Paid Communities Making $20M a Year & How You Can Build One

Paid communities interest me because I came across this thing called Tiger 21, and this sounds like lame that I'm bringing this up now after selling my company, but I've been interested in this for, for years. Do you know what Tiger 21 is?

I've heard about it. What I know about it is it's kind of like a mastermind peer group thing, but it's for a certain wealth level. I don't know if there is— I don't know if there's an actual cutoff, but it's supposed to be for wealthier, and I think it's mostly older people. And we have a couple friends who are in it, so I texted one of them today about it, so I got a little bit of info. But tell me what I missed. What do you know about it?

Okay, so Tiger 21, uh, Google it. I don't know the URL, maybe, maybe it's just that,.com. Um, but basically it's a peer group where you have to have at least $10 million of investable assets in order to join. It's very expensive, it's $30,000 a year. I wouldn't call it a mastermind because mastermind has a certain connotation, but yeah, it kind of is that. I logged onto the site. I'm not a member, but I used a friend's login to check it out. And there's at least 850 members according to what I saw and according to their site. So what's that math? $24 million a year in revenue. They have local chapters that meet up, I guess now digitally, and they do things like they share one another's portfolio and you have to defend your portfolio. And so it's basically rooted in rich people talking about rich people stuff, mainly being investing. But I think it turns into a little bit of therapy every once in a while, like a lot of groups do. But what did your buddy say?

All right. So I texted our mutual friend Keith, and he's, he's, he's a real estate guy. He's been on the pod. You can go listen to Keith's episode. And Keith's a good dude. And he goes, I go, you're in Tire 21, right? And he goes, yes. What's up? I basically asked him, what do you think about it? He's like, it's an interesting group because it's all about investing, preserving wealth. It's mainly for older people. He goes, the typical meeting goes 4 hours. You do, like you said, a portfolio defense where you talk about what you're holding and why, and other people get interested in it. Sometimes there's speakers, sometimes it's an external speaker, sometimes it's somebody from the group who speaks. And there's like a moderator. And they also do like events, because if you go to the website, you can see like they hosted a Tiger 21 event at Magic Johnson's house. And so they're definitely trying to build this kind of like who's who network, this sort of like Soho Club, Soho House vibe to the whole thing.

Yeah, so they do that. They also, you get like deals. So a friend of mine sent me a deal where they, basically when you're wealthy, you get this thing called umbrella insurance, which you pay $2,000 a year, and it's just like general insurance. And it's basically the story they tell you is like, if you get in a car crash and someone Googles you, they're going to see you're rich and they're going to want to sue you for $5 million. And this protects against all types of stuff. And so they give you a discount on umbrella insurance. And so by my calculation, I actually would bet they do $30 to $40 million in revenue. And they recently sold to private equity. And so it's a relatively big business. And I actually read about, uh, read up on it and someone said like there's 90% retention rate, which is pretty amazing. I've also been following Reddit's Fatfire, which is a subreddit similar to this, and it's like tripled over the last year. So this space has gotten me incredibly interested, but this is just one example of a paid community. And so what I wanted to do was go through a few other paid communities that are interesting. I want to explain— I'm going to try to explain why I think they work and then where the opportunity is for other paid communities. Does that sound good?

Can I start? Can I start with one opportunity, which is why isn't this just a business model for our podcast? Like, why aren't we starting Tiger 21 for people that are, you know, that have, let's call it, $1 million of investable assets, so $1 million of sort of like liquid net worth that you can go invest into something? And why aren't we starting this now? This seems like the perfect thing to do for a podcast like this.

I think that probably there should be something like this. I agree. If you go to the Tiger 21 website, you'll see like, you know, the type of models that people use on their website is like their ideal customer, and it's like, 65-year-old white dudes who own insurance companies that are quite wealthy, but not young or not like our kind of crew. So I agree. I think there's something there.

Okay, fair enough. So let's go into it.

All right, so let's talk about— where should we start? I've done a bunch of research. How about we talk about—

by the way, sorry, sorry, interrupt you one more time. The thing I just said, by the way, I think is important. I said, why isn't that the business model for this podcast? I think way too many podcasts try to just do ads, and we've talked in the past about like Supercast, which lets you do like a paid, a paid kind of super premium version of it for your hardcore fans who pay you $9 a month or $5 a month or whatever. And, uh, you know, I started a rolling fund largely off of the audience from this thing that said, hey, I've listened to this guy a bunch, I trust him, he has a good track record. And so now that rolling fund is $4 million a year that I get to invest into startups. That's more value than all of the ad revenue that we had before. And so I think that more people should figure out business models that are different from the content that they're creating. And so I'm surprised more podcasts don't have different business models.

Well, I agree with you, but we are—

It is more work.

We're in one of the most lucrative niches there is. I mean, like, if you're a comedian, if you're, um, what's that shit called, the two women who talk about sex all the time?

Call Her Daddy.

Yes, like, that's a little bit different. So how do you make money off that? That's a little bit different. And that's actually what we're going to talk about with paid communities. So let's actually talk about— let's— and I'm going to bring that up. So let's talk about what makes them interesting and what makes them not interesting. So to me, what makes them interesting is that when They can grow pretty quickly. So you had a podcast, you did this $4 million fund. Now building the audience takes a while, but you turned your fund on and you— it was $4 million in a matter of months. Very quickly. So they seem relatively fast to grow. They're really fast if you have an audience, but compared to like a software company, which could take 10 years, I think we definitely could build it in a matter of 2 or 3 years. Second, they seem pretty fun to run if the interest of your community is the same interest that you have. If you, if you, if they don't, then it's definitely not as fun, but it's kind of interesting if you are very interested in that, if you care about. Third, you don't really need a lot of money to start one. You kind of actually need no money. You really could just start it with a paid Facebook group. Um, and you can have a really lean team to do it. And finally, they definitely seem pretty profitable because you can have a lean team, but let's talk about the cons. One, and this is what I've learned with our paid stuff and from friends. I think churn could be pretty high. Did you notice that churn was high in any paid communities you've been part of?

Honestly, the churn was not high in the paid community that I ran. But you get charged a year. Yeah, yeah, yeah, for sure. But it was a monthly fee, so you could churn out monthly, right? For Trends, I think you charge annually, so you don't know your churn until, you know, sort of later unless somebody actively cancels.

So it's not like enterprise software churn where it's like a net, like a 100% negative. Yeah. So that, that, I don't think that exists in most communities.

By the way, my paid community, just for real numbers, mine was 7% a month was churning, which is like, if you just, if you're not adding any new members, you know, that doesn't take long for it to go to zero.

But I was, I think 7% is one year.

No, I'm talking about monthly. I was monthly churning 7%. And so, uh, so, oh, you're saying one year for it to go to zero.

Yes, I think if you have a 4% churn, that's 18 months.

And so when, including my growth, I think my net churn was like 1%. So I think I was adding 6% and I was losing 7% basically every month. And can you share anything about trends? What was the retention like?

Yeah, so we had some payment issues when we first launched. So basically we had some issues where if someone signs up on day 1 and on day 366 they get a renewal, The credit card statements, a lot of the banks will be like, whoa, whoa, whoa, what's this? That's fraud. So we actually had a big fraud, a problem with banks blocking it, but 80% of people were opted in to renew in year 1 or renew in year 2 in our first cohort. Yeah. Ballpark, ballpark, about 80%, which is pretty good, but not, but like it's hard to get new customers on a consistent basis. Yep. Okay, so the second thing is a lot of times they don't scale that well. And the reason they don't scale that well is if your community is kind of like Trends, where you value close-knit connections, or Tiger 21, more people makes it actually worse. Now, if your community is content-based, which we're going to talk about in a second, it can actually make it way better. But a lot of communities like a YPO, like Or like if there's 150 people at your meeting versus 5 people at your meeting, one is worse than the other.

The scale gets worse for 2 reasons. One is exclusivity. So if the reason to be in this group was that it's exclusive, the more people in, the less exclusive it is. Or if the value is that, oh, I really like this conversation, this conversation was really, really nice. But now you get a noisy room of 1,000 people. Well, now it's just too noisy. I can't keep up with this. I don't know who these people are. Some of these people are saying stupid things. I'm out of here. Here, right? So that's the two reasons that the scalability hurts.

Yes. And it can work though, because if you're Reddit, which is a community, not a paid community, but it's a good community, you want more. You need more. You need way, way, way more people. If you are Quora, you need way more people. If you're some of the other examples that you need, you need way more— more people is good. And that's great. But it's not always good to add more people. So what I wanna talk about is a few communities that I found that I think are interesting. And then I wanna talk about opportunities in the space. And then finally, we can talk about what I think you need to build a successful community. So the first one that I discovered, and I've actually brought up here a ton, it's called Aventa. Have you seen Aventa?

No.

Okay, so Aventa, I know the first example, it's gonna, it's like, doesn't even entirely apply because I think Aventa is actually a free community. But you need to apply and need or get invited. So it's somewhat similar, but Aventa is a community, is a professional group. I believe it has 18,000 participating members and it's for executives particularly. Are you on the website right now?

No, I'm on our notes.

Okay. Basically it's for Fortune 500 or Fortune 100 people. It's people like the, I don't even like, 'cause I've never worked at a company. I don't even understand all these roles, but like a CIO, Was that a Chief Information Officer? So I said CSO. I'm looking at their website. CISO. I don't even— I don't know what CISO means. Was that Chief Information Security Officer?

Yeah, CISO. Yeah.

So these are like things that I don't even know. I guess they have CFO. I know that is Chief Financial Officer. So it's basically executive.

This just turned into a glossary section for Sam to figure out.

You know what CHRO is?

Yeah, that's basically your HR, the chief, chief HR officer, basically.

Okay, I guess that one was easy. How about a CDO?

I don't know that one.

Uh, Chief Data Management Officer. Because come on, a lot of people aren't going to know what this stuff is, but it's a big thing. They have 18,000 members, and check this out, they sold in 2016 for close to $300 million. It was $375 million they sold for, and it was for 12 times profit, which means their profit was $23 million a year, and almost all of that profit came from sponsorships. And so the way it works is, is that, uh, they would get groups of 10 or 20 people, they would host a talk, uh, like I think it was mostly an online talk that says like how Walmart is going to handle— how Walmart is going to handle remote work, remote work. And 10 people, like I'm just gonna guess, what's a Fortune 500? So like The CMO of Northern— I'm looking at now the Chief Information Officer of Northern Trust. I don't know what that is, but it sounds like a huge company. Uh, the CIO of, um, Delta, of Chevron, of Nestlé is going to go, which is like— it's only 10 people at that talk, but it's 10 people who each control 20,000 people. And sponsors will pay stupid amounts of money, hundreds of thousands of dollars to reach these people, enough that it makes $25 million a year in profit. Uh, very interesting, an interesting community. Again, like Tiger 21, if you go to the website, it just kind of looks like pretty old school, mostly older white people. So who knows if it's, if it's hip or, or at least like in the know of everything. The second one that I want to bring up, and I got hold of their deck, uh, a year ago, and I could have invested into it and I skipped it. I passed. And I think that might've been a mistake, but it's called SoleSavvy. Have you heard of SoleSavvy?

It's like a shoe thing.

Yeah. It's pretty interesting.

Sneakerhead lover community, something like that.

Yeah. So it costs $33 a month. And you basically, when, when I was, got their deck, it was basically just a Slack group. That's all it was. And I don't know if that's what it is anymore, but there's a lot of kids, probably grown people as well, who are want to get insider tips on when a certain drop of a shoe is, and they somehow game the system. Like, it's what— it's called cook groups. So there's these like groups where they team up and somehow— I don't know anything about the space, but they somehow get insider information on when a drop is going to happen, and they, and they collaborate and scheme together on how they can get access to these certain shoes. Now what SoleSavvy is doing is they started with shoes. It was just a Slack group, which I think is Stupid, by the way. I think if you're building one of these on a Slack group, that's not the right move. But they get— they get— because they have a group of, I think they have 5,000 members now, so that's $160,000 MRR. Um, because they have this contingency of 5,000 like really big shoe fanatics, they can probably give them special access to X, Y, and Z. They can do interviews with special people. It's kind of interesting. They raised $2 million, uh, recently. They say that they're adding 400 people to their waitlist a day. I don't know if that's true, but it's an interesting space nonetheless. What do you think of that?

I think you did good by passing on it. I think it's a cool business for the person who owns it. It's definitely not a— as constructed right now, I don't see how that becomes a super large business worth investing in, why they need $2 million and how they're going to turn that into a $200 million plus company. I don't really see that because Like we said, communities themselves, these chat groups don't scale. And you're looking for diehards who are gonna pay. If you're paying $33 a month, right, like, that's more than, it's like you're providing more value than Amazon Prime. You know what I mean? Like that's double, that's triple the price of Amazon Prime. And so, you really have, yeah, the hardcores are gonna go for it, but also the more people you let in, then the more people who all have access to the same information, the same tips, the same drops that they're trying to go buy, the harder it gets for you to actually go buy anything that's valuable. So I don't really see how this becomes a big, big venture-scale business, but I think it's a great idea for somebody who's a big shoe fanatic to create a community like this. I think that's an awesome lifestyle business to own. And, uh, like, if that's your thing, that's great. I love it.

I agree with you. Um, so let's talk about 3 ideas.

Can I give you— can I give you 2 characteristics I think make it work? One is high passion. And then the second one is the ability to make money on the other side. So this happens a lot with stock trading groups. So there are a bunch of stock tip groups out there where people are looking for additional information and they want to be in a group where the crowd is moving a certain direction. You have this for sneakerheads. You have this for NFTs right now, collectibles. So the key characteristic is, it's not just like, I'm a big fan of the, you know, the Golden State Warriors, so I'm going to join this paid community for them. Typically that doesn't work as well as if I join this group, I'm going to get tools that are going to help me make more money. So it's a very simple money in, money out calculation for people. And I think that's why it works for sneakerheads and it works for trading cards and it works for crypto, but it doesn't work as well for like, you know, people who just love Gossip Girl.

Yes. So there's a few ways I think that if you're going to build this you've got to think about. The first is the amount of money that your company is going to make is exactly what you said, which is it's directly in proportion to the amount of revenue that the attendees can make back. So for example, if you are an enthusiast of RC cars, um, well, the equation here is how much revenue the attendee or member is going to make times how many there are. So members of people who like RC cars I have no idea. I just made that up, but there's probably not that many of them. And because it's like a hobby that you don't really make any money from, you probably cannot charge a lot for it. So that like probably won't be massive. That's not, I mean, maybe you should do it, but that doesn't mean it's going to be actually that big. So that's the math that you have to do, which is how much revenue is the member going to make and how many of those potential members are there, right?

Or, or the one, like you said, with Tiger 21. So Tiger 21 is actually like that, right? When you, when you go and you hear somebody's portfolio, you're going to get investment ideas. And even a single investment idea, a single like improvement to your portfolio, if you have over $10 million in investable assets, one good idea is going to more than pay for the $30,000 a year membership, excluding the friends you'll make and the deals you'll do together and that real estate thing you'll buy together and all that good stuff. So excluding all that. Now, on the other hand, if you're looking at something like the Aventa or whatever, where it's like, what is the CMO of Nestlé gonna do when she meets the CMO of Delta? Like, they're not gonna directly get revenue out of it. I don't think that's why. I think it's like, how hard were— how hard is it to accumulate this group of people in a room? So if it's really hard to reach these people, these are all high-value people, then it's— the membership is worth the value of the people in the group. So if it's just a bunch of sneakerhead buyers, each individual member is bringing zero, like, clout to the table. But if it's CMOs of different companies, then it's about how much clout do they each bring to the table. That's the value, not so much how much revenue they're going to make.