medium on the easy-to-hard scale, with brick and mortar businesses being the hardest due to the need to move physical goods and manage a large workforce. The conversation also touched on the importance of honesty and authenticity in business, as seen in Sahil Bloom's interview. Overall, the discussion emphasized the importance of learning from failures and using those lessons to grow and succeed in entrepreneurship.

• Staying informed about marketing trends: Recognize good business opportunities and optimize strategies by staying updated on marketing trends and learning from successful entrepreneurs.

  Staying informed about marketing trends is crucial for businesses to thrive in the rapidly changing tech world. HubSpot's "State of Marketing" report provides valuable insights based on data and surveys from marketing professionals worldwide. Sam Bankman-Fried, known for his ambitious self-comparisons to business icons like Warren Buffett and Steve Jobs, built his business, Pixel Union, from a Tumblr theme marketplace to a Shopify theme provider, eventually selling it for $14 million in 2014. However, he later bought it back and took it public as WeCommerce. Bankman-Fried's story highlights the importance of recognizing a good business opportunity and knowing its worth. By keeping up with trends and learning from successful entrepreneurs, businesses can optimize their strategies and grow efficiently. To access HubSpot's "State of Marketing" report and learn more ways to enhance your marketing efforts, visit hubspot.com/stateofmarketing.

• Transforming Regret into Success through Intensive Learning: Regret from selling a business can fuel a dedication to learn and succeed in investing. Focused effort and a business-savvy approach can lead to significant growth.

  Having a solid business foundation can lead to regret when sold, but with dedication and intensive learning, one can transform that regret into success in the realm of investing. This was exemplified by the speaker's experience with selling a growing business and later regretting the decision. He then became obsessed with learning about investing, specifically value investing, and spent several years immersing himself in the subject. This dedication paid off, leading him to become a successful investor and businessman. Warren Buffett's approach to business and investing, as demonstrated in a letter he wrote to the CEO of See's Candy, highlights the importance of being detailed and business-savvy, even for those perceived as primarily intellectual or investment-focused figures. By applying the operational lens gained from running a business to investing, the speaker was able to identify potential opportunities and challenges that spreadsheet investors might overlook. This experience underscores the idea that a decade of focused effort can lead to significant growth and success, regardless of one's starting point.

• The importance of product presentation: Effective product presentation, including merchandising and marketing, can significantly impact customers' perception of quality.

  The environment in which a product is presented, such as a store's layout, merchandising, and surrounding offerings, significantly influences customers' perception of its quality. Warren Buffett, in one of his letters, discussed how the presentation of Brandy's candy suffered in comparison to Stover's due to the haphazard arrangement of their products. He also suggested using descriptive material and creating a unique identity for the product to enhance its appeal. Buffett's involvement in businesses went beyond just investing; he influenced their growth and made them more valuable. Despite finding investing boring, he started businesses to keep himself engaged and create value. This anecdote highlights the importance of considering the presentation and marketing of a product to create a positive impression on potential customers.

• AeroPress: A Compelling Investment Opportunity with Lasting Impact: AeroPress, with its innovative product and potential to become a verb in coffee industry, has room for growth in digital sales and new leadership bringing best practices. Rare business resonating deeply with consumers, making it a compelling investment opportunity.

  AeroPress, a unique business specializing in a compact coffee maker, has the potential for lasting impact and could be around for decades due to its innovative product and potential to become a verb in the coffee industry. The retail market for AeroPress was not significant, leaving room for improvement in digital sales. The new CEO, previously the president of SodaStream, aims to bring best practices and growth strategies to AeroPress. The business's creator, an inventor, lacked a strong business focus, but the potential for significant growth exists. AeroPress is a rare business that excites and resonates deeply with consumers, setting it apart from others in the tech industry. The business's history, as well as its potential for growth, makes it a compelling investment opportunity.

• Navigating Different Business Challenges: Ecommerce faces thin profit margins and constant inventory investment, while agencies are asset light and scalable but can experience feast or famine. Be prepared for the unique challenges of each business type.

  Starting and running a business involves facing various levels of challenges. The speaker shared his experiences with ecommerce, which he found to be particularly brutal due to thin profit margins and the need to constantly invest in inventory. He also mentioned his experience with a cat furniture business, which was unprofitable despite initial success. In contrast, he found that agencies, though requiring a balance of supply and demand, were relatively easier to run as they were asset light and scalable. However, he warned that they could also experience feast or famine. Overall, the speaker emphasized the importance of being prepared for the unique challenges that come with different types of businesses.

• Navigating Different Business Ventures: Entrepreneurship involves risks and challenges, including market volatility, competition, and downturns. Be adaptable, prepared, and learn from failures.

  Running a business, whether it's an agency or a SaaS company, comes with its unique challenges. While every business owner aspires to expand into different industries, it's crucial to understand the nuances and risks involved. The speaker shared his experiences of owning various businesses, including a job board, a project management software, and multiple agencies. He highlighted the importance of being prepared for downturns and the challenges of competing against larger players with deeper pockets. He also mentioned the potential benefits of owning a SaaS business due to its recurring revenue model but acknowledged the risks of being acquired and the potential for market volatility. The speaker also shared his personal experience of learning the hard way that not every business venture is a success and that it's essential to learn from failures. In summary, the key takeaway is that entrepreneurship comes with its ups and downs, and it's essential to be adaptable, prepared, and willing to learn from mistakes.

• Targeted marketing for growth opportunities: Effectively targeting specific individuals or businesses with personalized marketing efforts can lead to significant growth opportunities, saving time and resources compared to traditional methods.

  Identifying and targeting specific individuals or businesses with personalized and persistent marketing efforts can lead to significant growth opportunities. The idea of creating a service that helps businesses get on the radar of potential buyers or partners by appearing in their preferred channels was discussed, inspired by a real-life success story of Jack Smith, who used targeted LinkedIn ads to join an incubator and later sold his company for $800 million. This approach, if executed effectively, could save time and resources compared to traditional marketing methods and create a strong brand presence. However, potential challenges include privacy concerns, ethical implications, and the need for a large budget to reach a select audience. Nonetheless, the idea has shown staying power in the mind of the speaker, making it a promising business opportunity.

• Starting a bank for small businesses with a language barrier to finance: A young finance professional started Tenzing to bridge the gap between founders and investment banking, providing affordable financing options and financial guidance for small businesses often overlooked by larger banks

  Many founders struggle to navigate the world of finance and access resources like investment banking due to a language barrier and lack of understanding. Investment bankers often view businesses through a spreadsheet lens, using terms that founders may not be familiar with. The speaker, who has only been in finance for eight years, has been searching for an investment bank that caters to small businesses, specifically those with an EBITDA of 1 to $5 million. After meeting a young investment banker, they decided to start their own investment bank, Tenzing, to help founders make informed decisions about financing options, without the fees and long-term focus. Tenzing aims to be a financial translator for bootstrap businesses, which are often overlooked by larger investment banks due to the smaller deal sizes. The founders wish they had access to such resources when they were starting out and encourage founders to explore all available financial tools and resources to maximize their potential. Tenzing's website is 10xing.co.

• Buying out founders for profit: Invest in great businesses, focus on buying out founders for potential profits, and exercise patience for long-term gains.

  Successful business investments often involve buying out founders who want to sell, rather than selling businesses oneself. This strategy was exemplified in the MeLime acquisition, where the founders wanted an exit and the investors held on to the business until it was bought by Albertsons for a large profit. The speakers also expressed skepticism towards crypto and NFTs, viewing them as speculative investments rather than long-term business opportunities. They advised focusing on investing in great businesses and avoiding currency trading. Additionally, they emphasized the importance of patience, citing the example of missing out on investing in Amazon early on but still having the opportunity to invest later.

• Second Chances in Business and Investment: Stay informed and open to second chances in business and investment, but be cautious of potential risks. Use examples of Amazon and Facebook as inspiration, and stay alert for red flags and potential fraud.

  There are often second chances in business and investment, even when it seems like you've missed the boat. The speaker uses the examples of Amazon and Facebook to illustrate this point. However, taking advantage of these opportunities can be difficult, especially when fear and hesitation are at an all-time high. Another key point discussed was the importance of being aware of red flags and potential fraud. The speaker shares their experience with the FTX situation and expresses fascination with the case, but also admits to not following it closely. They suggest that the story could turn out to be a compelling one, similar to "The Big Short." The speaker also mentions a Twitter thread by Jason Choi that provides clear evidence and a timeline of the situation. Overall, the takeaway is to stay informed and be open to second chances, while also being cautious of potential risks.

• Encountering Corruption and Fraud in Business: Bribery and stock market fraud can lead to significant financial losses for investors, often perpetrated by individuals who get away with it due to complex transactions and lack of enforcement, resulting in a large-scale impact on people's lives. Investment bankers can also profit from these schemes, perpetuating the cycle of deceit.

  The world of business, particularly in certain regions and industries, can involve corruption and fraudulent activities that are often legal but unethical. The speaker shares his experience of encountering such practices, including bribery and stock market fraud, which can result in significant financial losses for unsuspecting investors. He also highlights how these individuals often get away with it due to the complexity of the transactions and the lack of enforcement, leading to a large-scale impact on people's lives. The speaker expresses his disdain for such practices and calls attention to the prevalence of such incidents, particularly in Canada's stock market. He also mentions the role of investment bankers who profit from these schemes, further perpetuating the cycle of deceit and financial harm.

• Investing based on hype can lead to losses: Thorough research and due diligence are crucial before investing to avoid potential financial losses. Short sellers can uncover hidden facts and expose potential frauds.

  Investing in companies based on hype and trend without proper research and understanding of their financials can lead to significant losses. The discussion revolves around a Canadian holding company, Enthusiast Gaming (EGLX), which bought Luminosity, an esports team, and other assets, expecting a high valuation. However, the company's market cap is now significantly lower than the initial investment. Similar situations occur with other companies, such as Nikola and Bird, which promised revolutionary technologies but turned out to be fraudulent or overvalued. It's crucial to conduct thorough research and due diligence before investing to avoid potential financial losses. Short sellers, like Hindenburg Research, can provide valuable insights by uncovering facts and exposing potential frauds.

• Alternative funding structures for startups: Some investors offer flexible term sheets to reduce risk for both sides, but founders may prioritize traditional funding for long-term growth.

  The traditional venture capital model can be risky for both founders and investors due to its binary nature. Founders may end up with unrealistic expectations and pressure to deliver high valuations, while investors risk losing all their investment if the business doesn't meet certain milestones. To address this, some investors are offering alternative structures, such as non-binary term sheets, which allow for more flexibility and fairness if the business doesn't meet initial expectations. However, this approach may not be preferred by all founders and could create incentives to make short-term decisions that may not be in the long-term best interest of the business. Ultimately, it's important for founders and investors to consider the pros and cons of different funding options and choose the one that aligns best with their goals and risk tolerance.

• Flexible funding structures for entrepreneurs: Considering a flexible funding structure can offer founders more freedom and less pressure to pivot their businesses, but it also comes with challenges like potential burnout and the need for additional funding. Ethical considerations, such as not misrepresenting business potential to investors, are also crucial.

  The traditional venture capital model may not be the best fit for every entrepreneur, and an alternative approach, such as raising capital with a flexible structure, could provide more freedom and less pressure for founders to pivot their businesses towards a more sustainable and profitable path. However, this approach also comes with its own challenges, such as potential burnout of resources and the need for additional funding. Moreover, the ethical dilemma of raising funds at high valuations when the business may not be able to deliver a reasonable return for investors was also discussed. The speaker expressed concern about founders taking advantage of investors' trust and positioning their businesses as promising investments when they may not be. The speaker's tweet expressing skepticism towards "smart money" investors also adds to the discussion, highlighting the importance of entrepreneurs thinking critically and independently.

• Criticizing the venture capital industry: Investors should trust their own judgment and due diligence instead of relying on big names or industry trends.

  Relying on big names or the smart money to make investment decisions can be misleading. Even the smartest investors can make mistakes or engage in questionable practices. The speaker criticized the venture capital industry for its long-term fees and lack of transparency, which can lead to underperformance for investors. He also warned against FOMO investing and the pressure to follow the herd. Despite the risks and criticisms, the speaker acknowledged the intelligence and skill of the people involved, emphasizing that the industry's challenges make it even more impressive when success is achieved. He encouraged individual investors to trust their own judgment and due diligence, rather than blindly following the actions of others.

• Successful investors face losses and mistakes: Even the brightest investors can make mistakes and experience losses. Due diligence and understanding potential risks are crucial before making investment decisions.

  The investing world, even for the smartest minds, is full of uncertainty and risks. The discussion highlights instances where successful investors have made significant losses or questionable decisions. For instance, Paradigm's investment in FTX raised concerns about due diligence and potential misuse of funds. Similarly, Chamath Palihapitiya's investments in Metromile and Solana show that even the most knowledgeable investors can make mistakes. The alignment of incentives also plays a crucial role in investment decisions, and not all investors have the same level of commitment or risk tolerance. It's essential to remember that investing involves risks and uncertainties, and even the most successful investors can experience significant losses. It's crucial to conduct thorough due diligence and consider the potential risks and rewards before making any investment decisions.

• Don't blindly follow investor advice: Always trust your own conviction and do thorough research before making investment decisions, even when advised by reputable investors.

  While it's important to seek the advice and insights of successful and intelligent individuals in investing, it's crucial not to blindly follow their convictions without doing proper due diligence. Smart people can make mistakes, and even the most respected investors can lead you astray if you don't fully understand their strategies and motivations. The speaker shared an experience of trusting an investor's judgment without fully understanding the context, leading to a loss. The reminder was to always trust your own conviction and not rely solely on others, even when they seem trustworthy and knowledgeable. The speaker also acknowledged the importance of understanding the investor's background, investment style, and motivations before making any investment decisions. In essence, while it's essential to learn from others, it's equally important to do your own research and analysis to make informed investment decisions.