#101 with Ryan Begelman - How to Succeed Applying Private Equity Structure to Startups

Okay, what's up? We got Ryan back. Dude, back to back episodes pretty much. This is great. Yeah, I I'm excited about it. It's been uh it's been amazing how much feedback I've gotten. I've got I got buried in in all kinds of emails. And uh it was interesting to see what people wanted to know. What was the uh what was the best and worst email you got?

Well, there was a handful of people trying to sell me their their company, but uh they were usually too small, but there was a couple of interesting ones. And uh yeah, if people out there want to email me, they can just go to Ryanbeagelman.com and if they have a company uh with three hundred thousand or more profit, I'm interested in buying it. Uh or if they just wanna, you know, jam out or or ask me a question, I'm happy to help them. And uh a lot of people asking me about the concept of like how to structure your business to minimize risk. And outside, which we talked about You know, like joint venture waterfalls and structuring separate LLCs.

And um Some interesting some some invites to some other podcasts. So you guys are you guys are kinda like kingmakers, I guess. Well what podcasts. Music to my ears. You know, to be honest, I only listened to like three podcasts and and didn't listen to it for a while. So I didn't recognize the podcast, but uh but you know, I don't know. One of them had like Gary Vee and some other interesting people looked pretty legit. Nice.

Brian, when I was I don't know if you guys happen to see this, when I I uh tweeted about how I thought buying a home was a horrible idea. I pissed off so many people. I I agree with you, by the way. I mean Yeah, historically.

I think historically like home values have grown like two or three percent. And uh obviously in some areas of the people at the right time, they they've done better, but uh Yeah, I mean I was a renter for a super long time because I felt I could do better with my capital. Yeah, I'm about to eat a huge loss on my San Francisco condo. So um I'll never buy again, as far as I'm concerned. This taste will take seven years to wash out of my mouth.

How much will you have lost, a significant amount? Yeah, I think I'm gonna lose like I think it's gonna sell for two hundred thousand less than I bought it for. So that's just straight out of my down payment and then you know, it's a f the agents the agent fee is like five percent, right? So I went with like a real agent, not like a discount broker, because I was like, shit, it's gonna be hard to sell. I think I actually need somebody who's good and will hustle for this.

But five percent of a two million dollar house is like uh you know that's a hundred and a hundred grand right there. So so on top of the loss, I'm then gonna pay the hundred thousand fee for for my uh For the pleasure of of of losing money on my house, but whatever. It's okay. When when some other places I l lost on this one, that's okay. Well, one one of the ideas I brought today is how to make money on your house. Oh okay. Yeah, let's start with that then. Because I need that.

Well, it was you know, it was it was a lot of the concept I was talking about on the last show about holistic entrepreneurship and how you can live better lives through entrepreneurship and And so like one idea that I I love noodling on is Okay, you buy a house outside of a major city and a destination people want to go, like Hudson Valley, New York. And then you You turn you you renovate the kitchen, you make it a chef's kitchen, and you you give

High end cooking class experiences. I've I've done a bunch of these myself. But um You know, I was doing the math on it. And if you do two classes a day, five hundred bucks a person.

And you have ten people per class. And you and you do that five days a week. Fifty weeks a year. Um it's about two and a half million dollars revenue. And you could generate probably at least thirty percent margin at seven hundred and fifty grand a year.

And all while you're just like tending your garden. teaching coaching classes. And frankly, I I at thirty percent, I think you could actually hire a couple of people to teach the class for you. You'd want those people in your home? But you could build like a kitchen for him, basically. It's not even a home. Okay, well fine. You build you build one of those little uh pop up like you know, manufactured modular homes in the back yard and you do it there.

Yeah who's paying are you you pay five hundred bucks for a cooking class? Is that what is that a thing people do? Yeah, I mean well you could turn it into yeah, if you could turn it into like a half day experience. Yeah, I I've paid that much. And frankly, I think for you could have a higher end offering that's like a couple of grand. And uh we actually do this at Summit, so We've hosted all kinds of weekends. We've we've you know about a hundred and fifty people come out to a weekend when it costs about two grand. And uh we experimented with a culinary weekend where it was like all different kinds of chefs and

you know, tasting different kinds of things and you know, making things and pe people love it. I feel like with Summit you have this uh Both an amazing perspective'cause you sort of did the impossible and have this like really unique unique set of experiences. On the other hand, you have this really skewed view of reality because it's like The people who go to summit are people who are of a certain, you know, level of success. And then they they they basically get wrapped up in the summit like world, I feel, and they it's like a casino in the cloud. And like

They're like, Yeah, okay, take me on this helicopter ride. Um, all right, cool. You want me to buy this a piece of this a patch of this mountain that doesn't isn't undeveloped right now for a million bucks? Okay, take my money, you know. I think you get people into this. So it's so immersive. That the sales On you know the on premise sales are like, you know, bar none compared it's it's uncomparable to like what I think most people are ever gonna be able to to to deliver because you've built equity with people and you get them in the moment where they're like

I do need to live my life. Yeah. Like I I do want to be around these people more. Yeah, I do need to be out of the city and out in nature. And like I think people make great decisions when they're in that state. Before we even get into that, shall we remind people who you are? Yeah. Sure, sure. So Ryan, uh I'll do it for you. Because that's what I do. Uh Ryan started or helped start Biz Now Media, a company that did a newsletter and events business.

twenty million in sales and about six million in profit, sold it for fifty million bucks. Then what Sean's referring to is summit. He Yeah. Or other guys, I believe, uh, bought a mountain for fifty or forty million dollars and then turned it into a resort, and they do Summit Series, which is this. a bunch of a series of events for

I don't know. Who do you say? Industry leaders, artists? Yeah, artists, academics, scientists, and all kinds of entrepreneurs, nonprofit leaders, et cetera. I think you said it right on the last podcast, Sam, where you were like, it's like Ted but cool again. Like uh maybe how Ted used to be. Um it's like Ted if Ted was done by like, you know, twenty seven year olds who like wanted to have a lot of fun. And Ryan, you don't know this, but I've used you as an example so many times. I've never I've never even been to Summit, but I heard y'all's story. I read it up. I read about it because I was like, who was behind this? And it validated this theory I have, which is

You get no rewards pretty much for attending the party, or very little rewards for attending the party, but you get all the rewards if you host the party. And Sam, you did the same thing with HustleCon, where If you do the sweat to organize and you can convince just that first couple people of legit players to come in. There becomes this domino of legit people who will come in. You know, even though you have no track record, no nothing, no no claim to fame in that regard. And by being the one who invited everybody, you get this like amazing rush of goodwill and opportunity and relationships with people. And I've seen Sam do this with HustleCon. I saw you do this with Summit Series. And then uh the other example I always give is Patty, who created um

Web web summit and f F dot ounders or whatever. I don't know if you you probably know Patty'cause you guys are kind of in that world. Yeah, no, Patty did an amazing job of Web Summit. And um no, you're absolutely right. Summit started with just nineteen people. You know, we cold called them and those nineteen that invited their friends and then they invited their friends and and it just snowballed until it was, you know, a few thousand people getting together. Who who was the most interesting first like

The domino to fall of like legit person who was gonna attract other people But they had to be the first one onto the dance floor. Like, you know, with Twitter Ashton Kutcher or whoever, who was the first celebrity to really come on the platform and legitimate. Who was y'all's first in that? What was it like the Tom Shues guy or something?

Yeah, I mean Blake Mykowski from Tom's definitely. Um, and I would say Tony Shea was was instrumental from Zappos. Uh Tony was not only one of the first summiters, but We hosted this event at the White House, where we We're introducing basically the White House cabinet to Silicon Valley and entrepreneurs. And um and Tony came to that event and at dinner after the meeting with the White House

He came up to us and he said, Is there anyone here who like you wouldn't invite over to your house while you meet your parents. And we were like, Yeah, of course of course, like There's some really incredible venture capitalists and people here that we think are kind of dicks, but you know. They're here because everyone wants to meet them. And he was like, Nope.

They can't come back. He's like if you want to build serious culture and you want to have people that you know, like hold the values of this. then you need to only have, you know, the cer a certain kind, like you need to have kind hearted participatory people. And uh and that became then you know our second

uh, you know, kind of criteria for who counts. D who's the most interesting entrepreneur you guys have met? Or a couple of the most interesting where you're like, This person is going this person is is all they're cracked up to be. Well, I mean, look, it's controversial to say, but I told you this when we were together, Sam. I think Adam Newman is someone that I spent a tremendous amount of time with uh at certain key points and We Work's uh run up. And although you know obviously

He may have his shortcomings and and and but it was incredible to see how quickly could learn. How good he was at at negotiation, at real estate, at design, designing the space, designing the website. Um, I just think it he's been now underrated. Yeah,

um dynamic is. Um in in many respects. Just that like in terms of just like pure execution. Can you tell Sean and the listeners any of the stories that you told me? Yeah, an example would be I would go into his office and I was just always impressed by he'd have this huge screen up with all his KPIs. And and he was on top of like

How many people were asking for the air conditioning to be turned down in in in their we work, and you know, how many tours happened that day, which Frankly, like as someone who th who prides himself on building his businesses around KPIs, like I I had a hard time building that level of transparency into my business. And I had been doing it for even longer than him at that point. So I don't know, there were lots of little nuances like that that I was impressed by. So I got a question for you. So last time you were talking about structure and you were talking about like having a hold co that licenses the brand to the to the individual like kind of operating entities.

And this is kind of controversial because this is what the like Sam, I when I was listening to it, I was like Sam, you gotta ask about WeWork. We work did this and it was super controversial, right?'Cause like Well I I I know that Ryan and Adam had a relationship and Ryan and I were shooting shit about it and I just didn't know where I was gonna let Ryan decide if he wanted to get there. Okay, so I'm gonna I'm gonna ask it more directly. So That structure made a lot of sense to me and I think there's a ton of merit to it. But then We work was kind of an example where from the outside it seemed like Maybe they had gone too far where he was licensing back the We Work name for like seven million bucks and he was the master owner of the leases and then they would

least from him. And so it kind of seemed like a double dip. for the founder in a way that was not well received by the like kind of startup community and investor community. Um, what do you think? Is that an example of no, that was legit? Or yeah, maybe he took it too far, or that's this is completely misunderstood. Here's actually how to think about it. So I I think in some ways it was misunderstood and in some ways it was not executed quite right, and pr and I can't speak to why, but This is very common in hotels. So Marriott and Hilton originally

develop their own buildings, own the buildings with investors. Each building would have different investors. Maybe one set of investors doesn't want to invest in their Dallas Hotel, but they do want to invest in the Houston one. So and then they would have a holding company that owned the license to you know to own the brand and had and actually employed the people that were on the ground in each hotel. Managing those and and for that they would they would earn like seven percent of revenue. So they'd have economics in the building and they'd have economics in the service that's being provided from the holding company. So this is and then over time, Marriott decided that it was not advantageous to own a real estate because real estate is a slow burn business because it's very capital intensive. You can only open up so many hotels in a year if you have to go about it that way. So they sold off the real estate and they said, look, let's just double down on the flag or on the management company. And that way they were able to open thousands of hotels very quickly. So

You know, I think um Adam was dabbling in both, right? He was owning real estate with like joint venture partners and private equity and other sources of capital. And then he had We Work that was venture backed by another group of investors, some of who might be the same investors in the real estate. And they were then, you know, doing these deals where they were leasing the properties that they owned. Um You know, one way to solve that so that everyone's aligned is you raise capital from the same investors for both LLCs. So you say, you know, one entity is going to buy buildings and develop them and redevelop them and lease them. to We Work and the other entity is gonna be We Work and it's gonna own, you know, the technology and and the brand and the and the know how of how to actually operate these

he's on the ground and and it's gonna lease them from them. So I think that that's one way you could do it. The challenge though Is that most the the those are two kinds of different investors. The kinds of people who invest in real estate and the kinds of people who invest in venture are rarely the same people. And so I I'm guessing that's one reason he was struggling.

With that as a The investment community didn't really understand. Like the profile of these of how these two things could be synergistic. But how do you do that with Like a software company or a media company. I mean like with

more traditional internet based stuff. So like you know, an example for a media company would be to follow the virgin model where you build up a media brand, you develop the brand. And then you you license that brand. So take like Barstool. in you know, instead of them

you know, being bought by Pan Gaming, I think it was. They could have licensed their brand to Penn. Penn could have spun up, you know, an app for sports betting. And Barstall maybe take seven percent of it. And in addition to that, Barstell maybe gets paid for advertising so that they advertise. uh you know the new app.

And And in addition to that, if they want to take it a step further. They could even raise like a a venture fund. and invest in a new joint venture. So that they're basically taking a piece of the pie on every on every leg.

And a great example of someone who does this really, really well is is Barry Sternlick, who created the Starwood Property Group, which which is a publicly traded company that owns, you know, Starwood and lots of other uh brands like St. Regis. But he also, you know, I I think a lot of people don't realize this. Uh he also owns Star, right? So he also is a private equity fund. And he also own the one hotel and he also owns the Bakra. Like, okay, here's a great example of this. So Alright, today's episode is brought to you by Tempo.

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Tempo dot fit is the URL and tempo hustle. One word, you'll get a hundred dollars off. So check it out. I use it. If you look me up on Twitter, you'll see I'm always filming videos where I'm talking to that company saying I'm trying to crush their employees on the leaderboard'cause I actually love this thing and I and I use it all the time. So check it out. This is genius. He buys the Bachrock Crystal Company. been around forever.

He then takes that brand. And he creates a hotel company off of it. And he licenses the hotel brand. to a development company that builds a skyscraper in midtown Manhattan called the Baccarat, you know, hotel.

He fills those al Bakra crystal, which he buys from his own factory. And then you know, his private equity fund is like is the equity behind all these operations. And and you know, he's playing in like so many different facets of this business. Why would the skyscraper want the brand of the that diamond factory if there is no brand yeah, I mean it's just a name. Well, Bach crystal has been around for, you know, whatever, a long time and is really famous. And the target audience that's buying like thirty million dollar condos that are buying from Russia and China and Latin America.

Or I've been buying Bakarat crystal for, you know, generations. And so he uses his brand like you everyone knows Bakra means, you know. It means luxury. So It's like it's just a really smart way. And then on top of it, he owns the Bach Rock company, which is You know, hopefully just a decent investment on in its own right.

So so this makes total sense to me,'cause w whenever you're doing a new venture, if you can I what I I always think about hijacking trust. So like I did this with the podcast in a way where I was like okay, cool, I can start this podcast on my own and build my own brand and build my own distribution and all build all this. But like Hey, maybe there's a win win here, right? Sam has the hustle. The hustle has a big audience. They have no audio content. I'm willing to do all the work. I think I can do it, pull off a great operation on the podcast.

But If they put their name behind it and they put some distribution behind it, we'll get we'll both get there faster. And for them, they got basically a very low cost free option to build a whole new vertical of their business and and c capture some of the value. And so Like Sam, what you should be doing uh what I'm hearing from Ryan is what Sam should be doing is saying Is the hustle a good brand? If if you've put three, four years into building the hustle, which has some level of equity with

millennial business oriented people. And then you hear me talking about cool, I wanna build basically a new education company. I'm gonna do courses, I'm gonna do all this stuff. Well, you should be doing is say, cool, this is now Hustle University. I'll give you the brand, you give me six percent, you go do all the work. And you know that and as long as sort of like your brand is not being diluted by the efforts, right? So if you're partnering with a good operator or

Bakarat's case, like a high end developer that's gonna make a good quality hotel, then you're getting free expansion um of using you know equity that you already have that you're currently not tapping into Well that's the thing. I'm just gonna go do it on my own, right? And so you capture no value and I have to build trust in a slower fashion because I have less of a Brand then

You know, the hustle is kinda like a tiny, tiny, tiny version of virgin. So let that that sounds great. So when it works out, it works out. Let's talk about the downsides of that because I don't want people to think like oh this is obviously the answer. Let's talk about the downsides of that. I mean like the other the other The other side is that Did you go do it on your own? The other side of that is that you do it and it and it sucks. So that would if Barry didn't

So uh What's his name? Barry? Very Sterlick. Yeah, he's Yeah, he's that guy's I've I've heard him talk. He's pretty amazing. I mean, Ryan, what's what are the downsides of this? Yeah, I mean you mentioned it, like Oprah decided to be vertically integrated and own her own magazine and own her own network. And Martha Stewart went the other direction. Martha Stewart said I'm gonna license

out and and you know there's gonna be my clothing's gonna be sitting on racks at Target and someone else is gonna manufacture that. And the pro the challenge you can run with that, of course, like you mentioned, is someone dilutes your brand, they damage the brand. Um Or you know, you you kind of dilute your efforts because you're probably spending some amount of time and energy on on spinning these up. Uh, you know, I don't know. I think you you you probably also have like trademark and legal costs'cause like version of a whole team.

of people that are just fighting like uh trademark issues globally for them. Um, it's a it's a it's an amazing uh story and company. And also, by the way, for Virgin, there's I think they've launched two hundred companies and sixty of them are I think are around today. So like just like a venture studio, you're gonna have failures. So yeah, there's definitely There's definitely challenges. Now one way to manage those challenges is

Through your license. uh and through control. So you either want to control the brand as best you can through your license. So making your license up like maybe they have a brand committee that has to approve like, you know, marketing collateral and things like that for the licensee. Another way to manage that is is to either uh raise a fund or have the money

to own a majority of the company as well. So you're not just getting seven percent. You're also controlling the company, maybe you have three out of five seats on the board. And so if the CEO of the the new company is doing kind of shady stuff or you know, isn't running it well. You terminate them and replace them. Everyone talks about virgin.

And few people I think understand how it works. I think I don't understand entirely. I think you do though, right? Yeah, I I I'm really indivergent and I I think in general people don't under I I think so here's what I've observed. private equity people don't understand startups and startups don't understand private equity.

And if you understand both both sides of this of these coins. then you become like it's just you become infinitely more flexible and creative uh at how you can go about creating value for you know, customers and and shareholders. And so Yeah, Virgin is one of the few companies at scale that clearly understands both of these things. And they have a group in in in London, I think it's like three hundred employees.

And basically what they are is they're like a startup studio meets a private equity fund. You know, they They spin up companies from scratch or They join venture with existing entrepreneurs who are gonna build companies underneath their brand. Um, or they buy companies and put their brand on it. Like they they have a lot of different ways of skinning the cap, but ultimately it's a brand it's like a branded Berkshire hat one.

They're four sides, right? They have Innovation like a startup. They have private equity style um business operations as well. So they understand both those. But then they have a brand like Coca-Cola and Nike. And then they have operations like in a way that those those companies, you know, do so so they have these like sort of four four dimensions that

They got to world class level at And uh then you get sort of outsize returns. But where did the cash come for all this? So uh Virgin originally was a record store and then a studio and then like fifteen years in it was an airline. So like where does the financing for all this come? Did it did it come from the they they they sold their record label for eight hundred million dollars. Is was that the s the huge seed funding?

Yeah, so originally it was a magazine when he was a teenager. And then in the back of the magazine he put um like oh like a mail order for records. And then he became A uh a record label. And you're right, he made a fortune on the light on the record label. Yeah, I mean, he also even created a gaming company, they made video games. So he made a bunch of money. So in his case, You know, it's the family office that's doing this. But my point is you don't have to be rich to do this. You could

Create a fund Or bootstrap a company and then use the cash from that business, like Andrew, you know, Wilkinson has been on your show, use the cash from his own operation to start buying other companies. And and uh and of course you could also then as as tiny as now done raise Of fund so Yeah, you need you need like you need the right, you know, kind of components. You need operations.

You need a fund. That those two things alone will allow you to do this. And the third thing that will allow you to go a step further is to have a brand. And uh you know, like obviously the hustle has a brand, Virgin as a brand, summon as a brand. Um And then you can start to do really interesting things. I mean in the case of Stern, like he did he didn't even have a brand. He bought the Baccharat brand.

And then and then he also proved that he could do it by starting a brand. He created the one hotel, for example. From scratch and So he's done it, you know, in both ways. It's it's just it's really interesting. That's awesome. And Ryan, when we were so we talked on the phone last night and uh it was a great first date. Uh it w you know, I was blown away, you had a bunch of interesting thoughts, and the thing that I thought Y was kind of unique about you'cause I talked to a bunch of people who know a lot about business.

And they have a cool success story. But I thought you had a very good I don't know, point of view or set of wisdom around A a style of entrepreneurship that most people don't don't talk too much about. Yeah. I know you you you were talking about a little bit on the last podcast, but I thought you m you might have some thoughts or wisdom around you know, creating wealth while still having sort of

Uh A great life and not just this like Extreme Olympics level commitment and sacrifice all other areas of your life of Approach to business.

Yeah, yeah. So I've been I've been trying to think about how to best describe this. And you know, I I was talking last the last episode about holistic entrepreneurship. And um, you know, maybe another way of putting it I was thinking is you know, instead of thinking about disruptive companies. you know, lead disruptive lives. And so You know, I left like the the the kind of the traditional path of working at the Carlisle Group and being in private equity for this kind of entrepreneurial journey. that took us on this crazy adventure. And the idea was to like disrupt the norms and and and to get to a place where we could You know, kinda zoom out and broaden our focus from just achievement of status and money.

And instead like broaden our our focus. to creating real wealth and I think real wealth is about freedom And it's about the freedom to fully express yourself, to be creative, to use your imagination, to to you know, to avoid commuting to work if you don't want to avoid commute to work. And um And to of course, you know, making enough money to support your livelihood.

And I think along those lines You know, I have I've learned a few things that you know, I'm I'm happy to share. Yeah, let's let's do it. Yeah, one thought was You know, build skills that that will allow you to make money around your passion. So, you know, learn all you know, learn sales, learn marketing, learn digital, not not just to get rich, but so that when you have a a passion idea, like you know exactly

How to execute on it. And so I'm always trying to to master these skills, which which happens from listening to shows like yours. watching YouTube channels and like learning, you know, just taking online training, taking you taking U to V classes, taking online courses, calling founders, which is a a lot easier to do than than you might imagine. I I'm constantly cold calling founders. Have you heard of Ike Guy?

I have, yeah. Yeah. Yeah. So basically uh is it Japanese? Uh it's uh philosophy or uh I don't know what how you categorize it, but I think it's Japanese. And it's like there's It's like four circles that kinda look like the Olympic rings and it's like basically What does the world want? What do you want to work on? What can make money and what are you great at?

And it's like the the whole premise is find out something right in the middle of all four of those things. I I think that's what it is. Yeah, you can even eliminate one of those because if you if you do something the world wants, the money will come. And um And so th I think you you could simplify because that diagram makes it look like you have to become a flower, or it's like I is it confusing what that is, but it it it the real simple version is just You know

What do people want? What do you enjoy doing and what are you actually good at? And if you find the intersection of those three, that's the zone of genius you want to like operate from. Um And it sounds like Ryan, what you're saying is like there are some Master skills to pick up. Master skills like communication, like sales, like persuasion, like um, you know, digital literacy, some some things like that that

If you have Sharp at your disposal Then If your hobby is Ferrari, you'll know that you can spin up a f free newsletter and create a paid membership on top of it and you could be those guys who do two million dollars a year on their Ferrari newsletter. Talking to other Ferrari nuts. Yeah, exactly. Like right. Like I I've mastered, you know, events and info products and experiential. And so boom, like if I get into cooking, I get create a culinary school.

Um, and And so you know, and my other thought was Think small. Uh, you know, venture, I think like the world is dominated by this like kind of venture, you know, big you know, total adjustable market sort of thinking. And I really like this thought of like minimum viable market, like what's the smallest market that you need.

to generate the income that you're trying to generate. And um and often You know, part of one way of thinking about that is think expensive. Think cheap. So like I could offer my cooking class for five thousand dollars and make it extremely high touch. And then I might only need

you know, whatever, ten people a month to make to make a small fortune. Or I could charge, you know, fifty dollars and then, you know, I've got to build like a much bigger scale to kind of venture company. Well okay, but Sounds good. I am interested in that, but let's play the other side of this, which is Two points. The first is

If you're only making five hundred dollar classes, like that's not fantastic for the average Joe and like there needs to be Walmart and The biggest thing in the world is Yeah. I don't I mean you it doesn't matter what's the biggest a big thing is is Louis Vuitton, a big thing is Walmart.

Um the second thing is the people who you're saying you admire, Barry Sterlich And you also said you admire Adam Newman. Do you think they thought that way? Well first of all I I'm saying I admire their skill set. I'm not saying that I admire their well being. So they're two different things. I and I'm not saying I, you know, I don't I don't I don't know them intimately enough to know their well being, but what I'm suggesting is that We don't all have to build like billion dollar companies. They're

You know, good good for the Sam Waltons out there and the Adam Newman's, like let's let them go solve that. Luckily, there's seven billion people on the planet, and someone's gonna step up and sacrifice their whole lives and their family and their hobbies and their well being to make these insane incredible billion dollar companies. I I I'll be happy just to build something that, you know makes me a nice income and is meaningful. So I just I just hate when we We we get into these discussions.

me and Sean do with a lot of people and they say things like that. And I always wanna make it clear because to the audience It's like What our guess and what we are saying is that This is just one way to get it done. And I think that far too often people say, like you have to raise money, you have to raise money, you have to do this. That's cool. And then other times like Andrew and you and me and Sean talk about this too, like no no no fuck that. You could live this other life. And in reality, we have to understand that

There's So many ways to get it done. Um but that's the point of a podcast, right? We're gonna have people on who are like, yo, this is the way, because they believe it, they live it. They've had success with it. And then if you listen to 10 episodes, you're gonna be like, Wait, I heard this is the way ten times. Uh oh, what that really tells me is that there's 10 ways. And I should pick and choose the one that resonated the most with me. Uh and maybe it changes in my twenties versus my thirties versus my forties, and you know, I'm I'm cool to be flexible with that over time.

I completely agree. And I'm not criticizing criticising at all what Ryan's saying. I'm just wanna make it I always I hate when people Like I always do this and I hate when I do it is when I say like this is the answer. And then I always was like, No, I gotta make it clear that there are many ways to get it done.

And so I I wanna know more about Ryan about your way. So who's somebody you admire that actually has blended Let's say their entrepreneurial their ambition. With Without letting it overcome them and overtake their life where they're You know, you're Elon Musk, you got seven kids, three wives, and you know, you sleep in the factory two hundred days out of the year. Um, so who who's blended it well? Well give us an example.

Well, I I started talking about this last time, but you know, like one friend I mentioned is Joel Holland, who owns Harvest Hose. Yep, he lives in Bell, Colorado. He's got this great company. Uh it makes plenty of money for him and his wife. Yeah, he loves R V. He likes to go around in R V. It's actually his job is in part is to go around he loves drones and R Vs to go around and film Himself enjoying wineries.

in his R V, which actually becomes his Facebook advertising to promote the membership for joining The R V membership that he sells. So I I really like it. That's like one of my favorite examples lately. So let me ask you a different question.

Let's talk money for a second. So you made a good amount of money off of Biz now. Before that, had you done something that you were well off with or you just had a good paying job or something, or wh where were you at before that? Well, I had a I had a well paying job in banking and then uh at uh the Carlisle Group in private equity. But um but it was like you know what what is that? What what do you make when you're in private equity at a at a if you're what's a well paying talk? Is that like a hundred fifty K a year? Is it a hundred K? Is it three hundred K? What what does that mean?

Like at the level I was at, you'd make like three to four hundred grand and you'd be quickly on the path to making over a million a year. Okay. And so you walked away from ceiling? Is that the ceiling on those guys? No, the ceiling is making like hundreds of millions of dollars uh like like per fund. Um I mean, so here's the math, right? Like we had a three billion dollar real estate fund that I was in. There's like 10 people in the acquisitions group and a bunch of people in asset management. Three billion if we return.

Two times, which is like kind of the bare minimum for success over five years. then we we keep twenty percent of the upside. So we basically we turn three billion into six. That's three billion of profit. Sa twenty percent of that is six hundred million. We split six hundred million. amongst the ten partners of the Of the fun.

Yeah, I mean, I don't know exactly how many partners there were, but yeah, something like there's probably ten partners, but there's also then the holding company at Carlisle, which probably take It's like, you know, half or more of the Right. Okay. So you had a you had a good job and then you had a path and then you do biz now and that's great. That has a good exit, uh summit. Um has done well like Culturally, I don't know. Financially, which one's better for you personally? Was it Busnow or was it Summit?

Well, this kinda gets us so Bisnow was was more financially successful than Summit by by by a lot. Um, summit was never really meant to be like a financial success, or at least hasn't been thus far. It was it was more about building something really enjoyable and and awesome for the world and for the community that we were building. Which gets to, by the way, my solution for Sam because Sam and I've been debating this idea. Sam loves Sam is is partially driven by doing epic shit, right? And like he wants to go and do really cool creative projects that You know, have a cool impact on the world and make him excited and make him want to wake up every morning and work on them. But he also, you know, I I I I I'm speaking for you, Sam, but he also wants to make a few dollars, right? So one thought is

Have your phone. And then have your serious company. I think that's You know, I'm I'm somewhat living proof of this. Uh I don't know that we've done it perfectly. And I and I'm and really my partners were running some of it mostly day to day. So I can't say that I was as much involved day to day for many of the years. But You basically spin up a company, you get you get it to like making a million a year.

uh or half a million or whatever you need to to to make enough. And then You you know, you you launch your moonshot company in a separate L L C or a separate C Corp. Uh a lot of Yeah, go ahead. A lot of people do that and it's got great results. I mean, a lot of people get wins early in their career.

um or even mid in their career. And once you get that win, you you can get after it. That that's quite common. But there's a difference of uh. parallel versus in series, right? So like are you doing them at the same time versus you get your win or you you put the first five years in where you're you don't even think it about your side projects. You're just making your main thing actually work. And then as it starts to work, you either hire your CEO replacement or you sell the company or something, and then you now have a cushion and you have a buffer and you have a whole bunch of experience and sharpened up skills that you could apply to

More ambitious projects or more fun projects. So my personal take is that it's nearly impossible to do that in parallel. I don't know if you agree, Brian. I I would also s I don't know if it's I don't think it's impossible because it's definitely there's examples of people doing it. I know that if I tried that shit, I would get smacked by the market. I know that that reality would smack me and say, Oh, you thought you could do both? Like, you know, at the same time, like that's not how the world works. But Ryan, you're so it sounds like you're kind of saying You can

You you believe you can do them sort of at the same time. Not not I so look, we we started Summit in two thousand eight and I and I basically bought into Biz now in two thousand eight and we scaled them at the same time. Well part of the way that we did that was as I focused on bus now and my business partners. Токи стан саме. For the first three years I I worked till like two, three in the morning working on both.

Um every day like seven days a week. So it was it it was like you know, I was working kind of like it like I was accustomed to doing in banking. So w it was pretty brutal. However What another way to do it is

Uh about I think five years into business now, I had replaced myself with another CEO who I had groomed, who I hired out of college. who's still there running the company. And at that point I was able I had a lot more freedom. Now one thing that I was doing, however, was I was trading growth in that company. for doing other things at at that at that juncture. So like I could have doubled down. I could have been me and my CEO.

Spinning up lots of new things. Or I could have like slowed growth a little bit, which is what which is essentially what we did. So now I could spend a little more time doing other things. And we hear that all uh this advice a lot. And this is something that Silicon Valley doesn't actually talk about a lot, which is hiring, replacing yourself as a leader.

I kinda did that. What I noticed is that there is Very little. discussion on this out in the world and It's so hard to learn. It's so hard. Yeah, we we've done it now a few times and it's it is extremely difficult. We've I've definitely done it, I've definitely failed and succeeded at it.

I mean for me I had this guy, Will French, come live with me for nine months. I slept on an air mattress. I gave him my bedroom. And I uh it was right out of college and I trained him on literally like he was an apprentice. I I you know, he everything I did, we we I used to call it like knee to knee training. Like You're not gonna learn this if you don't like literally see my computer screen and see exactly how I'm building my spreadsheet. Like I taught him not to use any key not to use his mouse, only use his keyboard, you know, like I taught him like every nuance. of everything the way I think, the way I make decisions. And so over time

He learned the way I did things. Now, look, the way I did it, though, is I had like five people that I was doing this with, and one of them emerged as the obvious leader. It wasn't it wasn't so clear initially. Some people were really good at project management, but then sucked at managing people. Some people were really good at sales, but then couldn't manage the sales team. And and you know, some people could do one thing, but they couldn't innovate. So it w it's definitely challenging. I mean, one thing is If you're really good at being innovative and being like the zero to one guy.

You know, you can just be like a very active advisor, just someone else who's a stronger integrator and operator. Or if you're a really good operator, like maybe go find yourself more of a visionary zero to one sort of person. So Um You know, I I that that was that was kind of part of my my approach there. And you text us before this, you go, I got a bunch of frameworks around

Getting rich and having fun slash happiness. Which I think is What everybody wants. So so so rattle off a few of those before I know Sam has to jet soon. So I wanna I wanna get to some of these goodies while Sam's here. Before just starting a business, think about the egg the eggs and multiples of that business. I wish I had done this when we start when we got involved in business now. I if I had known a trade associate like trade expos sell for twelve times, but newsletters

you know, sell for less and conferences sell for somewhere in the middle, um, unless you and you know, I a caveat there, newsletters at scale, you know, can can sell for more. But The I I just didn't realize that. And so and it's not so much that you're trying to sell your company, it's that high exit multiples mean something. They mean that the company is probably more enduring, has higher barriers to entry, is has more diversity of of suppliers, more diversity of customers. And so You wanna replicate businesses that have higher multiples. If you're gonna put five years into like spending night and day building a startup.

Build a startup that's that's that's hard to to disrupt to that that that old door. And the way to do that is to look at a high exit multiple sales, which you can generally find through just like reading stories and talking to founders and figuring out the end for every industry, there's like the low multiple business and all the way up, there's a continuum up to the high multiple. And so I would try to understand where you are. in that industry. as you're thinking about your idea. So th that's my first point.

You just saved a thousand p thousand entrepreneurs listening to this, like you did you just save them like an aggregate of a hundred million dollars easily. Uh because somebody's gonna do that. Somebody's gonna say, like, actually that makes a lot of sense to me. Should I be building uh a SaaS company or should I be building uh information product or whatever, right? Like and each one of these has a different return profile. And look, if you're looking for what's gonna be the most successful and what's gonna get you the most value. Then that's a good thing to work backwards from. What else you got?

Yeah. Okay, second one. Take multiple shots on goal because most ideas don't succeed. But you don't want to take multiple shots on gold that are very different because now you're having the stress and the you're spreading yourself too thin. So, like I'm not saying start the boring company and start, you know, Tesla at the same time. What I'm saying is

With Bis now. We launched a newsletter business and we tried twelve different flavors of that business. We tried a newsletter for le for lawyers and another one for real estate entrepreneurs. It was the same editor. Different writers. But same processes, same best practices, same learnings. You know, I've seen Agora do a good job of this. I've seen Golden Hippo, you interviewed Craig Clemens, do a great job of this and direct to consumer.

Um You're basically using the same infrastructure, the same learnings, the same systems, but you're trying different permutations. of a similar concept. Uh and and then whichever one works

You gotta know when to cut the other ones and then double down on the one that's working, which is kind of that that's actually Part of the hard part. How long did it take you to test each one? And what was your process? We took way too long and were not very good at it at the time. I if I was doing it again. But basically We would spin them up. They were very quick and easy to run. You know, you'd hire one writer, you'd build an audience up to ten, fifteen thousand subscribers.

You would start producing the newsletter. And then you would launch your first conference. And then maybe you'd launch like a job board and you would play around with that. Um you'd sell your first ads and then once it was got up to like, you know I know it's uh hire a salesperson, get it up to like a hundred grand of revenue.

Some of them scale to a million of revenues, some of them scale to five hundred grand, and then we figured out, Oh wow. Commercial real estate. For all kinds of reasons I had no idea going into it is way better than the other verticals, and that went up to like twenty million in revenue. So Um

I think you just really quickly get a sense of like The audience, the profitability. How long was that for you? I mean, this was over the course of like four years that we tried a bunch of different verticals. We didn't start them all at once. Um And you know, some of them we would spin up and cut in like s you know, three to six months.

And some of them We had a hard time deciding. Like we had one for federal technology that was doing like over a million in sales. And was profitable and we kept that going for probably like four or five years before we got it. Uh Craig On our last

Or a few a while ago, Craig, this guy runs his multi hundred million dollar company, Golden Hippo. He said that the most expensive thing is a mediocre uh a mediocre success When they're spitting stuff up. Yes.

Yes, yeah, yeah. Yeah, I was I was la I was smiling when I was listening to that one because he's so dead on. That that was like the hardest one to cut. It was just so such a tough call. Um Yeah, I I I also really like um You know, I've been thinking about this idea that I'm building a portfolio.

of of activities is another way to go about it. Instead of becoming like the you know night and day CEO of your company, you could build up a portfolio of consulting and coaching and maybe you do an online course, maybe you speak, maybe you author a book. Um and you could basically piece together. I've I've seen a number of my friends do this, uh uh you know, where they've piece together You know, a uh anywhere from three hundred thousand to a million dollars or or even more a year.

um doing some combination of those things. You know, the the downside of that is you're not building like an asset that creates money in your sleep. Um, but the upside is you know, you've freed yourself from working for an employer and you're not like up all night worrying about your your startup as as much, perhaps. Yeah, that's a that's a good one. I have a different way of phrasing that same thing, which is sell your byproduct. This is an example from

the thirty seven signals guys in Chicago who they you know they bait they they made a company that made Basecamp. And then they worked a certain way, and then they started selling books just explaining how they worked. To the Basically their business was you know, served a bunch of small businesses, small business owners. And so then they sold the book to those business owners about like, hey, here's how we run our business.

And Just selling their byproduct generated millions of dollars and even more in new customers who like to hear how they worked. I'm I'm d I'm dabbling with this too now and I'm seeing very interesting uh interesting results. Do you wanna know my favorite byproduct?

Kingford Cho uh coal. Or charcoal. Kingford or is that what's called Kingford? What's the famous charcoal brand? Yeah, I think it is Kingford or something similar. Yeah, that was started using the leftovers of making a Ford car. That's amazing. Yeah, liter sometimes literally that it's like orange juice was like leftovers, right? Like

And then sometimes it's more leftovers of like your time or your expertise or your You know, just giving people access to what you're doing. You know, there's different other ways to sell your byproduct. Yeah, Tony Shea did a great job of this. You know, he he we became famous for company culture at his company. And then he created a separate I don't know how many people realize this, but he actually created a company that

Teaches other companies how to build happy cultures. And he did that by spinning up a book. I'm going on a book tour. And I think he even bought like Dave Matthews bus for the tour, which was like fun little side note. And uh and then he actually you know he hired a a a woman who who runs it. And they actually sell this to to companies. And uh yeah, it's like it's a it's an amazing

Little uh, you know, side project. Barstool does a good job of this too, where they They just film their pro their office and they film like hey, we're hiring an intern. Cool. Put a camera up and this is gonna become like, you know, content that's worth X dollars.

And we're just we're hiring this person anyways. Let's just make it entertaining. It'll be more fun for us and it'll generate attention and revenue. So like why not? We're doing the project anyways. Yeah, I I love how Barcel does that. It's so it's so brilliant. I w I wish I had real had thought of that years ago. Um, all right, Ryan. So I wanna leave it open to you because I think you were one of the rare guests who thought about what you wanted to say and was like, Hey, I got like some gold I wanna give out. And so I'll let you kind of jump around. You you said there's a couple of

areas. One was, you know, these idea frameworks. Some was, you know, wisdom on on kind of the health wealth balance. You talked about ways to finance without venture capital, three ways. And you said you had a couple of ideas. So I'll let you go where you think there's the most gold and then we can we can always have you back. All right, I'll I'll dive into one more.

I I And one is financing. You know, I again like I think too many people raise venture that they don't need to raise. Like I was talking to an entrepreneur just recently. Who is starting a new company. And he was about to go out and raise a million. I was like why why why are you gonna raise a million? There's there's let me give you like all these ways. So I started thinking of these ways. So

One is You can if you're if you're building a subscription product, let's say You can build a lifetime membership to this product, which the airlines used to do in the early days of their rewards programs. And you know, maybe you don't make it a lifetime, maybe you make it ten years, but you say to somebody, look, I'm gonna give you my a lifetime access to this thing that's soon gonna cost, you know, I don't know, a thousand a year. I'm gonna give it to you for five thousand dollars a year now. You'll never have to pay for it again. And on top of it, I'm gonna give you all these extra benefits. You're gonna have like you know an inside look on everything first or whatever it's gonna be. You'll have kind of like the backstage pass

to this to to this community, this product, whatever it is. And And then that you you sell, you know, whatever, fifty of those at five grand, you bring in a quarter million dollars. And boom, you're you're started. And I I think another thing that

that um Elliot, my my business used to say to me that I've always thought was interesting was When you we would hire a writer, I'd be like, Man, this writer's like you know, a hundred grand a year. And he'd be like No no no this writer is like a hundred grand divided by twelve. We just need a gap. started like if we can sell

Adds in month two. then we might be able to pay for writer the writer, you know, th in months three, four, and five. And so we kind of like would look at it kind of month to month, which I always thought was kind of clever. Um, and help me think through things kinda like eating an elephant bite by bite. So Yeah, one is selling a lifetime membership.

A second idea is If um If you have more of a service business. Then You can sell the first clients before launching. So

Like with Biz now, whenever I would launch a new market, like say I was gonna launch Chicago's newsletter for commercial real estate. I would fly to that market two or three times, or now we could use Zoom, and I would sell I'd say the law firms, hey we're only gonna have one law firm. I'm gonna give you all the inventory, all the ad inventory for the first six to twelve months, and it's thirty grand. And I'm only gonna have one accounting firm and I'm gonna have one of this and one of that. I would go to five competitors and be like only one of you is gonna get this for the first year. And then I would bring in about, you know, a couple hundred grand up front. I would charge them about a quarter of that to get going.

And then that would find the first writer and the first salesperson, and then they would start to fill in all the sales for for year two. Um So I love pre-sales. Obviously, you know, Kickstarter has kind of like, you know, turned that into a more popular idea. And I was saying, yeah, third is you can do that, of course, for manufacture product. You look at Kickstarter, right? You you you just launch kind of the concept of the idea, you get a fan base around it, you get them to commit, put down a deposit. Or even pay for the whole thing and they get access to when it when it comes out first. Uh and then finally my fourth way is if you can't do any of those things

start a consulting company. And then use the consulting company. uh and use the revenues for now to kinda keep the lights on while you're building You know, the real product that you're excited about. Yeah, I love those. And also, you know, I at Biz now we launched an event called Escape, which was basically like summit for it was like a five thousand ticketed item for people that are the CEOs of real estate companies. And I went to

The first forty people and said, If I do this, will you come? And it's five thousand dollars, by the way. And I went to those first three, I went to the most impressive first three people that I could get a meeting with, and I got them to say yes. But they'd only say they said only yes if The other people on my list came. I actually handed them an a spreadsheet. I was like, Here's

Here's forty crazy names. If I can get You know, half of these people would come, will you come? And I said yes, contingent on that. Then I went to those crazy people and I said, Hey These amazing people said they would come if you'll come. Will you come if they come? And then they all said yes. And then I went back to all them and said, Okay, all right, I got I got forty of you to say yes. You all said good to four five grand. And then before I locked in the hotel.

I took deposit on on a portion of the five grand and then I contract to the hotel and then I put down my deposit on the hotel. So There's there's ways to do this where you don't have to raise capital. And um And if you do have to raise capital, I have thoughts on that too, but but I I just think that it's it's it's fun to and and can lead you to a more meaningful life if you don't have the the the stress and pressure of a venture. And let's end on this because a lot of people I know

understand they understand this and when I advise them, hey, you this is what you should be doing. They get gun shy around either a selling or B specifically selling a high-ticket item because I think what often happens for people is they're like, Well, we haven't made anything yet, or this is just my time. Why would somebody pay me five thousand ten thousand dollars for this? You know, like I think people are really afraid to sell high-ticket items. Have you experienced this or what's your advice to the person who's Afraid to go ask for seven thousand dollars when there's nothing made yet. So one is that people value their time, especially people who have means or are running a business, especially corporations, their time is more valuable than

Than a few bucks. Um and and if you especially when you're thinking B to B You know, corporations obviously have bigger budgets than individuals generally. And so if you can create something, you know, sell on value, not on price, right? It's like a it's like a typical kind of sales one on one best practice. And and be willing to endure awkwardness. Like there are awkward moments in

phone calls that I would have where I'd be like People hate to talk about price. I I managed to sell like a couple of different sales teams and they kinda like they shy away. They wanna they wanna talk about it like at the last second or they don't talk about it at all. Or they wanna just send it in the proposal'cause it's too icky to talk about, like, ooh, I'm just gonna Well I'll just put it on page three of my proposed And I'm like never first off, never do that. Never email a proposal. Always schedule the next call and walk the person through the proposal.

And and walk them through price and be proud of your price if you think you really are have you know, real value to offer. Then you know, lean into that. And and and and be willing to ask. And and one thing I'll do is before I ask that, I will ask people how what is valuable to them. If I if if I could do this, would this be of great value to you? And get to know like what their problems are and where the where what they're trying to solve and what value those problems have. So like for the real estate conference,

People were trying to do like multi hundred million dollar real estate deals. So for them to source a deal and meet other people that can help them find a good deal was worth a lot of money to them. Once I understood that It was it was clear to me that a five thousand dollar ticket was was was like kind of a rounding error. Great. This is this is I think that that last bit I think is gonna help a lot of people who um

I'm thinking about my friend who I've been tell him this, you know, too for a long time and he's just like has all the symptoms you just mentioned, uh he has. And I I hope that he hope that he listens to I'm gonna send him this clip at the end and have him listen to it. Dude, Brian, this is great. Uh I think we're gonna have you back again. Probably which we're trying to do where we're going to be able to do When we find people who

are good at jamming out on new ideas or kind of high level frameworks that can apply to a lot of ideas. We're trying to create this like sort of friend of the house vibe where, you know, me and Sam, we only know so much, but like, you know, we we want to have really great people coming in. And it's surprising how many successful people don't have the ability to hang in conversations like these because they're just like They they know their thing, but they don't know how to sort of generally teach and talk to to a whole bunch of people. But you definitely have it. And so, you know, I'd love to get you kind of in

in the front of the house loop where you're coming on with some regularity, maybe once a month or every couple months. Yeah, I I love that. I even like the idea of coming in and just like arguing with people on your show. Sometimes sometimes I'm listening and I'm like I'm like oh no, there's a counterpoint here. Right. Let's bring in the devil's argument the the devil's argument. Yeah, yeah, definitely. All right. We're we're out of here. I hope everyone has a good one. I don't know.

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