How I Built The Hustle w/ Sam Parr

What's up, everyone? I'm Alex Lieberman, co-founder and executive chairman of Morning Brew. Today's episode is a guest journal by a very special startup founder. He is something of a celebrity in the startup community, and I am lucky to call him a friend. Sam Parr co-founded The Hustle, a business media company which he sold to HubSpot in 2021. He is also the co-host of My First Million, which is one of the most popular business podcasts in the world, and recently Sam co-founded Hampton, a vetted community of successful startup founders. I am so excited for you to hear years of wisdom packed into this guest journal. So without further ado, here is Sam Parr.

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All right, what's going on everyone? This is Sam Parr. I, like Alex said, I'm most known for this thing called The Hustle, which back when I used to run it, that meant Alex and Austin at Morning Brew. We were competitors. I hated them. Now we're great friends and I love those guys. And so The Hustle was a daily email similar to Morning Brew. We were a little bit more tech-oriented. They're a little more finance-oriented. And I started the company in around 2016, ended up selling it in around 2020, 2021. I now have a new thing called Hampton, which is a community for founders who are already doing a few million in revenue. You could see that at joinhampton.com. And I'm the host of My First Million, which is a popular business podcast about business ideas. And the reason why I'm sort of bragging about that stuff is because I've gotten pretty decent at launching companies and I have a pretty distinct formula, I guess you could say. I don't like using formula cuz that's a little guru-y, but It's a formula for researching which companies I'm going to start. And the reason why I'm bringing this topic up is because I wanna talk about how I research and figure out which companies I'm going to start. And I do that because there's a lot of people out there. Well, there's not a lot, there's a few, but there's the Elon Musks and the Zucks of the world who at a young age in their early 20s, they've got this grand vision from day one. They're super mission-oriented and they're not afraid of risk and they go big right away. That ain't me. When I started my company, I was about 24 years old and I had one goal, which was to have fun but also make money. And the reason I wanted to make money was because I knew eventually I'm going to have a family. I want to be able to buy my kid braces and not sweat it. The other day I had to buy a $10,000 AC for my house and I wanted to say, no big deal, here's my debit card. And there's a lot of people who have done this, a lot of great entrepreneurs that I admire. There's Mark Cuban. Mark Cuban had a company that he sold and I think he made $2 or $3 million when he was like 31. Travis Kalanick, the founder of Uber. He had a business that he sold and he made like $5 or $8 million. And then Stewart Butterfield, the founder of Slack. The point being, there's so many more, in my opinion, entrepreneurs who basically had a smaller exit compared to what they eventually launched. But in doing that small thing, it gives you a lot of freedom and breathing room to kind of focus on what you can do to create legacy, to create something much larger. And I wanna talk today about how I think about researching new companies that can help you, what I call it's your first nut. You gotta get yours, just get yours any way you can. But I actually wanna dive deep on that. And so this process I'm gonna talk about, I have this thing, it's called Audiation Bootcamp. I think it's AudiationBootcamp.co. I go like really deep in all this stuff, but I'm gonna give a few smaller examples that are super specific and tactical on my research process. I did this with Hampton. My new company, joinhampton.com. I did this with The Hustle. And so before we begin, and I'm gonna basically this process, I'm gonna tell you 2 or 3 research tools I use, but I actually start thinking about this before I even begin researching. So before I do anything, and this is probably a huge mistake that most people make, is they don't pick a goal or a timeline. So when I started The Hustle, I was about 25. I think I started— originally started as a conference called HustleCon. I started that when I was 24. Then I turned it into The Hustle at the age of 26-ish. I had a goal. I went and talked to a bunch of— I didn't have a lot of money at the time at all, but I went and talked to a bunch of rich people and I said, how much money do you spend per month? Like, how much money do you have to spend per month in order to feel like you have everything you need? And I talked to 10 people and they told me on average it was around $60,000 a month or $50,000 a month, which is about $600 grand a year. I then researched how much money do I need in order to live passively off my nut in order to make $600,000 a year. It came out to be about 3%. So that turns out to be $20 million. So 3% of $20 million means you can spend $600,000 and basically never run out of money. So I made that as my goal. There wasn't much science behind it other than someone told me $600,000 a year. And then another person, uh, I read this subreddit called FatFire. It's a, reddit.com/fatfire. Um, that's F-A-T-F-I-R-E, and it's all about people who want to retire early, but they want to live a luxurious life. Now, I never intended to retire, but I wanted to know like, what is financial security? And so that's how I came up with that number, $20 million. And so I said to myself, I want $20 million by the age of 30. And that was my timeline. And that was my goal. So the second thing that I look for, it's called ikigai, and that's I-K-I-G-A-I. I-G-A-I. And you guys should Google that, and this will be really easy to understand. But basically, it's this big Venn diagram of 4 different circles. Circle 1 is what do you enjoy doing? Circle 2 is what are you skilled at? Circle 3 is what does the world want? And Circle 4 is what will the world pay for? Ideally, you want to find something right in the middle of that, because if you find something right in the middle of that the likelihood that you're gonna be able to pursue it because it's gonna feel a little bit more like a vocation, like a, like a purpose, is a little bit higher. If you find something that you have very little passion for, but the world needs and is willing to pay for it, that's basically just a job. If you find something that the world really wants that you're good at, that's a mission, that's a hobby. No one's gonna buy it. And so the ideal situation is to find something right in the middle. However, if you're poor like I was, if you're just getting started out, I would rank the passion part the lowest, and I would rank the what the world needs and what they're willing to pay for the highest. This is about, I call it, or my partner Sean on the podcast, I called it, uh, we called it the ABCZ process. Meaning right now we're thinking about the process of A, which is just researching the company, and process Z, we're thinking about that as well, which is what's the outcome between A and Z. There's a whole bunch of letters and there's a whole bunch of steps. We're gonna figure that out along the way. You don't need to overthink that stuff. All we're talking about is A and Z. So we're going to think about what's the potential outcome and how we're going to get started and what we're going to start working on. So for example, for me, I was 24, 25. I said I wanted to hit the target of $20 million by the time I was 30. That meant I have 5 years to do it. In order to do that, I doubt that I could have cash flowed something, meaning I don't think I could have made something that made enough profit after taxes to add up to that $20 million in 5 years. I didn't think I could do that. However, I did think that I could start something and get to $10 or $12 million in revenue and sell that for around $20 million. That doesn't take into account taxes, but, but for argument's sake, let's say it's around $20 million that I could have sold it for. I think I could have done that. Also, I was a really big fan of content creation and I liked the business model of media. I liked hanging out with, uh, people who were creative. I didn't know anything about tech. Like I, I couldn't like build any software, so I wasn't good at that. And so I kind of honed in on media. So I was gonna be like, all right, I'm gonna create a media company. And so I'm gonna walk through the process of how I figured out what business model and the type of business that I decided to start. And the last thing I'll say is the goal of reverse engineering, which is what this process is. We're gonna reverse engineer different companies to figure out how they work. The goal of that is to figure out what is possible. I think that when you're a young person, or even if you're not a young person, you get into this habit of just like only knowing what's in front of you. You know, for me, when I'm 24, 25, I'm like, who on earth buys $100,000 of advertising? I didn't know anyone at that time who did that, but that was okay. But it limited my thinking. But the reason I researched was because I wanted to figure out what all is out there. And a good analogy is basically In the 1950s, Roger Bannister ran 4 minutes in the mile. He broke 4 minutes in the mile. For the 10 years before that, the world record was 4:02. People couldn't break 4 minutes in the mile. He broke it. And with literally within 60 days, 3 other people broke it. The point being is when you surround yourself, even just like mentally, you study other people and study other business models. When you surround yourself in the information that you need, it starts to expand your mind. And so that's why I think this is really important. And so I'm gonna give you 3 different tools that I use to research. So the first thing that I look for is demand. I'm trying to find what problems do people have. I wanna find demand in a market. I'm not trying to create demand. The second thing is I wanna figure out who's the audience, meaning how many people are there that share this problem as well as who are they. The next thing is I'm gonna look at the leaders, who's succeeding in the space and why. After that, number 4 is the shortcomings. So the people who are succeeding, where are they missing the mark or leaving opportunity that I can go out and grab? Number 5, and this is really important for me when I was starting the hustle, which is which business models work best for me and why. And then finally, what problems amongst the, um, successful companies aren't being met? What problems do I think customers have that aren't being met? So this example, I was just browsing on the internet because I wanted to find a VPN. A VPN is a piece of software that kind of hides where you are. So like if you're in Europe and you want to use your American Netflix, you download a VPN, you pay like $100, $200, $300 a year, and you use this software. If you just are afraid of security, you use a VPN to hide your IP address and a bunch of other things like that. I was Googling what is the best VPN, and I found this one website called CompareTech. Seeing that I'm a schemer and a business nerd, I wanted to learn all about it. And so I installed this tool called SimilarWeb. What SimilarWeb does is it gives you an estimate of how much traffic a website has. It will tell you where the traffic is coming from. It will tell you how much time on the website the person is spending. And then it will also tell you similar websites, similar to the ones that you are on. And so when I use SimilarWeb, if a website has 0 to 150,000 monthly visitors, that's okay. If it has 150,000 to 1 million, that's quite interesting. Between 1 million and 10 million, that's very, very interesting. And anything above 10 million is a lot. If you find something that has above 50 million, that means it's massive. I also look at the, the web source. What that means is how are they finding the website? There's basically 3 different ways. There's direct, search, and social. Direct means that someone's typing in a website to their URL, and that's the most important because if you really love a website, like Netflix, you're gonna type in netflix.com. Search is really important because if you rank high in Google, that means someone's gonna find you. Hopefully consistency, that's the second best one. That means someone's either searching your company's name or they're typing in something like what's the best VPN and you're ranking high. And finally, social is the least best because it's quite fickle. So, uh, if you create a website that gets all its traffic from Facebook and Facebook changes its algorithm, you're screwed. The next one, the final one that I'll talk about is time on site. So 0 to 1, 1 minutes, that's only okay. 1 to 3 minutes, that's pretty good. Anything above 3 minutes is great. Now let's go back to our main example, CompareTech. Now this is a website that compares antivirus software, VPNs, and like all this stuff that I would think is like a small niche, not important service. However, CompareTech, according to SimilarWeb, gets 3 million visits a month. And of those visits, most, about 84%, it's estimated, come from search, which is absolutely astounding. And the average visit time is around a minute and a half, which is pretty good. So this little website, this little rinky-dink website, it doesn't look like anything special. If you're from like a big tech company, you're going to look at this website and you're like, oh, this is just a silly little blog. I'm not going to take this seriously. It's amazing. It actually has a ton of traffic. The reason this is important for a founder is basically If I use SimilarWeb at all different websites that I go, eventually I'm gonna spot patterns. What's interesting about CompareTech is if you scroll all the way to the bottom, I do this with every website that I go to, you have to scroll all the way to the bottom at the very, very, very bottom where it says something like all rights reserved, you know, like copyright 2023. I always look at that. The reason I look at that is I wanna know who owns this website. Let's say CompareTech was owned by some other company called Software Reviews Inc. I will Google Software Reviews Inc. and I'm like, what is this company about? Oh man, they own like a ton of these reviews companies. Let's go and read all of them. My next tool is called Companies House in the UK. If you are a company that does at least 5, maybe 10, I forget the exact threshold, at least $5 or $10 million a year in sales. For some reason, it's their law. You have to create a financial report every year and you have to tell people what your revenue is, what your profit is, and you basically have to be almost treated like a public company in America. And so the reason this is interesting for CompareTech is I scroll all the way down and I see CompareTech Limited. When you see limited, that means it's a UK company typically, and it says their address and their company address, and it's in the UK. You go to Companies House and then you type in CompareTech Limited into the bar where it says type in a company's name, and you could see see all of their accounts, meaning their revenue and filing history and things like that. In the year 2021, this company did £14.8 million in revenue. What's that? I think that's like $17 million in revenue. I don't know what the, uh, conversion is, but so let's just say they did $15 million in revenue. And get this, they did £10 million in profit. They are telling me exactly how big they did. And how big this company is. And so my takeaways from all this, just from using SimilarWeb and Companies House, is one, VPNs, that's a huge market. Who would've thought that a company— that's not even the VPN market. This is just reviewing the VPN. What I've learned is that VPNs is a shockingly big market. I've learned that it's an incredibly profitable business model if you can rank high in Google and refer people to a tech product that costs hundreds of dollars. The reason being is it's a tech product versus a consumer, like a, like a deodorant or some type of consumer good. The margins are significantly higher on tech products. And so I learned that this business model is like incredibly intriguing. And if I'm thinking to myself about ikigai, I'm thinking, well, I love writing, I love tech products, maybe this is like an interesting business model. I think I can maybe potentially do this. And I will do this for maybe 10 or 20 different companies or different opportunities within that idea of media. In my case with The Hustle, at the time when I started, there was a company called Thrillist that was relatively popular. And I had HustleCon, my conference where I was running these conferences and I made the conferences popular cuz I would send emails. Uh, I created a newsletter and I was like, I like newsletters. I'm pretty good at that. I'm not good at conferences. So at least I don't even wanna do that business because if it rains, like your conference is screwed. That's, so it's not a good business model. What other business models exist? Where I can email content on a regular basis. And I did this same process where I just research different media companies and business models. And I came upon Thrillist. There's like 8 other companies that are making lots of money via newsletters. And I love newsletters. And that's kind of how I came to the process of launching The Hustle.

We're gonna take a quick break, but more from Founders Journal when we get back.

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Now I want to tell you the final tool for this episode, which is Moat. Moat is a really cool tool. There's other tools like Facebook Ad Archive, you can do that as well. So if you Google Facebook Ad Archive, but the idea behind both Facebook Ad Archive as well as Moat is it lets you see which advertisements different companies are running. And the reason that's important is because I want to see who the brand is appealing to, and I can typically see that in what type of ads they're running. And so I'm gonna give you a very specific example. And the reason why I'm giving this example is I'm friends with the founder of this company, and I came up with a hypothesis of like who their customers are, how it works, and then I emailed him and I go, hey, did I nail this? And I got a text message back from him or an email back from him and said, yep, you got it. And so let's use this example. So if you go to Moat, you type in Kettle and Fire, Kettle and Fire is a broth company. They make bone broth. So which is like something that you drink, I guess, to— it's like a health drink. And at first when I was thinking of bone broth, I thought, who drinks this? Like meatheads? Is this like a Joe Rogan-y, like, type of thing where it's like usually young men who's about bone broth? I don't know anything about that, but let's just say that I was interested in creating a health product and I'm like, well, bone broth is kind of intriguing. The leader in the space, I think, is Kettle and Fire or their one-up. Who's buying this stuff? And so I type in Kettle Fire into moat.com, and what you'll see is that the majority of ads are women. It's like a white woman with like gray hair, but she's got like really nice skin. And what you'll see about the ads is that it's typically like a 50 to 60-year-old woman. And the messaging on the ads, on almost all the ads, is all about restoring vitality. It's not about like get bigger muscles. It's not about lose weight or gain weight. It's about restoring vitality, meaning people are drinking this stuff because I guess it makes them feel good and it makes them feel Makes your skin nice, I guess, based off the pictures. It makes your bones strong. And I just thought that, wow, that's like a, that's an interesting learning. And then I text my buddy Justin, Justin Mares. He's the founder of Kettle and Fire. And I go, hey, is this all true? Is growing via these Google ads and Facebook ads and appealing towards women in their 40s to 60s, is that like your target customers? Because I would've thought it was men. And he goes, nailed it. That's exactly right. It's mostly middle-aged women who care about health and they just want to feel refreshed and emphasis on vitality. So that's just what I use to figure out what people are advertising on and who the customers are. And so previously I said I'm trying to figure out what problems people have. I'm trying to figure out how many people have that problem, who's succeeding in this space, things like what short companies do people have, what business models work. And so we've kind of done that with CompareTech. So with CompareTech, I figured out The business model is affiliate and it only works because it's a digital product and they have high margins. It's incredibly profitable too. And to wrap this up, the way that I finalize this process is this is just a research process. You gotta do a ton more stuff, but usually what I do is I then call either people who work at the company or people who used to work at the company, or if I can, the founder. And I go into what I call zebra mode, meaning my calendar, it looks like it has stripes. Like a zebra because I do 10 30-minute interviews with like a 15-minute break in between each interview. So I just have stripes in my calendar and I'll talk to 10 people a day for like 3 weeks. This whole process, when I started Hampton, it took me like 6 months because once you already have a little bit of money, you have that breathing room. If you don't have money, you should do this process in like 1 or 2 months, I think, because you gotta like move quickly. But this process works. And the point being, to recap, is it's all about figuring out which direction you're going to go in. And I think that there's a methodical way to do that as opposed to just creating something and hoping people buy it and getting into the business and figuring out, oh my God, I can't believe I have to operate this. I hate this. I'm not even interested in it. The business model stinks. Of course, this isn't going to, like, guarantee that any of that works, but all I'm aiming for is just signals to get me in the right direction. For me, with The Hustle, to recap and wrap this up, I started, let's say, 25. We ended up selling the company for many tens of millions of dollars. I hit my goal. And there was a whole lot of luck involved. I'm not gonna actually say that this process accounted for all that, but it definitely helped. Once you hit your goal, things don't— like money, they don't necessarily make you happy. It makes starting a new thing and taking care of your family though, a whole lot easier. And so this is the process that I use. I still use it even for building Hampton. Hampton's a business that I think we can run for 50 years. I think we can run this thing forever. And because I love it so much for this business, we actually emphasize the passion part of ikigai. If you want to learn more about it, it's ideationbootcamp.co. I go into like way more examples, but that's the episode on how I find interesting business ideas to start. You can find me @TheSamParr on Twitter if any of you actually follow this advice. We've had a ton of people follow this advice and actually create companies. I hope that you tweet at me and let me know if this interested you and I pray you email me or tweet at me and let me know that you've used this to start a company. Morning Brew, Alex Austin, my former enemies, now my close friends. Thank you for having me. Love y'all.