Lead Gen Businesses, Islamic Finance & COVID-19 Virality | My First Million Podcast 03-10-2020

Boom, we're here, coronavirus and all.

Yeah, the streets of San Francisco are empty. You could have walked down in the middle of the street and, uh, would have been fine.

Yeah, and, um, we're in this studio and Sam's just coughing up a storm, which has got me concerned. So allergies, this may be my last podcast, you don't know.

Allergies, the type of allergies that you can catch and kill you. Allergies.

So this is for all the students of Stanford, Harvard, Syracuse that have been shut down. They're at home, certainly just listening to the podcast in quarantine. This is for you. This one goes out to you.

Yeah, good luck.

All right, what do you want to talk about? We got a bunch of words on the screen. They all look interesting. Where do you want to start? Pick one.

Can we talk about— I want to do two things before we jump in. Yeah. Are we doing a plug of Jordan Harbinger's podcast?

Uh, yeah, but I think we want to talk to him about it, right? Like we want him to be talking to us as the plug.

Okay. So we're going to be promoting his podcast and he will be doing it to us. Yeah.

Scratch our back, we scratch his back.

That's how it goes. So if you hear a plug from him, go and listen to his podcast. He's actually helping us a ton. And the second thing is I re— I read every review for the podcast. Um, we have 600 reviews, maybe 794, just checked this morning. Cool. 7. So 800, let's say 800.

Um, I—

they're all 5 stars except for like 5.

Yeah.

And that's cool. I like reading the positive reviews.

And those 5 were from early on when you weren't even on the pod. So really, I take those. I take those.

No, there were 2 not 5-star reviews. And I like listening to negative feedback and I don't like following all of it, but some of it I follow. The first was that the sound for the guests were bad.

Agreed.

Fair. We will listen to that. And the second one, and I hate this, I don't hate it in that it bothers me, but I, I just don't, like, I don't think it's bad feedback, which is we were called bros, right? And I don't really care about that because what's that mean? How is that supposed to be? Like, people use that as an insult. I don't understand why that's an insult.

Yeah, it's an insult, uh, for sure, to be clear. It used to not be an insult, but being called a bro is an insult. And, um, yeah, I don't know. Is it the way we talk? Is it what we talk about? Is it Or are we using the wrong words? I'm not exactly sure.

Yeah, I don't take offense to that, even though people mean it to be offensive. So I don't care if people say that.

Yeah, I'm not a bro. I'm a lover, not a fighter. You know, I got multiple angles. I got gears.

What does a bro mean?

I don't know, Henry, what's a bro? We need the— get, get, get— you got to go into the mic. Thing to— come on, bro.

Yeah, come on, bro.

Um, it's definitely not a good thing, especially if you're like over the age of 20.

Maybe we have to replace Henry with a female and then we'll get more credit for not being just a bro down.

Yeah, no, I don't care about being called a bro.

Friends, like, you're bros, you just go back and forth.

So then it's a compliment?

Yeah, kind of. I don't know, whatever. I'm not trying to be liked, I'm just trying to be me.

No, well, here's what I'm trying to do. I'm trying to be me and I'm trying to create stuff that people want. And if it's predominantly people think it's bro-y, but they love it. I'm okay with that.

Yeah. Like for example, I listen to the Joe Rogan podcast. Joe Rogan talks about his carnivore, all meat diet, you know, uh, working out, UFC fighting, cage fighting, uh, hunting, you know, these are cars. Like these are his topics. Cause that's what he's genuinely interested in. I like talks about, and he talks about other things too.

Everything else.

Um, and I like when people, I like listening to stuff where people are interesting and they're interested in certain stuff. And so for me, the test of this podcast is, would I wanna listen to this? And so at the end of the episode, I just sort of think, would I be interested in listening to that podcast? And if it's appealing to me, then I'm sure it's appealing to other people. It's not gonna be appealing to everybody for sure.

And then the last bit of negative feedback we got, which is we focus too much on the San Francisco Silicon Valley scene. Um, and I'm from Missouri by way of Tennessee. You're from everywhere.

Yeah.

Including Colorado. I love San Francisco and I hate it at the same time. I'll be the first to make fun of it, but also I love all types of cool shit going on throughout the country. So yeah, that's probably fair.

If it's interesting, let's talk about it. In fact, I actually think personally, I think we skew a little too far in the kind of like low-tech ideas. And I think there's a lot of interesting high-tech ideas that don't require a high-tech entrepreneur. For example, I don't know how to code, but I've started tech startups in Silicon Valley, taken venture capital money. And worked with an engineering team where I'm the only guy in the room who doesn't know anything about engineering. You can do that. So I actually think that there's plenty of cool stuff that we're not talking about that I'm gonna be bringing more of. So if you don't like the Silicon Valley stuff, I'm sorry. I'm gonna try to bring more, uh, interesting technology, uh, to the table because there's a lot of it out there and I feel like we haven't been talking about it as much.

The way that I describe San Francisco and Silicon Valley is to me, it's kind of like Hollywood, but it's only, only if you're trying to make like a like a big blockbuster hit, right? Um, I believe that you can make those anywhere. It might be a little bit more helpful if you are physically in Hollywood because you'll— not because the chances are necessarily higher, but because you'll be around other people who have similar wants and dreams and your baseline becomes a certain thing for sure. But you can certainly make it from anywhere.

Absolutely. It's been proven. Um, okay, let's talk about some of these things. Um, let's start with Let's start with the Sequoia memo.

Okay.

Did you read this?

No, I avoided it on purpose.

Nice. Denial. The best, the best approach.

Yeah, I— we haven't raised venture capital, so it's a little bit different.

Not as applicable.

But once you explain—

so let's explain what it is. So Sequoia is one of the biggest venture capital firms here in Silicon Valley. They are famous for— back in 2008, I want to say, they released this presentation called RIP Good Times. And they basically, they called an emergency meeting of all their portfolio companies. They invited them to this dinner, locked them in a room, put this presentation up on the screen that was basically like, hey, the good times we've all been experiencing are about to end. Here's why. Most of you entrepreneurs, you have not been a part of these cycles. We've been investors through the dot-com boom and the bust, and then this new boom. And this was right before the sort of financial crisis of 2008. And they told them, look, Money is about to become hard to come by. Um, we are going to have, um, a giant financial crisis that will have ripple-down effects to you guys, to your customers, to your clients, to your investors. And so, you need to start tightening up. Anything you're wasting money on, you need to stop wasting it. Anything, uh, if you haven't raised money, if you don't have 12 months in the bank, you need to go raise money right now to sort of, uh, be able to endure a downturn. And they just released another one, which is the new Sequoia memo. So that was 2008. Now they released a new one, and they basically were like, look, this coronavirus stuff is a— this is a once-in-a-hundred-year virus. And there's this— it happened in China, which is like, when you shock China, you shock the global supply chain. And also, now that travel is gonna stop, a whole bunch of business is gonna come to a halt. That stock market's gonna go into a panic because we've been in a 10-year bull run and that's about to sort of end anyways. So they, they told him the same thing. Change your spending habits. You need to tighten up, uh, raise money. If you, if you have an offer out there, take it. Uh, don't worry about valuation. Just take it and get the money in the bank. And, um, and you know, you need to go into sort of survival mode. You need to change gears. And that's what just came out, which I think is very interesting. Have you made any adjustments to your business?

Not yet, but I live like this anyway. I'm kind of a cockroach in the first place.

Yeah.

And, and I actually think that me living this way has kind of been a, a consequence. It has been, is hurt me more than it's helped me actually. Mm-hmm. I think it, it, it made it so I wouldn't spend enough money, which if you have a machine that turns a dollar into more than $1, dump the, dump the truck, your money truck.

Like what, ad spend or what do you mean?

Yeah. I mean, look, if you have a, a funnel where you, or a product where if you just spend more on marketing or spend more on engineers or spend more on content creators and it turns that new customer into more than what you acquired them for. Right. Then if anyone had a, a little machine that turned $1 into $1.01, the name of the game is throw as much money on into that machine as you possibly can, as fast as you can. Yeah. And I've had those machines and I didn't capitalize on it. And so I've lived this way all the time. Right. And I think it's actually hurt me a lot. But in times like these, bring it on.

Yeah, you don't need to adjust.

We haven't changed how we've done things just because we're always tight.

Yeah. And your company's in a good position. Like just now before this, we were looking at a company's P&L and it was like cash in the bank, $220 grand or something like that. It's like, dude, you're a couple of months away from insolvency, you know, if that was the case. Whereas you guys are in a much better position.

Yes, I do. I am. I do have a little fear. I don't know how I feel about this corona thing, what it means for business. I do think that I am on the side of, I think it's bad, but I don't think it will be as bad as I think, or as I originally thought.

Right.

I guess I just have faith. I have a lot of blind faith that it will work out, which—

So I've been on the other side of this. So when we were doing our Idea Lab, Uh, I worked with this guy, Michael Birch. Michael Birch was, is known as, if you just Google, he's like one of the top growth guys in the world. He sort of was doing and invented viral marketing before viral marketing was a word. Uh, he did it because he didn't have money back in the day. So he built one of the first address book importers where, uh, for this company called Birthday Alarm, he had, he was like, and I think he did it before that at, um, Rick Marini's company.

I forget what that was called.

Birthday Alarm was before that. Oh, so Birthday Alarm was the first one where he was like, Hey, I want people to send this to their friends. What if I just imported all the addresses from their Hotmail and then I made it easy, push this button to send it. And he's like, he, he literally told me at his house, he was like, I thought that 10 days later, like I thought there's no way they let this go for more than 10 days. And he's like, it's now been 15 years and this thing still works. And he's like, um, so he was working on viral marketing cuz he just didn't have a budget. So he's like, I gotta use my customers to get me more customers.

And to explain that, You didn't explain it totally clear, but someone signs up for your thing and says, do you wanna invite your friends? Here's your Gmail contacts. Click select all and send an email to all of them.

And so in this case for Birthday Alarm, it was, I make a calendar where I'm, and I'll invite you. I'll say, hey Sam, can you add your birthday to my calendar? I, I don't wanna forget your birthday. This is before Facebook existed, by the way. And so you would add your birthday to my calendar and then it would, hey, it would say, hey Sam, don't you wanna remember Sean's birthday? That'd be nice. Like reciprocate. And you'd be like, "Yeah, sure." And then it would say, "Hey, Sam, you got one birthday on the calendar, but you surely got more friends than one, so why don't you invite some other friends? Here, let me make it easy for you. Would you like to import all your friends from Hotmail?" And you're like, "Yes." And then, and he added one thing at a time to make it more viral, so he would add a pre-filled message, 'cause he's like, "Oh, people are stopping because they can't think of what to say." Right. So here's a pre-filled message that I know works, and then I just say send, and so then he got this thing super viral, so, You know, Birthday Alarm grew to 50 million members with zero paid marketing. 50 million. And then he's done this again and again since then with his social network, Bebo, and others. So when I worked with them, the name of the game was viral growth. And so we did a charity campaign. They were trying to raise money for Charity:water. Well, we made a story, a website that was just telling a story of this boy, John Bosco, with no water. And then we said, can we get this to go viral? And so we did the same thing. Import emails, get people to send the story to their friends. And raise money for the cause. And we got it to go viral. So I've literally been at where like nothing, nothing, nothing. You'd come into work, nothing, no growth, no growth, no growth. And you would just tweak the right thing. And then all of a sudden that, you know, between overnight something would've doubled and the next morning it doubled again. Next morning doubled again. And I remember it just going from 0 to 5 million people signing up for this charity thing within like, you know, 2 weeks. It was insane. And so I've seen viral growth and how counterintuitive it is. Like, you don't think, you know, well, yesterday we had 4,000 people, so today we're gonna have, I don't know, 5,000, 6,000. It's like, no, you're gonna have 16,000, then you have 32,000, and it's gonna, you know, it's gonna go up to the millions within a few days. And so I've seen viral growth when you're talking about it in the good sense from a product perspective. Now it's viral growth of an actual fucking virus. And so, uh, and you can see actually in the US, somebody did a great graph where they mapped Italy where everything's on lockdown because Italy has started spreading like crazy. And they showed Italy day 1, US day 1. Italy day 2, US day 2. Number of cases. And the bar graphs are like identical. And the thing is, we're just in like whatever, day 6. And you can see by day 21 where this thing gets to if you don't like lock everything down right away. So I am very fearful because I've seen viral growth, I've seen viral spread, and I know that it doesn't work the way, it breaks our brains. Our brains think things go linearly. But this goes exponentially and it's really hard to just comprehend an exponential spread.

And to take the story a different way than coronavirus, which is that stuff that you're describing, that Michael Birch thing, you can actually still get all these cool plugins that auto, uh, automatically like allow people to share a pre-populated message to all their Gmail contacts. We used it and people still share.

Yeah. And the, the, the math works out where, you know, um, cuz you would think I would never do that. I wouldn't email all my contacts.

No, we had a lot of people doing it, but people do it.

And what happens is, You know, 1% or less will do it. But you look at the math, 1% of people do it, on an average they have 326 contacts. So, for every 100 people that come in, you get 326 people blasted out.

It doesn't work as good as that time because the email open rates are much higher then.

Yeah, but now people are like, oh, I don't know, I never talk to Sam, so if he's sending me this, this is junk, this is spam. Now people filter it. But in certain countries it works. Like, we were growing like, we could do this like clockwork in India. In India, people still open it like they did in the US 10 years ago, and they forward even higher rates. They don't care. They'll forward everything to everybody. And so India, Turkey, all these little countries where we would see this crazy growth that you couldn't get in the US and/or UK anymore, they kind of suck because the monetary value ends up, you know, the value per user is lower there, but it does still feel good to get like crazy growth.

And it definitely works, and people are shocked by that.

Yeah, we did one through SMS, I remember, and over the weekend it went viral. And like, you know, during the week, Monday through Friday, everything looks fine, is growing, but like not at a crazy pace. We didn't realize the viral coefficient was 2. And so over the weekend it took off and started compounding on a big number and we racked up $120,000 in SMS, $120,000 bill in SMSs.

Holy crap.

Going through Kazakhstan. I was like, we didn't even know we're growing, we're gonna grow in Kazakhstan. And it went crazy. And turns out texting in Kazakhstan is super expensive. And so $120,000 in 2 days we had to pay off.

That's crazy.

Sucked.

Well, I need it. We need to do the texting stuff, um, which we haven't. Uh, you want to talk about Zumper? Okay, you want to scroll up for me or down or whatever you want to? Okay. Okay, Zumper. I think it's zumper.com. Um, what did it— they just raised, uh was it $40 million today at a $400 million valuation. Total, they've raised $150 million in valuation. It's a cool— it's a cool service.

If you're a consumer, how does it work?

Yeah. So go on. Have you ever used Zumper?

If you're trying to find an apartment, you'll probably run into Zumper because you're like, it's a search engine to find apartments to rent.

Yeah. And typically for these new guys, San Francisco isn't the major market. It's typically more middle of America, more places where they have high-rise buildings, which we don't have a lot here. But basically, if you Google Chicago apartments, or moving to Chicago or something like that, Zumper or Apartment List, my— the place where I used to work, or a bunch of other things like that will come up and it'll be like, here's 843 apartments available in Chicago. Click here to get information and submit your information. Okay, great. Here's how they work, which a lot of people have no idea how they work. Henry, I'm going to explain to you how they work and you tell me if you ever heard this. Okay. So they're lead gen companies. You know what a lead gen company is? Okay. The way it works is, and a lot of people are shocked by this, and it's actually way easier to start than most people would realize. So the way it works is there's— I don't know how many there are who do this, but I know that there are for sure 4 or 5 that do this that are big names.

And so just in the apartment space, just in the apartment space.

So there's Apartments.com. I believe there's Rent.com, and there's maybe 2 others that are quite large. And then there's— dozens that you don't even realize exist. You'd have to Google them and find them. But what they do is they work with all the big apartment buildings. So there's Greystar, which has probably millions of apartments. Then there's CoStar, which has a bunch. And then there's every apartment building that you have.

WorldStar.

Well, what are the other ones? Greystar. And then there's Avalon, Avalon Bay, I think they're called. There's there's a bunch of them and they have millions of units. And what they do is they go to rent.com and they go, or apartments.com, and they go, for every person who signs a lease with us or who calls our phone, we're going to give you $100. And so what Zumper can do, or probably how they started out, or what anyone can do is they go, hey, apartments.com, you guys are getting $100 per call. Will you give us $10 per email we give you of people who are qualified leads? So what Zumper did, I imagine they did this when they launched and I'll explain why I say when they launched, is what they did was they go to these places and they go, all right, give us a cut of the revenue per email. And so the math works out that if we send you 5 emails, basically people who said, here's my email address, here's my phone number, I'm interested in a 2-bedroom at this particular building, apartments will be like, all right, we'll give you $10 for that because we're pretty confident that for every 5 of these we collect, one of them will become a lead. And so now we make $50 in profit. And so what Zumper does is they create a different funnel where they learn how to rank really high on moving to Chicago, find an apartment, or they are able to have really good Facebook ads and they get all these leads and that's what their margin is. And so the margins for these businesses, I know this firsthand, could be 60 to 70% gross margin, which means, let's see, what's the math on that?

Million bucks comes through the door. You paid, you know, $250K on search engine marketing.

Yeah.

But, you know, the rest is because there's no COGS, there's no, there's no physical product you're selling. So you have a very high margin product, 67% margin plus whatever content staff you have internally. That's your other cost.

So it's just a lead gen company. Yeah. And the interesting thing, I've known a lot of people who have these lead gen companies. I knew a guy who had a lead gen company for swimming pools. So if you wanted to buy a swimming pool, you'd Google Swimming pool repairman or indoor ground pool, indoor, in-ground pool setup, California, right? Or something like that.

He's number one.

And he would, he would be number one. You submit your information and he would sell it to these people who go and service, who actually do the thing, who actually do the work. You're a middleman when you're a lead. Now, there's pros and cons to this business. The first pro is you could set these up really cheaply and you could start making cash flow very quick. Like if you were able to spend 1 month just building this site and creating the relationship with this person, you could next day go out and start making cash so long as you were profitably acquire a customer. Right. So that's great. The second great thing is you could do this for most anything. The best way I think to figure out how to do this is you figure out what has the largest total market size with also the largest possible cost per lead, with also the least amount of competition. And you do like a grid. Yeah, like a grid. And so, for example, I've been bullish on truck drivers. The reason why is I think that there's a whole lot of truck drivers in America. The average truck driver makes a good salary, let's say $50,000 a year. Therefore, recruiters would be willing to pay like $100 per lead. So I was like, can I send leads there? Or you could do it for local services. So I need a landscaper or I need irrigation work. Done at my house, my home, and someone will buy those leads for, I don't know, $50. So you can do this for anything, right? You just have to optimize for what—

so my father-in-law is in the senior living business. He owns a couple of facilities, and the biggest thing for them, like, his business looks great when he has high occupancy rates, and it looks terrible if he gets high vacancy, so low occupancy. And so there's companies out there that do this for seniors. If you start Googling, like, you know, you know, memory care Alameda, California, there's a company that will pop up right on the top of search and say, hey, we've reviewed the top 15, you know, facilities here and come read about them. Or, hey, are you looking for this? Talk to our consultant. Just put in your email address here and we'll help you get land in a spot. And so then they'll pay these lead gen services a high amount because, you know, somebody who goes into a senior, senior facility, they're paying $8,000 per month and they're usually there till end of life. And so you get, you know, the very high lifetime value of that customer. So you're willing to pay $1,000 per qualified lead who's looking in your area.

Yes.

I don't know if it's that exact number, but high, high price.

And I have firsthand knowledge. I know someone personally and I know the financials of a senior home living or senior living lead gen business.

Mm-hmm.

It made hundreds of thousands of dollars a month in revenue and a very good profit. I know someone who did it for rent-to-own properties. I know people who have done it for, like I said, swimming pools. I know people who have done it for apartments. I know a guy who did it for local home services and did about $60 to $70 million a year in sales.

Right.

And so that's the name of the game. I also know people who have done it for jobs. Jobs is another good one. Now, like, RigUp has done this. They've raised money at a $2 or $3 billion valuation and they've done it for oil workers. And the way the math works is there's actually way more oil workers in America than you think. Hundreds of thousands or can be hundreds of thousands. And those oil workers, the barrier to entry is relatively low. You don't have to have like a master's degree in something, so anyone can do it, or a lot of people can do it. And the salary is quite high, $100 grand a year in some cases. So they're willing to spend a lot of money. And so it's a really interesting company, or a business rather. And a lot of people don't know that's how it works. Now, here's the downside. The downside is lead gen companies can be very transactional, which means as a business you only capture value and make money the more leads you're coming in through there. And often that means you only make money when you're spending money. A lot of times you, they suck at building brands. So like I said, you could spin something up really fast. That means it can likely go away just as fast because let's say that like if you create a URL that's like home, seniorhomelivingcalifornia.com, that is not like, maybe, maybe someone was just gonna Google that and they're gonna see it one time.

Right, they don't think of you.

Yeah, and then they're gonna get their, and they're done. They're never gonna think about you ever again. And so you have to pay for them again. And so if you want more customers, you got to pay again. Right. And so that's quite hard. So if you can build a brand around it, then that's where it's really interesting. And the second thing is that you are dependent on the person buying the lead. So in my case, I worked for a person who was doing lead gen and they go, all right, there's a cap on this. Like we can only make a certain amount of money giving leads. The way that we become a huge business is we get— we make a relationship directly with the apartment buildings and, um, go straight there, go straight to them. Now, the reason why that sucked is because the person buying the leads was like, oh, you're our competition now.

Right.

You're out. And they cut it off and their revenue goes away immediately.

Right.

And so what Thumbtack did— I like Thumbtack— what they've done is they've built a direct relationship with the people. So if you Google San Francisco wedding photographer and you see a wedding photographer on Thumbtack, they've built that relationship with them and that wedding photographer will pay Thumbtack directly for a lead. That's great because there's no middleman to cut out. Now, the downside with that is it costs a ton of money to do. This is like a really big problem to build a marketplace. And so you likely have to raise money or figure out some scrappy way to get it done.

Right.

But that's my rant on Zumper. Yeah.

And the big version of these, if you take it to its absolute max, is like Expedia or Booking.com.

Yeah.

Right. So what they're doing is they're saying, okay, cool, you want to book a flight? I will become the best at ranking for how to search for flights, find a good flight. Here's some recommended trips. And then we just— the airlines pay us a commission, an affiliate fee for every lead we're sending them.

And that is a notoriously difficult niche.

Yeah, they've done well, but they're hypercompetitive and they're, you know, it's always contentious.

And then hotels is another one that's quite challenging. If I wanted to make money really fast, I would find a relatively boring one like trucking jobs, which I find interesting, but most people do not. So they will not enter that. But flights and travel is a lot sexier, and so it can be a lot harder.

I'll give you another niche one. I have a friend who created this business called ApplyBoard, and what he was doing was international students, people, you know, I went to high school in China, and when I was graduating in China, everybody wanted to come to the US to study. Everyone wants to come to US colleges. So internationally, India, China, Indonesia, Malaysia, the best students all want to come to the US if they can. So they want to come to the US, but they don't know where the hell to start. They don't know what the schools are. They don't know how to apply. They don't know how to translate their scoring on all these like, you know, aptitude tests in Malaysia to like what the US schools want, et cetera. So there's a barrier there. And the US schools love foreign students because they pay more. Like I think a foreign student who, international student who's going to school at Berkeley will pay double the tuition as a local student. Not just an in-state student, like a US, out-of-state student versus international, the international student pays double. And, uh, Alan, that was you, uh, you paid double?

So I paid more than double.

So I went to school in Australia. I think the average per semester is like $5,000 to $6,000 for like a local student. I paid like $45,000 a semester.

Okay, so yeah, all right, great. So, so you paid like 9 times as much, um, going to school. That's insane. So basically what he was doing, so he went to colleges and you have all these small colleges that just need applicants because they don't have a brand name. So yeah, a lot of Stanford and Harvard, they don't really care because they're getting so many applicants anyways, doesn't matter. But like San Jose State, you know, they were like, hey, we will pay you $1,000 per admitted student, $3,000 per admitted student. So he was getting $3,000 per admission in contract with all these different schools. And then he just had to do lead gen on the other side for students who want to go to school in America, which is actually a big market of people who are searching for it.

And what happened to it?

Uh, he's still going. I don't know. I haven't checked in with him lately, but hope you're doing good, Martin. I hope you're doing all right.

So I used to work at the University of Sydney as a part-time job, and I remember getting an email one time where they're describing the strategy for the year and how they're trying to pivot away from attracting so many international students. But that was, they couldn't do it because that was their main source of revenue. Like they were making so much money from international students. They couldn't stay afloat if they didn't target.

Yep.

So if you go to campus right now, it's literally just like—

International students everywhere.

Yeah, I went to University of Sydney as well for a little while. It was crazy.

So did I.

We should actually talk about that on another time, because there's an interesting thing there. But to get back to this lead thing, to wrap this up, there's actually a lot— and this is way bigger than people think. And one of the biggest ones is credit cards. Credit Karma. I don't know what they do in revenue, but they just sold for $8 billion. I bet they did $1 billion in sales. And what their hook was, we're going to get you to sign up for a report, a credit, a free credit report, and we're going to recommend credit cards for you to use. And they'll make $100 per credit card affiliate we get— they get. Now, think about credit cards, huge market, huge referral fees, very competitive. NerdWallet does the same thing. They're bootstrapped, I think. I don't know if—

multi-hundred million. Yeah.

I mean, but I think they bootstrapped to like $50 or $60 million in sales, then raised money. So it's quite— Good. Now here's another company and here's one more interesting thing. You know, The Penny Hoarder?

No, I don't actually.

I don't know why. Have you guys heard of The Penny Hoarder? Thepennyhoarder.com. Kyle spoke at HustleCon. He's a cool guy. He was a great success story. Still is. But he started The Penny Hoarder. And what it did was he would write about when he was poor, he didn't have any money. He would say, I didn't have any money. I was trying to pay my bills. And so I would do things like drive Uber or I would do coupon clipping and he would blog about it. And anytime someone, saw an article that he wrote about driving for Uber. He would make $2,000 per Uber driver. And so he was like, oh, this is cool.

I should—

I'm going to blog about all the ways in which I can save money or make extra money. And so he did that, like through— like there's websites where you can fill out surveys and make dollars and make a few bucks. And he would blog about it. And mostly middle America moms would see and be like, that's great. I'll make money on the side and I'll sign up. And he would get an affiliate fee. And he scaled this thing from $0 to $60 million in sales, completely bootstrapped in like 6 years.

I love this.

That's great. And, but here's the problem. There's this other company called Fluent Media. Fluent, I think it's called Fluent. Fluent is a publicly traded company and they are performance marketers, which means they do what I'm describing but across tons of niches. So someone will say like DirecTV will come to them and be like, hey, we'll give you $80 for every customer you send us. And they go, great. And they spin up these landing pages and Fluent Media does this with trucking as well. They do a bunch of stuff. It's a big business, publicly traded. They saw Kyle's website and how much he was killing it 'cause he talked about it a lot for PR, which, I mean, it's—

Good and bad.

Good and bad. And they just, and they ripped him off completely. They created like the Dollar Saver or like something like very similar to like the Penny Hoarder. They just copied the website, copied the articles, and then they threw it on Facebook and they drove traffic to an article that said, here are the 100 best ways to save money. And they did the math so they could get a click for a penny or they could get a click for a dime and each person who came, they would make $0.20 because that's the conversion rate of which people would sign up. And so Kyle at Penny Hoarder, this is all public, you can Google it, sued them. And what they found out was Fluent Media, according to the lawsuit, hired one of the Penny Hoarder's employees and they said, yeah, here's how we did it. And so they just spun this up and it made a ton of money right off the bat. Yeah. And so these are the pros and cons.

Did he win the suit?

I think it's ongoing. It's ongoing. But, uh, for Kyle, but this is why this is interesting. Um, because I— and the Penny Hoarder, amongst its crew, amongst its audience, I think has a great brand. And, um, yeah, and NerdWallet actually at this point has a great brand. At first, NerdWallet was simply a— you're just going to Google— you're just going to Google best credit card and we're going to show up one, and you're not never going to remember us. But at this point, they're doing all this advertising and commercials, and people like turn to the nerds. Like, it's working. That's their commercial. So really interesting business model. I, I like lead gen. But a lot of people didn't realize how that worked. Henry, was that interesting? Did you learn how it worked? That was great. Yeah.

Alright, I got another one for you. Manzil. So this is cool. This is one of my favorite reasons to do the podcast is that interesting people just reach out and tell me about their business. So Manzil is this. So this guy Sam reached out. He listens to the podcast.

What's his last name?

Sam Malako, Malako, something like that.

Tweeting at me too.

And, um, so he was like, hey, I got this business, you know, would love some help with it, um, or just would love to chat. And so I said, okay, let's chat. So I get on the phone and I end up blown away by what these guys are doing. So they teach me about something I've never heard of and is now very finance— very, very, uh, fascinating to me. So what they do is Mansell does Islamic financing.

Oh, we've talked about that.

What's that mean? We talked about it not on the podcast, but we talked about it offline because I was pretty interested in it. So, um, Henry, do you know what Islamic financing is? If you didn't know Lee Jin, I don't think you'll know this one.

So are you, are you Muslim?

I'm not, I'm Hindu. Well, I'm neither, but like my, my family is Hindu. Um, so I didn't know about this, but basically in the Muslim faith there's, um actually sort of the advice is against traditional loans. So interest, which is known as like riba, I think, in their faith, is frowned upon in these. So a traditional mortgage where you go to the bank, you have your down payment, you take out a loan, and you're paying interest is actually not compliant with their faith and their law.

Which is actually common in a lot of other different religions.

Is that true?

Yeah. So I'm Catholic Christian and I was raised that way. And there's definitely rules regarding handling money and interest and things like that.

Yeah. And I think the fundamental basis— I'm going to kind of butcher this, so I apologize, but I'm just trying to explain as best as I understand it. So, so apparently, you know, money, sort of fiat currency, which is just not pegged to anything, is just a made-up concept. The belief system is that money has no value, inherent value in itself. And so you should not be charged interest for borrowing money, which is this sort of abstract concept. So they have loans or they have sort of agreements which can work as long as both sides are taking shared risk and getting sort of shared, shared upside, shared return in some way. So there's—

there's Sam Islamic, I believe so.

Yeah. And his partner Muhammad is also. And so they were explaining to me that, hey, there's this big thing called Islamic financing and there's these Islamic banks. Challenger banks. And so if you ever heard the word challenger bank, check this out. It's pretty, pretty cool. We know that banking has been around forever. These big bank brands that are, you know, in every country there's big banks that are worth billions of dollars. And recently, over the last, let's say, 5 to 7 years, there's these things called challenger banks or neobanks, they're called. And so in Brazil, there's a bank called Nubank, N-U-Bank. And Nubank is worth $10 billion. It's one of the most valuable startups in Brazil. In the UK, there's challenger banks. Oh my God, I'm going to forget their name.

Challenger just means a new one?

It's a startup bank.

Yeah.

And they offer different things. So, what these guys did was better digital access, so mobile apps, quicker ability to get sort of credit cards and debit cards spun up. And so, there's, you know, there's a couple of them that are huge now. A few different multibillion-dollar startups done this. What these guys have done is they've done this for faith-based a bank, which is basically saying there's a set of customers out there, in this case Muslims, who are not being served well by the generic banks, and we can make a bank that serves them better. And the way we're gonna do it is, you wanna take a mortgage out, you can either take a sort of a mortgage out, a traditional mortgage, which is not compliant, or you can take one out that's compliant with your faith. We've come up with a mechanism that is blessed by sort of the village elders, you know, the sort of leaders in the community, that says yes, this is, I think, Sharia law is what it's called, it's compliant with Sharia law, and then on the other side, this works as a mortgage, you can actually buy your home. And so these guys have this concept, and in other countries, this is apparently really big. So in Africa, Indonesia, places where the Muslim population is the dominant population, they've already solved this problem. But in places like US, Canada, where it's just a minority of the population is Muslim, They don't have these banks yet. So I love this startup idea because—

How are they doing?

So how they're doing? So they've spent a lot of time making sure that they can actually get it to be compliant and actually get the financial mechanism to work. That took them a while, over a year, maybe 2 years. Now they've gotten that to work and they have basically, they have 2 sides of a marketplace. On one side, they have people who are investors because, you know, if you're going to issue mortgages, their average mortgage is like $500,000. So it takes a lot of capital to start this business. They don't want to be the one they don't want to go raise $1 billion and then start issuing these loans. They want on one side to have investors who will put in the capital to fund these loans, and on the other side, they want to have the borrowers who are trying to buy a home, who can pull from this pool of, you know, sort of halal financing, you know, this financing that's compliant. And so they have $10 million committed on the investor side, $1.2 million in their bank, $10 million total. and then, um, and they're just, every week they're trying to close more of those checks.

Which is nothing, I think.

Which is a small amount, but this is like, just inbound interest. This is not like, they haven't really done anything yet. But $10 million will let you do, if you just do half a million dollar loans, that means they can do whatever, 20 mortgages, um, uh, right now, and every mortgage has a certain value, so it's about, worth about, I don't know, $20K a year to them, is that mortgage, just in their fee that they get on top of it. Um. And so, and on the other side, they have all these applicants, I think, you know, about 1,000 applicants, and these are what they call super prime applicants, because these are people who are doctors, lawyers, they have good jobs, they have the money, they have the means to afford their homes, they're just looking for a solution that doesn't force them to compromise their faith. So I really like this business. There's a working model in the UK, there's a working model in Africa, there's a working model in Indonesia. There's nothing in Canada where these guys are, and there's nothing really in the US.

Where— how many Muslims do you think there are in America? I think there's—

look this up. I think there's like a couple million, only 2 million, I want to say roughly.

That's pretty interesting. I like that. I think that there's a bunch of weird rules around banking. I mean, they're not weird. They should be there. But and so starting a, starting a bank, I think, is it's almost nearly impossible.

It's very difficult. So what all the neobanks do, all the charter banks do—

not real banks.

They're not real banks. They sit on top of BBVA or they sit on top of these other banks and they're just the app— they're the consumer-facing layer. But the banking happens with their underlying partner. And it's sort of like the lead gen model that you're talking about. They go to these banks and say, hey, I can get you a whole bunch more customers. I'm going to spend all the money doing the marketing. They'll be banking with you. But we own this sort of relationship.

Yeah. And that's actually pretty common. I use this thing. My debit card is Simple. Have you heard of Simple? I've heard of it. Yeah. This is my debit card. It's pretty cool. I like it because the customer service, I can just text and they're like easy. These like young guys in Portland and they, they're easy to chat with and they answer 24 hours a day. They were acquired for $100 million and I was like, this is like a freaking bank. That's it.

Yeah.

And I did not bank. Yeah. And it was what's called BBVA. Yeah, that's who they use. BBVA Compass, I think.

Exactly. They're under there and there's a few that are underneath all these. Now, the very first— there's now one of the Challenger banks got their very first banking charter, banking license. Who? Which is very rare. I forgot their name, but they just announced a couple weeks ago, last 2 weeks, that— so the— so now it's very interesting. Now once that seal broke, because it was so hard to apply for this.

Yeah, I think we—

and they all want it. Robinhood wants their license, Brex wants their license. It's just very hard for them to get this.

I think you need 5% or— what is the number? I think you need 10% in reserve. Yeah, you need a certain amount of reserve.

That's not even the problem. It's just that there's no incentive for the government to give these out. They're like, ah, you, you kind of highfalutin, you know, tech startups, do I really want to give this to you? You've only been around for so long. I don't know if I have the trust in you. So now the seal is broken. The first one got it. We'll see what that means. But what I like about these guys is they're not a bank. They're not taking your deposits. They're just doing loan issuance. So on one side they have the reserve capital, the investment fund, but they're using other people's money. OPM on one side. Yeah, other people's money to make the loans. And they're the broker and they take 1 to 2% of the transaction fee and people are willing to pay a premium to have halal financing. Just like people willing to pay a premium for halal meat or for vegan or kosher meat, you know, whatever. Like, right, people are willing to pay a premium for things that are compliant with their faith. I think this could be big. And you know what's interesting? I think that they've had a hard time raising money from traditional VCs because this is—

they didn't understand—

hard to understand. Yeah, you have to like, you know, most VCs are old white guys, and you know, it's the sort of cliché. And you know, I know they do look into it, but I think that there's the natural challenges of any high-aspiration startup, they have those. They have the problems that any startup that's really ambitious. But then they also have the problem of like, first they need to educate you about this problem. Like, you saw how I stumbled through this explanation, and I talked to these guys for an hour, you know, and that's where I am after an hour of really trying to understand it.

But you ran this by Furkan, your best developer.

Yeah, I ran it by him. I introduced them yesterday. I said, hey, Furkan understands this. He's Muslim, he's an investor, he's a technologist, and he's an entrepreneur. If he doesn't like this, I don't like this.

And what did he say?

And so he— so he's like, I've looked into this. He's like, a lot of my friends really wanted this. I tried to look at what options are available in the US. They suck. They're really super high premiums.

Is he practicing?

Yeah, like, you know, to an extent.

Like, what I want to know is, do you really like—

like, he doesn't pray 5 times a day, but he doesn't eat pork, right?

So he's like culturally—

he drinks, but like his dad runs the mosque in San Jose, and you know, like, it's It's like even people who are like culture, who aren't incredibly devout, are into this. If he had the option, he would prefer halal financing over not if it was convenient. And he's like, the problem with all the existing options, they're not convenient, they're not easy to use, and they're very high premiums. He's like, if these guys did it conveniently, I think this could be big. So he's going to talk to them. We'll see.

Like, I'm not a practicing Catholic anymore. Are you guys Catholic? You're Catholic for sure, right? Do you eat meat on Friday on Lent?

Yeah, I've been bad about it, honestly. I went to like all the all boys Catholic high school stuff.

Me too, I went to an all boys Catholic high school. I don't practice anymore, but that's another thing. I don't eat meat during Lent on Friday, so I try not to. So it's kind of like— it sounds like that's what it— it's kind of like where it's like, yeah, people—

it's a spectrum.

It's a— you prefer it but not—

yeah, you prefer it, especially if it's convenient for you. You, you, you know, the way Henry just said that, a lot of guilt there of like, yeah, I should but I don't. So there's, you know, if you can make it where people do what they want to do without lifting a finger, Then they'll do it. You know, it's great.

That's pretty cool. I like that. I like that thing, or I like that angle of finding, cuz I don't know anything about Muslim culture. I don't know anything about Hindu culture, which is you, where you're from. You, I don't know, you probably don't know too much about Catholic.

Yeah.

It's kind of an interesting way to like look at how other religions do things.

Right.

Another thing that we should talk about, not today, cuz I don't think we know what we're talking about. We definitely don't yet, is building things on top of banks. I think that's super interesting.

What do you mean by that?

So like what Simple did and like what the— what's the name of this company?

Manzil.

Man— spell it.

M-A-N-Z-I-L. Manzil.

Okay. Kind of like what Manzil did, a building, a building a front end on top of someone else's backend. Right. Which is the bank. I think that that's really interesting. Simple.com is my card. I didn't know they did this at first.

This is kind of what dropshipping is. So where you build the layer that says, I'm going to get the customer to a landing page and they buy. Yeah, but it's just going to place an order with this other manufacturer and they'll ship it directly to them.

Super effective. I like that with banks because like Simple, they did this all. I mean, it's a little different. The card is all white and it's a branding look looking.

Yeah.

And their app is really good. And so it's kind of interesting. I think this is kind of what Brex is doing, right? That's totally what Brex is doing. They're layered on top of MasterCard. I love these things. I really like that. Let's talk about— how many minutes are we in?

We're about an hour in.

Okay, you want to— we can answer some questions, or what do you want to do?

Let's do one of these fun ones. So let's do the rebranding words. So this was in the Hustle Trends, the Trends Hustle Facebook group, which is like a source for entertainment and gold.

Which, go to trends.co and sign up, and if you use the phrase Million. Million.

You'll get 50% off. Trans.co/million.

That's my plug.

I believe that's it. Is it, is it /million or is it a promo code?

Both, both will work. Trans.co/million or trans.co—

and you guys have this thing where you can sign up for a dollar, which is pretty dope.

Yeah, and it's working. I love it. I love it.

Um, okay, so, so, so somebody in the group, uh, can you scroll up? I don't remember if I have their name. I, I, I should have their name too.

Uh, your other up.

Up.

Yeah, there you go. Okay, we don't have the name. Uh, we should, we should find Alan, will you find the name of the guy who wrote this? Because I want to give him credit. So somebody was just talking about like, hey, isn't it funny how people just rebrand stuff and like give it a whole new meaning? So he's talking about MSG. He's like, oh, MSG, which was like got this really bad reputation for being a food additive, whatever, and just rebranded as umami. And now it's this like foodie word that like is good. And somebody came into the comments with like a bunch of really funny ones.

You want to know another food one? Aioli.

Aioli?

It's mayonnaise. Aioli is mayonnaise. It has a little garlic flavoring. Look it up.

I don't think that's true. I'm pretty sure it's better for you than mayonnaise.

Look it up. Aioli is flavored mayonnaise. Look up aioli versus—

just Google, is aioli mayonnaise?

I'm telling you, aioli is mayonnaise, but there's like way more. Yeah, you have to do it in a separate tab.

Yeah, you can't do this because we have to—

oh, here, right there. What's the answer say? It says it right there. What's the top result? What's it say? Is aioli any different than mayonnaise?

Aioli is made from garlic and olive oil. Mayo is made from egg yolks and canola oil.

Am I off?

All right, Henry wins. Okay, it's not, it's not exactly mayo, but I like the intent. All right, so let's go back to the doc.

Chilean sea bass is actually called Patagonian toothfish.

Yeah, that's awesome.

Yeah, I love it. So, so this guy had a bunch of them for business, which I like.

So, or nerds.

You know, when you skip, you know, I, I don't know, I'm, I'm like this, I skipped breakfast for years cuz I'm just lazy. It didn't wake up early enough. Um, and now it's intermittent fasting. It's like this health trend. It's like, oh, I'm fasting till noon. It's like, yeah, you skip breakfast.

Posted by Marlin Montgomery.

Okay, Marlin, uh, Marlin was the original post. And then who posted all these comments? And Jeffrey. So Logan, Jeffrey, Logan had a bunch of them that were fire that I liked. That's the reason I put it on here. Okay, so, uh, when you just quit your job cuz you want to travel Now that's called dispersed retirement. That's hilarious. Which I like. When you're a grossly underemployed writer or marketer, now you're a digital nomad because you have to go live in some low-cost area.

Or a coach.

When you just like to eat beef and cheese 'cause it's delicious, and now that's called the carnivore diet or keto.

I used to call the salami and cheese redneck charcuterie.

Sleeping around, online dating. I don't agree with all these, I'm relaying Logan's good ones. When you quit your shitty business idea that was bad all along and everyone told you it was bad, it's called pivoting.

I like that. Failing fast.

When you have a fear of commitment and therefore do not own anything and do not settle down, you're now practicing minimalism.

I love that.

So these are great. And in general, you know, funny shit aside, I think there's a lot of power to this. I think as a leader, you often have to rebrand stuff so that it's more palatable to your team. or to your customers.

Packaging.

Yeah, you have to frame things, package them up in a certain way. We did this with our sushi restaurant where we realized that if we just described things better or differently with better words, people would buy more and we could charge more because people wanted to have sushi that was more sophisticated. So when we called it, you know, whatever, you know, Atlantic salmon with blah blah blah, rather than just saying salmon, that was better. Or if we would create a whole new word altogether and put a little trademark next to it, that was even better than using common words.

Every once in a while, I, like, there's certain things that they use the positive phrase and just generally accept it. I like to use like a word that means the same thing, but is generally regarded as a negative just to fuck with people. So for example, instead of saying like, well, we're gonna get the customer to do this, like we're gonna get them to buy by doing this, or we're gonna influence them by doing this. I like to use the word manipulate. So like, yeah, let's manipulate 'em and get 'em to do this. Like, like words that by definition work, right? Just to, just to kind of throw around.

Well, what happens if we call it what it is?

Yeah. Let's just say, so we're gonna manipulate 'em. Like I'm gonna manipulate this person to like me. And they're like, well, how you gonna do that? Well, I'm just gonna be nice and charming and, and be, listen to what they say. But if you use that word manipulate instead of influence, it fucks with them. And I love using that just this group of people. Like, yeah, let's make— or like, um, when political people say like, well, they have an agenda. I'd be like, yeah, well, so look guys, I'm here to talk to you about my agenda, which is to do like, right. Of course I have an agenda. I'm trying to get you to do stuff. Uh, I'm like, yeah, you're, you're talking like someone has a political agenda. Duh.

They should, right?

Yeah. They should have a political agenda. I love using those words.

So, so Henry, if you scroll up for a second, so, all right. That's the end of this episode. Uh, thanks for listening. Tell your friends, Make it all happen. Leave us a review, we like that. Give us the real talk in the reviews because we read all of them and we like it. Or tweet at us. Sam's got 12,000 Twitter followers now. He has surpassed me in the Twitter rankings.

11,300.

11,300. Who's counting? So he's winning. Great, all right, we're outta here.

Thank you.