By playing, you agree to uListen's Terms and Privacy Policy and YouTube's Terms of Service.
My First MillionRanking The Best And Worst Businesses To Start w/ Billionaire Investor Andrew Wilkinson (#386)
Summaries, chapters, transcripts, and FAQs on this page are made by uListen, not YouTube.
CHAPTERS
- 0:00 – 2:30
Cold Open and Sahil Bloom Roast Banter
The episode opens on a teaser about easy versus hard businesses, then the hosts welcome Andrew Wilkinson back. They riff on the Sahil Bloom episode and how people misread the roasting as dislike.
- •Teaser question about which businesses are easy to start and where agencies rank
- •Sam says people wrongly thought he disliked Sahil Bloom after the roast
- •Shaan says Bloom was unusually honest and open instead of giving cookie-cutter answers
- •The group jokes that you only bust the balls of people you like
- 2:30 – 5:50
Mr. Business Builder and the Tiny Backstory
Andrew describes his early habit of starting a new business every month and why most of them failed. He says an early profitable agency kept him going, and that he swore off starting businesses until the last three years. The group also jokes about being labeled the next Warren Buffett.
- •Andrew said yes to every idea early on, treating it as throwing spaghetti at the wall
- •Running an agency let him watch startups make mistakes and learn from them
- •His first business was profitable, so he kept going through five to ten failures
- •He is now returning to starting businesses after three years away
- •Being called the next Buffett is a mixed blessing, since Sam Bankman-Fried and others got the same label
- 5:50 – 11:34
Pixel Union: Automatic Revenue, Selling at $7M, Buying Back
Andrew tells how a Tumblr theme favor for David Karp became Pixel Union and his first taste of automatic revenue. He sold it for $7 million in 2014, regretted it, later bought it back for $26 million and took it public at a $260 million valuation. The conversation turns to learning investing in under a decade and the problem of spreadsheet investors.
- •Pixel Union began with Tumblr themes and grew to about $10,000 a month, then expanded to Shopify themes
- •He sold it in 2014 for $7M at roughly 14x profit without knowing how to value a business
- •Selling led him to read two years of value investing books
- •He bought it back for $26M, made acquisitions and took it public at $260M
- •Operating experience made him a better investor than spreadsheet investors who assume margins can just be raised
- 11:34 – 16:30
Warren Buffett's See's Candy Letter
Shaan reads from Buffett's 1972 letter to the See's Candy CEO to show how deep in the operational weeds he was. Andrew finds it inspiring that Buffett built value in his businesses, then recalls Charlie Munger saying he has never been able to change a CEO's mind.
- •The letter covers store environment, packaging and merchandising rather than margins or debt
- •Buffett suggested descriptive material like a booklet called The Most Famous Kitchen in the World
- •Buffett wrote that he suspects 99% of a product's mystique is in the telling
- •Andrew contrasts Buffett, who grows businesses, with index holders who only own paper
- •Munger told Andrew and Chris that CEOs are not puppets and rarely change their minds
- 16:30 – 23:02
Bored of Investing and the AeroPress Acquisition
Shaan and Andrew agree that being a pure investor is boring because you lose the hands-on work. Andrew then explains why Tiny bought AeroPress: a product with potential lasting power, strong in coffee shops but weak online. The group also discusses Sodastream and the idea that a product that becomes a verb tends to win.
- •Both say being an investor without operating is boring, since you don't feel the lifts
- •AeroPress could last decades and is a rare product that even carpenters know and love
- •The original inventor's side focused on retail and few sales were online
- •Tiny hired the former president of Sodastream US, who grew it to $200M, as AeroPress CEO
- •Shaan thinks a D2C Sodastream competitor should be a $100M business
- 23:02 – 31:29
Cat Furniture Failure and Ranking Businesses by Difficulty
Andrew shares his first terrible business, an online cat furniture store that lost about $300K, and the lesson about thin e-commerce margins. He then ranks businesses from hardest to easiest, with brick-and-mortar and physical goods at the hard end, agencies in the middle, and the We Work Remotely job board as the easiest. He also describes losing $10M on Flow, a project management SaaS, and how agencies are faring in the downturn.
- •HJ Muse, his cat furniture store, taught him that e-commerce margins of 2-3% are brutal compared with 30-50% EBITDA margins elsewhere
- •His Victoria bakery and deli shows how hard businesses with many employees and physical goods are
- •Agencies are asset-light but have feast-or-famine supply and demand swings
- •We Work Remotely, bought from Basecamp's founders, is his easiest business
- •He lost $10M on Flow competing with Asana, and says sticky SaaS with many small customers beats a few big ones
- 31:29 – 33:33
Famous Original: How a Pizza Bar Went Wrong
Asked about Famous Original, Andrew explains his pattern of doing the wrong business before the right one. He and friends opened a bar and pizzeria in his own city and lost money through bad management, wrong incentives and overspending on the build-out. That failure taught him what a bad restaurant looks like, which helped him judge the later bakery and deli purchase.
- •He fetishized brick-and-mortar after years of internet businesses
- •The restaurant was hurt by the wrong management hires, wrong incentives, labor shortages and slippage
- •They overspent on the build-out so they could never recover the money
- •The experience helped him recognize the bakery and deli as a stable, well-run business
- 33:33 – 37:13
Business Idea: A Sniper Rifle for Getting on Someone's Radar
Shaan asks for ideas Andrew isn't pursuing, and Andrew pitches a service that makes a target buyer see your company everywhere they go online. Sam tells the story of his friend Jack Smith using hyper-targeted LinkedIn ads to get into Angel Pad. Andrew adds a variation based on mapping someone's information diet.
- •Andrew says he'd pay $10,000 a month to be everywhere a target acquirer looks
- •The idea draws on the notion that seeing something five times makes it seem ubiquitous
- •Jack Smith targeted an incubator head with LinkedIn ads limited to 10 people a day, and later sold Vungle for $800M
- •Andrew suggests tracing a target's email to learn which newsletters and podcasts they consume
- 37:13 – 43:15
Tenzing: A Modern Investment Bank for Bootstrapped Founders
Andrew introduces Tenzing, a new business he and Chris started about a month earlier. It is an investment bank, meaning a business broker, aimed at bootstrapped founders who don't speak banker language. Shaan questions the economics, and Andrew explains the focus on companies with $2-3M or more in profit and the cost of founders not knowing their financing options.
- •Investment bankers are realtors for businesses, and Andrew found none serving $1-5M EBITDA companies well
- •They hired a young banker who disliked the traditional job to build a bank for founders
- •Tenzing is named after Tenzing Norgay, the Sherpa who helped Hillary climb Everest, and aims to lay out options without being fee-driven
- •Andrew says he missed about a million dollars of Canadian R&D tax credits for lack of this knowledge
- •The target is bootstrapped businesses with roughly $2-3M in revenue and up to about 10M ARR
- 43:15 – 45:26
Mealime Sale and Why Andrew Doesn't Like Selling
Sam asks about the biggest business Tiny has sold, and Andrew describes Mealime, bought from its founder's co-founders and later sold to Albertsons. He explains his preference for holding businesses forever, noting that dying businesses sell for little and are hard to time.
- •Tiny bought out Mealime's two co-founders, and the remaining founder asked to be left alone
- •Albertsons later bought it for tens of millions
- •Andrew says it's hard to predict how big a business gets or how fast one dies
- •A dying business may sell for about one times profit, so holding usually beats selling
- •They sold Mealime only because the founder wanted the exit
- 45:26 – 51:47
FTX Collapse, Crypto Skepticism and Second Chances
Sam asks for Andrew's take on the FTX saga. Andrew says it is very bad for crypto, that he steers clear of currency-style speculation, and that he is waiting for the long-form accounts. Shaan relays a lesson that there is always a second chance on the train, and points to a Jason Choi thread as the best timeline.
- •Andrew compares FTX's failure to JPMorgan suddenly collapsing and expects lasting damage to trust in crypto
- •He sees Bitcoin as currency trading and prefers to buy great businesses
- •Shaan relays Kevin Van Trump's point that you always get a second chance on the train
- •Andrew questions whether Sam Bankman-Fried was a psychopath or just over-levered
- •Shaan recommends Jason Choi's Twitter thread over the soft New York Times piece
- 51:47 – 1:02:21
Fraudsters, Legal Stealing in Canadian Markets, and Collapsed Hype Stocks
Andrew asks whether the hosts have met famous frauds and describes the small-time fraudsters he's met. He explains the legal pump-and-dump pattern of Canadian IPOs dressed up as hot trends. Shaan points to the esports holding company EGLX, and the group discusses Nikola, Hindenburg Research and Bird's collapse.
- •Andrew says most frauds he meets are small-time, which Munger calls rats in the granary
- •Investment bankers can profit from trend-chasing IPOs through fees and warrants while retail investors lose
- •Andrew met a banker who took a two-location business public and made an estimated $5-20M
- •Shaan's call on EGLX came true, with the stock down about 90%
- •Hindenburg Research's reports on Nikola and Bird's drop from a $3B valuation to about $70M are discussed
- 1:02:21 – 1:11:11
Non-Binary Term Sheets and Alternative Funding
Andrew describes his non-binary term sheet for Supercast, where the valuation dropped from $10M to $5M when revenue targets weren't met. Shaan objects that founders have little reason to accept it and that it creates odd incentives, while Sam thinks standard venture works as designed. Andrew counters that the structure helps founders stuck on a venture path and warns against raising at inflated valuations.
- •Supercast raised at $10M, resetting to $5M if it missed $1M in revenue within two years, and Andrew took the cut
- •Shaan says a founder could simply take traditional venture terms and the benchmarks create weird incentives
- •Sam argues venture capital is not broken and that this resembles private equity
- •Andrew says a venture structure can trap founders who would be better off with a smaller lifestyle business
- •He objects to founders raising money at inflated valuations from non-VCs with little chance of a return
- 1:11:11 – 1:25:08
No Such Thing as Smart Money: VC Fees and Outsourcing Conviction
Shaan explains his tweet that there is no smart money, citing big funds' bets on FTX, Bird and SPACs while still collecting fees. Andrew criticizes venture management fees as guaranteed income on a 10-15 year delay, noting he charges none. They close on not outsourcing conviction, with Andrew sharing how copying Howard Marks into a Greek shipping company cost him $100K.
- •Shaan says even very smart investors make big mistakes and still profit from fees and promotes
- •Andrew says a 2% fee on a billion-dollar fund pays $20M a year while the underperformance only shows up after a decade
- •Neither Andrew's funds nor Shaan's early fund took management fees
- •Shaan distinguishes normal venture losses from large bets that lacked diligence
- •Andrew lost $100K copying Howard Marks's shipping bet without realizing it was a tiny position by a distressed debt investor
