Category: Uncategorized

Open Startups: Exhaust Data, Transparency, Open Makers

On the surface this is about open startups. It’s really about a lot more. Another name? How to Profit from Transparency.

This is the free version of Trends PRO #0015 — Open Startups

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🔍 Problem

Startups have to cut through noise to stay top of mind for customers. And prospective employees.

💡 Solution

Open startups tell a story (mostly) with exhaust data. 

Revenue, page views, salaries and more. Data generated from business activities.

This is a marketing strategy. Not only for customers. But prospective employees.

In 2013, Buffer listed staff salaries publicly. Job applications doubled. Jumping to 2,886 from the 1,263 they received 30 days prior.

🏁 Players

Open Startups

Open Makers

Makers sharing metrics and stories.

Open Platforms

🔮 Predictions

☁️ Opportunities

🔗 Links

  1. Transparency — This TED radio hour episode tells stories of transparency. Covering everything from salaries to CIA operations.
  2. The End of Asymmetric Information — Tyler Cowen and Alex Tabarrok take a deep dive into information problems and their effects.
  3. Doubling Down Instead of Shutting Down — Nathan Barry is the founder and CEO of ConvertKit. In an interview with Eric Siu, he said “…another important thing for us is storytelling. I want you to buy ConvertKit not just because it’s the best tool for your business. I want you to buy because of the team and the story and who we are and what we’re building.”
  4. ‘100% copycat’ — Pierre de Wulf, co-founder of ScrapingBee, tweets about downside of sharing numbers. This is why moats matter.
  5. Research: Gender Pay Gaps Shrink When Companies Are Required to Disclose Them — Denmark required companies over 35 employees to disclose gender wage gaps and the gap to shrunk to 7% from 17.5% between 2003 to 2008.


Paid Communities: Membership Tools, Hyperniche Communities, Lowering Churn

This is the free version of Trends PRO #0014 — Paid Communities

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🔍 Problem

Free communities tend to be noisy without a barrier to entry.

💡 Solution

Paid communities have requirements, financial or otherwise.

As Derek Sivers says, the higher the price, the more they value it. 

Barriers change these groups. Members are more engaged. They aim to justify their investments. Not fuck around or troll.

🏁 Players

Paid Communities

Membership Tools

Platforms

🔮 Predictions

  • Tools like sharedthis.email will make it easy to pirate paid newsletters. This will accelerate the move towards content-based communities.
  • Communities will be built on exhaust data. Fitbit leaderboards track your steps and update your friends in the background. Open Startup dashboards track revenue and update the world. What’s next? A community built on continuous glucose monitors? A business community tracking Stripe, Google Analytics and ConvertKit dashboards for signs that you need help?
  • Hyperniche media companies will be best positioned for paid communities. Social networks have network effects. Paid communities have reverse network effects. Think Farnam Street versus Facebook. 

☁️ Opportunities

  • Don’t use money as the only filter for your paid community. Price is more than money. It’s time, risk, sacrifice.
    • eCommerceFuel is $99 per month. Members must own a 7-figure eCommerce business and have “deep operational experience.”
    • Everything Marketplaces is $49 per month. Members must “actually operate & know marketplaces.”
    • Makerpad is $600 for lifetime membership. Membership is invite-only and a max of 30 invites are sent each Friday.
  • Build a paid community from your blog, podcast or newsletter audience. The founders of Traffic Think Tank and Web Smith (founder of 2pm) used this strategy to build paid communities. We discussed the content-to-community playbook in Trends #0011 — Paid Newsletters.
  • Add gamification to boost engagement and lower churn. Moz Community rewards members with MozPoints. These are redeemed for profile upgrades, t-shirts, tickets to MozCon and more.
  • Have a founding member launch. Use the launch to shape the culture of your community. Offer early members great prices. The Visualize Value community was $19 for lifetime membership. Now it’s $99 per year.
  • Track the NPS and KPIs for your community. Diana Tower spoke with James Schramko about the importance of collecting qualitative and quantitative feedback from community members.
  • Host guest AMA sessions. Online Geniuses featured Courtland Allen, Gary Vaynerchuk and Guy Kawasaki.
  • Think twice before building a paid community with Facebook groups. We discussed platform risk in Trends #0012 — Micro Private Equity.
  • Have shared struggles. Members will justify the struggle (price) to themselves. See fraternity initiation and military bootcamps. Look into commitment and consistency bias.
  • Create a group identity. Give your community a name, develop a language and have swag. Pat Flynn has Team Flynn. Their slogan is “Team Flynn for the win.” And you can buy a shirt with the slogan.
  • Have a questionnaire for new members. Use this to learn more about your members and create an intro for them. You can eventually trace member success back to patterns in the questionnaire. Superhuman engineered product-market fit with questionnaires. You can engineer community-member fit.

😠 Haters

“All paid communities are not online.”
Sure. WeWork Labs, Switchyards and Renzo Gracie Academy are offline paid communities.

🔗 Links

  1. How to Build and Profit from a Hyperlocal Community Site — Katy Katz and Sean Jackson talk about the power of hyperlocal (or hyperniche) communities and how to build them.
  2. Come for the tool, stay for the network — Chris Dixon explains how networks like Delicious and Instagram were built on single-player tools. This is reminiscent Stu McLaren‘s saying that people come for the content and stay for the community. Single-player tools can become multiplayer networks.
  3. From Audiences to Communities — Web Smith tracks his journey from newsletter to community. This intersects with insights from Chris and Stu.
  4. The Rise of Private Communities — Steve Pavlina explains why we should opt for paid communities. He notes that they are full of engaged doers. This is an excellent, in-depth piece. Take into account: He has a paid community.
  5. My Paid Mastermind Experiment. Is It Worth It? — Omar Zenhom echos Steve Pavlina in this episode in 1211 of $100 MBA. He compares his experience in free masterminds to his experience in paid masterminds. Omar also has a paid community.



Online Courses: Superstar Instructors, $140k Before Launching, Distribution

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🔍 Problem

Live lessons from world-class instructors are expensive.

💡 Solution

Online courses offer a similar learning experience for less.

Some courses add personalized feedback, community and certifications.

🏁 Players

Online Courses

Niche Platforms

General Platforms

🔮 Predictions

  • More courses will have cohorts, office hours and online events. Piracy is a problem. But these elements cannot be copied. See Makerpad memberships and Write of Passage cohorts.
  • Instructors will experience the superstar effect. The best will receive asymmetric rewards. Superstars will emerge in coding, writing, design and more. This already happened in China.
  • More companies will pay instructors to promote products. This is advanced content marketing. Kiley Bennett was against Skillshare’s revenue share model until a company paid her upfront to teach, using their product.

☁️ Opportunities

  • Start small.
    • Tweet, blog, hold a live workshop, write a book and make a course.
    • Each level validates your idea and builds a following.
    • Feedback from live workshops help you test your content and format. Find issues before you immortalize them in a book or course.
    • Make a mini-course before you make a signature course.
  • Have a clear goal linked to your course. Students should finish with a podcast, app, meal, painting, rental property, newsletter, job, affiliate marketing site, audience, Etsy shop or an online course.
  • Validate the course before you make it. Presell and let early students give feedback. Paula Pant had $140,000 in presales before she launched.
  • Add live elements to your course. Including cohorts, online events and office hours. These benefits can’t be pirated. Platforms such as Coursera allow free members to pay for graded assignments and certificates.
  • Offer certificates. These add value and cost you little. You’re impressed when you see Harvard, YC Alum and ex-Google. Signals carry weight. Offer something similar. See LinkedIn Learning Certificates, Udacity Nanodegrees, CXL Minidegrees and edX MicroBachelors programs.
  • Build courses for the same audience and leverage existing relationships. This lowers customer acquisition costs and boosts customer lifetime value. You can profitably outbid others in paid channels such as Reddit, Facebook and Google.
  • Provide value and grow your audience today. Building an audience allows you to use a platform like Podia. You’ll pay a flat monthly fee and keep the proceeds from your course. Udemy helps students find you but you earn 25% of the purchase price. A price that you might not control. And Skillshare may pay you less than that. That’s the price of distribution. So make your own.

😠 Haters

“What about free online courses?”
These exist. But not here. This report is for paid online courses. Platforms such as Class Central and Khan Academy are great free options.

🔗 Links

  1. Blogger Earns $140,000 from Beta Phase of Online Course — Find out how Paula Pant made $140k before launching her course. Her early students helped improve content for the launch.
  2. How to Make $2.5MM as a Solo Founder by Teaching What You Love with Adam Wathan — Find out how Adam Wathan made $100,000 in one day from a course for developers. And how he made $1,000,000 in one month by partnering with Steve Schoger on Refactoring UI. The duo delivered free resources for years before they launched.
  3. Launching an Online Course — Nicholas Scalice interviewed Janelle Allen. She talked about why it’s important to validate before you build, how to launch and more.
  4. Tiago Forte — Organize Your Learning for Better Productivity — This time Janelle Allen did the interviewing. Tiago Forte shared how he got started, why his second course failed after the first succeeded and what he learned.
  5. The Economics of Teaching in an Online Learning Marketplace — This is a great overview of 7 platforms and when it makes sense to use each.
  6. Escaping the 9-to-5 Grind to Create a $3 Million Business with Joel Hooks of egghead.io — Courtland Allen interviewed Joel Hooks. Joel talked about how Egghead.io got started, what he’s learned so far and how to build a sustainable company.
  7. Income From Online Courses — Dr. Mo offered ideas for nomad physicians to make money with online courses.
  8. Building an Online Course From Start to Finish — Pat Flynn earned $1 million from courses in 2017. He shared tips on how to get over the fear of selling, how to outline course content and a lot more.


Micro Private Equity: Building a Playbook, Abandoned Projects, Revenue-Based Financing

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🔍 Problem

Founders want to cash out.

💡 Solution

Micro Private Equity buys businesses valued at or under $5 million.

These are not sexy, venture scale startups. Some are technology-focused. But they tend to be simple, cash flow positive companies with stable growth.

🏁 Players

Micro Private Equity Funds

Companies

Marketplaces

🔮 Predictions

☁️ Opportunities

  • Build a playbook to boost returns:
    • Raise revenue by raising prices
    • Raise revenue with conversion rate optimization
    • Raise revenue by negotiating better affiliate commissions
    • Lower customer acquisition costs by improving SEO
    • Lower costs with tax efficient business structures
    • Lower costs with tax credits
    • Lower costs with a remote team
    • Lower costs by automating workflows
  • Attract investment opportunities with content and events. Look at:
  • Make offers on abandoned projects found on the Chrome Web Store, Shopify App Store and Product Hunt. Which projects have not been updated?
  • Build a playbook around similar assets:
  • Buy businesses with similar customers, cross-sell and lower customer acquisition costs.
  • Invest across platforms and verticals. Amazon recently slashed affiliate commissions. Coronavirus took out many travel-related businesses. Concentrating on one platform or vertical carries a lot of risk.
  • Niche horizontally. Focus on a business characteristic instead of a vertical. Consider B2B SaaS, B2C SaaS or digital assets.
  • Start low and stair step up in deal size. Sure… Small deals have relatively high transaction costs. But fuck ups carry less risk at this level. Move up to bigger acquisitions as you learn.

😠 Haters

“You didn’t include Tiny.”
Andrew distinguishes between Tiny and PE. I won’t contradict that.

“You didn’t include SureSwitft Captial.”
Kevin said that he doesn’t like the term. Refer to Tiny. 👆

“Sometimes Micro PE buys majority stakes. Not whole companies.”
Nuance. That’s the purpose of this section.

“Is this investment advice?”
No.

🔗 Links

  1. Vroom Vroom Vroom & Mudbrick Capital — Mike Boyd is a great storyteller. Find out how he got started and why he loves digital assets.
  2. Buying cash-flowing internet companies, starting job boards and building no code projects — This was Andrew’s first podcast interview in a while. Find out why he’s bullish on no-code and podcast memberships.
  3. Billionaire Stephen Schwarzman on Private Equity, His Life and Blackstone — Stephen shares childhood stories and how he built Blackstone.
  4. Q&A with Andrew Wilkinson, Co-founder of Tiny — Andrew Wilkinson came back for an AMA. He fills in the gaps that weren’t covered in the interview.
  5. The Snag of Selling to Private Equity — Find out how Sherry Deutschmann built a $40 million dollar company and why she insisted on profit-sharing.
  6. Trends #0005 — Bootstrap Funds — Micro PE and Bootstrap Funds have similar investment criteria. Bootstrap Funds invest earlier, founders sell minority stakes and stay onboard.
  7. The Berkshire of Software — This is a wide-ranging interview. Savneet and Patrick cover Spanish real estate, software sales, gold, crypto and a lot more.
  8. How a Passion for Craft Spirits Turned into a Six-Figures-a-Month Subscription Box Startup — Mack McConnell shares how he built Taster’s Club and why he sold to SureSwift Capital.


Paid Newsletters: Conversion Rates, Newsletter Bundles, Building a Six-Figure Newsletter

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🔍 Problem

Advertising alters incentives.

💡 Solution

Write for your readers. Not advertisers.

🏁 Players

Paid Newsletters

Platforms

🔮 Predictions

  • New types of newsletters will be created. Need an example? Flow State sends you music every weekday.
  • Substack will help writers extract more value (and commissions) from their audience. Their incentives are aligned.
  • It will be hard to cancel writers. Paid newsletters make you accountable to your audience. Not sponsors or their stakeholders.
  • More writers will hold events. Sam Parr held a small meetup at his Airbnb with subscribers. Fintech Today hosts virtual events.
  • Newsletter fellowships will become common. Substack CEO, Chris Best, described the Substack Fellowship as a “mini-YC” for writers. 
  • Most writers will add products to their offering. Paid content is a simple way to monetize. But this leaves money on the table.
  • We will see more newsletter bundles. Bundling newsletters can lead to more revenue and lower reader acquisition costs.

☁️ Opportunties

  • Build a community on top of your newsletter. Use your platform to connect people. Courtland Allen, Pieter Levels and Jack Butcher used this content-to-community playbook.
  • Reach 1,000 free subscribers then monetize. The founders of Substack estimate a 10% free-to-paid conversion rate if you have:
    1. At least 1,000 subscribers
    2. At least a 50% open rate
    3. Good feedback from your readers
  • Start a podcast. You’ll reach a new audience that prefers to listen. Make money from podcast memberships.
  • Build a SaaS for your audience. Jane Portman has Userlist. Paul Jarvis has Fathom Analytics. Justin Jackson has Transistor.fm. Audience-first works.
  • Use your newsletter as a funnel for books, courses, events and consulting.

😠 Haters

“Reader acquisition costs is a made up term.”
Everything is made up. Stay woke.

🔗 Links

  1. How Newsletters Make Money for Writers with Hamish McKenzie of Substack — Hamish McKenzie, Co-founder of Substack, drops tactical knowledge bombs. Find out what he has learned from thousands of paid publications. And why he recommends charging general audiences $5+/mo and professional audiences $10+/mo.
  2. How to Build a Six-Figure Newsletter Without Anyone Knowing — Glen Allsopp shares the stories of several six-figure newsletters. Great, in-depth writing. High signal-noise ratio.
  3. This indie newsletter generated over 10,000 paying subscribers — Robert Cottrell founded The Browser. He shares what he has learned so far. And how he uses an algorithm to find some of his content.
  4. 1 Company, 1 Employee: Tearing Down Stratechery’s Pricing — Patrick Campbell, founder of ProfitWell, explains why Stratechery is priced too low. With data from 1,411 current, former and prospective customers. Spoiler alert: Some would be willing to pay $18.40 per month or $201.39 per year.
  5. How My Newsletter for Developers Generates Subscription Revenue – Adam Roberts shares how he went from ads to subscriptions.


No-Code: Faster Development, Scalability, Leverage

A Lego brick.

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🔍 Problem

Developers are lazy and curious. Repetitive tasks annoy them.

💡 Solution

No Code tools help you build things without writing code. Blogs, forums, mobile apps, online stores and a lot more can be built without knowing how to code. 

The life of a no-code tool starts with developers solving their own problems.

Most no-code tools share this path 👇

  1. Developers write reusable functions to write less code
  2. Then they create frameworks to write even less code
  3. Then they deploy APIs to help others write less code
  4. Then they create no code tools to help others write no code

🏁 Players

No-Code Products

No-Code Makers

No-Code Tools

🔮 Predictions

  • No-Code Developer (or some variation) will become a common job title.
  • No-Code will become a gateway drug for makers to start coding.
  • No-Code ➡ Low-Code ➡ Code — New businesses will follow this path. Mature companies will have all three.

☁️ Opportunities

  • Build a no-code tool to create chrome extensions
  • Host a no-code virtual summit
  • Host a no-code hackathon
  • Join a no-code community
  • Start a no-code blog or newsletter
  • Start a no-code investment fund
  • Build a no-code agency
  • Move to the no-code capital of the world. Atlanta.

😠 Haters

“Atlanta isn’t the no-code capital of the world.”
Of course it is.

“You can’t build a business on no-code.”
I wrote Million Dollar No Code Businesses to dismiss this. It doesn’t matter what we think because it has already happened.

“No-Code can’t scale.”
Most no-code tools can scale but it doesn’t matter. Scaling isn’t the hard part. Traction is. Once you validate demand, I’ll come scale it for you. 💰👀

“No-Code will eliminate developer jobs.”
I won’t argue. DM me a falsifiable theory and your confidence level. Let’s make a bet.

🔗 Links

  1. CodeLess — A podcast by Edmund Amoye
  2. Let’s clear some stuff up about ‘no-code’ — A tweetstorm by Ben Tossell
  3. No-Code Coffee — A newsletter by Michael Gill
  4. The Rise of “No Code” — An examination of the no-code movement by Ryan Hoover
  5. NoCode Camp — A mastermind by KP and Joe Brown
  6. MakerPad — An education platform by Ben Tossell
  7. Codeless Ventures — An investment fund by Michael Gill
  8. No Code List — A list of tools by Drew Thomas
  9. Nocode Rumble — A challenge by Sako and Michael Gill
  10. No Code Founders — A community of makers by Joshua Tiernan


Bootstrap Funds: Post-Traction Investments, Access to Experts, Islamic Finance

A cowboy boot with US currency superimposed on it

There’s a big gap between billion-dollar unicorns and small businesses.

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🔍 Problem

Founders of niche businesses struggle to find smart, aligned advisor networks.

Venture capital funds provide capital and guidance. But this comes with billion-dollar expectations.

💡 Solution

Bootstrap funds are built to provide funding, connections and thrive without billion-dollar exits.

In order to survive, VC funds rely on one or more companies to return the fund.

VC funds are built on the premise that most investments will fail or break even. This is a feature not a bug. But VC doesn’t work for most companies.

This model may work when major network or scale effects are at play. These are powerful forces that blunt competition and protect margins. Think Google, Facebook and Uber.

Bootstrap funds are designed for less extreme outcomes. They tend to invest post-traction and operate in niche markets.

Think Castos (podcast hosting), MakerPad (education) and StaticKit (developer tools).

These are not billion-dollar rocket ships or traditional small businesses.

🏁 Players

Bootstrap Funds

Portfolio Companies

Advisors

🔮 Predictions

  • Advisor networks will make or break bootstrap funds. Post-traction companies have no shortage of funding options. Founders are choosing bootstrap funds to align interests with and get access to experts.
  • Nearly all bootstrap fund LPs (limited partners) will be experienced advisors. Operators have capital to invest. Bootstrap funds will prefer to feed the flywheel rather than add deadweight.
  • Some companies will harness network/scale effects and jump from bootstrap funds to VC funds. Bootstrap funds will have a chance to exercise equity rights.

☁️ Opportunities

  • Study Islamic Finance to make better shared earnings agreements. Specifically profit and loss sharing. Sharia law prohibits interest payments and creates a natural experiment to study the history and practices of profit sharing.
  • Invest in a bootstrap fund.
  • Start a bootstrap fund in a meaningful niche.

😠 Haters

“Bootstrap funds?! That’s an oxymoron.”
Yes. What’s life without a little cognitive dissonance? So roll with it.

“These companies have traction. They should not give up equity.”
Some founders beg to differ. They can find cheaper, non-dilutive capital but opt for bootstrap funds instead. Hint: It’s not about the capital. They want help.

🔗 Links

  1. The Alternative Funding Options For SaaS Start-ups Cheat Sheet — Geoff Roberts
  2. For Investors: What is a Shared Earnings Agreement and How does it compare to a SAFE? — Tyler Tringas
  3. AMA with Tyler Tringas from Earnest Capital — Jacob Peters
  4. Reflecting on My Failure to Build a Billion-Dollar Company — Sahil Lavingia
  5. Why We’re Putting A Bunch of Our Savings into TinySeed — Rand Fishkin
  6. Funding for Bootstrappers 2: What we learned — Tyler Tringas
  7. Why Smash.vc is not vc — Travis Jamison
  8. My Next Act: Building The First Startup Accelerator Designed for Bootstrappers — Rob Walling
  9. Why venture capital doesn’t work for everyone — Eric Johnson


Co-Living: Sharing Economy, Downsizing, Experiences

Picture of a living room from a co-living facility.

The sharing economy, downsizing and a focus on experiences set the stage for co-living.

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🔍 Problem

The cost of living in major cities is rising faster than wages.

🏁 Players

Co-Living Spaces

Co-Living Networks

Co-Living Directories

🔮 Predictions

  • Co-living networks (such as Selina and Outpost) will continue to grow.
  • Co-living network members will be able to travel the world with low switching costs. (Predictable revenue from subscriptions will enable this.)
  • Co-living spaces will form around interests, i.e., house music lovers, startup founders, tennis players and more.
  • Niche co-living spaces will be used for mentoring. A community of retired lawyers may provide legal advice to startup founders. (Prediction by Keith Bradley)
  • Many who can afford to live alone will choose community over seclusion
  • Equity firms will do ‘co-living rollups’ to form networks. Branding, booking, accounting and other services will be consolidated.
  • The next recession will lead to more co-living. (EDIT: Unless the next recession is caused by a pandemic 🥴)

☁️ Opportunities

  • Start a co-living space (See this guide)
  • Develop hardware for co-living spaces (Check out SALTO)
  • Create a co-living quiz to match residents to spaces 
  • Create subscription services for co-living residents (snack packs, dry cleaning, curated clothing boxes)
  • Develop value-add services for co-living spaces (fitness training, massages, cleaning, shuttles, catering, tours)
  • Invest in a REIT with co-living holdings
  • Create specialized furniture for co-living common areas
  • Build software to solve co-living problems such as security and shared resource booking

😠 Haters

“This is no different than roommates.”
Co-living approaches shared space from first principles. These spaces accommodate more people with better unit economics. And without the annoyance of bill splitting.

“This is no different than dorms.”
Similar concept. Both demographics are skewed young. But many co-living residents are young professionals not college students.

🔗 Links

  1. Co-Living Is Not a Trend, It’s How Everyone Has to Live Now — Liz Steelman
  2. ‘Co-living’: the end of urban loneliness – or cynical corporate dormitories? — Will Coldwell
  3. Millennials are paying thousands of dollars a month for maid service and instant friends in modern ‘hacker houses’ — Melia Robinson
  4. The Case for Co-living — Joe Frabotta
  5. “Co-living” is the new “having roommates” — Rani Molla
  6. The Coliving Code Podcast — Christine McDannell
  7. Co-Living 2.0 Trend Stronger Than Airbnb and WeWork? — Gord Collins
  8. Hacker houses offer shared living for the young, green, and tech-obsessed — Samantha Larson