The Startup Ideas Podcast
Niche Startup Ideas: Hedge Fund Data/Info Business, Expert Network, & AI-Generated Kids' Music
Mon, 15 Jul 2024
Join us for an engaging conversation with Jesse Pujji, Founder and CEO of Gateway X, as we explore a wide range of startup ideas and business opportunities1) Hedge Fund Information Business • Sell insights to hedge funds for $100-200k/year• Use reverse auction: only 20 clients get access• Potential $10M+ EBITDA business2) Verticalized Expert Networks • Focus on specific industries (e.g., marketing, IT, healthcare)• Connect experts with businesses needing insights• Target both Wall Street and industry professionals• Differentiate through specialization• Example: Marketing-centric expert network• Potential $10M+ EBITDA business3) Demographic-Specific Supplements • Create multivitamins for specific ethnic groups• Target $100/month price point• Potential 9-figure business with 100k subscribers4) AI-Generated Kids' Music on Spotify • Use AI to create catchy, simple songs for kids• Mimic successful artists like Parry Gripp• Create multiple "ghost" Spotify channels• Potential for passive income stream• Potential $1M+ businessWant more free ideas? I collect the best ideas from the pod and give them to you for free in a database. Most of them cost $0 to start (my fav)Get access: [gregisenberg.com/30startupideas](http://gregisenberg.com/30startupideas)🚀 My FREE 5 day email course to learn how to build a business of the future using the ACP funnel:https://www.communityempire.co/free-course🎯 To build your own portfolio businesses powered by community you might enjoy my membership.You'll get my full course with all my secrets on building businesses, peer-groups to keep you accountable, business ideas every single month and more!Spots are limited.https://www.communityempire.co/📬 Join my free newsletter to get weekly startup insights for free:https://www.gregisenberg.com70,000+ people are already subscribed.FIND ME ON SOCIALX/Twitter: https://twitter.com/gregisenbergInstagram: https://instagram.com/gregisenberg/LinkedIn: https://www.linkedin.com/in/gisenberg/FIND JESSE ON SOCIALX/Twitter: https://x.com/jspujjiInstagram: https://www.instagram.com/jspujjiLinkedIn: https://www.linkedin.com/in/jessepujji/To improve your rankings your business on Google and using AI for SEO, sign up tohttp://boringmarketing.com/Episode Timestamps: 0:00 Intro02:56 Startup Idea 1: Hedge Fund Information Business06:47 Startup Idea 2: Verticalized Expert Networks11:54 Jesse’s framework for finding and launching businesses24:36 Startup Idea 3: Demographic-Specific Supplements41:36 Startup Idea 4: AI-Generated Kids' Music on Spotify
There's a huge hedge fund information business. I remind every one of my friends, you know who the richest man in New York is? It's nobody who works at a hedge fund or private equity. This person's richer than Schwarzman, richer than all the hedge fund guys. Michael Bloomberg. No way.
By far, he is the richest person in New York because he sells all the information and the picks and shovels to all the finance people. When I worked at Goldman, there's a ton of information businesses. Alternative asset guys are great customers because they're very rational. If you make them money, they don't mind paying you a lot. They're not price sensitive at all. They're very urgent.
They need the thing when they need it. One of my ideas was, let's create a business... where the customers are hedge funds. And within a week, you and I could go get probably $5 billion of ad spend on Facebook, like agencies and friends who are running a lot of spend. And we survey them. And you can pay them a ton of money to survey them.
And first you do it for Meta, then you go do it for Google, then you go do it for Amazon. Then you basically go through the biggest public companies and you create information that the investment and hedge fund world uses. And I think that's easily a 10 million EBITDA business, maybe more.
This is an absolute pleasure to have you, Jesse Pugie. This guy has hundreds of profitable startup ideas lodged in his brain. You're my go-to guy when I want to jam ideas, so thanks for taking some time today.
Yeah, absolutely. Let's get into it. So what do you got for us? Well, what genre do you want? Because I can take us in many different directions. I think maybe I'll start with my formula. It might be helpful and then we can talk about some of them. Having launched a bunch of businesses, some which have been very successful, some which have failed, I think I've gotten a better formula down.
One of my favorite things is unique insight and unfair advantage. Part of unique insight is I always tell people, look at your own situation. Who do you know? One of my favorites is cross-sections of things you know. Like one of the very successful businesses we started last year is called Ox Insights, and it's helping private equity firms understand marketing.
Like we basically do diligence for them and help them get it. It's like, okay, well, those are two cross sections that were kind of unlikely bedfellows that we've been able to build a very successful business in. So that's one. And then the unique insight is like, what's the problem in there that somebody's got? An unfair advantage usually around distribution. Who do you know?
And so I'll start with one for fun. I'm not sure the audience will love this one, but when I was running Ampush, I was making like $200,000 a year doing GLG and like alpha sites calls. And the reason was because all these hedge fund dudes had like 100, 200, $300 million positions in meta. And they would call me every quarter and they'd go, what are your clients doing? Are they spending more?
Are they spending less? And I was like, man, I don't have time for this. So I went from $500 an hour to $1,000 an hour. I'm not kidding, $2,500 an hour. And I saw no drop off in volume. So I was doing whatever number of calls a quarter. And so I'll give you two ideas actually that came from this. So the first idea is, You know, hedge funds, there's a huge hedge fund information business.
I remind every one of my friends, you know, the richest man in New York is a richest person in New York. Who is it? It's not, it's nobody who works at a hedge fund or private equity. This person's richer than Schwartzman, richer than all the hedge fund guys. Someone in real estate? Nope. Nope. Michael Bloomberg. No way.
By far, he is the richest person in New York because he sells all the information and the picks and shovels to all the finance people. When I worked at Goldman, there's a ton of information businesses. Alternative asset guys are great customers because they're very rational. If you make them money, they don't mind paying you a lot. They're not price sensitive at all. They're very urgent.
They need the thing when they need it. One of my ideas was, let's create a business... where the customers are hedge funds and within a week, you and I could go get probably $5 billion of ad spend on Facebook, like agencies and friends who are running a lot of spend. And we survey them. And you can pay them a ton of money to survey them.
Or you can give them a trip to the Bahamas every year in exchange for doing this survey. And all the survey answers every quarter is, did you spend more? Did you spend less? Whatever. What are your metrics? You basically collect a bunch of really... And you go to hedge funds. You say, I'll charge you...
$100,000, $200,000 a year to have access to this information and it's going to give you an edge. My better idea even, by the way, for pricing is we're going to hold a reverse auction. Only 20 people will get this information. Bid to your highest bid that you're willing to pay for it.
And first you do it for Meta, then you go do it for Google, then you go do it for Amazon, then you basically go through the biggest public companies and you create information that the investment and hedge fund world uses. And I think that's easily a $10 million EBITDA business, maybe more.
So I haven't seen a lot of people doing this, but I actually think that if you used AI to scrape a lot of data and enrich your data, that's also value add. And I feel like AI assisted just data in itself is like, if you're a hedge fund and you're not spending money on that, you're like, I don't want to be left behind.
Dude, there was a company that we paid $100,000 a month at Goldman, maybe not quite that, maybe $50,000 a month, called First Rain. And it was literally a fancy Google Alerts for public companies. Because the argument was, you need to know first when something happens to your stock. And we are the fastest, best way to get you that information. And it was literally just Google Alerts.
And so I think there's a lot of ideas in this vein. And this is a good example, by the way, of getting super thoughtful about a customer and what they need and who they are and how to approach it. But that's one of my ideas for that world. The other one is a broad idea. I mean, you know, you've heard of Alpha Sites or GLG, right? Yeah.
So for anyone who's listening, there's probably 10 of these companies. All have been extremely successful. Their customers are hedge funds, private equity, consulting firms. And they basically supply them with expert networks, expert experts. I used to work at Goldman, right? And I had to get smart on the trucking industry.
So I went to them and I go, hey, guys, I want to talk to a guy who owns 10 trucks. I want to talk to one of the biggest, you know, I want to talk to two truck drivers, like actual truck drivers. I want to talk to someone who ships through three different trucking carriers. I want to talk to someone who's built the truck engines, the special diesel engines. I made this whole request for them.
And within two weeks. They had experts for all of those people. And I'm sitting there asking, how does this diesel engine work? Is the technology actually going to change the game? Blah, blah, blah. I'm learning all about it. And they've all been very successful. I'm talking nine-figure EBITDA. Multiple companies have hit nine figures in EBITDA. I think that whole space is going to verticalize.
And as my unfair advantage, I'm going to verticalize it in marketing. And I actually think there's probably even more to it. I think you could definitely sell into that group. I think marketers would pay marketers to get a little bit of information around how do you do X, Y, and Z. But I think there's an opportunity in building basically a marketing-centric expert network. Quick ad break.
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So for my own businesses, I wanted that. I didn't want to have to rely on Mark Zuckerberg. I didn't want to depend on ads to drive customers to my businesses. I wanted to rank high in Google. That's why I like SEO and that's why I use boringmarketing.com and that's why I invested in it. They're so confident in their approach that they offer a 30 day sprint with 100% money back guarantee.
Who does that nowadays? So check it out. Highly recommend boringmarketing.com. So beyond marketing, what are like three, four, five other verticals that could be interesting?
Yeah, I think there's all IT stuff, right? I think healthcare is another one. I mean, really, you just go down the GDP list and you pick them off, right? Healthcare, I think auto, and... AI, right? You could probably build a nice AI expert network that's just all these foremost people in AI. And I think the verticalization, you know, there's a company called Tegas, I think, that recently sold.
And there's people innovating in the business model. Their innovation was we're going to record every call, transcribe it, and 90 days after the call takes place, we'll make it searchable and available in the database. So they were actually creating data and aggregation of information. that became very valuable and differentiating for them versus some of the other guys.
So, you know, I think there's things like that that can be very differentiating. But yeah, I mean, any vertical, again, that you're in, it could be, there could be a content one. It's just an expert, you know, go get a collection of a hundred experts in content and people will want to tap into that in different ways.
Totally. I actually was thinking about this the other, yesterday I had a meeting with my editor for my, for my YouTube channel and podcast. And I was like, we should hire just like consult with the number one person on YouTube titles and thumbnails. And like, we'll pay whatever, whatever it is.
That's exactly for the marketing one. I just want to get all those experts. I think not only could you do the wall street people as customers, but I think you could do other marketers. There's someone who really knows how to run Facebook ads for dog food. There's someone else who really knows how to do Amazon for water bottles.
There's somebody else who, and those people are sitting there with that information in their head and it kind of goes under monetized. And I think, I think there's a massive opportunity to connect the dots on those things. And I think vertical, the nice thing about verticalization is it, it just, it creates natural differentiation. Yeah.
It's like the one thing you could pitch against GLG or AlphaSight. It's like, well, guys, this is all we do. We focus on one specific vertical. And it's just a natural pitch that everyone goes, well, yeah, it's all they do. So if we're going to do marketing stuff, we better talk to these guys because they're just naturally better in that space.
Totally. Yeah. They're the cheesecake factory. There's everything on the menu. Yeah.
That's right, exactly. It happens all the time. It's a whole vertical SaaS thesis that people talk about. There was ACRM called Salesforce or whatever, and now there's 50 CRMs. There's a CRM for real estate, there's a CRM for... By the way, real estate would be another good vertical for this expert network.
So both these ideas I buy. These are ideas, I'm scribbling notes, I'm like, I want to start one of these. But how do you actually go about growing some of these ideas. In your hedge fund idea, I'm like, yeah, that makes sense, but I don't know anyone in hedge funds.
In, let's just say, the real estate vertical or the automotive vertical, how do you go about taking this from idea to actually execution?
Yeah, I think who you are matters a lot in this situation. For me... part of the reason the idea has come to me is cause like I have 50 friends who are at hedge funds. Right. And I just, cause I went to work college with a bunch of them. I worked at a hedge fund for a few years. And so I think the lesson for someone listening is like, who are your friends?
Like, like what world are they in who, you know, because you're, I could kind of call any of my friends and they would all support me. Right. And this is small money for someone at a hedge fund, but But in aggregate, you start to build a business against it, right? And it's like, well, we like Jesse. We trust him. And so I think if you're listening, it's not go sell things to hedge funds.
Well, I'll come to that in a second, actually. But I think you could start with who you know. And that's part of the unfair advantage in getting distribution early, often and early, right? You sell things to the people who you have a relationship with or you have some understanding or knowledge or know-how.
And I think that's just an overlooked, I think there's so many entrepreneurs who I'll meet, you know, they're like salespeople at whatever, some business. And they're like, I want to start an e-commerce business. And I'm like, why? Like, but look, and if their answer is I love water bottles, fine, God bless, right? Like that makes sense if that's really what you want.
But they're like, oh no, because I saw Shark Tank and this, and I had this really smart idea. And I'm like, yeah, I get it. But like, you've been talking to these people for, you know, 30, the last five years. Like, go sell them something. You know, go talk to them. So that's probably the biggest push I'd have. If you were to start this and you don't know anyone at hedge funds...
you've got to go know people at hedge funds, right? That's the only answer for the business, which is why you go back to rule one and say, well, no, just go find people you know somewhere and sell things to them. But I mean, early on at Ampush, we did that. And it's just like, you leverage your network extremely heavily. I bet you with a week or two, you could get 10 hedge fund meetings, right?
Through friend of a friend, essentially, or some version of your network if you really cared. Obviously you go in, you've got to bring it in those conversations, you've got to be really well prepared, you've got to explain why it matters to them, you've got to match their energy and their orientation, you've got to know their culture of the buyer, and I think you'll have some good success with it.
Again, my recommendation is more so find the people you already know and find something to sell to them versus try to go and learn some new thing.
Yeah, or partner with be the back end and find a front end with someone like you. Totally. If I was going to start something like this, I would pick a really great name, create a great brand, build out the MVP, and then do two things.
I would set up cold DMs and just start cold DMing hedge fund managers, people who work in hedge funds, just to look at the website, even if only 1% or less than 1% ends up opening you know, your, your messages. And the second thing is I'd build audience around, you know, around it. I'd build memes around it.
You know, funny enough, like I do both of those things also. I think you know that I do cold stuff and I also learned how to build an audience. Um, And I do think they have tremendous, I think the media stuff is way more valuable than I ever expected it to be. The first thing I would do is I have this crazy system on LinkedIn where I just find mutual introductions and it works like a charm.
Like you get your 50 targets. Usually you'll have a second degree, maybe a third degree, but even third degree works better than you would think. Like, especially if it's like you, right? So I call you and I'm like, Hey Greg, you know someone, you know, Andrew and Andrew knows the head of Oxfam. Like you're my friend. Like it takes time.
It's a little more of a patient game, but within a week or so you actually have a pretty good introduction. And that's actually for all of my businesses. How I started is using, even when I was 25, by the way, or 26, because everyone's, I was like, you have a huge network, Jesse, which is true. But when I was 25 or 26, I was like, I did the exact same thing to get the first 10 Ampush customers.
They were through my network somehow. And I would just, I would sort of salute the people I wanted to talk to and I'd work backwards somehow to figure out how I could get an end to them. Sometimes, by the way, it's not even on LinkedIn.
You have to connect the dots by looking at a board member or a C-level executive at a place and going, oh, they used to work at this company and I actually know someone. Was there any overlap there? And like, again, you work your network or you work the kind of connections a bit and next thing you know, you're having a warm conversation with someone. And I think
For me at least, that's been the most tried and true way I've started every business.
Yeah, there's an app I use called The Org. I'm not affiliated or anything, but theorg.com. So you can just see publicly traded companies and trending companies and seeing who works there, track them, stay updated on team changes. So I think using platforms like that is helpful. The other thing I would do is...
besides the mutual connection thing, is I'd create content and I would just tag the people that I want to see the content in, which works surprisingly well. If you're super thoughtful, let's just say it's the automotive business, info business, it's like, okay, go research some stuff, create a really interesting piece, add an image or a video to it, Because LinkedIn is optimizing that.
And then tag two or three people that... Bring them into the content. Hope that they like it. And if they like it, reach out literally right away.
I think the other thing I also find a lot of entrepreneurs doing... And I think I did this, but then... I don't remember what I did when I was young fully, but... man, if you go to someone and you're just honest and you put your hat in your hand and you say, you know what? Like, I think this is a good idea. And I mean, it's for anyone.
Like if I was starting this hedge fund thing and I didn't have a network, I know someone in finance. I try to find someone senior in the finance world, somebody's friend, somebody's cousin, someone's something. And I'd say, listen, here's the idea I have. Honestly, I don't know if it's a good idea or not. All I want to do is meet people to try to better understand if this is a good idea.
And if so, what do I need to do to make it a real thing? And man, humans are humans. And anytime I've come with that mindset or orientation to somebody, all that's happened is their heart has opened up to me. And they've said, you know what, there's three or four people I think you could connect with. And I think they'd really be able to give you a big perspective.
And if you come in pretending like you know everything and you're pitching everyone and you're selling everyone, it oftentimes has the opposite effect that you think. And I think owning where you are and being authentic in the networking process is a really powerful way to get something going.
But you don't think someone's listening to this and they're like, well, easy for you, Jesse. You went to Wharton and then you worked at Goldman. Like, what about the person who doesn't live in the United States, didn't go to the great school, doesn't, you know, his friends are his or her friends are just, you know, construction workers or who knows. Right. What do you say to those people?
Well, again, I say two things. I think, well, one is depending on your age, it does matter where you go to college. And that's like a fun one on Twitter that I always throw at people because people love saying it doesn't. And I can tell you that the biggest meal ticket of my life was going to Wharton. I went to a very average public high school. It was like middle class immigrant parents.
And man, that was a, I felt the step. Like I felt the step in my life and I have continued to feel it ever since. So that's one thing if you're 16 or whatever you are and you're wondering and you're reading this shit, it matters. I think it matters. So that's number one. I think number two is, again, if you're a construction worker, why would you start a business selling to hedge funds?
It just makes no sense. Start a business selling something to construction people. Find the problems in the world you're in. Every business can make money. It's not like selling to construction is better or worse than selling to hedge funds. It's all just what you know.
And then the third thing is, I don't want to get too spiritual here, but I definitely believe the quote that once you put out into the universe what you're trying to get done, it conspires to help you create it. So even if you were a construction worker... And you're like, I do want to do the hedge fund thing. You start talking about it at parties. You put yourself out there.
You ask friends for introductions. You, you will, it may take you longer than it took me, right? It may take you six months to get your first really valuable meeting, but you will get a meeting. And if you go to that person and say, I don't, I'm from the construction world, but I think they should have data on construction and I want to sell it to hedge funds. Like,
people will start to help you and take notice. And I've never, I've just never experienced it. I mean, I don't know about you. I think you're like me. If some random person comes to me through a friend or through even a thing like an uncle's cousin, I usually take a call for 15 minutes. And if they say like, look, I don't know what the hell I'm doing. I need some help.
I would say, well, here's a few people like, you know, send me an email and I'll put a little bit of work on that person. I'll say, send me an email, outline it. Tell me what you... And if they don't ever follow up, then I know they're not serious. But then some of them are like, man, they come back, they follow up. I'm like, wow, I met this person. They seem to have a unique energy.
Do you want to meet them? And then I'll check in with that person in a year. And guess what? They have a business and they're running. And so, yeah, I think even in the third case, it is, I wouldn't necessarily, but even in that third case, I think when you put things out into the universe and you're serious, it starts to conspire to help you.
100%.
It doesn't make a difference. Using the construction worker example, it's kind of interesting that you're a construction worker building a hedge fund thing and you have this unique insight into that space, into companies in that space. I remember when I first moved to San Francisco coming from Montreal, Canada, I didn't know one person, like literally no one.
But I ended up meeting some people at the Canadian consulate type thing, which is random. And basically when people from France
were coming to san francisco and they wanted someone to show them around i like became known as the guy who would take these people around san francisco and i ended up bootstrapping my network from all these like french entrepreneurs who ended up like you know the founders of zenly who sold it to snap for like three or four hundred million dollars all these like startups um and my my advantage was i spoke this language and so they wanted someone who spoke the language and that's it so
I find that helping people, I mean, it's funny, right? This private equity business, we're basically helping private equity firms assess companies' marketing capabilities, right? And we charge a quarter million dollars a month for our services. It's a very high ticket item. Half of the customers were students. I was older than them. And they're like VPs at these firms now, VP plus.
But I was helpful to them. I prepped them for their interviews. And I just did it because they're two years younger than me. They're like, hey, Jesse, you work in finance now. Can you help me prepare? And that's just, I don't know. That's what I do. I help people. I'm willing to help someone just because if... people have helped me, right?
And I'm just like, okay, now you roll in and imagine they're a VP or principal at Blackstone or pick your favorite. And I'm like, hey, I got a new business. I'm trying to start it. What do you, you know, what do you think is going to happen in that sales conversation? They literally do everything and anything they can to find an opportunity for us to collaborate on something.
And then I get to say Blackstone is a customer or whoever, like, like, So it's just, you know, I think there's a lot to be said about finding ways to be helpful in ways that are true and unique to you.
Again, I think being helpful inauthentically, everyone can tell, but being helpful authentically to the types of people and for the things that make you, light you up or give you energy, I think is a really valuable thing.
What other ideas you got?
You want to do some more off the wall stuff?
Yeah, 100%.
So, you know, we started a couple supplement businesses in e-commerce, which have kind of been a slog. But I do think supplements are an awesome category. I think they're high margin. I think they're endlessly marketable. And I think there's something really interesting about making the person feel like the supplement is meant for them. Okay, so like let's use a most common example in the market.
There's Centrum, which is this like daily multivitamin most of us have heard of. And there's Centrum Silver. And it's like, oh, that's for the old people. And there's certain things in that that the old people need.
So one of my ideas is to take the world, and this came actually, I'll tell you, if you talk to any South Asian, again, this is myself, you talk to any South Asian dude, you probably have a million Indian and Pakistani friends. And I'll tell you their lipid profile. I can tell you right now. They have low D3. They have high LDL.
They have some heart issues, like some, you know, maybe a little high cholesterol, like a... And probably high glucose. Like they just have a similar profile because of, you know, genetics and the fact that we were not meant to eat pizzas and burgers. We were meant to eat dal and roti, right? Like it's a very specific lipid profile.
So one of my ideas was like, let's create a, by the way, South Asians are also the highest diaspora income in the United States. Higher than Jews, higher than everyone else, right? Let's create like an Indian South Asian men multivitamin. Like Centrum's not the right one for them. Right. Like we'll call it must be right.
And it's going to be a hundred bucks a month and it's going to be meant for them and it's going to speak to their issues and it's going to talk about that. And then I was like, okay, well, what about for black women? And what about for, you know, apparently lots of Jewish dudes have digestive issues. Like that's a common issue for Jewish dudes. Like,
So one of my e-com ideas is basically like a hyper-demoed multivitamin or vitamin orientation. And I think that the ads on Facebook would just be perfect. Again, it's back to this thing of you just find an area that no one else is in. And I'm the only one who can say, this is the South Asian vitamin. And is it 70% similar to Centrum? Maybe, but like...
If you have the money, why wouldn't you buy the thing for you?
Yeah, I like the idea of a studio around this. Kind of like how the Match Group has dating apps for every category, or IAC has a bunch of different verticals. What does that look like for supplements for different demographics?
Totally. Yeah, exactly. So I think that you do supplements for different demographics... The other thing I like about it, dude, is here's a couple other data points to think about. One is this is a perfect example of something that could not be retail. Because you're not going to get shelf space for... There's not enough Indian people in any one area.
Maybe in Toronto or Vancouver, but every other city in North America, no.
Mississauga, Brampton, Ontario.
Mississauga, maybe those two places, but nowhere else in North America, right? So that's number one. Number two is you could charge a lot for it. Number three is like it's... I forgot the number exactly, but I think it's somewhere in the ballpark of 10 million...
uh south asian so five million men south asian in the u.s right growing growing category it's like a hundred thousand people paying you a hundred bucks a month like that's a real business dude like that's just like a nine figure it's a real business that's one of the verticals right so what i like about it is that it just it fits in so many different places frankly i wish this is what i would have i had the same idea and i chose a different thing and i like we wish we would have done this but it's still on the list
It's still on the list. Well, thank you for sharing it and being open with it. I appreciate that. How do you go about, I know nothing about creating supplements. How does one go about doing that?
You know, it's funny. Some of these guys who are building airplanes and aircraft, sometimes I'm like, wow, it's so incredible. And then other times I'm like, the world is... The beauty of being alive right now as an entrepreneur is like, man, there is a system, there is a sub-market and a whatever for everything. So I had a similar intimidation in the beginning.
And then obviously you can go and... order the raw materials, and then find someone to mix your supplement. You could build a whole supply chain. On the other side of it, in the beginning, you could literally go to third parties who will white label their supplements for you and let you sell them however you want. If you wanted to validate this, you and I could build this business in a week.
Because there's a third party who will slap a label on something, call it whatever we want, and we can start running Facebook campaigns on it within a week. And so the answer is that. You start with something like that and then you slowly get more, you know, that's how we started. Then you slowly go, okay, wait, let me actually work with a doctor and formulate something.
And they have their research and we do some other things and we start to formulate like a proprietary blend of something. And then you go to a third party who manufactures it for you and that's it. And again, I'm sure as you get bigger... you can keep ripping costs out and improving supply chain and all that stuff. It becomes a bigger function.
But early on, it would be silly to do all that stuff, in my opinion. So I'd first start with one of these third parties that will literally make it for you on demand, whatever, and just throw a white label on it. Then I would go one level further and make a proprietary formula.
And then maybe when I'm a much bigger business, I would buy my own ingredients and maybe there's third parties that just mix it for you if you want that. But in the beginning, you just need something to sell someone and see if it works.
And you're a paid ads savant. So how would you go about thinking about your paid ads strategy for something like this?
Yeah, you know, one of the funny things, you know this, right? I've probably overseen over my career $2, $3 billion in paid spend, right? We scaled Uber to $100 million a year in 600 cities, Dollar Shave Club was spending $3 million a month with us for four years. Stitch Fix, Casper, you name it. And we basically ran at least their paid social, if not all of their digital.
And when I started doing this on my own, I totally fucked it up, actually, because I was so used to running bigger things that I was like, oh, go create this special creative, go do X, go do Y. And it turns out that what you actually need to do in the beginning is the first month or two is what they call seasoning the pixel.
And so you create actually five to seven static non-video ads that are very basic with your product, with the pixel, and you spend 50 bucks a day, 25 bucks a day. And the first week is going to be the worst results you've ever seen. And then you'll see Facebook will start to learn your audience a little better.
And maybe every week you make a small adjustment just to what's working, spend a little more on what's working, pause what's not working, basically based on how much they're spending or what the metrics look like. And then you kind of let it go.
And so what you should see is after two months, the pixel will be seasoned because the CPA will be cut in half and you'll just notice that the metrics will all look better. Now Facebook knows who your audience is Now you can get crazy with the video creative and some of the other things that are, you know, UGC, like the more engaging creative.
But part of it is you almost want bad creative up front because you want Facebook's algorithm to get a better and better signal on who your audience is. And if you give them too much good creative, like... you know, if I show you a pretty girl dancing around or whatever, you may buy the product even though you're not the right audience. And then Facebook kind of learns the wrong lessons.
You want them to learn, oh, this is like a really crappy ad, but oh man, it's an Indian supplement. I'm Indian. Okay, I'm going to buy it. Man, the site looks really bad, but the formula looks good. Okay, you want that to be your first hundred transactions to calibrate the audience really tightly. And then you light up, again, video and UGC. Now, one of the big mistakes people make here is
You really shouldn't grow your spend until the economics are profitable, until you're first order profitable. Which means, let's just do this math. If you're doing a $100 supplement, it's kind of an expensive supplement, but let's go with that. You're probably doing 70% gross margins, maybe more. So you're making $70 in profit. Your CPA target should be like $50.
at the highest because that makes money on every transaction. And what you have to do is calibrate your spend, your creative, your metrics internally to that. That would be considered a two ROAS on your spend And it's too easy to convince yourself to spend more on a shittier metric.
And what it forces is a discipline of sorts that you're not allowed to scale until you can't spend more than $50 a day until that 50 is able to. And what it means is you may spend six months trying to rip through different creatives and hooks and all the things you and I know from the world of organic social.
But then when you get it and everybody gets it, if they stay long enough, it is a dream because now all of a sudden you have a money machine that you can just keep turning up. And if you read my newsletter, we actually started using some lending in our case, and we didn't follow this rule, and it was a big mistake.
It made us too able to spend money too fast, and that's actually a really bad thing in customer acquisition.
And in terms of creative, because nowadays creative is huge, right? The main lever, yeah. The main lever. What do you recommend to folks in terms of creating, how do you create creative that is going to get you that two ROAS?
Yeah, I mean, I have a whole presentation I shared privately with a handful of business leaders that's like, get the organic social formula, which you and I know really well. Like, is it a good hook? Is it going to get someone to stop what they're doing? And in order to do that, I typically think of it as curiosity and benefits. I think Craig Clemens, the guy from Golden Hippo, says that, like,
Make me curious and tell me what's going to benefit me. And that's the first thing in the hook. And that means you've got to know your audience, you've got to know your customer, you've got to know all these different things. Then you've got to deliver some value, and usually it's informational value in the creative itself.
One of my favorite frameworks is the PAS, the Problem Agitation Solution Framework, right? Where you say, well, the hook is something you have an issue with. You don't immediately jump to the solution. You're like, ugh. And then you present the solution at the end of the ad. And obviously then you can trim some of the landing page. My favorite example of this, this has become my favorite product.
This is like, if I was Oprah, this is Jesse's product of the year. Have you seen this Air Moto thing? So... Okay, so once you have kids and you're a dad, one of the random jobs you get assigned, of many, there's many, many jobs, like suitcase carrier and whatever, you just, you are the inflating guy. You inflate shit, okay? You inflate tires. on bikes, you inflate car tires.
If something goes wrong with your car, you inflate pool toys. Um, just, just nothing you don't inflate. Your responsibility is to inflate. It's just, it's the law of dads. Right. And so I get this ad on, on Tik TOK. And it's like, it's like, you know, it kind of is making fun of this. Like, you know, do you get annoyed by this? You have to do it. And then it agitates the shit out of you.
It's like shows the guy at the gas station looking for quarters, trying to fill his wife's tires and he's pissed off. Then he comes home and his kid's like, can you fill the bike tire for me? And the bike tire keeps deflating and it's like, it's annoying and he's sweating. And it was like, I was like, yes, yes, that's me.
Like, you know, it's such a random thing too, because I would never consider myself. And I was like, man, these guys, like I was just so agitated. And then they're like, it's a mini compressor. So it's like this tiny little compressor, right? It connects, it's really smart. It's automated. You can press a button, plug it in, and it just goes until it needs to turn itself off.
It can just set to whatever PSI you need to. Right. And I kid you not, I like bought one and it blew my mind. Like I handle all the things, even taught my son now how to do it. He's a little older. Like, you know, it's like just a total game changer. Like it literally, we like joke about it. And then I was like, I just bought 10 of them. And every man I know, I just give them like, here you go.
Here's an air moto, dude. And so for the second, the last part is kind of extreme, but like the example of great creative was knowing your customer really well, presenting the problem, like connecting and then really agitating it.
Um, and again, they just did a wonderful job of like, and every single agitation was felt very real for me being at the gas station, trying to find quarters to fill my, my wife's car, my, you know, my kids incessantly asking me to, and that's just, that's a, that's a perfect example. That's the case study.
That's why before you do ads, do organic content. Cause it totally right. Alongside. Yeah.
Cause it allows you to, it's R and D basically. And here's the other thing about people get so strange about organic is And I, man, I screamed this at the top of my lungs. I'm like, if your organic sucks, no one sees it.
Yeah.
By definite, even mine and yours now, we probably write certain, like I've written tweets where I'm like, this is going to crush. It gets like 1200 impressions. And I'm like, all right, well, that was a bad idea. But guess what? No one saw it. Like it's totally asymmetric. And, and the world, you know, everyone talks about the beauty of asymmetric payoffs. I mean, it has no downside whatsoever.
100%.
Before we move on from supplements, I have a related thing I want your feedback on, actually. A buddy of mine, his name's Rablay Jama. He sold a company to Shopify. When he does something, I really pay attention. He launched something new the other day, which I thought was really smart. So he is Somalian by ethnicity. He's Canadian, lives in Toronto. But he started this skincare line.
This is like a digital guy, like a software guy. And it's called, it's called, the company's called Glean, but it's this, the product's called Kaisel, which is an all natural multipurpose ingredient used for thousands of years to help alleviate redness and diminish hyperpigmentation. Cool. But it's targeted towards people who are East African.
And it kind of reminded me a little bit about your thesis here. So what do you think about this business? And have you ever thought about skincare or beauty in that category?
Beauty and skincare is a great category. It's not one I know super well. I mean, I kind of accidentally know supplements. Look how expensive it is, too. $170. This has got to be super high margin, right? You can just see that it's there. Yeah, I love it, man. I think it's great. I think the question I would like, I want to see the Facebook account. My guess is a 70, 75% gross margin.
The bottle looks a little fancy, so maybe a little lower than that. Shipping matters a lot in these things. Basically, the weight below one pound matters a ton to keep the cost really low because of the USPS shipping. Site looks fine. I would look at it in mobile because that's where all the traffic will come. Nobody goes to the desktop website.
But to me, I would want to see their ads library on Facebook and I'd want to know from them, do they have an ad that generates greater than two ROAs. The only thing that matters in e-comm, dude, is first order profitability. It's just the only thing that matters. And if you can't be first order profitable in scale, then it doesn't matter.
Basically, the market will tell you if the idea is good or not based on that metric and your ability to obviously put good creative out there, assuming there's demand for your product. And then obviously, one thing I should say, one big lesson we learned was having a good, unique, bleeding-edge product.
The guys who have done Colostrum, there's multiple nine-figure revenue startups because they were really early to that trend. That trend matters a ton in these categories of beauty and supplements. If I could go tell myself one thing when we launched the supplement world, I would have said,
trends find something more on the bleeding edge don't pick like we picked gut health and it's just such a tired category we just I just wouldn't have done that that's the one piece of advice I would have told myself I'm sure I wouldn't have listened to myself but that's what I would have told myself Jess you have time for one last idea yeah of mine yeah or I can I could jump in no no I got I got a bunch give me a genre and I'll give you a good idea
I like these niche ideas. Your first idea was really unbundling. And the second idea was demographics.
Here's what I texted our CTO about last night. You don't have kids. So there's a guy called Perry Grip on Spotify. And he's got the catchiest... kids songs you've ever heard in your whole life okay like i know them all so i will sing like one is called my favorite one is called haunted cupcake and he's like oh haunted cupcake sitting on the plate all right I want to eat you, but I'm too afraid.
What are you filled with? Nobody knows. Is it creamy butter or a spooky ghost? Haunted cupcake. Haunted cupcake. There's that. There's like, it's raining tacos. And basically my kids from four to six, I mean, if you looked at my Spotify, obsessed with it. And this guy reportedly makes like a million bucks a month.
Because he just, I mean, you can just look at these hundreds of millions of streams of these songs, right? And so my idea, I texted our CTO last night and he was like playing around with AI stuff and for our supplement brand, he created a song about our supplement brand and it's a good song using AI.
So I was like could we like create kind of like the ghost kitchens like could we create like ghost Spotify channels that are kids music that are all AI basically driven and just make a ton of music like you can make an unlimited amount of music basically. And I don't know how distribution works in that world. Like I don't know how Perry Grip got popular.
Like my kids I'm guessing other kids told I have no idea. That's the part I don't understand. It makes me a little nervous about it. Like I don't understand distribution but It feels like a good idea.
How does it work with Suno and some of those products? I created the theme song of this show, the Startup Ideas podcast, which 80% of people love it, but 20% of people have nightmares about it. I used Suno to create it. But could I go and put that on Spotify and earn revenue? Who owns the music?
I have no idea. That's a great question. My guess is you own it. But I don't know. I mean, we have to look at the user. But one way or another, there's a way to use AI. I mean, chat GPT. You could make me a funny melody about... I mean, this guy haunted cupcakes.
Yeah.
The guys, I mean, well, I'm a creative enough person and so is Adam, our CTO, that I think we could brainstorm topics like that and just see like what are things kids talk about. And like I want, like even like, you know, as my kids got a little older, my older two are nine and seven now, like they're into like boobs and farts and like, and I bet you like there's probably a whole genre of songs.
I mean, dude, there's a Spotify channel called that takes various categories and just says, it repeats the exact same lyric over and over again, and it's really catchy, but it's kind of annoying.
What the hell is it called? It's like Mango. Yeah, it's called Hmm, That's Strange.
That's the name of the channel, okay? And it's, I don't know if you can even hear this. Okay.
Can you guess what it's going to be?
Mango cheese eggs? Donuts.
The number one is the Serial song. It's all the same shit is the point. It's just written to that thing. And they have 50 volumes of songs. I mean, maybe these guys are doing this already.
Yeah. This is a huge insight that you've blessed us with, which is it's easier to create music now than ever. You can monetize off these platforms and children's music all is kind of Sounds the same.
I mean, dude, it's something. I want to see how hard it'll be for us to try this. This is my dream, by the way. All my businesses, private equity consulting for marketing, it's hard. You've got to get good people. You've got to know your shit. My dream would be to make a million bucks a month off a business like this.
Yeah, totally. I love it. Jesse, thanks for coming on. Where could people get to know you more?
Sign up at bootstrapgiants.com. That's our big area of push right now. We're trying to build the largest community for profitable, ambitious companies. The pitch is there's a lot of content out there for VC-backed. As you and I both know, there's a lot of content out there for 4-Hour Workweek. It's kind of like this music example.
I think that most underserved founders are building bootstrap, profitable, fast-growing businesses that just don't get... any love. And we're going to share my insights. I've done this multiple times. We're going to spend a lot of time opening up the private equity world to this group.
So mid-market and lower mid-market private equity, which I think are the right types of partners for profitable businesses. And we're going to be doing a bunch of other kind of accelerator-y type things there. So bootstrapgiants.com, sign up.
Beautiful. All right, my man. Catch you later. Peace. That was great.