Should you raise money today?, 73% free trial conversion rate, Netflix ads tier & password crackdown

We've talked in the past about you not wanting to raise money anymore. And today when I asked Bryan Johnson again, I was like, would you want to raise VC for this? He's like, probably not. If he does raise, it'll probably be from like a lot of friends and family because he has more of a brand now. Now, this tweet is from Jesse Pujji. And do you know how FanDuel got screwed? The founders of FanDuel got screwed?

They raised too much money?

Something like that. So, you know, you and I know what liquidation preferences are, but let me just explain. So, the title of this one is How Liquidation Preference Hurt FanDuel Founders. So, when the FanDuel founders raised funds, 2 key investors received a liquidation preference that entitled them to the first $550 million— sorry, $559 million in an acquisition. Founders and employees would be paid only if the acquisition exceeded $559 million because these guys are first in line, right? Because the Paddy Power Betfair, I think that's the deal, was for just $465 million, the founders received nothing. So, the question is, should people raise in this environment right now? You can raise if you're going for a moonshot thing, but I think for the vast majority of people, you probably shouldn't.

Fanduel, in my opinion, did not get screwed. The founders didn't get screwed. They raised a total of $416 million over 8 rounds. The investors should get their money back first, plus a little bit more.

I agree with that. But, you know, you would think, you know, as a founder, I worked so hard for this thing, you know, I've been doing it for so long.

That's life.

As I was—

so would you raise—

let's go back to the point again. Probably for the majority of people, you don't need to raise money. This type of thing, I think you probably should raise money though for FanDuel.

FanDuel, yes.

I think you need capital for this.

I'm not opposed to raising money. The problem is I can't deploy the money correctly. And here's what I mean by that. So I've raised money in the past and the lesson I learned is, for me at least, it's either you're doing something crazy like a ChatGPT or OpenAI that requires tons of money. By all means, go and raise money. I'm not that kind of entrepreneur who's innovating like crazy. I'm actually innovating very little to none almost, right?

I'm running a template playbook. What about your personality test?

I didn't really look at mine.

Oh my God.

You looked at mine for me.

So Neil and I, we took this personality test. This is from Ray Dalio and Adam Grant. It's just the backstory.

And Eric made me take it. You're like, take this one for me.

I was like, dude, we're going to learn how we work. And you didn't even read it. But point is, on creativity, on a scale of 1 to 100, where do you think I am? 50? 60? No, like 90-something.

Okay.

Your creativity, where do you think you are?

10?

Yeah. Yeah. But, but when it comes to you being like tough, you're like maxed out, right? And when it comes to you being like super detailed and deliberate, like you're, you're maxed out. And so you're, you're very different me in like those areas, but like in some areas you're very similar to me. Like we're both maxed out in practical. Point is, you can finish your story, but it's my point I'm trying to give everyone here is that You have to know your strengths and your weaknesses.

Yes.

And you don't— just because someone else is going for a moonshot doesn't mean you need to go for it too.

Totally. And what I learned when I raised money early on, I raised it for Kissmetrics and I've raised money for a few other things too. But the big lesson that I ended up learning is, is if you're going to do something crazy that requires a ton of capital, go for it. But in today's world, it is cheaper to create a business. I'm talking about cheaper to get it off the ground. I actually think it's more expensive to do sales and marketing. Technology, the cloud, AI has made it easier to launch a startup. And there's so much more competition now. I actually think it's more expensive to gain traction. My philosophy on raising money is if someone can give me a dollar and I know I can turn it into $3 or $4 and I have a clear path, I would take a lot of money and I wouldn't be opposed to raising money in that situation. I don't have a scenario where I can take $500 million and deploy it in an economical way that produces amazing returns for them and me. I have ways where I can take $20 million, $50 million, $100 million, but due to my corporation size, I don't really need someone's money for $20, $30, $50, $100, and I can continually recycle money so I can keep going for a long time. If someone gave me $500 million, it would take me more than 5 years to deploy it with my current playbook because the type of companies I buy, They're not expensive enough. And B, if I wanted to scale up to deploy that money fast enough, which I could, I would be overpaying for the companies and it wouldn't fit the economical or economic returns that I look for. So I couldn't make the math work with someone else's money. Yeah.

Point is, again, what I was saying earlier is that for the majority of people, it also depends on the situation. It depends on what kind of bet you're trying to make. It probably doesn't make sense to raise money. And even if you are going for a moonshot, like you look at what Bryan Johnson is doing, Braintree, Venmo, for the first couple of years, he actually bootstrapped it. He didn't raise for like 4 or 5 years, I think. And then for Don't Die or Blueprint, which is what he's working on now, he's probably not going to raise money for a while, right? They're already breakeven, which is great. So, you know, your mileage may vary, but that's— we're experience sharing on our side. All right, everyone, quick message from the Agency Owners Association. So this is the peer group for agency owners that Neil and I both put together. This is for people that are doing 6 figures, 7 figures, 8 figures, even 9 figures as well. And we're all here to help you grow your agency faster. In this In this group, we share leads, we share learnings with each other. It's a community where people can ask questions, their most burning questions, personally, professionally. We'll share templates, reports, things like that. We're constantly adding more value to the group. I will tell you that the price is continuing to increase. The good news is that there's no long-term commitment, so you can just learn more by going to marketingschool.io/agency. Once again, that's marketingschool.io/agency to learn more, and we hope to see you inside. This guy, this company, I invested in this one company called Synthesis. And this guy, Chrisman Frank, I believe he's the— I don't believe, I know he's the CEO of Synthesis. And by the way, you should check it out for your kids. Kids really love it. Like the kids can't get enough of the learning from this thing because they've gamified learning. Neil's like, I'd rather look at how much money so-and-so raised instead of take care of my kids.

No, I need to take care of the kids, but I can't find it online because I don't pay for a Crunchbase account. But Brainsheet didn't raise a lot of money. It doesn't look like it. Good for him.

Yeah. So anyway, Crispin Frank says this, free trial conversion rate for Synthesis Tutor, solid progress. Primary reasons people don't convert right now, content not right for their child, blah, blah, blah. He says all these things. So let me just simplify this. He has a free trial conversion rate right now. So from free to paid, 73%. And the—

Wow, that's high. That's extremely high.

Yep, 73%.

Is it free with credit card or free without credit card?

I think it's free without credit card.

That's extremely high. Free without credit card to paid, If you're at 10, 20%, you're doing a pretty good job.

Yep. And the reason is because the one he was in this tweet, he was talking through a couple of objections, right? Primary reason people didn't convert: content wasn't right for their child.

Wait, what's the website? Synthesis. How do you spell it?

Synthesis.is. S-Y-N-T-H-E-S-I-S. .i Synthesis. I think it's .is or. I don't know if they got the .com.

Synthesis.com.

Yep.

For kids who think. Synthesis Tutor 5+. Let's see, start your free trial.

Are you checking the funnel?

Is it credit card? Yeah, I'm checking the funnel. It's too high of a conversion rate. I think they require a credit card. There's just no way. If so, good for them.

Anyway, let me continue. So they didn't have a chance to use it before the trial expired.

Their conversion rate is not crazy. It's credit card. Credit card?

Okay. So the kiddo didn't like it. My sense is— so basically they upgraded the product and they made it a free trial type of scenario and then 73% of people continued on, right? So what would you— you said it's not amazing now?

It's not amazing. It's not bad. It's actually good, but it's not—

It's not like— It's not bad.

It's not great.

If there was no credit card, it would be amazing.

It would be amazing. I've never seen that. That's why I was like, I need to check out this one.

Yeah. Point is, look, if you have a really good product, I think, you know, my interpretation of Brian Johnson's quote, like, making money is— what do you say? Making money is the most expensive thing you can do. So they're deferring gratification, and then actually in return, they're actually getting more signups. So we'll see how this plays out for them. But this Which just goes to show you that you got to keep testing. By the way, what they're doing over here is not necessarily anything new or mind-blowing. It's just for this podcast, it's on us to call out recent examples of people doing things that continue to work because sometimes what's old is new again.

Dude, for sure. And if you don't continually test even the stuff that works, you're going to shoot yourself in the foot. I remember when we were running Kissmetrics, it was an old analytics company, but just think of a software company that failed. And we had people sign up, our flow was register with your name, email address, etc. Okay. The moment we switched to sign in with Google, we were able to get more than a 90% lift. It was less than 100%, but it was actually closer to 100% than it was to 90%. And then over time, the conversions tanked. Want to guess why they tanked?

Why?

Because people didn't want to be forced into signing in with Google due to privacy concerns. But when we started the company, people didn't really have— That was a big issue. Yeah, people didn't have privacy concerns. And now they're like, oh, my personal information and yada yada. And even though Google limits on what they give people and you disclose it, people are just worried. So the moment we had that as the only option, we kept seeing our conversion rates tank. Then when we switched it to sign up with your name or email address and password or with Google, so we gave them an option, the sign-up rates just skyrocketed back up.

It's like on the sales checkout pages when you add in options to buy with Apple Pay and then Google Shop and PayPal, your conversion rates shoot up. A lot of stuff seems like it's table stakes, but a lot of people still miss. I was trying to buy some stuff yesterday from a beauty store, and I couldn't Apple check out. I just like fill everything out. It was really annoying. All right, quick note: This is about my company. It's called Single Grain, and Single Grain is an ad agency where we're focused on driving innovation. Want to talk about a couple new strategies, and if you need help with marketing, great. If not, here are a couple new strategies that you should try out. One is programmatic CRO. So we are doing programmatic conversion rate optimization on our site. So it's building products that will automatically optimize your site to increase conversion rates. We're also auto-optimizing, auto-updating from an SEO standpoint, and we're constantly thinking about what else we can do in terms of enriching the visitors that are hitting your website and also tailoring custom messages for them using AI. And so there's a handful of things that we're doing from a marketing standpoint, and our mission is just to drive more innovation. So if you want to learn more, just go to singlegrain.com, grain like rice. So singlegrain.com to learn more. And we'll see you inside. You have something here about Netflix adds 40 million subscribers.

Netflix adds 40 million ad tier subscribers in which they're receiving ads when they watch Netflix. Or Netflix ad tiers hits 40 million subscribers. They didn't add 40 million, but more so the people who are on their ad plan is roughly 40 million. That's a big chunk of people. I do believe As a company, if you're not marketing on Netflix, you're not marketing on Disney+, you're not marketing on all the streaming channels, you're missing out on a massive audience. It's like the new form of TV, but it's trackable and it's way better trackable than it was to doing TV advertising.

Yep. I'm excited to see where it goes. There's actually a good Wall Street Journal piece that we should talk about. I don't know if we'll get to it today, but about how TV is slowly dying. But I want to continue on the Netflix thing real quick. So this is an Instagram post from Private Wealth Guy and he talks about Netflix's password sharing crackdown. lockdown has been a huge success. It helped add 30 million paying users in 2023, second highest year ever. Bloomberg has details on the rollout. Netflix built a model to differentiate a single user traveling or one person sharing with lots of people. They tested 2 methods to shake freeloaders. One, pay per household. So this is Reed Hastings' plan. He's the famous CEO for Netflix. And an account, uh, number 2 would be an account could add new users for additional fees. So this is the new co-CEO Greg Peters' plan, right? So they These co-CEOs had one test versus another, right? So they ran the A/B test in Latin America where password sharing was the most widespread. They found Peter's method, number 2, based on users. So charging people a fee per new user led to more upgrades. So that's why it's the second highest year ever because of this password crackdown.

So I was borrowing someone else's Netflix username and password. They gladly shared it with me. I was using it for many years. I even had my own image when you logged in or profile. And I wasn't paying for it. And then the crackdown happened and I was so pissed because then I had to spend like $20 a month or whatever it costs.

My God. So, so bad.

It adds up.

Tough life.

So then I was like, all right, all these platforms are going to start doing it. So I just went all out. I bought Disney+, Netflix, Prime I already had because of Amazon. I added Max, Paramount+, Peacock.

You pay for those?

I pay for all of them, dude. I pay for literally most of them. Okay. Apple TV I pay for, of course, because I'm a Mac user. And now when my sister, she's like, oh, what's your Netflix? So then I gave her my Netflix. She lives in San Francisco, started having issues. It was logging me out, logging her out. I'm not going to ask my sister to pay for Netflix, right?

So anyway, that's it for today, everyone. Please don't forget to rate, review, subscribe. Marketingschool.io/agency. We're going to show you all how we build this community. And if you have an agency, we're going to help you build your agency faster. So That being said, we'll see you tomorrow.