This episode of the My First Million podcast features hosts Sam Parr and Shaan Puri interviewing entrepreneur and investor Andrew Wilkinson. They discuss the characteristics of “easy” versus “hard” businesses, share stories about their own entrepreneurial journeys, and analyze the mechanics of successful and failed investments.
Topics: Entrepreneurship, Business Models, Investing, Venture Capital, Startup Lessons, Asset Allocation
Easy vs. Hard Businesses [00:00]
Sam Parr: What are easy businesses that you’ve started where you’re like—because for me, Milk Road was a way easier business than any business I had ever started. What’s been an easy business for you?
Andrew Wilkinson: And where do agencies rank on the easy-to-hard scale?
Sam Parr: I’d say it’s medium. I mean, the hardest—let’s just say the hardest possible businesses are brick-and-mortar, or where you have to move physical goods and you have a lot of employees.
The Roast Battle with Sahil Bloom [00:36]
Shaan Puri: Sean, did you know that Sahil Bloom, the one that we did—we had Sahil Bloom on the other day? Two things were interesting to me. One, people thought when we were making fun of him that we disliked him. They thought I disliked him, which is not true. And two, it was shockingly popular. Did you see that?
Andrew Wilkinson: Well, that part’s not that surprising. The first part’s surprising. I mean, we were all making fun of each other, I thought. I thought it was a fairly even give-and-take, but maybe not. Maybe we were a little too harsh.
Shaan Puri: It was a bit of a roast battle. But you don’t—you only do that with people you like.
Andrew Wilkinson: Yeah, exactly. If you actually don’t like somebody, you don’t just come out and start busting their balls. That’s not really like—
Shaan Puri: To be fair, the guy is like stupidly handsome. I met him when I was in New York. Very, very handsome guy, so we got to shit on him.
Andrew Wilkinson: Yeah, he’s perfect. I mean, you have to take down the handsome guys. And the worst part is, you want to hate those guys, but if they’re nice, it’s almost worse. He was very nice.
The “Serial Entrepreneur” Experience [01:29]
Shaan Puri: The one thing that was really good is he’s pretty prone to like taking a pretty like a cookie-cutter response to things because he’s like—he’s got like a good image, he wants people to generally like him, like he’s, you know, he’s on TV sometimes, he’s got his like book deals. So he’s like doing things where, you know, public perception kind of matters, whereas if you’re just an entrepreneur who owns some business, like you don’t need everybody to like you. But for his thing, it’s, you know, it’s good when people like him. It’s good for business. But he came on and he was like super honest, super open about everything and was not giving us politician answers, even though I do think he’s a future president. He wasn’t doing that though. So I thought, you know, mad props to him for, for just being normal. Like, if we were normally hanging out, that’s how he was on the pod. It was perfect.
Pixel Union and Early Business Lessons [02:10]
Andrew Wilkinson: When I started my business, I was like Mr. Business Builder. Like, I’d say yes to absolutely everything. I’d be in the shower and have the idea of like, “Oh, you know, why doesn’t this exist?” And then that day I would start it, and I would just constantly be starting new businesses, like every single month. And I think it was really good because it was like throwing spaghetti against the wall, right? So it was like seeing what a good business model is via pain. So it was just constant pain, and then also running an agency, you get to see all these startups make mistakes and learn from them. And I had this really painful experience of starting an agency, getting really, really lucky that my first business was actually profitable, because I think one of the things that happens is people start their first business and fail, and then they just say, “I don’t like this entrepreneurship thing, I’m out.” And so I was able to keep going and started another five to 10 other businesses, and almost all of them failed. Like, it was incredibly, incredibly painful. And after that, I kind of swore off starting businesses, and I’ve only just come back to it over the last three years. So I can talk a little bit about my experience in some of those businesses.
The “Warren Buffett” Comparison [03:36]
Shaan Puri: And by the way, for the listener, this is Andrew Wilkinson. You’re on—he’s on the pod all the time, owns this thing called Tiny. Although, are you guys—do you want to go by Tiny Capital now or just Tiny?
Andrew Wilkinson: Just Tiny. I hate Tiny Capital.
Shaan Puri: Yeah, I know you—I know you hate it, but everyone was like using it, but it owns Tiny, which is, I think, one person called you online the Warren Buffett or Berkshire Hathaway of internet companies. So you basically buy, uh, in-hold a bunch of internet companies that collectively are now doing a hundred north or hundreds of millions of dollars in revenue, whatever the number is that you say publicly.
Andrew Wilkinson: How much did you pay your friend to say that about you?
Shaan Puri: I actually, it’s really funny because there’s been all these, uh, uh, uh, like on the cover of Newsweek or whatever, it’ll be like, “The next Warren Buffett.” And Sam Bankman-Fried was one of those people, and so everyone’s sharing all these covers from all these things. So being called the next Warren Buffett is not good. Uh, I and I’m, I’m different from Warren Buffett, but I’ve copied a lot of his ideas.
The “Next Steve Jobs” and “Next Warren Buffett” [04:21]
Shaan Puri: The next Steve Jobs, that was Elizabeth Holmes from Theranos. That was another another one you didn’t want to get tagged with. I think Chamath was calling himself the the the the the new Warren Buffett or like the brown Warren Buffett or something like that for a long time.
Andrew Wilkinson: He called himself that?
Shaan Puri: He called himself that, uh, or I don’t know if he called, I don’t know, I don’t want to put like the quote on it, but he definitely insinuated it and he definitely said, “We’re trying to build, you know, the next Berkshire Hathaway,” blah, blah, blah. And so, you know, he he was given that or he named himself that way.
Andrew Wilkinson: My favorite thing about Chamath, um, was that in his annual shareholder letters, he would, uh, he would compare himself to Berkshire Hathaway. So he would track social capital’s results versus Berkshire. And then one year he just stopped. And I think it was the one year that he didn’t actually beat them, I think. I don’t recall. That might be unfair characterization, but that’s my recollection.
The “Non-Binary” Term Sheet [06:25]
Andrew Wilkinson: So, I I started, incubated the business, didn’t raise any outside capital, spun it out of Metalab, became its own independent company. Um, we ended up selling it in 2014, and then I stayed on the board, I kept 20% of it, and then a couple years ago I bought it back, and then we ended up taking it public, and that became WeCommerce.
Shaan Puri: What did you sell it for? Like $10 or $15 million? I think I I read about it publicly.
Andrew Wilkinson: I sold it for $7 million.
Shaan Puri: $7 million. Why would you sell that?
Andrew Wilkinson: Well, at the time I was doing, I think $500k of net profit, and I didn’t—to be honest, it was one of those things where I didn’t know how good the business was, and I hadn’t read anything about investing yet, and so I didn’t know how to value a business. And so it was a double-edged sword because I sold this incredible business for, um, you know, a good amount of money. It allowed me to kind of have a sense of comfort and retirement and all that kind of stuff. But doing so, I suddenly had this pile of cash and I had to learn how to invest it, and so I started reading about Warren Buffett and reading all the investing books and going, “Oh my god, I can’t believe I just sold that incredible business.” You know, it was growing at 50% a year, and you know, I thought it was great to get a 14x multiple, but not when it’s growing that fast. Um, so I regretted it.
The “Investment Banker” Fallacy [09:35]
Andrew Wilkinson: I think those that stuff is not really accessible to founders, and frankly, they don’t speak the language of investment bankers. The investment bankers are the spreadsheet business people, right? They look at a business like a spreadsheet, and they go, “Oh, it’s easy, we’ll just increase margin by 20%,” not realizing that in order to do that, you have to convince 100 people to change.
Shaan Puri: What a—let me let me pick you back off that real quick. So, have you did Sam, did we talk about this Warren Buffett “Sees Candy” letter? I know I had it on our list. I don’t know if we ever did it on the pod. Did we did we talk about this?
Andrew Wilkinson: You, it’s been on your list. You’ve never you’ve never brought it up.
Shaan Puri: So Andrew, you’re like a, you know, Warren Buffett PhD, so you you probably know this, but maybe not. I had never seen this before. So there was a letter in 1972 that Warren Buffett wrote to the CEO of Sees Candy after they had bought Sees Candies. And, um, have you read this before? If not, I just put it in the in the chat, because it’s kind of amazing and I want to talk about it. This was this was very surprising to me. So I put it in the chat here in Riverside, but, um, okay, so I think of Warren Buffett as this like kind of like what I see today, there’s this guy who’s super smart, really like, you know, likable storyteller. He’s an investor, he’s, you know, he’s not doesn’t look like an operator. He’s like a geezer, right? He’s just sitting there at his at his at his table and he reads all day and, you know, he makes investment decisions. He’s he’s a capital allocator. But when you read this letter, you realize like how detailed and in the weeds he was and how business-savvy he was. So I actually want to read out parts of this real quick so that, you know, people who aren’t reading it can can follow.
Andrew Wilkinson: Dude, this is this is terribly—I mean, sorry, this is incredibly well-written. He’s got a he’s he’s got such a good voice.
Shaan Puri: He goes, “Dear Chuck, I was at Brandy’s a couple days ago and have a few strong impressions to pass along.” So he visited the store and here’s his here’s his impressions. He goes, “Um, people are going to be affected not only by how our candy tastes, but obviously what they hear about it from others, as well as the retailing environment in which it appears. This means like the class of the store, the method of packaging, the condition it appears, the surrounding merchandise. Just like the New Yorker creates a different editorial environment for Lord & Taylor ad than it does for Village Voice, so do the surroundings of our candy, uh, affect the way that our potential customers, mental and gastronomical impression of our quality. You know, of course, you know, of course, you, of course, know this better than I.” Right? So that that was the first piece, which he’s basically talking about like, you know, the the store environment, you know, like the way that Apple, you know, sort of recreated the the retail store. He’s already thinking about this and sending this like, more like an operational and almost like it’s like a design note, right? He’s not talking about margin, he’s not talking about like, you know, debt. He’s talking about the the the merchandising of the store and how it feels and how that’s going to affect how people taste uh taste the stuff. Um, then he goes and he talks about, um, uh, let’s see, what’s the next uh good bit? So he’s like, Number three. Yeah, he goes, “At Brandy’s, our products suffers in comparative way against Stovers.” He goes, “They have extremely well-organized, well-displayed, attractive area put uh featuring nothing but their candy.” Um, “We’ve taken a number of our boxes, put them on the counter with 25 other offerings operating cheap, bulk candy and other run-of-the-mill products.” And they, you know, and so he’s talking, he’s like basically comparing this the store design. And then, if you go down, he goes, um, so he’s talking about the merchandising for a while, and then he goes, um, he’s like, “We may well want to have a have descriptive material, maybe our own little booklet called ‘The Most Famous Kitchen in the World’ or something of that sort.” Coors gets a lot of mileage out of the fact that all their beer comes from one brewery, and I do think there’s certain there’s a certain mystique attached to products from with a geographical uniqueness. Maybe grapes from a little part of Italy or France, um, are really the best in the world. But I’ve always had a suspicion that 99% of it is just in the telling about it and 1% is in the drinking, right? So he’s talking about like, you know, like sort of this marketing psychology about the, you know, giving them like ideas for catchphrases and slogans. This is way more active and sort of like the brain switched on in terms of operating than I had thought. Uh, what is this? Is this was this a surprise for you too, Andrew, or is this something you knew about?
Andrew Wilkinson: That’s one of the things I found really inspiring about Buffett is everybody—I like, to be honest, my impression was always like, “Okay, entrepreneurs are the people that do the work, the investors are people that shuffle paper around on Wall Street.” And what I realized with Buffett is that he actually was someone who, yes, he owned the businesses, but he influenced the businesses massively, and he made them grow and, you know, brought them together and did acquisitions. There’s so many ways where he built value, right? Which you can’t say about a lot of people. Like, BlackRock doesn’t build value. They just index. They own a bunch of pieces of paper. Warren Buffett actually grows stuff. What’s fascinating though, and I’d be curious to know whether he would still write a letter like this, is Chris and I had dinner with Charlie Munger a couple years ago, and we asked him, “How involved do you get with the CEOs?” And he really said, um, I’ll never forget this, he goes, “I’ve never been able to change someone’s mind. If someone has a an idea about something they want to do, um, I’ve never been able to talk them out of it.” And so, you know, he said there’s always opportunities within their businesses to tweak them and make changes and all that kind of stuff, but it’s just very hard to actually get CEOs to do stuff. CEOs are not puppets. They have their own brains and they want to do their own things. And, you know, two men with a hammer, everything looks like a nail.
The “Boredom” of Investing [16:30]
Shaan Puri: Do you ever get bored just being an investor?
Andrew Wilkinson: Yeah. Very. That’s why you start all those businesses. Yeah, exactly. I honestly, it’s so boring. I that’s why I don’t like doing it. It’s so boring. I totally It’s like, um, it’s like, yeah, it’s like imagine if, you know, someone came along and was like, “Hey, look, you don’t have to work and you can have all this free time and just read all day.” And it sounds like a luxury when you’re a stressed-out entrepreneur, but actually doing it in practice, you have to find new things to fill your time with, and you don’t get your hands on the tools, right? So you don’t get the sense. So like, for example, you know, we bought Aeropress, and when we first bought it, I helped drive the redesign of the website, which, you know, I was proud of. But I very quickly had to let go of it. I knew I couldn’t keep, you know, holding on to the business, and so I, you know, we hired a CEO and I had to pass them the baton and let go. And yes, I got a sense of like pride of ownership, but as the business progresses, I don’t feel the lifts, I don’t feel the gains.
The Aeropress Acquisition [17:30]
Shaan Puri: Can we talk about that acquisition?
Andrew Wilkinson: Sure.
Shaan Puri: So the background here is Aeropress for like—it’s almost like a coffee snob product. Uh, I I owned it, I loved it. It was basically like a more convenient French press that you could travel with. I I loved it. I still own. I I own two of them. I have one that I I have one that I travel with and I have one that just stays in the cabin. I use it every morning. Uh, I love it. But it was only sold—I’m almost positive, I would only see them in mom-and-pop coffee shops, and maybe Amazon. I don’t even know if they were on Amazon, but I like—so the retail wasn’t that great. Uh, but like it was clearly like a good product. It’s one of those products that like consumers can buy for 20 bucks, but even the coffee snobs are like, “This is the best way to do it.” Uh, and and you guys purchased it recently, which it’s not exactly an internet business, but you’re trying to make it a little bit more internet-related. But, uh, are you happy with this deal? I know you guys paid, it seemed like a lot of money. You paid a premium for it.
Andrew Wilkinson: Absolutely. I mean, I think, um, when I look across all the businesses that we own and I think about what business could exist in 50 years, there’s a very, very small number. I mean, most businesses die, and I think that Aeropress is something that has, um, potential lasting impact and can be around for decades. Uh, and it was just an incredibly unique business. I mean, when do you get the opportunity to buy a way of making coffee? It’s like, how do you value buying Kleenex, right? The word for the way of making coffee that’s written on grinders and is a verb almost.
Shaan Puri: No, I think it’s sick, man. Sean, did you see he bought this?
Andrew Wilkinson: Yeah, I’m not a coffee guy. Like, I literally don’t drink coffee, so even though I had heard of the brand, it didn’t—I didn’t know enough about it or didn’t sort of didn’t have too much of a, you know, opinion on it, uh, because it’s not my thing. But it does remind me of like, I was looking at SodaStream, and I was like, I really love this type of this category of product. I think it’s a fantastic category where it’s a thing that gets another device that gets in that can get into every kitchen and has like this sort of consumable, you know, refillable component to it. So that’s great. And then if you become the de facto device, like you said, I think you just said like the verb basically, like if you could become a verb, I just read this recently with someone who was like, you know, I learned 25 years ago, if something becomes a verb, just invest. And, you know, it’s it’s pretty true, right? Google it, we’ll Uber there, you know, like you you you realize that these verbs tend to become like de facto winners of uh of of their category. And so I’ve definitely definitely uh think it’s a good idea. I just don’t, you know, drink coffee myself, so it’s not something.
The “Bird” Scooter Story [21:06]
Shaan Puri: Do you guys, do you guys remember Bird? Sean, you remember Bird in San Francisco?
Andrew Wilkinson: Yeah, of course. The scooter company.
Shaan Puri: Okay. So scooter company that I don’t remember how much they raised, but I I believe it was a $2.5 billion valuation, and I bet they’ve raised north of 4, 500. I think they’ve raised over a billion dollars. Let me see. They’ve raised over a billion dollars. Yeah, I they’re they’ve raised more than it’s currently worth.
Andrew Wilkinson: So, listen to this. Listen to this. Google what it’s worth right now. So, they took it public at a $3 billion valuation, I think. It’s currently trading right now at $70 million.
Shaan Puri: 70? Okay, they raised 883 million.
Andrew Wilkinson: Is that crazy? This company is is is the market cap is 73, I think, million bucks.
Shaan Puri: Wait, which company? Bird. Bird scooters. Do you guys think they have to have at least 70 million of of scooters.
Andrew Wilkinson: Well, and how much secondary, how much secondary did the founders take out, too? Which I I can’t blame them, to be honest, because it was so hot, but still.
Shaan Puri: But I but I don’t know how much he took, but I always like stick with like the best way to figure out uh you know, how wealthy someone is is by looking at how expensive their home is, because it’s kind of hard to like get a fake mortgage that way. Uh, and Travis, the guy who founded it, if you Google his name and like house, you’ll see like, you know, uh tech entrepreneur selling $10 million home in Santa Monica or tech entrepreneur buying $20 million home in Miami. So he’s he bought he’s I think he’s bought two houses that are worth tens of millions of dollars. So he’s definitely There’s there’s something I’ve got a really quick thing if we have time. Yeah. So, um, do you guys remember I did this thing called a non-binary term sheet a couple years ago? Yeah. Yeah. So, so I I I’m on that non-binary train before everyone else was, dude. Exactly. Exactly. So, so I’ve always found I’ve always found venture really tricky, right? Because someone will come to you and they’ll say, um, you know, I am going to revolutionize XYZ industry and I’m going to create a billion-dollar business. And I always say, “Okay, well, if you don’t create the billion-dollar business, then I lose all my money,” right? And to me, that a, it sucks for the founder because if they, um, you know, get a bunch of money at a valuation that’s too high, they can never make their investors happy. And it sucks for the investor because it’s binary, either they lose all their money or uh or it goes. And so when I was raising money for Supercast a couple years ago, I wanted to get what the market rate was for valuation, but I also wanted it to be fair, because for me, I didn’t want to feel like shit if the business didn’t pan out. I knew that if the business didn’t pan out to be a huge business, it could actually be a good smaller business. And so, uh, we raised at a $10 million valuation, which at the time was kind of a good, um, you know, angel angel round valuation, but it was structured so that within two years, if the business doesn’t do a million dollars of revenue, that turns into a $5 million valuation. And so it ended up we we did uh close to a million dollars, but we didn’t hit it. And so I crammed myself down by 50% to make it fair. Now, I know a lot of founders wouldn’t want to do this because why would you do this, um, you know, other than to be a boy scout and, you know, have a sense of fairness if no one else is doing it and if VCs expect this. But I think it’s a really interesting structure and we’ve been offering it to more and more founders as the environment changes, where we say, “Look, we’ll invest, but it has to be structured so that if you don’t deliver on what you say you’re going to do, we can still get our money back.” What do you guys think about that?
Andrew Wilkinson: I I don’t love it for two reasons. One is what you just said, which is like, why would a founder do it? Like if I think about it from the founder’s perspective, if I don’t have to do that, I’m not going to I’m not going to do that, right? Like traditional venture would just be a better deal for me as a as a founder in that case. Um, and then the other thing is I think it creates weird incentives, like, um, I like the concept behind it, like I like the spirit of it. But then I’m like, okay, who’s going to set these benchmarks? And then what happens when the thousand different things can happen in business and like you you you said it yourself, like, we got close but we didn’t get there. And then there’s like this crazy urge to like do something to nudge it over the top and now you’re doing something that may not be long-term, um, you know, right for the business. And so you create some weird dynamics. I wouldn’t say it’s worse dynamics than they currently exist. Um, it’s just more like if I’m the founder, I would rather I would rather take the venture path where I’m getting a higher valuation and selling less of my business. I would also say, there is a sort of like, we’re going for it or we’re not. Like you would if you’re running a pro like my e-commerce business, we run to maximize EBITDA. Like, yes, we want to grow it, but it’s like this thing needs to make profits every year, whereas when you did venture things, it was like, we don’t think about that, we think about, you know, how are we going to grow users, let alone revenue, let forget about profits altogether. And so there is like sort of like a there is a benefit in knowing which path, which blueprint of business you’re trying to build, and then being able to go all in on a strategy that’s aligned with that versus a strategy where you’re hedging. You’re like, maybe we should try to have profits, but also try to grow big.