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Ranking The Best And Worst Businesses To Start w/ Billionaire Investor Andrew Wilkinson (#386)

My First Million・88 minutes read

Starting a business like Milk Road is easier than other businesses like brick-and-mortar stores. Sahil Bloom gained popularity for his honest podcast appearance, Pixel Union's success led to ups and downs in growth, and marketing psychology plays a significant role in product perception and storytelling.

Insights

  • Starting Milk Road is easier than other businesses, with agencies ranking medium and brick-and-mortar as the most challenging.
  • Sahil Bloom's honesty and openness on the podcast garnered significant popularity, showcasing the value of authenticity in engaging audiences.

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Recent questions

  • What is the easiest type of business to start?

    According to the Summary, Milk Road is highlighted as an easier business to start compared to others. This suggests that businesses in the dairy industry, such as milk production or distribution, may have lower barriers to entry and operational complexity, making them more accessible for aspiring entrepreneurs. Starting a business in a niche with straightforward processes and demand could potentially lead to a smoother launch and growth trajectory.

  • What is the most challenging type of business to start?

    The Summary indicates that brick-and-mortar businesses are considered the hardest to start, with agencies falling in the middle in terms of difficulty. This suggests that ventures requiring physical locations, inventory management, and customer foot traffic may pose significant challenges compared to other business models. The complexities of managing a physical storefront, dealing with overhead costs, and adapting to changing consumer behaviors could contribute to the higher level of difficulty associated with brick-and-mortar businesses.

  • Why was Sahil Bloom's appearance on the show popular?

    Sahil Bloom's appearance on the show was surprisingly popular due to his commendable traits of honesty and openness during the podcast. The Summary highlights that his authenticity and transparency resonated with the audience, leading to increased engagement and positive reception. By sharing personal experiences, insights, and valuable information, Sahil was able to connect with listeners on a deeper level, ultimately contributing to the popularity of his appearance on the show.

  • How did Pixel Union grow its revenue to $10,000 monthly?

    Pixel Union was initially started as a favor for a friend, and its revenue grew to $10,000 monthly. The Summary mentions that Shopify approached Pixel Union to replicate their success for their platform, indicating that strategic partnerships and opportunities for expansion played a significant role in the company's revenue growth. By leveraging relationships, expertise, and market demand, Pixel Union was able to scale its business and achieve a substantial monthly revenue milestone.

  • What led to the regretful sale of Pixel Union for $7 million?

    The regretful sale of Pixel Union for $7 million was attributed to its rapid growth, as mentioned in the Summary. Despite the initial success and profitability of the business, the quick expansion and potential for further development may have influenced the decision to sell prematurely. This highlights the importance of strategic planning, valuation assessment, and long-term vision in determining the optimal timing for selling a business to maximize its value and potential.

Related videos

Summary

00:00

"Startup Success Stories: Milk Road to $260M"

  • Milk Road was an easier business to start compared to others.
  • Agencies rank medium in difficulty, with brick-and-mortar businesses being the hardest.
  • Sahil Bloom's appearance on the show was surprisingly popular.
  • Sahil was commended for his honesty and openness during the podcast.
  • Andrew Wilkinson shares his experience of starting multiple businesses.
  • Pixel Union was started as a favor for a friend and grew to $10,000 monthly revenue.
  • Shopify approached Pixel Union to replicate their success for their platform.
  • Pixel Union was sold for $7 million, regretted due to its rapid growth.
  • Bought back Pixel Union for $26 million, later taking it public at a $260 million valuation.
  • Andrew's investing success stemmed from intense reading and operational experience.

13:09

Influential Store Environments and Marketing Psychology

  • The editorial environment of a store affects the perception of merchandise, as seen in Lord and Taylor and Village Voice ads.
  • Store surroundings impact customers' mental and gastronomical impressions of quality.
  • Apple's retail store design is highlighted as an example of effective merchandising.
  • Brandy's product organization is compared unfavorably to Stovers' well-displayed candy.
  • Suggestions are made for creating descriptive material like a booklet to enhance product appeal.
  • Marketing psychology is discussed, emphasizing the importance of storytelling in product perception.
  • Warren Buffett's active role in influencing and growing businesses is highlighted.
  • Charlie Munger's approach to influencing CEOs is mentioned, emphasizing the challenges of changing minds.
  • The acquisition of Aeropress is detailed, focusing on its potential lasting impact and unique business model.
  • The importance of online sales and hiring experienced executives for business growth is discussed in relation to Aeropress and SodaStream.

26:08

"Speaker's Diverse Ventures and Valuable Insights"

  • The manager of a bakery is being replaced, and the speaker, part of a food and hospitality group, has delegated responsibilities to others.
  • Agencies are highlighted as asset-light businesses requiring minimal investment, with scalability but the challenge of balancing supply and demand.
  • Agencies, akin to law or consulting firms, exhibit linear growth over time, with a need for readiness to adapt to market changes.
  • The speaker owns a job board company, We Work Remotely, acquired from Jason Fried and David Heinemeier Hansson, which saw significant growth with minimal effort.
  • The speaker recounts a costly lesson from investing in a project management software, Flow, competing against Asana, leading to a loss of $10 million.
  • The speaker partially owns around 10-12 agencies, mentioning Vista Equity as a significant player in the PE industry with a vast SAS revenue.
  • The speaker anticipates a slowdown in the agency business due to economic pressures, with clients seeking similar outcomes for less money.
  • The speaker reflects on the challenges faced in the restaurant business, learning from failures before finding success in a deli and bakery venture.
  • An idea for a service targeting specific individuals with personalized advertising is discussed, inspired by a friend's successful marketing strategy.
  • A new venture, Tenzing, is introduced as a modern investment bank for bootstrap founders, aiming to provide accessible financial services aligned with long-term goals.

40:16

"Government Funding Boosts Small Business Success"

  • Government pays 30% of R&D for small companies in Canada.
  • Lack of awareness led to missing out on tax credits worth a million dollars.
  • Could have used credit line to buy ads for SAS business.
  • Could have sold working businesses but let them die instead.
  • Focus on maximizing resources and providing tools for success.
  • Investment bankers typically avoid startups due to small deals.
  • Focused on bootstrap businesses with profits ranging from 500k to 3 million.
  • Facilitate connections between businesses and finance networks.
  • Sold a business called Me Lime to Albertsons for tens of millions.
  • Preference for holding businesses rather than selling, citing unpredictability.

53:25

"Stock market fraud and legal loopholes"

  • Small-time fraudsters are difficult to catch and are referred to as "rats" by Charlie Munger.
  • In the Canadian stock market, fraud is prevalent due to minimal enforcement.
  • Investment bankers manipulate trends to attract retail investors, leading to stock price fluctuations.
  • Investment bankers profit from these schemes legally, leaving investors with losses.
  • Legal loopholes allow for fraudulent practices in the stock market.
  • A publicly traded company in Canada, eglx, was overvalued and experienced a significant drop in stock price.
  • Luminosity, an esports team, was acquired for a high price by eglx.
  • Supercast, a company, raised funds at a high valuation but had to adjust it based on revenue performance.
  • A non-binary term sheet structure was used to ensure fairness in investments, with valuation adjustments based on performance.
  • The traditional venture capital model may be more appealing to founders due to higher valuations and less dilution of ownership.

01:06:37

Challenges in Venture Capital and Private Equity

  • Certain businesses may not fit the venture model due to limited access to capital.
  • A new funding option, similar to PE, is emerging for technology businesses.
  • Venture capital success rates are low, with few companies achieving significant growth.
  • Founders may feel pressured to continue down a venture path even if it's not viable.
  • Private equity focuses on existing success, while venture capital projects future growth.
  • Raising large sums at high valuations can lead to challenges if growth stalls.
  • Crowdfunding platforms may overvalue businesses, creating unrealistic expectations.
  • Major investment firms may make poor financial decisions despite their reputation.
  • Venture capital firms can profit from fees regardless of investment performance.
  • Diligence on large investments may not always match expectations, leading to losses.

01:19:16

Chamath's undisclosed losses highlight misaligned incentives.

  • Chamath could have gained more respect if he had openly shared his investment losses, aligning incentives with investors, rather than keeping it undisclosed.
  • There was a lack of alignment in incentives, leading to investments in questionable businesses, with some being labeled as "shitty bets."
  • Investing in startups with potential failure is different from investing in fraudulent or self-dealing businesses, highlighting the importance of due diligence.
  • Outsourcing conviction to successful individuals can lead to costly mistakes, emphasizing the need to conduct thorough research and not rely solely on big names in decision-making.
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