🏁 Start your exit strategy now, opportunities in a Post ChatGPT world, ...
I listen to 10 hours of podcasts a week, so you don’t have to.
This is the 46th edition of Best 3 Podcasts of the Week 🥉🥈🥇, featuring Nudge, My First Million, and In Depth.
What you need to know
🐺 Marketing lessons from MrBeast
🤖 Opportunities in a Post ChatGPT world
🏁 Start your exit strategy now
BONUS segment
🥷 Dealing with ‘What’s in it for me?’
🐺 Marketing lessons from MrBeast
🥉 Third place (4 min read vs 29 mins listening)
Why do we buy? First, there has to be a want or a need. Second, we need to trust a business will deliver on its promise. The later is where many startups fail. How do you build trust with limited to no social proof? How do you build credibility and showcase your expertise?
Fortunately, MrBeast has the answers. He has more subscribers than the population of Russia and his YouTube videos have been viewed more than 26 billion times. Phill Agnew spent 50 hours researching the psychological tactics behind his success. Discover how to use them in your business.
What they say
The input bias
The first psychological bias that MrBeast uses is the input bias.
It means the more time, effort and money you sink into something, the more you’ll value it.
If you spend $50 on a bottle of wine, you’ll enjoy it more. If you spend 50 hours painting a portrait, you’ll value it more.
This works not only for individuals who experience the input (i.e. the wine drinker or painter) but also for others who witness the input.
Phill Agnew
The plastic knife example
One of MrBeast’s first viral videos was him cutting a table in half with a plastic knife. It sounds boring because it is. The content is undeniably dull.
Yet it has 3.5 million views. It propelled his fame. Why? Because of the sunk costs. He sinks so much time into creating the video that people value it more.
Viewers think ‘If he’s spent dozens of hours doing this he’s clearly someone who’s not afraid to go to great lengths to create interesting content.’
He saw the success of this video and made many more just like it. He read the longest word in the English language. It took him 2 hours and has got more than 30 million views.
Phill Agnew
Putting it into practice
Even if you’re not looking to gain the attention of a billion teenagers, MrBeast’s approach will work on anyone.
The tactics he’s using are based on deeply embedded psychological biases that all of us have.
If we use the input bias, costly signalling and the contrast effect in our messaging, we too can capture attention. All types of business can benefit.
A whiskey brand could highlight the exact number of years, months and days its whiskey has been casked for. They will sell more than others because they’re showcasing that input.
Patagonia gave away the company to climate charities. This is classic costly signalling. By showcasing the expense they’ve given up, a $3 billion company, people value them more.
A video course on how to code could record a group of grandparents completing it. That would trigger the contrast effect and make it more memorable.
Phill Agnew
What I say
Why it matters: The abundance of customer choices means that competition is fierce. Even the most innovative business ideas can be quickly replicated.
So, how can you stand out and build trust with customers? Here are a few strategies to consider:
Demonstrate the benefits of your product or service by using it yourself and recording a testimonial video.
Write for a 12 year old. Use simple language customers understand and avoid using words you wouldn’t speak.
Provide clear contact information. Include who will answer queries and how they’re qualified to help.
Offer a free trial or a money-back guarantee. Give customers confidence they’ll get value from your product.
Between the lines: Psychological tactics are a great way to gain trust but they’re not enough to sustain a successful business over the long term. You need to consistently deliver value and provide excellent customer experiences.
As Sam Parr suggests, perseverance is key. This is evident in MrBeast's success. At only 24, he has spent 8 years perfecting his videos and building his brand. It's important to remind ourselves that great things take time to build.
🤖 Opportunities in a Post ChatGPT world
🥈 Second place (4 min read vs 1 hour 4 mins listening)
Heard of Anand Sanwal? Me neither until last week. The best way to describe him is a data fanatic. Anand is CEO and co-founder of CB Insights, a company that makes ~$100 million selling data about private companies. He shares a few of his favorite startup ideas and explains why now is the time to start a database company.
What they say
Idea 1 - New college rankings
U.S. News & World Report is the preeminent college ranking. There's been plenty of coverage about how that's a basic con and how Universities do all sort of finagling to get higher.
You've got these subjective criteria like student to teacher ratio. Universities will massage that data so it looks good. It's unclear how causal those factors are to getting a good education.
I think the U.S. News & World Report in 2013 was doing like $40 million in revenue and I’ve got to believe it's doing $100 million now.
The idea here is you go to graduates of the school and ask them for their W-2s.
You're like 'How much are you making? Does this place actually get you a job that gets you paid or are you a server in a restaurant with $200,000 in debt?'
You put a ranking together of here's how much you pay and here's how much you make when you get out.
Parents care about that. They don't want to send their kid to a school where their prospects for employment are garbage.
You’d start with a niche like New York colleges. Don't try to be everywhere right out of the gate. Then build out from concentric circles from there.
Anand Sanwal
Idea 2 - Compare hidden SaaS pricing
On your ideas list you had one about pricing data. You said you’d go to every SaaS company and send a $5 an hour employee through any sales process or demo and collect their pricing data.
SaaS companies are hiding pricing on their website. Now you have it you can make that visible. You have a giant search engine or a database of how SaaS prices compare across them.
Shaan Puri
How to start a database company
Sam: I find it crazy fascinating because it's very clear to see the opportunity here. What's shocking is you just use Mechanical Turk or make a ton of phone calls to get interesting insights. Is that really how a lot of this works?
Anand: Yes. The beauty of this business is 99 people out of 100 won't do that work.
Sam Parr and Anand Sanwal
What I say
Why it matters: I’ve said it before and I’ll say it again… database businesses are beautiful businesses. But why start one now? Won't ChatGPT make your website redundant?
Anand believes that Google traffic for public data is declining, and that AI tools like ChatGPT will eventually capture most of these users. However, he argues that private data is becoming even more valuable. A database company can add value by providing access to information that is opaque, highly variable, and a high-consideration purchase.
Between the lines: One last nugget of wisdom Anand shared was the benefit of changing data. Counterintuitively, he said if your database needs to be updated regularly then that’s actually a good thing. It means you can charge a subscription for access to the updated information.
If you're considering starting a database company, ask yourself ‘Who needs up-to-date information about my niche and who can pay top dollar for it?’ Work backwards from there.
🏁 Start your exit strategy now
🥇 First place (5 min read vs 1 hour 3 mins listening)
Pay attention to this section. Although it focuses on selling your company, the lessons are still useful today. Daniel Debow is a three time founder, VP at Shopify, and M&A pro. He believes it's crucial to start thinking about your exit strategy from the beginning. He also shares how to effectively communicate the process to your team.
What they say
Get your mindset right
You have to get rid of this mindset of ‘Am I going to sell this company?’ The answer is you will sell your company.
Let’s be clear. When you sell shares in your company to a venture firm, you’ve sold part of the company.
The question you’re really asking is ‘Do I sell all of the company right now or part of the company?’
Daniel Debow
You’re always selling to a person
You don’t actually sell your company to another company. There is no such thing as a company. It’s an imaginary legal construct.
You have to sell your company to a group of people who happen to work together in a company.
That may sound like semantics but it’s not. Once you understand you have to convince some people that they want to buy my company, it becomes more of an approachable problem.
Let’s say I have to sell my company to Twilio. Well, no. I have to get Jeff Lawson to see that this thing is a solution to a problem that they have.
Daniel Debow
Start now, not later
You should always build relationships with executives at large companies.
It’s not a great spot to be in if you have to say ‘Hey, we’re running a process, do you want to buy us?’
What is a great spot to be in is to have met an executive 5 or 6 times who runs a business unit that’s complimentary or competitive to your company.
You’d say ‘I’m really thinking what the next steps are. I know you have this problem and I wanted to see if we could talk and see if I could help you solve that problem.’
We maintained relationships like this all the time at Rypple before selling to Salesforce. It’s not like we were trying to sell the business all the way through.
When the time came it was very natural to call up 5 or 6 people and say ‘Hey, should we have this conversation?’ They already trust you.
The most important thing to understand is you sell to a person who has a problem. You’re going to take your IP, your team, but also yourself as the solution.
You really want to build that relationship and trust well in advance of starting any process.
Daniel Debow
What I say
Why it matters: Building relationships with potential acquirers can give you a pulse on the market. Has a potential acquirer recently missed out on another deal? Is M&A activity slowing down or picking up? This can help you determine the best time to sell. Remember, 'It's not what you know, but who you know' holds true in M&A as well.
Between the lines: The principles of enterprise sales can be applied to M&A. To succeed in M&A, it's important to have a deep understanding of the buyer's needs and challenges, as you and your company are the product. Get to know the buyer's pain points and craft a compelling narrative that demonstrates how you and your team can solve their problems.
BONUS segment
🥷 Dealing with ‘What’s in it for me?’
The second you say to your team that you’re selling your company, everyone listens to one radio station. WIIFM. What’s In It For Me.
As the founder you’re super excited. You’ve been working on this for 8 years. You’re ready to make some money.
Your team is just thinking about ‘What happens to my equity? What’s going to happen to my job? Am I going to get fired?’ These are real concerns.
You have to lead with some serious empathy when that occurs. Answer their questions. Take the time to go through everything positively.
You need to come prepared for these kind of questions. Don’t show up and say ‘Yay! We’re going to do this M&A and you’ll all get interviewed.’
People’s hands shoot up and ask ‘What does this mean? Should I keep working on our product?’
Answering ‘Let me get back to you’ is a bad scenario. It’s better to say ‘Here’s what I think is going to happen. Here’s what could happen.’ You then keep people updated on the process as it’s going through.
Daniel Debow
One of the biggest hurdles in selling a company is effectively handling the emotions and expectations of your employees. Their support is critical for a successful outcome during due diligence and post-transaction. Communication plays a key role in the success of a company sale, so it's crucial to follow Daniel’s advice.
Shoutouts
When I find newsletters, podcasts, or books worth sharing, I’ll feature them here:
Want to start your own newsletter? Ignore every single thread, article, or YouTube video on the topic. The only thing you need in your life is Matt McGarry. His posts are packed full of actionable content - so much so that you may see me copy a few of them in the coming weeks and months.
Note, these quotes were pulled at different points of the episode. Some sentences were left out to make the narrative clearer and more concise. Podup is not associated or affiliated with any podcast (unless otherwise stated). All roundups are independently written and do not imply any sponsorship or endorsement by the podcast.