Alex Hormozi invested roughly $10 million of his own money in Skool because the community platform matched his audience of aspiring entrepreneurs and showed 20% month-over-month organic growth. He calls it his best deal ever because the risk is brand endorsement, not cash, and his audience converts well to scalable products.
Dude, you did that school deal, right?
Yeah, no, the school deal is going exceptionally well. We've, you know, 5 or 6x the business in the last 8 months.
Break it down. Why do that deal? It seems like you made a much bigger bet. And I'm saying that because you started wearing the hat around, whereas your other deals you don't promote. So I'm like, okay, he definitely like ponied up for this one and made a big bet on this. So why do a SaaS deal or, you know, why do the school deal? How, how did you figure out the bet size and was it like a butt clenching number? And then what's the plan?
Well, I'll say this. So breaking down into the, into the deal components, any brand endorsement for me is by far the butt clenching component of it, not the cash, because you only have 3, 4 brand bullets that you can use where you're going to promote without becoming a shell. Right. And so if I looked at my audience, I think about. The people who best monetize an audience do percentage conversion times LTV. That's it. So what percentage of your audience do you convert and what's the lifetime gross profit per customer? And that's, that's it. That's the math. The person who makes the most money wins. And so the, the big thing that I saw with my audience is that obviously we have a very skewed monetization structure because we have portfolio companies where we just make a tremendous amount on like handful, uh, and then everything else like kind of doesn't matter.
Um, and do you even promote— you don't even promote those others, right?
No, I don't know the other— no, not at all. That's just— but they come inbound though. So that's— it still comes from content often. Um, I'll— let's put a pin in that because I have a whole bunch on deal gen that I think you might find interesting. But a huge percentage of my audience are people who want to start a business, and that's probably some of the people who listen to your stuff. They're people who are employees, they're high up, they're executives, things like that. Or, and they, or they want to start a business of their own, whatever. And so I was like, okay, so there's this entire huge part of my audience that wants to start a business and I want to have something for them. And so I also don't want it to cannibalize acquisition.com in terms of how we generate deals or things like that. And so, uh, it had to be something that would help people start a business, which in my opinion was going to be the closest match, you know, like audience match. So highest percentage conversion. It had to be a scalable thing. So I didn't think a service would work given the amount of volume that we have. And so I was like, okay, it has to be something that's demand constrained, not supply constrained. So it's like, okay. And ideally, if there's something that we can create some sort of network effect and some sort of compounding machine within it, and it has to be at the right point in the life cycle of the business, right? If you're day 1,000 at Facebook, it's probably too late, you know what I mean, to get in on Facebook at any appreciable percentage, right? and also where I would have less leverage and less value to add to a company of that size. And so Skool was a big company in terms of its value and the rounds that they had done already. But I also have a really big brand. And so it took Sam and I, call it 9 months to work out kind of every component of the deal. Uh, there is, in my opinion, it was the best deal I've ever done, not in terms of like winning over anything like that. It was just, it's a, it's a really elegant deal the way that it works, which I'm not at liberty to explain all the pieces of it, but basically like we both gave a lot and we both are happy with how it's going. And so we both made commitments to the other person of what we can and can't do. Like if, if someone's going to come on and, uh, you know, be in an ad from school, like I have to be okay with it because I have a strong association with that. That and things like that, right? It's like, there's, how can I mitigate this risk? How can you mitigate that? And so to circle back to the original question, why did I do the school deal? I felt like I had 70% of the audience that I have because there's always way more people who want to start a business than have a business, especially if you make business content. And so I wanted to have something for that audience that I, that met all those other requirements. And I knew Sam, um, and Sam told me about school 2 weeks into him starting school. And so I was kind of like, I'm not going to try and bet on a platform at day one. That's why, that's where Sam has just massive balls.
I think on our podcast, I think he said he spent $10 million of his own money to fund the business. And I think he also said that was the bulk of all his money.
Yeah, it was. I mean, I think he's been public about it. And then he still raised another $5 million to still keep continuing to reinvest in the business. And when I saw the metrics of Skool, It has everything that you want. It had viral organic growth. It was compounding, you know, 20% every single month, month over month over month. And I was like, this thing's a fucking monster. And it was right at that point where he's like, we need to grow. And I was like, okay, I need a product. And so it was a perfect match. And, um, it's worked really well. All right.
If you like that clip, there's a full conversation with a lot more just like that. Just follow my finger. It is right here.
