[Summary] Truth about ad agencies with Brendan Gahan + Brainstorming with Daniel Gross | My First Million

🔑 Key Takeaways

Starting an agency can be profitable by offering unique services that are in demand, while establishing yourself as an expert in a specific area to attract clients and provide valuable services.
Agency owners can boost their income by securing lucrative retainer fees from big brands and exploring alternative revenue streams like developing their own products and investments.
The rise of D2C has given birth to a new generation of agencies, focused on Facebook ads and software development. However, balancing client needs and scaling up can be challenging in this model. Consider a distributed workforce for cost efficiency.
Staying updated on emerging trends and exploring alternative platforms can lead to profitable opportunities and meaningful connections in the online world.
Pioneer's platform identifies promising individuals, creates companies for them, and provides funding and support, aiming to tap into untapped potential and foster growth and innovation in society.
Small ideas and projects have the potential to grow into something significant with time, dedication, and perseverance.
Successful investments in early stage startups often require belief in the founder and market opportunity, willingness to take risks, and the understanding that beginnings can be uncertain.
Passion is not always necessary for startup success. Finding business-minded individuals who prioritize profit and enjoyment can lead to success in startup ideas. Constantly generating ideas and keeping an open mind is also valuable.
Writing down ideas allows for pattern recognition, best practice discovery, and creative packaging. It prevents loss and serves as a starting point, but finding a balance between fixation and flexibility is crucial.
Angel investing involves personal and Pioneer investments, with varying check sizes and a focus on smaller investments with larger volume through Pioneer.
Successful investment strategies require careful asset allocation and selection pressure. While personal traits and preferences may impact efficiency, satisfaction can be found in working closely with a small number of deals. Legendary investors like Mike Moritz stand out for their picking ability, and underrated markets offer opportunities for success. As Pioneer gains popularity, it becomes harder to stand out, just like prestigious brands face challenges.
UiPath's success in the RPA industry is attributed to its focus on automation process improvement, software innovation, and effective sales strategies, emphasizing the significance of a strong sales team for enterprise startups.
The increasing popularity of no code software could disrupt the traditional software consulting industry, but it's important to carefully evaluate investment opportunities and consider other emerging technologies and industries for starting a successful company.
By immersing oneself in a large enterprise company, individuals can gain firsthand knowledge of broken processes and inefficiencies, offering an opportunity to create innovative software solutions to fix these issues.
Recognizing the value of internal stock ranking and sharing ideas as tools for evaluation and problem-solving can improve performance and address unmet enterprise needs.
Building industry-specific platforms that offer unique services can attract a targeted audience and generate substantial revenue by providing innovative alternatives and incentivizing user engagement.
Offering high-quality software at a premium price and creating dedicated apps to streamline communication can be valuable in meeting the specific needs of high-end customers and niche online communities.
Strong software, a thriving community, and leveraging network effects are vital for platform success, but maintaining high-quality offerings is essential to prevent user dissatisfaction.
Building a trusted brand in a specific domain can provide a valuable alternative to Google and Amazon, helping businesses gain credibility, attract celebrity endorsements, and achieve customer loyalty.
Specialize in a specific vertical, curate top products, cater to niche markets, and prioritize value and exceptional experiences to become the go-to destination for online consumers.
Brands must stay aware of and adapt to changing consumer needs and preferences in order to remain relevant and appealing in the market.
Understanding and catering to the unique needs and preferences of specific target audiences is essential for success in the market.
Understand that venture funding is not the only option for business growth. Consider debt funding or retaining a larger share of the business for a more fulfilling entrepreneurial journey.
Embracing remote work policies can transform cities by creating opportunities for smaller towns to become startup hubs, leading to economic growth and job creation.
Special economic zones, both physical and digital, can drive innovation and attract talent by providing a conducive environment for experimentation and development, similar to the pioneering days of research.
Cities face difficulties in implementing changes due to expensive and complicated infrastructure. Prioritizing tangible value and revenue generation is essential over seeking intellectual approval and social media validation.
Perform for yourself and a select few who have achieved success in areas you admire, rather than seeking validation from the masses. Find your true motivations and perform in a way that leads to a more fulfilling journey.
Success is determined by the usefulness, importance, and interest of one's work or investments, while the strongest friendships are formed through collaboration and creation.

📝 Podcast Summary

The profitability and success of starting an agency lies in offering unique services that meet the demand in the market.

Starting an agency can be a profitable and viable business model, especially if you can identify a niche or a gap in the market. Sam Parr and Shaan Puri discuss how agencies can provide an opportunity to earn money while learning and gaining experience. The key is to offer unique services that are in demand, such as influencer marketing or YouTube optimization. It's important to establish yourself as an expert in a specific area to attract clients, even if you start with small retainers. As your reputation grows and you deliver results, larger companies may be willing to work with you. Ultimately, the success of an agency lies in providing valuable services that meet the needs of clients.

Maximizing Revenue through Retainer Fees and Diversification Strategies

Agencies can generate significant revenue by working with big brands on retainer fees. These fees can range from thousands to millions of dollars per year, covering a wide range of services such as strategy, creative development, production planning, and social media management. High-end agencies are able to secure millions in retainer fees from Fortune 500 brands. Profit margins for agencies typically aim to be around 15 to 25%, with 25% considered good. Agency owners and partners can derive their income from this profit. However, some agencies are diversifying their business models by developing their own products or investing off balance sheet. This allows them to create additional revenue streams and potentially acquire the brands they work with.

The Evolution of the Agency Model: From Brand Building to D2C Expertise

The agency model has evolved, with two distinct generations emerging. The classic agency model focuses on big brand equity building work and retaining clients. However, the rise of D2C has led to a new generation of agencies, comprised of entrepreneurial individuals with expertise in selling and running Facebook ads. These agencies are more flexible, expanding into building intellectual property and software. However, there are downsides to this model, as it relies on selling people's time and balancing different client needs. Scaling up also presents challenges in efficiently placing and selling people's time. Additionally, winning business through pitches can be demanding and time-consuming. While being in proximity to brands and talent in places like New York is advantageous, a distributed workforce model may eventually be necessary due to high overhead costs.

The Future of TikTok and Emerging Trends in Short-Video Platforms

TikTok is currently a hot trend in the social media and live streaming gaming space. Despite concerns over potential bans and the inability of American software to enter the Chinese market, TikTok's format and concept are likely to continue even if it were to disappear. There are also alternative platforms like Triller and Firework that are gaining popularity. This suggests that the short-video format is here to stay and has the potential to expand further. The interview with Daniel highlights the importance of staying aware of emerging trends and exploring different avenues for generating profit. It also emphasizes the value of internet connections and the ability to build real-world friendships through online interactions.

Empowering Individuals to Start Their Own Company

Shaan Puri's company Pioneer serves as a platform for people to experiment with their ideas and potentially start their own company. The goal is to encourage more startups and fewer large companies in order to foster growth and innovation in society. Pioneer scours the internet using psychometrics and machine learning to identify promising individuals and then creates a company for them on the spot, providing funding and support. This approach aims to tap into the untapped potential of individuals who may have had fleeting thoughts or ideas but never pursued them. By generating more founders, Pioneer hopes to contribute to a world with a greater number of startups and a broader range of technological advancements.

From Small Beginnings to Great Success

Successful companies and entrepreneurs often start small and humble before they become big and influential. Take the example of Facebook and SpaceX, which now dominate the tech world, but started as simple projects with limited scope. Similarly, Notion, a popular productivity tool used by many companies in Silicon Valley, began as a small idea that took years to develop into a successful product. It's a reminder that even the most successful ventures have humble beginnings and face doubts along the way. So, if you have a small idea or project that you believe in, don't underestimate its potential. With time, dedication, and perseverance, it could grow into something significant.

The Challenges of Investing in Early Stage Startups

Investing in the early stages of a startup can be a challenging decision. It often involves a lot of emotional belief in the founder and a clear market opportunity. The investor must decide when to bet on hard signs or take a risk on an unclear area because they believe in the person behind the startup. This is especially possible if the price is low and there's a path forward. Good investments at the beginning are typically unclear, and many successful companies had uncertain beginnings. Starting small and humble is common, and the narrative may be retrofitted later on. Lastly, creating a podcast that allows for brainstorming and discussing ideas with interesting people can be more engaging for listeners than traditional interviews.

Success in startup ideas doesn't always require passion but finding business-minded individuals who prioritize making money and having fun.

It is possible to give someone a startup idea and still have it be successful. The key is to find individuals who are business-minded and seek opportunities to make products better through buying or selling other companies. These individuals are often product agnostic and prioritize making money and having fun over being passionately invested in the idea itself. While solving a real problem and being passionate about it is the ideal scenario, it is not always necessary to achieve success. Additionally, constantly jotting down ideas and training the brain to seek out new concepts is valuable, even if those ideas may not be implemented. However, there is a contrasting view on writing down ideas, as it may cause the brain to stop actively thinking about them.

The value of writing down ideas and thoughts.

It is valuable to write down ideas and thoughts, even if you don't intend to immediately execute on them. Writing them down allows you to recognize patterns, discover best practices, and package ideas in a unique and creative way. While many cool ideas and successful things are not entirely original, they are often a combination of borrowed features and concepts. Writing down your ideas also prevents them from getting lost or forgotten, and it can serve as a starting point for further exploration and development. However, it's important to acknowledge that writing things down can also be limiting, as it solidifies and fixes ideas in a way that may hinder flexibility and adaptation. Therefore, finding a balance between writing and keeping ideas open and fluid is key.

Speaker actively involved in angel investing through personal investments and Pioneer venture capital shop.

In short, one big takeaway from this conversation is that the speaker, referred to as "3," is actively involved in angel investing through both personal investments and through Pioneer, a venture capital shop powered by software. While they have invested a significant amount of money, it has not yet returned all of it, though they have had some returns. The average check size for personal investments varies, ranging from $20,000 to $1,000,000, and even into the tens of millions for larger companies. However, the investments made through Pioneer are smaller in size but larger in total volume, with the company investing in about ninety people last year. Overall, angel investing can be a complex business with various strategies and structures.

The Role of Asset Allocation and Selection in Investment Strategies

Asset allocation and selection pressure play key roles in the success of investment strategies. Sam Parr acknowledges that he may not be as efficient as other investors due to his pioneer mindset and introverted nature. However, he finds satisfaction in closely working with a small number of deals, allowing him significant ownership in the organizations. While there are many great angel investors and investing platforms, Mike Moritz stands out for his legendary picking ability and board support. In terms of investment themes, Parr expresses skepticism towards the overhyped "no code" market but emphasizes the importance of underrated markets that offer free selection pressure. As Pioneer gains popularity, it becomes increasingly difficult to stand out, similar to the challenges faced by prestigious brands like Harvard.

The Rise of RPA and UiPath in the Enterprise Software Market

RPA (Robotic Process Automation) and UiPath, in particular, have become significant players in the enterprise software market. RPA is essentially a way to automate repetitive tasks by creating macros that mimic human actions on a computer. UiPath, a European company funded by Sequoia and others, has emerged as a leader in this space, with a valuation of $7 billion. However, the macros created by RPA can be brittle and require manual intervention to improve their effectiveness. This is where UiPath stands out by employing engineers to fine-tune the automation process. Moreover, UiPath's success lies not only in its software innovation but also in its sales machinery and channel sales strategy. This highlights the importance of a strong sales team in enterprise startups, as demonstrated by Salesforce.

The Rise of No Code Software and Its Potential Impact on Traditional Software Consulting

The popularity of no code software is growing rapidly and it has the potential to disrupt traditional software consulting and revenue models. Although some may find it comical or dismiss it as a meme, the sheer number of smart individuals working on this problem indicates that something significant will emerge. The market for no code software is vast, with the potential to eat away at industries like software consulting. However, it's important to note that popularity doesn't necessarily translate into investment opportunities. Other emerging technologies like radar companies may offer interesting solutions, but they may require significant capital investment and face regulatory challenges. Finding a niche where you can be at the forefront of a technology or industry can be valuable in starting a successful company.

Identifying and Addressing Broken Systems in Large Enterprise Companies

There is a significant opportunity in building software solutions for broken systems within large enterprise companies. Many people are unaware of these problems, resulting in a lack of software built to address them. The key is to immerse yourself in a large enterprise company and observe the broken processes and inefficiencies firsthand. By doing so, you can identify the number one issue and start a company to fix it. This experiential, painful understanding of the problem will drive you to create innovative solutions. Additionally, creating an import-export list within the company can help identify problems that need external solutions and internal hacks that can be packaged for other companies. Overall, there are vast possibilities for building valuable software in the enterprise software space.

Internal stock ranking is a valuable tool for identifying top performers, but it is not commonly used or liked by employees in large companies. However, it can still be applied across different areas to evaluate performance. Another takeaway is that sharing startup ideas does not necessarily mean giving someone a specific idea to execute, but rather providing inspiration and starting points to help them explore related problems and find their own unique solutions. Additionally, there is a need for more focus on unmet enterprise needs, particularly in areas like sales, where tools like org charts can greatly assist in the selling process. By recognizing these takeaways, individuals and teams can better understand the potential benefits and challenges in their respective industries.

Untapped Opportunities in Industry-Specific Platforms

There are untapped opportunities in building industry-specific platforms that offer unique services. For example, creating an org chart as a service could potentially become the next LinkedIn. The key to success would be to incentivize employees to fully update their profiles, just like they do on LinkedIn. Another opportunity lies in creating a website like ScienceHub, which acts as a Napster for research papers. By providing a better alternative with all the research papers available, one could potentially have the highest intellectual under management website. Furthermore, there is a need for a better version of Goodreads, where reading material can be shared and discussed in a more multiplayer environment. These niche platforms have the potential to attract a targeted audience and generate substantial revenue.

Meeting the Specific Needs of High-End Customers with Better Software Solutions

There is a need for better software solutions that cater to high-end customers and their specific needs. Examples like Superhuman, a luxury email client that charges $20 per month, show that there is potential for success in offering high-quality software at a premium price. Additionally, there is a demand for messaging apps that streamline communication between individuals and their admins, especially in professional settings. The oversaturation of messaging channels makes it difficult to keep track of important information, and a dedicated app that simplifies this process could be a valuable offering. Furthermore, there are opportunities for improved software in niche online communities such as flyerTalk and let's run.com, where outdated platforms can be replaced with more modern solutions.

The importance of software quality, community strength, and network effects in platform success

The quality of software and the strength of a community are crucial factors in determining the success of a platform. While a strong community can make up for subpar software, it's ideal to have both elements working well together. Additionally, the power of network effects and migration between platforms should not be underestimated. Building a better experience can attract users, but it requires reaching a critical tipping point where the decay of the previous platform begins. However, it's important to note that large companies may prioritize revenue over maintaining high-quality software, leading to a decline in user satisfaction. Therefore, it's essential for businesses to continually focus on improving their offerings to avoid this trend.

The Power of Brand Trust and Customer Loyalty

Building a trusted brand in a specific domain can be highly effective in creating customer loyalty. This can be seen in the decline of trust in Amazon reviews and the dominance of Google search results filled with ads. Creating a brand that customers trust and rely on for information and recommendations can provide a valuable alternative to these platforms. By focusing on one particular domain and nailing it, businesses can establish themselves as a go-to source, gaining credibility and potentially attracting celebrity endorsements. Though relying on Google or Amazon can be risky, building a brand that becomes a destination in itself can help businesses stand out and gain customer loyalty.

Establishing Yourself as the Ultimate Destination for Online Customers

Becoming a destination in the minds of consumers is crucial for success in the online marketplace. By specializing in a particular vertical and offering the best products or services in that category, companies can establish themselves as the go-to destination for customers. This can be achieved by curating and curating top picks in a specific area, ensuring that they are the best of the best. Additionally, catering to high-end, luxury markets can be a lucrative strategy, targeting a niche audience and providing specialized content and products. Ultimately, the key is to focus on value and delivering exceptional experiences to customers, whether it's through unique offerings, superior quality, or expert recommendations.

Adapting to cultural shifts for brand success.

Successful brands and companies understand the importance of recognizing cultural shifts and adapting accordingly. They look for a "sea of sameness" in the market and find opportunities to stand out by meeting the changing needs and preferences of consumers. For example, Method saw the shift towards a focus on ingredients in cleaning products and capitalized on it. Snapchat recognized the desire for private and temporary content in a world of permanent social media and became a major threat to Facebook. Luxury brands should consider redefining luxury experiences for younger generations who prioritize experiences over material goods. Additionally, companies like Uber and Postmates offer Millennial Luxuries by providing hyperconvenience. By staying attuned to cultural shifts, brands can stay relevant and appeal to changing consumer desires.

Meeting the Needs of Innovators and Creators: A New Laptop and Messaging Platform

There is a potential market for a new laptop that caters specifically to innovators, creators, founders, and developers. This laptop would have built-in LTE for wireless connectivity and a long-lasting battery. It would also prioritize fast and efficient performance, with a focus on auto-complete features. While this laptop may not appeal to the masses, it could find a niche market in cities like New York and San Francisco, where it would be the go-to device in coffee shops and other workspaces. Additionally, there is a growing dissatisfaction with messaging apps like Slack, indicating an opportunity for a new messaging platform that offers a different community and vibe. Overall, the key takeaway is to identify and cater to specific target audiences and address their unique needs and preferences.

Venture funding vs. debt funding: Choosing the right financial path for your business

There are two different worlds when it comes to starting and growing businesses. On one hand, there are startups that aim for hyper-growth and domination of their market, often fueled by venture funding. These startups focus on relentless growth and aim for tectonic scale. On the other hand, there are traditional businesses that may start small and grow over time, without the pressure to achieve massive growth. Startups and traditional businesses both have their merits, but it's important for founders to understand that venture funding may not be the right financial instrument for every business. Sometimes, taking debt funding or owning a larger share of the business can lead to a happier and more fulfilling entrepreneurial journey. Ultimately, successful businesses come in various forms, and it's crucial to choose the path that aligns with your goals and aspirations.

The Impact of Remote Work on Real Estate and Cities

Remote work has the potential to drastically change the real estate market and the economic landscape of cities. As more companies embrace remote work policies, there will be a shift in the demand for housing and office spaces. This presents opportunities for smaller cities and towns to position themselves as startup hubs by attracting startups and tech companies. To do this, cities should focus on creating an environment that is conducive to startups and venture capital investment. By offering incentives, building infrastructure, and fostering a supportive ecosystem, cities can attract tech companies and talent. In turn, this can lead to economic growth and job creation, making these cities more attractive to investors.

Creating Special Economic Zones for Innovation and Development

The concept of special economic zones, where companies and innovators can have more freedom to experiment and advance in various fields, can attract significant talent and drive innovation. The internet itself can be seen as the ultimate special economic zone, where one can pretty much do whatever they want, but in the physical world, regulations pose challenges. Creating special economic zones in specific physical locations, such as cities or countries, could foster a similar environment for experimentation and development. This approach has been successful in the crypto industry, attracting innovators to certain regions. Applying this model to cities and countries could accelerate progress and encourage risk-taking, similar to how it was during the pioneering days of research in the past.

The challenges of growing cities and the risk of getting caught in a "status trap".

Cities, like startups, can face challenges as they grow and become more established. The conversation highlights the difficulty of making changes in established cities like Manhattan, where infrastructure projects are incredibly expensive and complicated. Cities can be compared to large organisms, with many interconnected systems that make it harder to implement new ideas and innovations. Additionally, there is a risk of getting caught in a "status trap," where people prioritize seeking intellectual approval and social media validation over creating tangible value and generating revenue. The focus should be on building something useful for people and chasing revenue, rather than getting caught up in the infinite pursuit of status.

Shifting Perspectives: Performing for Ourselves and Those That Truly Matter

It is important to identify who we are performing for in our lives and careers. Early on, many of us perform to seek validation from others such as our parents, bosses, or successful mentors. However, as we grow and evolve, our perspective on this may shift. The goal should be to perform for ourselves and those few individuals who have achieved success in areas we admire. It is not about seeking the attention and approval of the masses, but rather benchmarking ourselves against the expectations and opinions of those who truly matter to us. Understanding our true motivations and finding the right way to perform, whether through sharing ideas or focusing on career success, can lead to a more fulfilling and meaningful journey.

Measure success through action and meaningful contributions, not just words.

Success is not determined by nice tweets or jokes, but by creating something successful, like being a captain of a successful ship. The key to measuring success, regardless of who you are performing for, is whether your work or investments are useful, important, and interesting in the world of money. This means taking more action and focusing less on captions or words. Building on the idea of creating, the strongest and best friendships are those formed through collaboration and creation, rather than just consuming together. So, when choosing friends, seek out those with whom you can build and create, as they often lead to the most fulfilling relationships.

Truth about ad agencies with Brendan Gahan + Brainstorming with Daniel Gross | My First Million | Sam Parr & Shaan Puri #38