The 5-Step Process To Build & Sell A $100M Business | ft. Jason Lemkin

Jason Lemkin

You want to reverse engineer things. You have to have a model with economies of scale that gets you to $300,000 to $400,000 per employee, or your model is not real. It is not scalable.

Sam Parr

What's going on, man? How are you?

Jason Lemkin

I'm so excited to be here and talk about all my first millions. I'll discuss the millions I lost, a few learnings on scaling, and whatever you want, Sam. It's great to be here.

Sam Parr

I love you for many reasons. One of them is that you're so catchy and you're so good at summarizing important things, but you explain them in a very simple way that's easy to understand. Before we get into that, I need to talk about background because we have to acknowledge the OG software guys. You are the guy. If we talk to the founders of HubSpot or the guys who run multi-billion dollar companies, they say, "If you want to learn about software, Jason's the guy." But we have a bunch of sometimes 20-year-old kids listening to this, and I want to give a little background. I don't want to spend too much time on this, but basically what I know about you is that you started a few software companies, including EchoSign, which you sold for nine figures. I don't know the exact amount, but you've said nine figures. Then you've been investing in startups as a VC since 2013, which I think you said you 10x'd your fund or something like that. Is that right?

Jason Lemkin

That is about right.

Sam Parr

And then what else did you do besides EchoSign before that?

Jason Lemkin

Before that, I had a startup where I made my first million. This was during the time when the internet died for a while. I actually founded a startup making implantable batteries from nanomaterials, which I knew nothing about. Interestingly, we sold it for $50,000,000 after 12 and a half months. It is kind of an MFM story, and I learned a lot from it.

Sam Parr

What was that company called?

Jason Lemkin

It was called Nanogram Devices, and we did something that was thought to be impossible. We got bought by our competitor. It was a classic buyout after 12 and a half months when we took away one of their largest customers.

Sam Parr

Did you raise funding?

Jason Lemkin

We did, and it was hard. I'm dating myself; this was one of the crummiest points. We raised $9,000,000 in our seed round and sold 70% of the company in our first round. That was the deal. There was no choice; there was no negotiation. It was a different time.

Sam Parr

And that meant... what you and the founder, you and your other partners—I don't know how many you had—had $15,000,000 left over to share after the $50,000,000 exit.

Jason Lemkin

I'd say it was more like about **$10,000,000** or maybe even **$8,000,000** to share. So, it was interesting enough for the first million. It was just enough to not work for the man. I have worked harder; I worked even harder on the next startup, **EchoSign**, which Adobe bought.

Sam Parr

So, EchoSign was basically like what DocuSign is now. You guys just sold earlier.

Jason Lemkin

Yeah, a lot of learnings. We actually... DocuSign, believe me, I'm really dating myself. DocuSign was basically a printer driver company when we started. We were the first web solution. I wrote it all myself in PowerPoint and with crappy wireframes. We built it and we got to $1,000,000 a month, burning $4,000,000. So we got to $12,000,000 ARR, growing 100% with 110% revenue retention and cash flow positive. We sold it in 2011, and 2011 was a long time ago in internet time. In real time, it was just before we understood the metrics around recurring revenue businesses. Even my board and my investors weren't sure we had a good business. If I said to you today, "Sam, I've got a business doing $1,000,000 a month, growing at 100% with a 110% revenue retention and profitable," you would say, "That's the ticket! That's the ticket!" Now, DocuSign was bigger; we had about 36% market share, but we were cash flow positive and growing at 100%. We only raised $4,000,000. So when you sell your company to make your second million, sometimes the second one... there's a certain logic in it. The logic, in its own way, can be stressful. It could be stressful to compare that. That was a very complicated decision because it made sense on paper, given that the team wanted to do it and part of the team wanted to do it, and given how little we'd raised. But in my gut, I knew it was emotionally the wrong thing to do.

Sam Parr

Scott Galloway came out a while ago, and I didn't get to talk to him about this, but he had this awesome presentation. You and Scott are similar in that you both have beautiful language. That's what I describe these types of people as; they pick their words beautifully. Scott has this thing where he sold a company for, I don't know how much, I think it was between $100 million to $200 million. I forget the exact amount, but it was a nice exit. He said, "Well, I wanted to have a nine-figure exit, and I wanted to do it in this data business because that's what I knew." So, he worked backwards and sort of reverse-engineered it. He mentioned that he knew he needed to have an international presence. He also knew he needed to charge at least $50,000 a year for a service. Then he listed all these things, and he spent eight years, or however long, building it. I love that because I enjoy reverse engineering. It's what I tell a lot of people. They want to create this amazing stuff, and I'm like, "Yeah, that's cool, and sometimes that works." But you can actually reverse engineer a bunch of stuff to figure out what the rules of the game are that you need to play. Then you optimize for those rules. I wanted to have you on to basically reverse engineer what it takes to get either $100 million in revenue or even $100 million in outcome because I actually think those rules are the same. I was like, "Jason, I want to talk about this reverse engineering thing," and you banged out this like five or eight...

Sam Parr

The thing you said is that a lot of startups right now, because they raised money in a zero interest environment, have about $100 in revenue per employee. You said no, the minimum needs to be $300,000 to $400,000. Is that right?

Jason Lemkin

It is... if you're trying to reverse engineer whether your business model makes sense. This is one thing: reverse engineer certain business models have economies of scale, and some don't. If you want to go really big, you want a business with economies of scale. If you step back to the old days of software, the old Adobe's, Microsoft's, and Intuit's made **$1,000,000** in revenue per employee. **$1,000,000**. Okay, you'd have a bunch of engineers who would go off into their offices. Everyone used to have a private office to code. They'd spend two years building a piece of software with a small team. You'd put it on a DVD-ROM or a CD-ROM that costs **$0.50**. Then you package it up, which costs **50¢** for a dollar, and then someone would sell it for you between **$50** and **$400**. This was a really good business with **90% margins**. The classic Adobe, Microsoft, and Intuit had **50¢** of every dollar go straight to cash flow. We don't see this anymore in companies that go public. It was so profitable. So that was a million, and then things just... whatever you want to call it, it got crazy. We reached a low in **2021** of **$100,000** in revenue per employee for all these unicorns. **$100,000**. So we were only **10%** as efficient as we used to be. Now the pendulum has swung back. Historically, we were at **$1,000,000** per employee at the low.

Jason Lemkin

Was $100,000 per employee, and when employees in the Bay Area probably cost you $250,000 fully burdened with insurance, benefits, this and that, you're losing $150,000 per employee. Now, every public company, at least public SaaS (Software as a Service) company, is at $300,000 to $400,000. HubSpot's at $310,000, which we talked about, and Cloudflare's at $400,000. That's where you have to be.

Sam Parr

When do you have to be there?

Jason Lemkin

So, one way to think of it—if you're lucky enough or unlucky enough, depending on how you look at it—to raise capital, angel money, venture capital, whatever it is, it bridges the gap. It bridges the gap to get you to $300,000 to $400,000 per employee. But you're going to have to get there. If your product isn't profitable enough, if your gross margins are too low, if it doesn't make sense, make some changes. You have to have a model. If you want to reverse engineer things, you have to have a model with economies of scale that gets you to $300,000 to $400,000 per employee, or your model is not real. It is not scalable.

Sam Parr

And then you have another point. Here you say "going multiproduct," and you mention it's a huge issue of how, when, and where to figure out when to go multiproduct. But did you say at like $10,000,000 in revenue you want to go? What did you say for going multiproduct?

Jason Lemkin

By the time you get to 10,000 customers, you better have a second product. This isn't just a non-obvious thing; it can be bigger than the first. This one took me a while to figure out. For HubSpot, the CRM in two years will be bigger than marketing automation. HubSpot for years was a marketing company, but in two years, its sales product will be bigger than its marketing product. It has to be, and you want to be there by 10,000 customers.

Sam Parr

This is the same for e-commerce businesses too. They sell a handful of SKUs and then they reach some type of critical mass. Then they say, "Alright, we need to create more stuff." So, like, we made deodorant. Now we need to make toothpaste or shampoo or something like that.

Jason Lemkin

But the second one has to be bigger. This is the mistake founders make. If the second product is the easiest, Sam, it’s to add a product extension. Okay, we sell shampoo in e-commerce. Okay, let’s sell shampoo and conditioner. That’s the easiest thing because our customers already know us. If they bought shampoo, they’ll buy shampoo and conditioner. But the problem is, if the second product isn’t bigger than the first and the first one’s still growing, you never catch up. It’s never enough, right? If you’re selling $150,000,000 of shampoo and you’re growing 20% a year, you’re adding $10,000,000 a year. Right? And you launch shampoo and conditioner, and it does $1,000,000 in its first year. It’s great, but it will never get there. The second one has to be bigger than the first. And this is it. We all default to the easy second product, and you actually have to do the harder one.

Sam Parr

That's interesting. So, at The Hustle, we had, I don't remember, a million and a half subscribers. I think we were doing a million a month in revenue. In a media company, you basically build an audience and then launch multiple businesses to that audience. Whether it's advertising, conferences, software, whatever, that's kind of typically how media companies work. It's usually a collection of small businesses or different businesses. I think we were at a million a month. I forget the exact number, but I wanted to create a subscription service called Trends. It was like... and dude, I messed it up so bad because I charged $300 a year, which is so stupid. It should have been $30,000 a year; it should have been way more expensive. I think in the first month, we did, I don't remember exactly, but we did almost a million in sales. Then it was a pain in the ass to manage, but by the end, I think when we sold, we were at $5 million a year in sales with it. It only had like 4 or 5 people running it, so it was profitable. But the mistake I made was not making it bigger than the first thing. I intimately know that mistake, and it's really hard because I'm like, "Well, this is a clear extension. Just do this, then this." But it’s also a psychological thing of, "Why pay attention to this thing? Just put money back into the main thing."

Jason Lemkin

This is an advantage to hiring a VP of Sales. For example, founders often underprice their products. Usually, they underprice them because we know what's more important: getting the product off the ground and acquiring 100 customers rather than optimizing pricing. As founders, we're always thinking medium or long-term, so we almost always leave money on the table to make people happy and get them going.

Sam Parr

Dude, I've underpriced everything I've done. I've underpriced.

Jason Lemkin

Yeah, and so have I. So have 80% of founders—not all, but it's a... I hate this term, but it's a feature, not a bug. Because as painful as it is, you can fix pricing later, at least for new customers. It's harder to fix it for grandfathered customers, right? But for new customers, then just double it to $612, $1,800. Like, it is hard.

Sam Parr

I think it's rooted in imposter syndrome... like, "I don't know if this is good enough." But then you talk to a good salesperson, and you're like, "Dude, I could just put a zero behind that. I'll sell it." You know what I mean? If you talk to a good salesperson, they can get it done.

Jason Lemkin

A good salesperson will not rip people off, but a good one will get the full value for your product in a way that, as a founder, you almost never can. That's why a lot of the classic SaaS content is about hiring a VP of Sales. In Q1, during the first 9 days, you should see a lift from a good VP of Sales at least. They can run this playbook with the same leads, the same customers, and the same dynamics for trends or something else. Someone with the confidence to ask $30,000 for trends, knowing it's cheap compared to Gartner or Forrester, will take that off your plate if they're good. You'll see a 30% to 100% revenue lift from someone that's great. On the other hand, someone that's mediocre will rip your customers off, never understand your product, misspell trends, and not know what it is. A mediocre salesperson will actually see a revenue decline from founder-led sales, but a good one will solve that piece. So, I think the other thing is, you just didn't give it enough time either.

Sam Parr

I sold the company after four and a half years. Yeah, but I was okay with that. I don't regret it at all because I wanted to achieve some financial freedom, and I was broke. I think I paid myself the first two years; my salary was $20. The third year, maybe $100, and then the fourth year, I think I paid myself a few hundred thousand dollars. But I was fucking poor. I was impatient, and what you talk about all the time is that the worst thing is a tired CEO. I was a tired CEO. I was tired of being poor, basically. And that was a huge mistake, by the way. Pay yourself way more if you can, is what I've learned.

Jason Lemkin

As soon as you can afford it, pay yourself. The market is the learning. Yes, it is the learning. Always, as soon as you can afford it.

Sam Parr

And you had this other thing on here. You talked about wanting **30%** of your revenue to be outside of North America. That's very intimidating. That's probably the most intimidating thing here: going global. At least in my opinion, I think it's a very intimidating thing.

Jason Lemkin

Obviously, some businesses may find that this approach doesn't really work. If you're highly regulated, it can take a long time, for example, if you're very specific. But at scale, the average public software leader gets about a third of their revenue outside of the U.S. HubSpot is now a majority; the majority of HubSpot's customers, small businesses, are outside of North America. So, let's step back in terms of reverse engineering. There are a couple of things: if you don't lean into them, you're going to have less revenue than you otherwise would. **International** and **partners** are two of them. If you try to only sell direct, that's an issue too. So, how do you do this? How do you learn how to sell in France, Germany, Milan, and London? It's not as complicated as it sounds. What you do is build your business, build your brand. Find a niche where you're one of the top two or three players. You don't have to beat HubSpot everywhere, but find a little segment where you're better in your area and watch who wants to buy from you. If you're in software, what will happen is that Australia, New Zealand, the UK, and some parts of France are very used to buying from U.S. companies. They will find you if you are the best vendor. You don't actually have to find them. Now, traditional industries won't find you. It's going to be tech-focused folks, early adopters, the cool kids, but they will find you. As soon as you cross 5% of your revenue in an area, then invest in it. Just invest in it. As soon as you see a cluster in England, New Zealand, or somewhere you didn't expect, like Chile or Brazil, support it. Then, the cheat code—this sounds obvious. The first one is just support it. Make your product open. The one that takes work is also to localize your product earlier. Most of your engineers don't want to do this. They don't want to localize the product into Spanish and Portuguese or turn it into 30 languages. It's not a super complicated engineering task, but 95% of engineers just don't want to do it for a variety of reasons. So, you can get going in the English-speaking countries and even in Europe, but you're not going to penetrate certain areas if you don't actually localize your product. That's the second cheat code. The first one is just being welcoming to it. You don't have to go hunt customers in Japan if you have zero presence there.

Sam Parr

Have time as founders? Going to Japan is like the worst place ever to go because the culture is so different. There have been so many failures of Japanese companies wanting to come to America and vice versa because the cultures are wildly different. I actually looked at one of the ways that I research cool company ideas. I like to look at Japanese publicly traded companies. There's this one called Usabase. Have you heard of Usabase? So, Usabase is a media company in Japan. They own three products. One of them is sort of like CB Insights, and it was doing $30 to $50 million in revenue. The second one was a news app called Newspix that was doing another $30 million. Then I think they had one more thing. I remember going and trying to download their app, but it was all in Japanese, and I couldn't really figure it out. Eventually, I translated it and thought, "I'm going to make this app in America, and I'm going to do it at The Hustle." So, I built out this whole thing, and I was going to launch it and everything. However, the culture of what they were trying to do required users to leave feedback and opinions on news, which is not so common here. I remember thinking, "Why is this Japanese idea not working?" Then I realized, while reading Wikipedia or whatever, that there's a whole term to describe the failure of American companies trying to break into Japan because the culture is so different. It scared me like hell to do anything involving Asian cultures because our cultures are so different. I thought, "I can never crack that," whereas with Germany and France, it's mostly similar. But yeah, the whole Japanese thing freaks me out.

Jason Lemkin

I'll give you two examples. Salesforce had 10% of their revenue in Japan in the early days. Now, they didn't plan it; you can Google it and see what Marc Benioff said. They got dragged into Japan, some of it through partnerships and others, but my point is that it wasn't on their day zero plan. Okay, but it took off there. I was just talking with Howard Lerman, who has a new company called Rome. He founded Yext and took it up to $1 billion, and they were huge in Japan. We were discussing how he's going to approach Japan next time, but they got dragged into Japan for small businesses. So my advice is: don't show up to Japan with no traction asking for a tour of the city. But if, somehow, in your first 100 customers or first 500, you've got 5 in Japan, don't dismiss them. Don't be snarky like some folks are. Don't say it doesn't matter. In fact, say, "Oh my God, we got 5 customers from Japan in our products, not even in Japanese! We've got something good here." Let's take a pause and figure out what the heck is going on, like Salesforce did, and get 10% of our revenue from Japan. That's how you do it.

Sam Parr

Is there a sweet spot for how much you charge? I think with a lot of people starting out, like what I did, my business was two-pronged in that we had users and then we had advertisers. Our advertisers were spending six figures a year, but I had to acquire **4,000,000** subscribers in order to make it work. It was really hard.

Jason Lemkin

Acquisition

Sam Parr

Yeah, and so is there like a price where you're like, you want your average customer to be paying $50,000 a year?

Jason Lemkin

I think that pricing is over-discussed, and I'll tell you why. Most businesses have bought over 200 SaaS apps. It's too many—200 pieces of business software. We all kind of know what stuff should cost. Like, we know what Notion should cost, we know what HubSpot should cost. We're on Riverside; I know what Riverside is. What do you guys pay? $300 a month? Okay, let's say you pay $300 or $400 a month. Now, if someone else has a better version of Riverside and they want $50,000 a month, you're going to kind of balk, right? But what if someone had something that was better than Riverside and it was $30 a month? It would seem too cheap, right? So my point is there are organic price points. What you want to do is anchor around them. Go figure out the couple of products out there that are most similar to yours and charge the exact same way. Either charge the same pricing or, if you're nervous, charge a smidge lower—10% lower, 20% lower. If you charge too much lower, you're telling the market you're not as valuable as Riverside or you're not as valuable as HubSpot. Customers will bounce off you if you're too cheap. If you're too cheap, they will get confused. So anchor around the comps. If you're truly 10 times more valuable than Riverside—okay, and Riverside is very good; we're using it to record this session—if you're 10 times more valuable, maybe charge twice as much because you're telling the market, "We're 10 times more valuable than the leader." But whatever you do, founders that say, "There's no one like us, there's no comp," try harder. It doesn't have to be the same as you; it just has to feel the same. It feels a similar amount of value, a similar type of utilization. Do I use it 8 hours a day? Do I use it once a month? Do I use it as an API? Is it metered? Is it per seat? There are hundreds of apps like you, and if you price similar to similar value apps, you remove friction from the sales process. That's what you want to do until you're really big. This is why we also underprice as founders. You want to remove friction. We want every deal to close in the early days, don't we? We want every deal to close. So your job as a founder, if you want to scale, if you want to reverse engineer things, your job—because no one else in your company will do this—is every day to relentlessly remove friction from your customer acquisition process. Remove friction. People add it at scale. The classic one is "Contact me." You know, you go to a website, you're all excited to buy on your own, and then you have to talk to a rep. Well, there are a couple of reasons for that. One reason is they've gotten to $100 million in revenue, and they actually want to add friction to the sales process. But you don't want to do that until you're at tens of millions in revenue. You want to come into work every day, and if you can't do anything else for your company, remove friction. How can I make sign-up easier? How can I add single sign-on? How can I make it easier to check out from my e-commerce site? How can I make the bundle easier? How can I make support better? Remove friction. Having support that happens automatically in seconds rather than waiting 5 minutes on the dumb bubble removes friction, doesn't it? Whatever it takes, remove friction.

Sam Parr

The last you have is the most challenging. It's getting to net revenue retention of 100%.

Jason Lemkin

Yes.

Sam Parr

And we've... I don't know how you would describe yourself. I think of you as a CEO, founder type, but I think that you have an edge on sales and operations. The churn part, I think—and this may be naive—it's mostly product. Maybe it relates to who you sell to and how you position it, but it's like product. It's the hardest part. It's like figuring out how do I make something that integrates into someone's workflow? Or how do I make something that's so essential to someone's life that not only do they not want to get rid of it, but they're also going to tell their coworkers, and their coworkers are going to have to start using it? It's so freaking hard. I think it's part art, part science. But you said that you have to have a 100% net revenue retention. The good news is that a lot of the big boys sucked at first. I think Brian Halligan told me that they were churning out something like 1.5% to 10% or maybe even more per month. He was like, "It was horrible, and it took us 4 or 5 years to figure it out." But what do you have to say about churn and retention? How do you make it good?

Jason Lemkin

If you want to reverse engineer things to your advantage, you need to really, honestly have a path from a product level. This way, you can eventually get to that 100% right, and you can stage it. I don't know if HubSpot was really turning 5% or more in the early days. Let's say its revenue retention was more like 50% in the beginning.

Sam Parr

I think he told me there was like a quarter or two where it was *existential crisis* bad. It was something like that... I think they're like year four where it was like, "This is not going to work if we don't figure this out."

Jason Lemkin

Yeah, well, I know from when I talked to him, it was 75% from him to rush at like $30,000,000 in revenue, which is kind of late. They still hadn't totally figured it out until they went multi-product and a bit into the midsize of SMB. On the one hand, yeah, their VCs were critical, blah blah blah, but they did have a plan to get there. They were going a little bit upmarket—not a lot, just a little bit—into bigger small businesses and to have more than one product to add value. In fact, it's interesting. HubSpot nominally has raised prices, but the average customer today pays $11,000. The average customer two years ago paid $11,000, and the average customer four years ago paid $10,000. Okay, so what HubSpot has done, which a lot of folks don't do, is they get it wrong. This is one of the reasons HubSpot is successful: they're adding more value for the same dollar. They're adding more value each year for the same dollar. That software is supposed to be a service—SaaS, software as a service. We forgot about it in 2023. Late 2020, SaaS became "software as a rip-off." Everyone got massive price increases for no benefit. Some folks will grumble about HubSpot having raised prices, but overall, the prices haven't gone up that much. Now they have five times the amount of software that's 50 times more powerful. It's like 250 times better than when Brian started. That's what you've got to aspire to as a founder. The flip side is, if you have a high churn business—and HubSpot started there. A lot of folks start in high churn businesses. Be honest. Build a spreadsheet. I know you and I talked a little bit about this in the hustle in the early days because you had high churn as a media business. It's inherent to media; you had high subscriber churn. Okay, you were stressed about this. I actually wrongly challenged you to be less stressed because I thought you were a great founder and would figure it out. But you've got to put it in a spreadsheet and say, "Look, if you have churn north of 3% a month—3, 4, 5—and that is endemic to certain models, look what gravity does to you around when you get to double-digit millions. When you get to $10,000,000, $15,000,000, $20,000,000, usually gravity weighs you down because you're losing so many customers each month. It almost becomes impossible to replace that leaky bucket.

Sam Parr

So, we... the Hustle was a daily newsletter. We sent an email six days a week. We were at 1,700,000 subscribers. We lost 50,000 subscribers... or no, maybe it was 40,000 subscribers per month. We were adding like 4,000 a day or something like that. It was insane! Can you imagine losing 40,000 people? We were like, "How are we gonna fix this?" Eventually, we did, but I know that companies like... I don't know what the Hustle's at now. I assume they're close to 3,000,000 subscribers and the churn is really low. Morning Brew is at like 4.5 million subscribers. You wanna know all the newsletters do that people don't talk about? So, we grew organically to 100,000 subscribers. I imagine many do too. Once you do that, you do paid marketing to get to many millions. Then you get a name after four or five years, and then you quit advertising or you spend very little. You're just like, "We're just gonna stay at 3,500,000 or 3,000,000 subscribers, and we're gonna launch more newsletters." That's the name of the game. That's how you get to $100,000,000 in revenue for newsletters. It's the exact same thing as software, which is you go multi-product. But, unlike software, the churn is outrageous. Thankfully, the market size is like 30,000,000 people, but it's... it's like crazy high.

Jason Lemkin

Churn that ties to the idea of being very self-aware about this, right? And that churn... so you churned out... you had like, you're churning out... I'm getting that math wrong. I think you're churning out about 30% of your growth each month, right? In that phase, right?

Sam Parr

It was 4%, so if we sent an email to 1,000,000 people and if we had 1,000,000 subscribers in 1 month, and we sent 6 times a week times 4, that's 24 times a month. We would lose roughly 4.5% of the million, so yeah.

Jason Lemkin

That's that 3 to 5% churn we talked about, right? On the way up, it's sort of okay because the hustle's exploding and there are viral elements. It's great! But eventually, gravity... that's the thing. You have to be honest about gravity and come up with a strategy to address it, right? For small businesses, that math just... it’s, you know, and I think you would echo this: around $10,000,000 in revenue, you need so much growth to overcome that churn. You need like epic, epic growth. You can't even rely on what your gut says as a founder. So, you need double-digit growth per month. Here's the insight: you need double-digit growth per month to overcome that churn at scale. You need double-digit growth.

Sam Parr

And you need to understand which business you're in. So, you're in the conference business now. I was in the conference business, sort of. I think my conference business was doing over the handful of years, I think we probably did $3,000,000 in revenue. You're doing $30,000,000 in one year, so we're not in the same ballpark. But what I learned with the conference business is it sucks. It sucks hard. And for some reason, I still love it. Same with media—I freaking love it—but it's way harder, I think. Why are you in the conference business if you're supposed to know all of this great stuff about software? Because software seems like we all work the same amount of hours per week. It just seems like you should just start a software company. Why start a conference business where you're in kind of an uphill battle?

Jason Lemkin

It's a good question. I mean, the...

Sam Parr

Do you guys make a profit on $30,000,000?

Jason Lemkin

Yeah, we do. But we've got to... So, SaaStr Annual is our big flagship event. We get 12,000 people in the Bay Area. Now, it's every September. It costs $10,000,000 to turn the lights on. That's a stressor. It costs $10,000,000 to turn the lights on, okay? Before you make a dollar.

Sam Parr

Okay, so a **$1,000** per attendee is your cost.

Jason Lemkin

Yeah, about **$1,000** per attendee is the full, honest, fully burdened cost. We do one in Europe in June for **$35,100**. That's much cheaper; that'll be about **$300** to turn the lights on. Well, **$300** per attendee, but it's still like **$1.5 million** to **$2 million** to turn the lights on. Okay, **$2 million**, **$1.5 million**, and **$10 million**.

Sam Parr

What's the...?

Jason Lemkin

So, you've got to get over that, and then you've got to pay people, right? And then you've got other expenses. So until you cross... if it's funny, I get it, it's a terrible business. So we talk about it. I literally had a VC managing $500 million in revenue, making $1 million a year just in fees, with a good track record, call me the other day saying they wanted to build a conference business because investing is so hard.

Sam Parr

It's like, dude, you still get paid if there's a natural disaster or like a rainstorm. That was my whole thing. I'm like, dude, I've worked so hard for this freaking conference, and if it rains, attendance is down. It just sucks. Like, 1 or 2 days of some crazy weather or something can change things.

Jason Lemkin

Terrible. The reason we did it was by accident. We built this community around content, right? So we created content, and then it became a community. Yeah, we've got some newsletters and some podcasts. They're not quite at your scale, but they have some scale. Then we just did meetups, and so many people came to the meetups in the beginning. You've done them, and this is a long time ago. Like, this sounds small today, but our first meetup in 2013 had 800 people come. These were great CEOs—great CEOs, right? CEOs that now have gone public or have nine-figure businesses. They all came. I didn't know it would be a business, but I knew we had product-market fit, so I wanted to build. Then I did another meetup, and that one had 1,000 people. We had to turn people away. Then we did a one-day event just to do it. I didn't think it was a business. I outsourced the first two years. I never even looked at a financial statement. The first two years, I had a partner who kept all the profit or the revenue. I just drove the engagement, right, in the content. By the second year, we had 3,000 people, and there was demand. So the real reason I got into the business, Sam, wasn't because I wanted to. After the second year, my partner quit. He didn't want to do it anymore because it was too much work. So I quit. I had no ability to do this. I had no team, I had no blueprint, and I didn't know how the revenue or the finances worked. I had to learn from scratch for the third year. It wasn't intentional. I felt like the community wanted this—that there was organic demand. But yeah, it is a terrible business. Once it got... now you can do the math in your head, right? Once it got over $15 million in revenue, it finally generated actual profits. But that's a lot of years—not fake $15 million, not pretending you're at $15 million, not claiming revenue that's not real. But you gotta really just get over $15 million to clear the knot.

Sam Parr

But they... a lot of trade show businesses on the high end can sell for 15 times earnings. However, a lot of them can go for 8 or 10 if it's like a B2B trade show. There are a bunch of companies involved.

Jason Lemkin

A handful.

Sam Parr

Yeah, or more.

Jason Lemkin

A handful.

Sam Parr

Yeah, the best ones can go for...

Jason Lemkin

20 times

Sam Parr

If it's been around for 40 years and it's an annuity at that... And for some reason, it's always British companies. A lot of British companies buy trade shows. There's Informa, there's Euromoney, there's a bunch of them. "Would you ever sell?" Yeah, Hive bought my friend Ryan Dice's company, I believe the Traffic Summit. "What could you sell SaaStr for, and would you do it?"

Jason Lemkin

We've had two folks that have approached us to buy SaaS R over the years. I wouldn't say we've ever had a term sheet to be on the table. The learning from that is it's really been based on comps. I know we talk about EBITDA and blah, blah, blah, but it's really been based on comps, right? ShopTalk was bought for $150 million at about our size, probably under. They got a good deal. Money 2020 sold for a good deal as well; it sold for $100 million when it was only doing $10 million in revenue. But both were iconic.

Sam Parr

Dude, let's talk about that. Let's talk about the guy who started those companies in Hampton. I've got to know him. That guy is amazing! What?

Jason Lemkin

Off the charts. And then he sold another company for $30,000,000.

Sam Parr

But listen, these guys started a tech company - I believe like a payment company. They sold it to Google for $100 million. Then they went and started a conference. It kicked ass. They sold it for something like $50 or $100 million, I forget [which].

Jason Lemkin

Money: $20 for $100,000,000, and now it's doing $100,000,000.

Sam Parr

Then they did it again with Shoptalk, which is like a trade show for D2C [Direct-to-Consumer]. Now, I forgot what's the other founder's name. There's a white guy and an Indian guy. The white guy has a new one... I think it's called Health.

Jason Lemkin

I don't know... I know Anil a little bit, but yeah.

Sam Parr

"H-L-T-H" [spelled out], you gotta look at this because here's what these guys do: The website is all the same. Yeah, it's like the same avatars for... and it's like the same graphic design.

Jason Lemkin

Oh, and it just looks just like Shoptalk or Money 2020. It's the same thing again and again.

Sam Parr

They do the same thing, and he's done this like four times. I think this is their fourth time that they've created a new trade show.

Jason Lemkin

I should've known it. I see it now. Yeah.

Sam Parr

Have you... So, I think this is significantly larger than Shop Talk and Money 20. Health is like a... they do these trade shows where they get all... it's what a trade show basically is. A lot of people don't realize it's basically a marketplace that lasts for three days. You get a combination of buyers and sellers, and you hope that you create some type of transaction. What he does is he charges people. You can go for free, but you have to offer up 30 minutes of your time to be pitched, I believe, to set up a meeting. Yeah, or you could pay money to set up a meeting with a...

Jason Lemkin

Yeah, they're **$800** per **10-minute meeting** now at Shoptalk. So, I don't know what they are at Health, but they're **$800** per quick meeting.

Sam Parr

And these guys pick a variety of niches where they're like, "Alright, there's a bunch of buyers and sellers in this market." They scale up these trade shows faster than anyone I've ever seen, I think.

Jason Lemkin

It's epic.

Sam Parr

A lot of people don't know this. They run other companies. The guy I'm referring to (I'll find out his name) is also on the board of a large private equity firm. These guys are *killers*, and for some reason, they picked trade shows as their main thing, which boggled everyone's mind. It was like, "Why would a bunch of tech guys who can make their money in significantly easier ways start a freaking trade show?" They've knocked it out of the park. It's like a gem of a business to study.

Jason Lemkin

They are gems. I will say I only know Aneel a little bit, the other co-founder of these multiple companies, Money 2020 and Shoptalk. But it is interesting in terms of convergent evolution that he got into it by accident too.

Sam Parr

How so?

Jason Lemkin

They built Money 2020 to support their fintech. They didn't build Money 2020 originally to be a standalone business; they built it to support their startup. Like many of us do events to support our companies, right?

Sam Parr

Jonathan Wyner.

Jason Lemkin

Okay, I don't know. I might know the other one, and it took off. It took off money in 2020. Then Shoptalk was like a heat-seeking missile, right? They acted like it was totally tactical. They even gave up on a lot of things and just did these paid meetings. They just did it. Going back to the conversation, how do you get into something? Sometimes you plan it out on a whiteboard, and sometimes, like these guys for these events, it found them. They leaned into it and became experts. But I know... I don't know Jonathan, but I do know Anil. I remember talking with him the last time I saw him in person, and he said, "Man, this is a hard business." So you think. He built a software business, and it is hard. I would just caution folks that everything is harder than it looks to get into. There aren't a lot of shortcuts. I'm sure that HLTH is wildly successful, but you gotta be in the top 2. If you're not, you're worthless. You have no value at all. Why would you go to the fourth-tier event in an industry? In fact, most of them died in 2020. Most of the fourth-tier stuff died. It sort of stumbled around when we all worked together in the office and in the Bay Area, but most of them never came back. Only the best ones really came back after lockdown.

Sam Parr

Let me ask you one last question. You are an investor?

Jason Lemkin

You yes.

Sam Parr

So, you've raised money for your own startups, and now your latest one is bootstrapped. You're also an investor, having deployed tens or hundreds of millions of dollars into companies. I have a theory: I think that if building wealth in 5 or 10 years is your number one or number two priority for starting a company...

Jason Lemkin

Yes.

Sam Parr

You should basically raise no money or very little money, and you should not raise venture capital. Do you agree or disagree with that?

Jason Lemkin

If your goal is to get your first points on the board to make your first millions...

Sam Parr

Yeah, I think what you call it... you use the word "shekels" a lot, or "nickels" if you want to get a few nickels.

Jason Lemkin

No, your first... it's a lot. If you want to get the money to not work for "the man," where we started this conversation, listen: all this stuff is harder than it looks. It's all hard, as we know. But if you want to have an exit for **$10 million to $30 million** or **$10 million to $50 million**, which is still harder than it looks statistically, right? But north of **$10 million**, then yeah, you want to raise only a fraction of that. Don't raise that much. So, if you raise... here's a simple way to think about it: if you raise a couple million dollars, which is hard—like, it looks easy on the internet, but it's hard—if you raise a couple million dollars, you have lost no optionality. The only thing you've suffered is some dilution. After a couple million, the game changes. After a couple million, the game changes. And so, yeah, I think there's something to be said for raising nothing, but most people raise nothing because they can't raise anything. I think there's even more to be said if you can, about being "one and done," anywhere from **$500,000 to $2 million**, whatever you can close together. And you use it not to pay yourself—that's what losers do. You use it to hire a few good people to de-risk this investment, to accelerate this investment. Use it to hire a few good people and get it off the ground. Most of us need a little help. Some folks just literally can do it on their own; they're two great engineers, they don't need any help, they can go do it on their own. Most of us are not those people, especially if you're a business person. It's harder to do it on your own, right? Unless you build something on WordPress or tools, it's hard to do on your own with a little bit of money. But stop there. You not only maintain control and have less dilution, but then any exit works. Once you raise more than **$10 million**, it can be worth it. But if you raise more than **$10 million**, here's... and this goes to your...

Jason Lemkin

This people don't get this in today's world. If you raise more than $10,000,000, you're signing up for a $1,000,000,000 exit.

Sam Parr

And anything less than that is a disappointment.

Jason Lemkin

It just might not even work out. There are so many variables. You may run out of money, or you might not get people. Once you start raising $10,000,000, you get addicted to burning more money too. There are lots of issues that creep up from that. But you gotta commit to a billion dollars. If you don't see a billion dollars, if you don't feel it in your bones, then don't raise double-digit millions. Just don't do it. It's generally not worth it. Find a way to do it with less. Everyone will be chill if you raise single-digit millions or less and sell for whatever. Everyone will be chill. They're not chill once you get to the double digits. It ain't chill for a long list of reasons. People start expecting a lot, and too many folks these days think that venture capital is free, that it has no cost. The social contract between investors and founders has broken down in the last three years. It has broken down. I literally just suffered my worst investing loss ever. I'm 10x lifetime, and I suffered my worst investing loss ever—worst loss ever—$5,000,000. Not all of my capital; some of it's mine. $5,000,000 out of $200,000. Okay, so it's not gonna change the pace, but I've never lost this much money. And you know what the founder said?

Sam Parr

I tried.

Jason Lemkin

To harden my best, your money? What do you care? It's not really your money.

Sam Parr

What do you say to that?

Jason Lemkin

I could honestly say, Sam, I had to bring in a friend to deal with him. I couldn't talk to him again. I spent years of my life helping him. I helped him raise all his money. I put him in all of our SaaS events for free. I promoted him constantly for years, and then he says, "What do you care? It's not your money."

Sam Parr

I remember when I took a little bit of angel money. I remember thinking, "I am like a steward of this." I was like, "I have to die to get a return."

Jason Lemkin

That's how I felt, though. But kids don't feel that way these days.

Sam Parr

I was like, "It's my life's mission now." I have just... because to take someone's hard-earned money, I felt so much stress. I remember when I hired someone who had a kid. I was like, "Oh, I have a kid now." Then I remember feeling the stress when I took someone's money. I'm like, "This person just trusted me with $25,000. I better go hungry or die in order to get a return for them." Because if someone loses my money, I'm gonna want to beat them up, you know what I mean? It's like a big deal. This is someone's mortgage that I just took from them. I better make this get a good return. Jason, I appreciate you doing this, man. Where do people find you on Twitter? You're a Twitter guy now instead of Quora, even though you got famous on Quora.

Jason Lemkin

So, Quora was great for 5 years, and now it's nonexistent. But yeah, you can find me on Twitter at **@jasonlk**. Or honestly, if you're a business person, find me on LinkedIn.

Sam Parr

Dude, thanks for doing this. You're the man! I appreciate you, and that's the pod.