How to Build a Community-Enhanced Business

What's up, everyone? Welcome back to Founders Journal, my personal diary made public for the world. This is Alex Lieberman, co-founder and executive chairman of Morning Brew. Today we are talking about community and how building your business as a community or building community around your business can create an unfair advantage and increase your odds of success. And to help me do that, I'm bringing on my friend Greg Eisenberg. Greg is the founder of Late Checkout, a holding company that creates, grows, and buys community-based products. Prior to that, he was the head of product strategy at WeWork after selling his community app Islands to the company. And he was also the founder of 5by, a video discovery app which was acquired by StumbleUpon. Greg is one of the best builders of community-based businesses in the world, and he has spent more time thinking about this topic than anyone I know. After listening to this episode, you should have a good idea of how to build a community-enhanced business and why it can act as an accelerant for your company. Let's hop into it.

Greg, long time no see. Thanks for joining the pod.

Good to see you again.

Okay, before we start, because this is going to frame the conversation, can you explain what your thesis is around the businesses that you build? Like, what is your— the highest level thesis for what you build?

My thesis is that community-based products outperform non-community-based products. And I define community-based product as either the community itself is the product. So for example, Clubhouse, if everyone leaves Clubhouse, then the value is low. The community itself is the product. Or the community enhances the product. So for example, Soho House, if the membership at Soho House is high quality, then you might stick around and order another glass of rosé. If it isn't high quality and you don't like who's around there, then you might leave and cancel your membership on your way out.

Yep. So take me through your playbook for building a great community-enhanced business. I wanna start with the second one first. So a business that the core business isn't necessarily a community, but having a community significantly improves the value. What is the step-by-step for actually making that happen in your business and also knowing if your business is right for having a community attached to it? Or is your thesis that every business should have a community attached to it?

I don't think every business should have a community attached to it. I think that 92% of businesses should have a community attached to it, but you're probably not gonna wanna be in the community of your self-storage, public storage that you just put stuff in there. For me, I'll give you an example of a business that actually started off as community is the product that made its way to community enhance the product. So it's a bit of both. When AI started being all the buzz in early 2023, we created a landing page and a Twitter account. The landing page was youprobablyneedarobot.com, and we created a Twitter account with that, and we started tweeting about AI and productivity specifically, and it started going viral. We had nothing. We literally had nothing. It was just a Twitter account and a landing page that said, Follow us on Twitter and put your email address. Something's going to happen. We realized that there's a bunch of people who are looking to share tips around basically introducing AI into their workflow to increase their productivity. So we created a private community and a public community that people can join for free. Within 45 days, that community grew to 25,000 people, which is insane. And the beauty about community is if you have a real community and people Like, it's genuine. Figuring out how to monetize, like, there's 100 ways that you can skin that cat. So we ended up, you know, community enhances the product, so to speak. We created like private courses that people can take to learn more about AI, but we let in the most interesting people. So community enhances it. We created an agency that helps companies figure out how to introduce AI and automation into their business. So we didn't have to go and, you know, broadcast out to get cool and interesting customers. We would just look at our community, our free community, and be like, who's the, you know, oh my God, this person works at Toyota, this person works here, this person works here. And we'd have these interesting clients and that enhanced our business.

Yeah, it's so funny. It reminds me of a totally different business, but that has been entirely driven by community enhancing the business. I have a buddy You would love just like nerding out on this business. It's a vertical software for carpet retailers. So the business is called Broadloom. They sell to people who sell carpet in retail stores. This guy, Todd Saunders, runs the business, and their number one channel for product discovery, for getting customers, is the world's—

Let me guess.

Yeah.

Well, you said the world's largest, but I would guess that Facebook groups.

Yep.

Is it?

Yeah, it is. It's, it's the world's largest Facebook group of carpet retailers and carpet manufacturers. And Todd started that community when they started the business, and they continue to run it today. And I think it's responsible for something like 60 to 70% of every customer that Broadloom has. And Broadloom's a, you know, $10 million a year business.

Yeah, it's, it's, and it's a $10 million a year business in vertical software. Like, that business is worth a lot of money.

Totally.

And, you know, built off the back of the these communities that people can join. The other interesting thing about community is that it's an incentive to get people to give you their email address. So people were giving us their email address because they wanted to join the You Probably Need a Robot community. And all of a sudden we have this email address of someone who wants information. And, you know, that's how we started growing our You Probably Need a Robot agency, was just sending a weekly email. And at the bottom of it, it was like, do you want to work with us?

Yeah.

And we could introduce AI and automation into your workflow. And we weren't some random group at this point. It was just we built the trust.

Yeah. And out of curiosity, is that agency like, is it still around? Is it like a significant agency?

It isn't a significant agency within the context of how big our portfolio is today, but not by the virtue of we don't have enough customers. It's just we are trying to figure out how to scale that business. Scaling As you know, like scaling like a copywriting business and finding great copywriters, although hard, a lot easier than finding someone who worked at OpenAI to, you know, work doing engineering.

Totally.

And solutions. So we're trying to figure out what that looks like.

That makes sense. And outta curiosity, when you think more broadly outside of what you're doing, what are some examples of companies that you think, like for someone who wants to study great community, Mm-hmm. To think about either say they wanna build a community business in the future, or they have a business and they're thinking about how to attach a community to it. Can you give a few examples of either great community-first businesses or great businesses that have communities attached to them?

Yeah, I'll say one that just came up today. I went to a store, it's called Rapha. Do you know? It's a cycling store.

Yeah, I've never heard of it.

So it's, and that's a good sign, by the way. Totally.

Like, I'm not their demographic.

First sign of like a good community-based product business is like, you ask the majority of people, hey, have you heard of this thing that I'm really excited about? No, never heard of it. That's how you know that it's like for nerds.

Totally.

Right? Like it needs to be for nerds. Rapha is a cycling store, cycling apparel, started in London or in England. And I think they actually sold the business for a few hundred million dollars, but it's cycling apparel. And the way it works is you actually buy the apparel and you could also be a part of their club to guess what? Go on races and meet other people who like cycling. So for, I think it's like, I don't know, $10, $15 a month, something like that, you get access to meet up with other cyclists and go on different races. And guess what? They're obviously gonna be wearing Rapha gear when they show up. So it creates this flywheel around, first of all, it's great recurring cash flow where you have a monthly subscription. People feel more connected to the brand 'cause they're showing up to meet like-minded people. And then they wanna show up wearing your product, which is not cheap, which could cost hundreds of dollars average order value. So that's a beautiful community-based business.

Yeah, I love that. It also just reminded me of how many massive businesses there are that I learn of every day that I've never heard of in my life.

It's incredible.

One last question for you on community, which is, okay, let's say someone wants to launch a community or they want to, let's just say, launch a Slack community attached to their, I don't know, their B2B SaaS business that is for B2B SaaS marketers who believe in the power of content to enhance their business. Let's just say that it's for content marketers who work at B2B SaaS companies. What are your 10 commandments for making a community great? Because it's not easy.

Yeah, it's not easy. And, and the majority of communities die and aren't very good. I think I'll shorten your 10 commandments to one commandment, 'cause if you get this right, Actually, I'll make it 2 commands. Here's the 2 commandments to building a successful community. One is a mission. It can't just be, here's B2B content marketers. There needs to be a reason why these people are coming together, and it needs to be crystal clear around why, you know, why they're coming together. Could be 1 line, 2 lines, 3 lines. Doesn't need to be 4 words, but there needs to be deep, deep, deep mission. And the second thing is there needs to be rituals. I use the word rituals because I think it has a bit of like a religious context. And if you think about the greatest communities— I'm not a particularly religious person at all, but I'm a studier of religion in the sense that I think the best— some of the best communities are religious communities.

Mm-hmm.

When you think about something like Christianity or Islam or Judaism, what do they have? They have a book which is sort of, you know, a Bible of some sort which tells you how to live your life, essentially. There's long-term goals, there's short-term goals. I think you can study religion. And it's funny you use the word Ten Commandments because I take a lot of inspiration from that. And rituals specifically are things like when, if you're Jewish and you're 13 and you're a boy, you get a bar mitzvah on Friday night. you do a Sabbath dinner and stuff like that. On Saturday morning, you go for prayers. There's these holidays. There needs to be reasons why people show up to your community on a daily, if not weekly, basis. And that's the thing that people miss.

Yeah.

The biggest.

I also think, um, kind of implicit in that is there's institutional knowledge where there's actually like You have to put a— to be part of the community, you have to put a little bit of work in to understand the shared rituals, language, behaviors, customs of the group. And when you do, it naturally creates this feeling of being part of something because you've gone through kind of the quote unquote— I think about pledging from college, but like the quote unquote, just like onboarding or on-ramp to this community.

Absolutely. And It's funny you mentioned pledging college and fraternities and sororities because they're also an incredible example of what community looks like and how to build it well.

Totally. Any final thoughts on community-based businesses before we hop?

I just need to say that I was never in a fraternity. I'm not like— I don't want to be like looked at as like a fraternity bro or anything like that. So I had to get that off my, off my chest.

It's okay. I was in a fraternity, but I really don't identify as a fraternity bro either.

I have a I have a free five-day email course on how to turn strangers into community members and stuff like that.

I love it.

You can check it out at communityempire.co.

Cool, awesome, Greg. Thanks so much for joining the pod.

Thanks, man.

Thanks so much for listening to this episode of Founders Journal. If you enjoyed this episode and want more celeb shot episodes in the future, send me an email to alex@morningbrew.com recommending a topic that you want to see covered by a guest, or feel free to share a guest that you want me to get on the podcast.

I'll try my best.

Thanks so much for. Thanks for listening, and I'll catch you next episode.