For over 30 years, XPRIZE has been the global leader in designing and executing large-scale, incentivized competitions. And through these competitions, they've accelerated solutions to some of the world's greatest challenges. such as climate change, water scarcity, and healthy aging, just to name a few. XPRIZE is a catalyst for radical breakthroughs that have impacted the lives of millions, and they're just getting started. Through the power of incentivized competition,
XPRIZE can drive scientific discovery, cutting-edge innovation, and groundbreaking solutions. The future is still ours to create. Head to XPrize.org to learn how you could help architect a future of equitable abundance. Thumbtack presents the ins and outs of caring for your home. Out. Indecision. Overthinking. Second-guessing every choice you make. In. Plans and guides that make it easy to get home projects done. Out. Beige. On Beige.
on beige. In, knowing what to do, when to do it, and who to hire. Start caring for your home with confidence. Download Thumbtack today. From the Vox Media Podcast Network, this is Channels with Peter Kafka. That's me. I'm also the chief correspondent at Business Insider, where I cover media and tech. Thank you again for all the feedback about the last stretch of shows.
I always am happy to talk to big, important people who run big companies here. But I'm also happy to talk to people who run smaller, interesting companies. Those conversations can shed light about the way the world works. And that's what we're doing here today with Tim Huleskamp, who runs 1440, which is a newsletter business.
If you're listening to this podcast, there is a good chance you know that newsletters are not a new idea. They are an old idea the media business rediscovers every few years pretty consistently. But Tim seems to have figured out a way to supersize newsletters using a combination of pretty straightforward strategy and tactics. As we discuss, he and a partner started 1440 in 2017.
Now it's a money-making business doing about $20 million a year, owned almost entirely by the founders. Want to hear more? I thought so. So here's me and Tim Heelskamp. Talking to Tim Huleskamp. He is the co-founder of 1440, a newsletter company with 4 million readers. Do I have the number right, Tim? Yep, 4 million and growing. Yep.
I met you recently, but I told you I've been seeing pitches from you guys for a long time. And the pitch was, we have a newsletter that tells you what you need to know about the day. And it's non-biased. And I thought, I've seen this pitch a lot.
before. And I kind of didn't really pay that much attention to you. I was really surprised to learn that you've built what seems like a profitable growing business at scale. And I wanted to learn more about it. So thanks for coming on. Yeah. Thanks so much for having me. Really honored to be here with you.
Like I said, the idea of a newsletter business is not a new one. I'm very old, so I can remember spending time thinking about companies like Daily Candy and Thrillist and Morning Brew more recently. There's companies that launch with newsletters and sort of aspire to build into something bigger. That's sort of the Axios or Semiform model. Tell me the origin story. Why did you guys...
Did you have a media background and why did you decide you wanted to build a newsletter business? Yeah, absolutely. So the reason why we exist is basically there's a ton of intellectually curious people in the world and they love learning, but it's not easy for them. So we're a knowledge company for the intellectually curious. And our core product is, as you mentioned, a newsletter for 4 million and growing Americans. So where did, how do we start this?
Just so we're clear, the newsletter itself is a really simple product, right? Yeah, I'll get into it. Here's a summary of what's in the news over the last day that you probably didn't read because you're not addicted to Twitter like Peter Kafka is. This is all news. Exactly. That's a good way to summarize it. Yeah. So, you know, we now have a bunch of writers and journalists from the media industry, but we started.
with me and my co-founder, not from the media industry. So I worked at a $20 billion publicly traded private equity fund. My co-founder Drew is a PhD scientist. He worked on Capitol Hill. And basically we were both intellectually curious people. We love learning and we felt like the media land.
wasn't delivering for us in two key ways. The first one was like media by design is very niche or verticalized. So you have sports and culture and technology and local, and it's getting even more niche as we get bigger. And we said like, you know, if you're intellectually
curious person like we are, or a doctor or a lawyer with not a lot of time, who brings that all together for you and gives you, you know, what's happening in the Middle East, the sports updates of the day, what's happening in Hollywood, the latest company IPO-ing, what CRISPR is. and why that matters to society. And then also fun stuff like fall foliage schedules and Michelin stars. So we felt like in a world of niche.
No one was kind of like inch deep, mile wide. I did want to just, I think I'll do this throughout the duration of our conversation or part of it. The premise that people don't have access to. to news seems wrong to me i mean there's lots of general interest ways to get news um but clearly you're finding an audience that that wasn't getting it so what do you have a sense of sort of what the media diet of of your consumers is that the that they don't
they're not consuming general interest news? Yeah. So I think they are consuming. We know they are consuming news, but I think that the way they were consuming it was very frustrating to them. So we have like a large cohort of our audience that basically used to watch TV news, right? And what they tell us over and over again is...
They would watch the news like at night. And obviously there's incentives for people to watch as long as they can because of the advertising dollars. And you might watch one of the hour long shows and like you actually don't even learn that much. And they bring on a couple, you know. people to opine on the left and the right and what everyone's thinking and they kind of yell at you yell at each other quite a bit and so that's one of our core audiences like these folks that are
They're intellectually curious. They want to learn a bunch of different things across all the different verticals. And they don't want to tune into a show for an hour long and have just beat up something for 30 minutes. So I think that's what we find interesting in our audience. That's one of our cohorts. Another cohort is a doctor that's got three kids that's reading the New England Journal of Medicine every morning and going very, very deep in his expertise.
But basically, he doesn't have time to maybe read the Wall Street Journal or know what's going on in Hollywood or know what's going on in Hollywood as well. They want to know that stuff, but they don't have time to go do it. And like what we do is we go do that work for them and we summarize it and serve it to them.
So yeah, we have different cohorts of audiences, but it's not that there isn't general news out there. I think it's our special one-two punch that we've been working on over and over again, which is again that... the comprehensive angle. So let's get you a bunch of information in one place.
where you can quickly kind of choose your own adventure. What we see over and over again is readers might come in and today they're going to click on a CRISPR 101 and then the best Airbnbs in the world and then the latest company IPO-ing. Our click date is really interesting in that the folks aren't.
clicking on the same things every day. The reader doesn't even know what they're going to get every day, but they open it kind of like with fun and fascinating knowledge and news combined, and they get to choose their own adventure. And just to... keep pushing on this i mean the only reason your company can exist is because there are other news outlets going and creating this news you summarize it you aggregate it you link back to them it's a you know that's a well-known tactic
But so people are making the news. You're saying we basically found a better delivery service for the news. Yeah, I think that's a great way to summarize it, right? We're the curatorial layer on top of the news. We love journalists. We love finding these pieces of content that are terrific and sometimes bear.
on the 50th page of Google or just don't see the light of day. We love finding those and then putting them in our newsletter and then 4 million people find them and click on them every day and we drive, in some cases, 100,000 plus clicks. to these journalists and their stories because they're not being found in the current news ecosystem.
And I mentioned Twitter, but there was a long period where people thought, oh, this is the future of news, whether it's Twitter or Facebook or some other Internet aggregator is going to pull all this stuff together and deliver it to people. Why do you think that?
isn't happening or not enough for the 4 million people who are reading what you're making. Yeah. I think there's something special when a human helps you do it. Right. So yeah, you can use a tool and use Google news and which aggregates like click data and all these things, but.
I think there's something special when a fellow smart human who's also intellectually curious, that's our entire team, not only our entire editorial team, but... our entire team like we're out there looking for fascinating things that we want to learn every day even like we use slack internally and everyone from our team might find something like wow look at this fascinating there's dick van dyke with coldplay yesterday and a video that if you haven't seen
And it's really, really awesome, right? Like a crazy video about living life to the fullest. And that got put in by, I think, someone on our sales team, if I'm not mistaken. So people want to learn these fascinating things. And we try to be that delivery mechanism for you. Yeah, so I just Googled Dick Van Dyke Coldplay because that was news to me. And sure enough, here are one, two, three, four, five outlets that Google has aggregated for me, telling me about it. Presumably there's many more.
As I scroll down, there's a lot. So there's a lot of people covering this stuff. But your argument is that unless you knew to look for it or were in some place where people are going to surface this for you, it will be news to you. Exactly. Yeah, I think that's our key point. So we have our newsletter today. I'd love to tell you more about this topics page strategy you're working on for Future Vision. But that's the whole thing. Even with our newsletter, it's basically...
you don't know you don't know you don't know or you can't find things so there's this there's this like serendipity that the humans have where they find wonderful things and um yeah like you know i told you about it so then when you went up and you went and looked at it But if someone would have led you there, would you have seen that piece of content? So we skipped ahead, but let me rewind back. So you and your partner don't have media backgrounds.
Presumably you were looking for other businesses to build. Were there other ideas you were playing with before you landed on general interest newsletter? Yeah, I mean, so I left private equity and was kind of looking around for some ideas, but really... quickly honed in on on this idea for 1440 so
And this is when? When did you guys start? This is 2017. So basically, we sent the newsletter out to 78 friends and family. Again, with that one-two punch of kind of comprehensive and then just get rid of all the extras that helped me learn efficiently. So we sent it out to 78 friends and family. We were currently doing it once a week. Unsure if anyone would even care or agree with our thesis that this needed to exist in the world.
We said basically if we didn't have a 40% open rate and a 5% weekly organic growth rate, it wasn't worth our time. One of the beauties of the... of the newsletter industry is there's tons of benchmark data so you can see how you're performing on a relative basis so we did our first edition and basically we had a 60 something percent open rate i believe it was and a 10 organic growth rate so it went from 78 over 10 from 78 to 91. And then the next week it went to 104.
And the next week it went to 120 something. So we're like, wow, people are really digging this thing. And we spent the first two to three quarters focusing on nothing else but the product, right? Just delivering a world-class product that truly helps that intellectually curious person learn. And we just iterated on it like crazy.
And basically after two or three quarters, we had, I don't know, 500 subscribers or a thousand subscribers in our 60% plus open rate, which is best in class, which we still have today, was holding. And Drew and I were like, hey guys, there's something in here.
We should keep focusing. So at that point, we basically said, how do we turn this into a viable business model? Because how do we make this a full-time job and a business for us? Exactly. Exactly. Right. So if you look at our core business, there's really three things.
it's hiring the smartest people in the world and on your team. And then it's three things, but it's basically write a wonderful newsletter that delights our customers every day, which we still do today. Now our audience, instead of being 78 friends and family is 4.1 million Americans.
They have a third of them have a graduate degree versus about 10% of the United States. They're 50-50 male-female. They're spread almost perfectly across the United States. And interestingly, they're also roughly a third Dem, a third Republican, and a third Independent. It's this large swath of Americans, doctors, bankers, lawyers, consultants that, again, like want to learn and are hungry for learning.
And that's who our audience is. But that's now. Back in 2017, 2018, when you're playing with this, are people pulling you aside and saying, hey, of all the things you guys could do to make money, media is a terrible idea. We've just gone through this.
boom-bust cycle where a bunch of people, including my former employer and my current employer, said, oh, we're going to attach ourselves to Facebook and we're going to build a giant business. We're going to raise a ton of money. Everyone has sort of rethought that. But generally, the media...
Media businesses is where money goes to die. Did anyone try to counsel you out of getting into newsletters? Oh, yeah, we got a ton of counsel on staying away from media. But I think like, again, I think what we thought, though, was.
Yeah, we hear all the counsel, but we think there's a very, very large total addressable market or TAM of these people out there that are not being served. Like it was just me and Drew at the time, but we started talking to our friends and family and getting feedback on the newsletter and we could feel that product. market fit that what we were delivering didn't exist in the media landscape. So then we just kind of kept leaning into it. And I think one of the things.
we focused on as we tried to get bigger was just keeping it very lean and mean. Given our experience in private equity, I've seen, as you said, Peter, like a lot of companies. kind of grow too big, too fast, raise very large venture rounds, hire a thousand people, fire them, you know, 10 months later. And we basically just said like, let's build this like kind of Warren Buffett would build a flywheel business model, be, you know, live within your means and just like.
optimized for kind of staying alive and not growing like really rapidly and then one day as we get bigger we'll have this advantage that we're profitable and we control our own destiny so i think that really helped quite a bit as well as we just tried to be a little bit more, maybe slow down and just really focus on the product and really nothing else.
and have a shot to build a violent business model. And flywheel business model means you make something, you earn some money from it, and then you use that money to make the business bigger. Correct. Yeah. So going back to my basic standard. Business that some people don't do for whatever reason.
Yeah, I think that's right. So going back to my three principles, right? So it's basically just the three core tenets of the flywheel model. So it's like write a wonderful newsletter every day that delights the customer. If you're not doing that, nothing else matters because you need the readers for monetization and growth.
So it's right at number one, write an incredible newsletter. Number two, you have this audience now that is, you know, a third of them have a graduate degree. They tend to be very affluent. They're actually very busy, so they don't have a lot of time to learn about new products. So believe it or not, they actually like learning about new products that we partner with.
advertising partners. So because of that, and because we're in this like true learning environment where you're learning in the newsletter, you could actually, you can monetize the product really well if you do all the work. So we saw that as well as we started partnering with you know, financial services brands and then better for you wellness products. We like to say our audience likes to be healthy, wealthy and wise. So they like to learn about those products as well.
So to your point, we were able to partner with advertisers who want to get in front of that audience. And that's two. And then three, we take a large, large majority of our revenue and reinvest it back into growth. So basically, you know, we're spending almost a million dollars a month now on paid acquisition and other paid social, Twitter, Google.
We test Pinterest, Quora, all of them to basically see what's the best, most efficient way to grow the list while also keeping in mind targeting the right audience and then also audience quality, i.e. are they opening the newsletter every day? Are they retaining? Because... This whole business model breaks down if you don't retain the user for multiple.
you know, multiple quarters, if not years. You keep getting ahead of me because I wanted to ask you about how you're finding new customers. And you just said we're spending a million dollars a month, you said, on paid acquisition. That's mostly ads. Are you buying lists?
We never buy lists. If anyone's doing that, they should stop immediately. That's a terrible, terrible strategy. Just FYI. Isn't that a sort of a standard newsletter? No, no. I think for the ones that didn't make it, they were doing that. It's really bad. You'd never want to do that. And why is that bad?
The spam companies actually put bad emails in those lists and then they look for them who's buying them. So you just never want to do that. Also think about it, right? At the end of the day, this is all about delighting the customer and making someone's life. life better, which is what businesses are supposed to be about. And if you just buy a list and send them some random email and expect them to open it, like, is that going to be a good
good experience. We know that in the past you have opened another email, so we're going to send you an email, but an email is not a product. It's just a thing. Exactly. You got to earn the relationship, right? And like address their problem.
and get in front of them the right way. Like that doesn't, that doesn't work out well. So if anyone's buying lists, they should stop doing that immediately. And there's a lot, I'd be happy to opine later. There's a ton of research on why you should not do that from a spam perspective and get put in the penalty box. Well, you guys can email Tim on your own or not.
asking about that. But I do want to ask where that million dollars a month is going. First of all, it means you're making a million dollars at least, right? Yeah, well over that. So we have 19 employees and we do over a million in revenue per employee.
So we take a lot. Even I can do that, Matt. That's a $20 million a year business. I mean, it's growing every year. So, yeah, right now we're over that number you just mentioned. And, you know, hopefully we'll be higher next year. And but yeah, we do is so we take a large majority of our.
revenue and then reinvest it back into growth. So it's just under a million bucks a month now. But yeah, we're looking at what's the most efficient way to grow. So if you look at our list, we're adding about 250 000 new subscribers per month and roughly a third of them are kind of word of mouth organic seo referral e and then the second half is paid paid acquisition so we have an incredible team
growth team, best in the business that basically goes out and spends our budget the best way we can. Usually about half of that is on Facebook and Instagram. It floats every month where we're seeing the best returns. Like as an example, right now, given the holiday season. Facebook CPMs really start to rise as all the brands come in and try to spend for the holiday season. So you actually see lower returns on the big networks. But we're constantly looking at Facebook and Instagram, IE Meta.
We spend on Google. We spend on other newsletters. Actually, if there was only one channel to spend on, it would actually be other newsletters because those folks already like newsletters. They're opening them and their lifetime value, i.e. like how many times.
they open and engage with emails in the future, it's actually much higher in an email. Same reason podcasts advertise on other people's podcasts, right? Because you know you're inclined to do it. But just again, to rewind, you said about half of your million. Half of your paid spend is going to Meta products, basically, and then another significant chunk to Google? Yeah, half-ish to Meta, depending on the month. And then, yeah, Google.
We used to be, and then we test Pinterest and Quora and all these other ones, but, and then about a third of it, call it, it depends on the month, is other newsletters as well. So when people, this is just a good illustration sort of when people talk about the duopoly and they're talking about meta and Google usually, right? Sucking up all the ad dollars. The reason you're doing it is not just because they're big, it's because they're effective. You're able...
What makes them effective for you? Yeah, I mean, so as a small and growing business owner that has access to both Facebook and Google, it's really remarkable. And I think actually this is one of the... the pressures you're seeing that are lowering kind of advertising rates maybe across the whole industry just because Facebook and Google can get so efficient.
And they keep getting more efficient as they learn your audience better. So basically, what do we mean by that? We target that intellectually curious person that wants to learn.
And there's a lot of those folks in America. We think it's over 100 million. And I think it's something like 75% of all Americans are on Facebook or Instagram, which Meta targets. It sounds like I'm doing an ad for Meta here. I'm really not. But it's an amazing... platform where because of their machine learning, they can rapidly test ads so quickly and it'll automatically push your budgets to the best performing.
creative so you know just from a from a small business perspective like we can we can be we i think last quarter we tested something like 1500 different variants of our creative And like some of that is our doing and some of that's the algorithm doing as well. Changing words, changing, you know, the button sign up now or join free. But every day or every week, maybe like their algorithm gets smarter and it learns more about.
the audience like look-alike audiences like what's out there and then also what your copy is that's resonating with them so over time the machine learning just gets smarter and smarter and it allows you to reach new audiences and lower your cost per acquisition. So they make it very, very easy on companies to basically say, here's my...
For some companies, it's their entire budgets. They do Facebook, meta, nothing else. On the back end, as a business enthusiast, it's truly amazing what they've done in the last few years to build this system that...
I think it's 8 million small businesses or businesses are on Facebook. And, you know, that's why they do... so much revenue it's just amazing uh that was always the pitch of facebook and google for different reasons they know a lot about people on the internet um and they can target those people and be much more efficient and they've got giant scale right
Curious, a couple of years ago, anyone who's in ad tech knows about this. Apple changed the way targeting works on the Internet. For a while, it really seemed to hammer the Facebook meta advertising.
operation. They had a huge stock drop, but you are now continuing to plow a lot of money into them. So it's working. Were you there when they had their problems? I guess you would have been, right? It was a couple of years ago. Yeah, we were there. So we actually saw similar to what everyone else saw. which was essentially when the cookie got turned off, the targeting got turned off for lots of users as well. And I don't know exactly what happened, but...
Once that happened, it was about three years ago in the summer, our CPAs over the next quarter kind of doubled. That's cost per acquisition. I'm sorry. Yep. Cost per acquisition, cost per acquiring a new subscriber. So we saw them double. And from what we heard at the time talking to a bunch of advertising agencies like, you know, Facebook meta growth advertising agencies was that.
The brands were still investing, but they weren't getting the same returns because the targeting wasn't as strong, but they didn't have anywhere else to place the money. So they just kept putting the money in. And then because of that, the supply supply demand dynamics, excuse me. The CPMs shot up, but again, they needed the customers, so they just kept doing it. So we saw similar things where our CPMs about doubled and then our cost per acquisitions about doubled on Facebook as well.
That part makes sense to me, right? Facebook remains really big. It's now less efficient, but you need to continue to advertise there because they can reach your customers. So you pony up and you spend there. But there was a period where Meta was saying, no, no, our ad dollars are good.
We've lost ad dollars, or however they phrased it. And what I couldn't understand there, and I was thinking about companies like yours, is you need to grow. The fact that your marketing costs are now more expensive doesn't... reduce your need to grow what what am i missing there did did you pull back money from meta and spend it somewhere else or or did you just bite the bullet and say all right it now costs x amount more than it used to
No, as I said earlier, we just reallocated it to other better performing channels. So for us, we reduced our meta spend and pushed it over to newsletter spend. Okay, so you did move it around. Yep. Yeah. I mean, we're looking at it literally every week, sometimes daily, like where are the best returns? You can see it's really fascinating. So our business model.
Tell me if this is too detailed, but I can cut it down. But if you think about it at a very simple level, we send out about 25 emails a month and we have a 60% plus open rate. So the average person opens about 15 emails a month. And then when you do the CPM math, we can do like the big numbers, but to break it down simply, we basically make about a nickel every time someone opens an email from us, right? So if 15 opens at five cents is about 75 cents a user per month.
So that's our lifetime value per user. And then it's, as I said earlier, it's all about keeping them around forever. We have some cohorts from 2018 that I think 30, 40% of them are still with us because they love our product. And we've been making a nickel off them for five or six years. We'll be right back with Tim Heelskamp. First, a word from a sponsor.
but opportunities. As artificial intelligence powers pivotal moments of change, Alex Partners is the consulting firm chief executives can rely on. Alex Partners is dedicated to making sure your company knows what really matters when it comes to AI. their 2024 tech sector report, Alex Partners spoke with nearly 350 tech executives from across North America and Europe to dig deeper into how tech companies are responding to these changing headwinds.
And in their 2024 Digital Disruption Report, Alex Partners found that 88% of executives report seeing potential for growth from digital disruption, with 37% seeing significant or even extremely high positive impact on revenue. growth. That's www.alixpartners.com. V-O-X. In the face of disruption, businesses trust Alex Partners to get straight to the point and deliver results when it really matters.
How do custom orders work on Kraken? Imagine I'm a music producer, dialing in my newest track. Need more bass? Crank it. Vocals not popping? Double it up. Want a bigger sound? Hit that reverb. Hard. That's custom orders on Kraken. Complete control over your crypto trades. Go to kraken.com and see what crypto can be. Don't invest unless you're prepared to lose all the money you invest. This is a high-risk investment, and you should not expect to be protected if something goes wrong.
With an Intel AI PC, AI assistance helps you save time. With AI-powered text-to-image tools, you can unleash your creativity with fewer clicks. Or let AI draft your emails. It's possible on an Intel AI PC. Additional purchase may be required. Learn more at intel.co.uk slash AI PC. So you have this, what sounds like very simple, very efficient business, but it can't be that simple. Otherwise, everyone would be doing it. So what am I missing?
Yeah, I don't think it's, I think it's simple in like by design, like in IE, like we focus on things and try to keep things simple, but also like, I mean, we have the best product in the space. If you look at the data, we have a 60. sometimes 5% open rate. And I think we work harder and delight our users better than anyone. And basically, if you really break down why businesses win, it's that.
Not only on the reader side, but on the advertiser side as well, right? So like if we want to win here, all those dynamics I just mentioned with Facebook and Google, like we're on the other side of that too, right? Because we partner with brands that are looking to get the word out in front of folks.
if it's very easy for us to give almost all of our budget to Mark Zuckerberg, it's very easy for them to do the same thing. So we have to constantly be thinking about how can we be delivering returns. for our advertising partners. Otherwise, they have a lot of places, i.e. what we just discussed, to just push their budget in the middle, right? So I think we're constantly testing on the reader side.
delighting the user? How do we come up with the best content in the world? How do we summarize it so it's helpful for them? How do we give them fascinating items? Like I said, fall foliage schedules in addition to what's happening in the Middle East. And then the advertising side, it's like, you know, you got to work every day to make sure that you're delivering. clicks and conversions and awareness and brand advertising to your partners. Otherwise, they're just going to leave.
We have a very sophisticated backend team. It might look simple from the outside because we only have one product, but we're constantly doing the work to optimize. on the back end for our revenue partners as well. Do you ever hear from the media companies you're aggregating from saying, wait a minute, we should be in the business of this, whether it's the New York Times or the Chicago Tribune or the Associated Press or anywhere that you're...
finding information and aggregating it and summarizing it and telling your readers about it. Do you ever hear from your media partners slash sources say, wait a minute. This should be our business, not yours. Yeah, so we hear from them all the time, especially when we tend to like break their websites. So it happened a couple of weeks ago. We sent a link and it drove over 100,000 clicks to them and they thought it was a spot, like a spot, or excuse me, a spam.
bot so then they'll be like oh wow what is this 1440 thing like i want more traffic can you guys help me so we now have a a program where all the big publishers come to us and they we want we want their best content right because again like it helps them It helps our readers. It helps everyone. So now they're coming to us.
sometimes on a weekly basis and saying like, hey, we love these pieces of content we created. They did really well for us internally. We think your readers would really love them. Could you take a closer look at them? So that actually helps.
everyone right helps the we get more traffic and revenue to our to our oh yeah yeah yeah no just wondering i mean it just seems like the you know i'm not i'm not damning it with fame praise when i say it's a simple product right just seems like it's a product you got into it with no experience you figured out how to do
do it. It seems like other people could make the same thing. I think that's fair. Maybe it doesn't make sense for them because they have different business priorities. And it seems like... the people who are going to make this product one way or another are the AI companies because AI is good at some things, bad at other things. The one thing that seems consistently good at today is...
Taking a fixed data set, i.e. an article in this case, and summarizing it more or less correctly, it seems like that is the thing that you guys either are competing against right now or will be any minute now. Yep. I think that's fair. We think about that a lot is basically, it might sound kind of crazy that a newsletter thinks that, but yeah, we think our...
competitive set in the near future is the open AIs, the Geminis, the perplexities of the world. To your point, so one secret that we've learned is if you think about kind of, again, like going back to the intellectually curious reader that loves to learn.
When they go, they're very frustrated with the learning experience. We hear this over and over again, right? So as some examples, they might go to Google and search for something and they get like an clickbait article. It's SEO optimized that again, doesn't really help them learn. Then we find they go to YouTube to look for a video and like.
to learn on it. And there's some really cool stuff on there. There's also some crazy stuff on there. There's also videos that don't help you and they're just beating their heads against the wall trying to find it. Right. So like that, that audience, that curious person that's trying to learn, that's who we serve. So what we like to think is kind of the old way.
of doing it was, and by old way, I mean up until like a couple months ago, was you would go on the internet, you would search, a bunch of links would come back and you'd have to click through all the links. To your point, I think what we're seeing is the AI companies.
are realizing that folks just want the insights for the answers. So this is what perplexity does so well, what OpenAI does so well. You no longer have to click on something. It just gives you the answer right there. I think I saw recently...
Gemini is up to now 25%, Google's Gemini is up to 25% of their searches just provide the answer for you, right? So they just tell you what it is rather than having you to go for the clip. So I think they're facing the... the pressure from OpenAI and I'm speculating here, but they're facing pressure from OpenAI and these tools and they're like, we should just be doing that same thing, which is provide the answer, which is very helpful to the user.
But we think it's missing one thing, which we try to lean into. And this is what we're trying to do with our new topics product, which is basically there's a step further that we're building for, which we think is going to be the next wave. So there was search. Now there's answers. And we think there's this like knowledge component, which is basically.
If you think about when you want to learn deeply about a topic, so we see these over and over again from our readers, you know, what's the gut microbiome? What's Burning Man? What's inflation? People want to learn about these things and they're not experts in those spaces. Like that's what our audience is, right? They're doctors, but they're not experts in venture capital, but they want to learn about venture capital. How we see it playing out is basically.
Yes, answers are very helpful. If you have an OpenAI feed or perplexity feed and you type in, what is venture capital? It'll give you some wonderful answers where you can kind of learn about it, but it doesn't step back and help you truly understand and contextualize the importance of venture capital like a human can. And that's what we're trying to lean into. So some examples there. So our page, you go into, and rather than typing in what is venture capital, on our page, what we do is...
here's a quick definition of venture capital. And then here, after we talk to experts in the space, After we go search the entire internet and go down all the rabbit holes and find the best articles and best answers, we synthesize all that data for you, all those insights for you and say, here's some big takeaways that if you're learning about venture capital, that you should know.
So as an example, what is carried interest? And you might hear this concept, two and 20, the management fees and the carried interest. What is that? How are venture capitalists paid? And how does the math work? And again, your premise is I could get all this through Google. I could get all through an AI engine. The pressure is on you to deliver some version made, at least in part with humans, that is better than those results.
Correct. And also, it's not only better, but just the AI only gives you the answers to the questions you ask it. So that's the thing we find over and over again is... People don't know what they don't know, and they need a guide to help them learn the knowledge topic. So that's part of it is basically contextualizing it and making it easier to understand. And then another part of it is, you know, it's getting better, but AI still hallucinates.
And also we say like, you know, it lacks serendipity. So for instance, when you're reading about, when you're learning about venture capital, a human does that work and talks to experts, is reading all these resources.
And they come across things like, you know, carried interest in what I just mentioned, but they also might be like, what was the first venture capital investment? Or like, you know, which was essentially whaling in Nantucket in the 1600s, or actually Queen Isabella in 1492 in Spain is like arguably the first venture capital.
An open AI engine isn't or an engine of that isn't coming up with that answer for you. So it's like that connective tissue that we think humans have that serendipity. What's the Midas? This Midas list keeps coming up. What is that? Oh, it's the best 100 venture capitalists in America. Who are they? I want to go learn about them. Who is Marc Andreessen? Oh, okay. You can go down these rabbit holes and learn things.
That again, if you have a human guide helping you there, it makes it much easier on you. And not only easier on you, it's just a better learning experience. We'll be right back with Tim Heelskamp. First, a word from a sponsor. Adobe Express makes it quick and easy to create everything I need for my business. From social posts to TikToks and flyers, all in just a few clicks. Get Adobe Express for free. Search for Adobe Express to find out more.
Once upon a time, some early modern humans and some Neanderthals met up and had sex. We know this because some of us have 2% Neanderthal DNA. But we don't know exactly when or how it happened. There isn't just like a deer diary. Yeah, deer diary. Met Og today. Slightly shorter, but you love a short king. This week on Unexplainable, the search for Og. Follow Unexplainable for new episodes every Wednesday.
Support for the show comes from New York Magazine's The Strategist. The Strategist helps people who want to shop the internet smartly. Its editors are reporters, testers, and obsessives. You can think of them as your shopaholic friends who care equally about... And their new feature, the Gift Scout, takes the best of their reporting and recommendations and uses it to surface gifts for the most hard-to-shop-for people on your list. All you have to do is type in a description.
of that person. Like your parent who swears they don't want anything. Or your brother-in-law who's a tech junkie. Or your niece with a sweet tooth. And the Gift Scout will scan through all of the products they've written about and come up with some relevant suggestions. The more specific you make your requests the better.
Even down to the age range, every single product you'll see is something they've written about. So you can be confident that your gift has a strategist seal of approval. Visit thestrategist.com slash gift scout to try it out yourself.
So when we met, you said, I want to show you one of these topic pages or topic letters. And you sent it to me and I clicked on it. And it sends me to a web page. Whereas your core product is a newsletter. I read it in my email newsreader. I'm assuming that's a very intentional. decision on your part to build a web business am I do I have that right um yeah I mean we're still in like the learning phases but yeah we think that
Eventually, we'll move it over to different mediums, but we think the web page is the best way to experiment and be learning right now. And is that because you want to build a web advertising business? That seems way more difficult and less efficient than the newsletter business you have. Yeah. So, I mean, I think what it is, is the newsletter is incredible. And if you want five minutes of knowledge, efficient, efficiently delivered to you.
and summarized and like newsletters are amazing medium but you can't really go deep down a rabbit hole on a newsletter right because it's fixed and it's static where with a web experience you can be exploring you can choose your own adventure We have dozens and dozens of links from MIT and Harvard and all the best journalists out there. So it just doesn't allow you to choose your own adventure. So we think. a web experience optimizes for that journey for the reader.
Where does all this go? How do you expand? And then what do you think your mode is? Because again, I'm not the first media person you've talked to. You've been telling this story about hyper-efficient, million dollars per employee business. It seems like a lot of folks would want to come in and do 1450 news or whatever version of that. So how do you protect yourself from the competition and where do you build up? Yeah, I mean, I think.
from protecting ourselves from the competition, the only thing we can do there is continue to think about how we delight our customers every day. So yeah, other folks can come in, but as long as we're serving our customer better than anyone, that kind of doesn't matter.
That's what we're focusing on is just how do you delight the customer over and over again. And like, yeah, this whole concept that we came up with for this, you know, we're calling it topics is because of user feedback. So actually, if you respond to any. email we sent out it still comes to my inbox. So we're constantly asking our readers for feedback and for how we can make their lives easier and how we can help that intellectually curious person learn more efficiently.
And this idea actually came from thousands and thousands of pieces of feedback that we're receiving from our readers. So they kept on telling us, I love how you... every day, summarize what's going on in the world across all these different verticals. And I can be smart and I can choose my own adventure. However, when I want to learn about these topics that you cover in the newsletter, I have that same pain I had before I read 1440, which is...
I've already said this earlier, but I go to Google and there's SEO and I go to YouTube and there's too much stuff going on and I'm a busy doctor with three kids and I want to learn about this thing and I don't have time for that. Can someone help me? So this product came from our readers.
essentially begging for it and saying, like, I have this pain. Can you help me solve it? And what we've learned from private equity and studying under founders is if you can deliver for your customers over and over again and delight them. usually competition doesn't always matter so like that's how we're thinking about it like obviously we mentioned some pretty
There's a million restaurants in the world. The restaurants that do really well serve good food at prices people can afford. Exactly. Exactly. So that's what we're focused on. And then also because we're lean and mean and very profitable, we can make a lot of mistakes, so to speak, and still recover from them. because we have those profits behind us as well. So yeah, I mean, long way to go and this might be all wrong and maybe we're not going the right direction, but...
I really think just hearing from our readers over and over again, if we can deliver this experience for them, which is, again, helping them understand these topics and go deeper on them. And some people just want the two minute summary of what venture capital is.
And they're like, cool, I'm done. I learned it. I don't really need to learn about that. But a lot of people, once you have them in that learning mindset, when they're fascinated and captivated, they want to go down the rabbit hole, but they don't want to go down inefficiently. So again, like what we do and our wonderful team does is they're down right now on the Internet going through the combing through it, looking for all these wonderful pieces that are so incredible.
but they tend to be on the 68th page of Google and no one ever finds them. So that's the thing is like we view ourselves as that connective tissue. There's this wonderful content produced by wonderful journalists that should be seeing the light of day.
But the way the internet and media works is it just, no one can find it. So we're trying to be that connective tissue knowledge, intellectually curious knowledge seeker and the best piece of content on the web. And we're trying to put them together. We touched on this, I think, briefly, but I want to spell it out. Did you guys ever raise a round? Did you get outside investment?
So we did like a, if anyone's seen Shark Tank, Mr. Wonderful, we did not do Shark Tank. We probably should have, but Mr. Wonderful does like this royalty-based financing. So we did a similar- And the other sharks ever say, never do that. It's a terrible deal.
Yeah, exactly. So we did a similar version to that where essentially, actually from my old colleagues' bosses in the private equity world. So that was a nice advantage we had. But yeah, we did a... essentially a royalty-based deal which gave us more flexibility in terms of uh not allowed us to not have you know
not give away the farm, so to speak, but give away a lot of, be a dilutive of that, but also it allowed our investors to see some returns earlier on. So they got a percentage of our revenues until it got paid back. And that wasn't because- If you think back, I've experienced in the venture capital private equity world, but at the time when we went out to raise and tried to grow the company, we had our unit economics figured out.
50,000 to 75,000 readers at that time. We could prove the unit economics, i.e. the cost per acquisition, the lifetime value of the customer divided by the cost per acquisition of the customer. So we had all that and we had the story, but I think what we heard over and over again was... newsletters aren't a venture scale business, which I think they were a little wrong on. It's not a surprise to me because a lot of venture guys are looking for...
you know, billion dollar, $10 billion companies are unicorn hunting. So if you come to them with like a very clear business model, they're like, yeah, I love it. I can get maybe 10. That's not a venture business. That's a lifestyle business. Yeah, exactly. But I mean, I think. I think a lot of folks are proving them wrong now. You had Axios.
exit at 525 million. You had Politico exit at a billion. You had Industry Dive go out. I think it's 389 up front with 525 million with their earn out. So you're seeing some large companies being created in this space. So I think they might have been a little bit wrong about the total market size of these things. But in the meantime, if I understand your story correctly, you took some money, but you've paid those investors out. So you and your partner own this thing free and clear?
uh so they they got a little bit of the the company like a small percentage of it for upside and then we also have everyone in our company has a slice of equity as well we think that's really important learn that in private equity so we're all rowing in the same direction and also everyone can get
You know, when we succeed, we all succeed. To summarize it 1440 style, you've built a big, fast-growing, profitable business with minimal outside investment, and you and your partner own the majority of it. That's correct. That's a great position to be in. Thank you. Yeah, we worked really hard and it took a long time to get there. And I think...
Warren Buffett or actually I think it's Einstein and then Warren Buffett quotes him and then every venture capitalist quotes them. Compounding interest is the eighth wonder of the world. We set up our our flywheel business model very early on and when it was just compounding and we took again most of our revenue we kept the business very lean and mean and allowed it to to compound so you know six five years ago we were adding 10 or 20 000 subscribers and every month as our revenues grow
we see that number that we can invest grow and now we're adding you know almost 300 000 new subscribers a month yeah i'm talking to you you're in chicago not a ton of big media companies or even internet media companies out of Chicago. The last big internet media sensation, remember, was Groupon. It was quite some time ago. Any advantages, disadvantages to working out in the middle of the country instead of one of the coasts? I think, you know, just early on we leaned into the whole...
We're a distributed workforce. So our team, our incredibly talented team is all over the country. We have a few people in Chicago, but they're in Boston, New York, Austin, Charleston, just all across the country. So I think... What we did there is like, this is the talent wars, right? And you have to like, how do you acquire the best talent in the world? And I think like when COVID was happening, we realized that.
If you aren't in one market, it opens up your TAM on your talent exponentially. So Chicago is something like... Three percent of the Chicago MSA is about three percent of the United States. Like, you know, now we have 100 percent of the United States. We can go get the best talent from all over the world. It's folks that want it, want that invite, that lifestyle that we provide. Right. So we try to basically.
We have a lot of folks that are kind of like, you know, 30 years old, a ton of media experience. They have two kids and they don't want to go into an office every day and waste two hours on a train and they want the flexibility. So that's like been our. playbook and we go fire hire those people excuse me and um just try to delight them every day and you know just make them make it the best place in the world to work at we've had
Everyone has equity in the company. We pay well above market salaries. We try to not ever bug anyone on the weekends ever. We want people to kind of go hard from nine to five and then hang it up so they can be great parents.
to explore their passions and then also like we try to have you know the best benefits package in the world work really hard at this every day we just we just launched a new one with um a body scan you know like a preventative body scan and we have a 529 plan for your kids so we want to invest in them just you know we started i worked in investment banking right out of college
And I literally slept under my desk. It was crazy, right? That's how you knew you were doing a good job if you didn't have a life. Yeah, and I'm grateful for the experience. The two years allowed me to get into private equity and see a bunch of cool things. I mean, they didn't even, you know, the concept of benefits and work-life balance, it just didn't exist, right?
What we said is as I was watching this company scale, I was like, you know, if I was ever part of a company that could make decisions on how people are treated, I wanted to lean into a place that. really treated people like royalty. And I think like, you know, if you do that and you make it a great place to work and you're also working on a big vision and something ambitious, that attracts really talented people. And if you treat them well and pay them well.
Good things happen. And I think that's one of the things like, yeah, we can talk about competition and I know that we're competing against, we're trying to go compete against literally the best. most well-capitalized companies with the biggest talent ever as we go into this topic. Yeah, and you're competing against robots that don't need to sleep under their desk or anywhere else.
Correct, but you can also feel that lack of love in the product, right? And that's what I'm saying. It's like when you have really talented people that really love what they do, you can feel the love in the product. And maybe you can't point to the number on a spreadsheet. But that's those intangibles that make, excuse me, make products addicting. And that's why we have a world-class retention rate as well. That's why people...
write in every day and say, thank you so much for making this a wonderful, joyous experience where I'm learning and fascinated every day. Tim Heelskamp, thank you for coming on this show and teaching me about your business. I appreciate it. Thank you, Peter, so much for the opportunity. Thanks again to Tim Huleskamp. Thanks again to Jelani Carter, who produces and edits this show. Thanks to our advertisers who bring it to you for free. Thanks to you guys for listening. We'll see you next week.
How do custom orders work on Kraken? Imagine I'm a music producer, dialing in my newest track. Need more bass? Crank it. Vocals not popping? Double it up. Want a bigger sound? Hit that reverb. Hard. That's custom orders on Kraken. Complete control over your crypto trades. Go to kraken.com and see what crypto can be. Don't invest unless you're prepared to lose all the money you invest. This is a high-risk investment, and you should not expect to be protected if something goes wrong.