Nathan Latka (@NathanLatka) believes we've entered a new world where the most scarce thing any founder can compete for is not funding, but people's attention. So after selling his first business in 2015, Nathan made a surprising pivot from SaaS and started… a podcast. Then he wrote a book. And launched a magazine. In his eyes, nobody should be building SaaS products until they've built a media brand. In this episode, Nathan and I discuss how he's built up an audience, his tactics for earning millions of dollars in sponsorship revenue, and how he's capitalizing on the attention he's earned with his new product Founderpath.
Founderpath – Nathan's business to help get SaaS founders funding
@NathanLatka – follow Nathan on Twitter
The TOP Podcast – Nathan's podcast with over 3000 episodes
LATKA SaaS Database – Nathan's database of SaaS metrics sourced from his podcast
Latka SaaS Magazine – Nathan's magazine, "the most expensive magazine in the world"
What’s up everybody? This is Courtland from IndieHackers.com and you’re listening to the Indie Hackers podcast. On this show I talk to the founders of profitable internet businesses, and I try to get a sense of what it’s like to be in their shoes. How did they get to where they are today?
How did they make decisions, both at their companies and in their personal lives, and what, exactly, makes their businesses tick? And the goal here as always is so that the rest of us can learn from their examples and go on to build our own profitable internet businesses.
If you’ve been enjoying the podcast and you want an easy way to support it, you should leave a review on Apple podcasts. The easiest way to do that, if you’re on a Mac is to go to IndieHackers.com/review. Today, I’m talking to Nathan Latka. Nathan’s a polarizing figure to say the least, and he’s a really tough guy to describe. He runs multiple businesses that have done millions of revenue.
And I think I would describe him as an Indie Hacker with an emphasis on the word Hacker. It always feels like Nathan is hacking systems to figure out how to get things cheaper, faster, easier, and more exclusively than he really has any right to do.
It’s fascinating just looking at the way that Nathan approaches problems, because he just figures out how to get the most bang for his buck in pretty much every situation. Nathan is also a strong believer in media first. Distribution first. He believes you should build out an audience and build out a channel to reach that audience before you build your product. I think there’s a lot to learn from this approach, so enjoy Nathan’s story.
(end of intro) You’ve got a lot going on right now. You’ve got a podcast with millions of downloads. You’ve got a magazine that you’re publishing. You’ve got your subscription business, Founderpath, and a bunch of other products that you’ve leased (ph) in the past. And you’ve made a ton of money doing all this stuff and generated your fair share of controversy at the same time.
So I guess right from the top, why do any of this? Why not just go get a normal job somewhere like a normal person?
I would just be very bored, I think, right. My first job was at Target during high school. I would work as much as I can over the weekends. I just remember, I’d get so bored. So my supervisor came over and said, “Nathan, one of the things that I really need to do, and our boss is pushing down on us as we need to sell more Target credit cards.
So if you can start figuring out ways to up-sell these Target credit cards, when people are checking out like their candy and their gum and their milk, that’s something fun for you to do,” but I still even got bored with that.
So the answer to that question is I really enjoy deconstructing how things work then trying to replicate it, then trying to improve it, and with that improvement typically comes opportunities to generate cash and build a real business.
How much does the generating cash factor into the motivation side of things? I mean, if you get a normal job, there’s usually an upside to how much money you can make. As an entrepreneur there really is no upside. The sky’s the limit. How much does that factor into your motivation?
Well, I mean, sometimes I’ll sit down, like you read these posts on Bezos right now on Twitter, about, he’s making a billion per minute, which divided by X equals 7,000 million years on earth no one would ever catch up with them.
The money question to me, it truly is a measuring stick. I think as a founder, and this is what I’m trying to get at when I interview my founders on my podcast, too, is I try and decode their first big cash moment in life, right?
For me, many people think my first big cash moment in life was in 2015 when I sold the Heyo. What most people don’t realize is I sold Heyo for a loss. We had raised two and half million bucks.
That company hit – we had 5 million total sales over four and a half, five years. The highest run rate we ever reached was about one and a half million. We had, and this is on page 243 in my book. I just put the LOI in there from iContact.
When I was 21, they offered to buy the company for 7.5 million bucks, Courtland. And I thought I was the crap. I thought I was a stud. I still do by the way, but maybe it’s a little toned down now, but I said no. And our board said, no because I had raised VC. They wanted me to go for a billion-dollar exit. And that was one of the biggest mistakes in my life.
So the point is we sold for way less than 7.5 million in 2016. I didn’t make money on that. My actually first big cash moment was the salary I paid myself from my dorm room, both pre-raising capital. So we grew to about 60 grand a month in revenue before we raised capital. I was making and paying myself like 10, 15 grand a month in a dorm room as a college kid.
I saved up a ton of money. My early cash moment was actually an accumulation of salary over three to four years between ages 19 and 24 where my expenses were very low relative to the salary I paid myself from my own company. Bringing all that back to your question about what’s enough money. For me, it’s really, truly a measuring stick and I’m very competitive. So it’s points for me.
Right now you’ve got, I think at least three major sources of revenue: your podcast, which I mentioned, your subscription database and now Founderpath. Which one of those is making the most money?
Let me sort of break down how we make money on all those things in order, sequential. So 2015, I sold Heyo.com. That was my first SaaS company. Understood, learned everything about SaaS there. I then launched the podcast in 2015. I didn’t know what to name it so I Google searched the word – you ever use Keyword Explorer, Courtland?
So back in 2015, I typed in podcast just to see what the most search term related to podcast was. And it was, “What’s the top podcast?” So I said, “Heck, I’ll just name my podcast, The Top Podcast and get all this free SEO juice.”
So that’s what we named the podcast and quickly what happened was I had people asking to sponsor, I just put the email in the meta description on iTunes and people would start reaching out, but it was like nothing.
It was like a hundred bucks an episode. I’m like, this isn’t even worth recording 60 second mid roll. What I realized is a lot of these sponsors reaching out, asking to sponsor would anchor to CPM, which essentially cost per thousand downloads. I realized to make a million dollars via podcast you would have to have serial like numbers 40, 50, a hundred million downloads a year if you were going to price on a CPM model.
So what I started doing is when sponsors reached out, I said, “What is your current CAC, customer acquisition cost, on other channels you’re spending money on?” And then I told them if I thought I could beat it or not. So I anchored to what their CAC was on their other channels versus CPM.
And that’s how we grew the podcast where, last year, I’m trying to remember what my tax folks sent me. But last year we did over $700,000 in sponsor revenue directly from the podcast. Our largest sponsor pays six figures a year and all sponsors start out on our test, which is a $5,000 a month for a three-month test.
So 15 grand paid up front. And if that goes well, they typically then extend to a year. So that’s how the podcast started. I’ll pause there before I go into the other two revenue streams.
I think first of all, it’s a pretty fascinating transition to go from having this venture funded business that now you’re in talks to sell for millions of dollars. Then after that’s done, decide to start a podcast, especially knowing the podcast, didn’t really make that much money on a CPM basis at least, and you’d have to innovate.
It probably wasn’t obvious to you right at the beginning. “Okay, how am I going to make this make a ton of money?” Why go into the meeting industry? Why start a podcast instead of starting another SaaS company?
My bigger belief back in 2015 was that distribution was more important than product. When I was growing Heyo as founder, one of things I spent so much time on was trying to convince people with distribution channels to talk about Heyo. Whether that was convincing a big blog that wrote a post about the space to put our link in the top header so we get backlinks or convincing an affiliate that a 30% cut during first year revenue was better than 10% in perpetuity.
Or scanning YouTube I would type in the word webinar plus the competitor name and then all the webinar recordings they did with other affiliate partners would show up on YouTube and then I would go hunt all those other, like hunt them to do a thing with me.
It would take so much effort, I realized, “Wow, the real power here is not necessarily building a software company, but it’s building a media business that locks down distribution in the industry you want to own.”
And I know that long back in 2015, I knew that long term, I wanted to play in the B2B SaaS space. So I said, I’m going to go build a distribution channel in this space and I happen to choose podcasting to do that.
This is something that a lot of first-time founders end up learning, is that even if you build a product and that product is great, it doesn’t matter if nobody can find it. You have to go to where the people are and that usually means going to other distribution channels owned by other companies, trying to get to the top of the app store rankings or the top of the Google rankings are trying to get the press to write about you, or trying to show up on Facebook ads or something.
And that’s just like a lot of time, a lot of money, a lot of effort spent basically begging other people to feature you on their distribution channels. So then your second at bat, you’re like, “Screw that. I’m going to build my own audience, my own channel, my own podcast, or newsletter or whatever it is.
And then I don’t have to beg anybody else to let me get in front of their audience because I already have my own.” What was your long-term plan for your podcast? How did you plan to actually grow this thing and turn it into a distribution channel that you could use?
All of the people that I knew in podcasting in 2015 that had top shows, there wasn’t anything magical about their shows other than they launched in like 2006. They had been doing the same thing the longest, most consistently.
So I knew launching, I had to figure out, “Nathan, can I do this thing for a long period of time, extremely consistently, and at a high quality?” And the only way that I could say yes to that was to make sure I could produce each episode as cheaply as possible.
So that even if nobody listened and I had no revenue, I could afford to make it keep going for as long as possible. That’s what would ultimately help us generate revenue. So I was prepared to do a hundred to 300 episodes, even if like five people downloaded each episode.
We talked about this a few weeks back, and the advice I give to everybody who asks me, what should I do if I start a podcast, is don’t quit. No matter what you do prepare to keep going, you’re going to want to quit after the first four or five episodes when it’s hard to produce an episode and it’s hard to find guests and you don’t have that many downloads.
But when I started Indie Hackers, I put like a triple digit episode number before every episode. So the first episode was zero zero one. So I knew I had to go at least until a hundred episodes, otherwise I would look dumb. I think you’ve hit the nail on the head. Like people with successful podcasts often just have the longest running podcast. They never quit.
That’s exactly right. I mean, look at you right now and look at me, right? Everyone is everyone’s locked down. We’ve changed locations. A lot of people think they can’t get into podcasting until they spend like 10 grand building a fancy studio.
But when you add up all my equipment that I have right now, it’s probably like 80 bucks. And what’s most important is it all fits in my backpack. So I never have an excuse not to record because I can take my studio with me. You’ve done the same thing. What is your equipment? You have your headphones, you have the mic. What else?
Yes, I’ve got my headphones, my mic, I’ve got an audio interface and it all fits my backpack. I just don’t see any point in building up this huge wall of things that you need before you get started. I could go out camping right now and tether from my phone and record this podcast episode.
You have to tell everyone where you are right now. It’s super cool what you’re doing
Yes, I’m in Mount Shasta at the moment, I’m probably going to be in a different place for every podcast episode I record for them for the foreseeable future.
I’m doing sort of an indefinite road trip and I’ve just been driving around California for a while, just making sort of last-minute stops to see where I want to stay. It’s all been incredibly beautiful, Mount Shasta in particular.
And this whole trip I’ve just been thinking about just how much COVID-19 has changed things. Seeing the different ways that that cities are open right now, all the things that are closed, what people are doing and just my own trip and other people making similar trips. It’s crazy.
I mean, like even big technological shifts like computing, like how much has the world really changed as a result of us having computers? Well it’s changed a lot, but it hasn’t really changed how people move around in the world.
It hasn’t really changed the layout of our cities and our suburbs. But I think if COVID sticks around long enough, which it looks like it might, that’s actually going to have a big change. It’s going to force us to fully embrace some of the technology that we’ve had, that we haven’t really fully embraced.
Most companies could have been fully remote for years now and yet they just aren’t. And now suddenly, they are. Not because we have new technology, but just because we’ve had a shift in social norms because of this disease. So I’m really enjoying traveling. I think most indie hackers who have the ability should try changing it up a little bit, rather than just sitting at home in one place.
It’s important. I mean, I think I have a bit of an advantage. I forget your situation, but I don’t think you have kids and I don’t think you’re married, and I don’t think dating right now.
No, completely unbounded.
Yes. So we have a bit of advantage. So there might be listeners listening right now that are like married with two kids. A little bit different situation, but still the same concept.
I remember when this all started, I was reviewing our month close out and I was paying Verizon like 300 bucks a month for my phone plus Wi-Fi. I’m like, “This is ridiculous.” So I switched to Google Fi, which is 70 bucks a month.
I had the same thing.
Yes. It’s like, Courtland, this is incredible. So I’m here at this house in LA with four other tech executives and they’re all complaining the first two days that the ethernet, Wi-Fi is not strong enough.
We were only getting like, what was it? We were getting like 300 megabits down. But up is really what matters. We were only getting like three or four up and they’re complaining. I turn on my Google Fi and I’m getting like 15 up.
It was like, high-speed. I’m shooting high quality YouTube lives on my Google Fi thing, which is like, “Wow, I could be in the middle of the woods and still run my whole business now
They give you so much data, too.
I’ve been getting notifications from them. Yes. Just it’s free up to a certain point. They’re like, “Oh, you hit your six-gigabyte limit. Everything here is free until you get to like a hundred or something and then we’ll start throttling you,” but I’m not going to get there every month.
It’s pretty amazing. Yes. We’ve got the technology to do it and I think the lifestyle is pretty good. How much does that factor into your decision to be sort of an Indie Hacker? I mean, if you’re --
Yes, the ability to choose basically when and where you work.
When you sort of define what it means to be rich, rich is like, you can buy whatever you want. Wealth, to me is more interesting, which I sort of have defined for myself as being able to do whatever I want whenever I want to do it. And by nature, to do that, you have to be an indie hacker.
You have to have your own stuff going on because you can’t answer to a boss where you have to check into Slack at 8:00 a.m. every day. What if you’re camping in the middle of the Sequoia Forest and you just, on your little Coleman camp stove made coffee and it’s 7:55.
You don’t want to have to fix your hair and do shit and pop up your computer to like, make that Slack call that kicks off the day. So you have to be an Indie Hacker if you want to be wealthy, in my opinion.
Yes, I agree. I think wealth comes a lot from freedom. Like you said, the power to do what you want to do when you want to do it. It’s really hard to have freedom if you’re not taking control of your life with your own hands. But on the flip side, there’s a lot of risk. There was just a post on Indie Hackers yesterday about basically a small hit rate.
If you go to the Indie Hackers product directory and you sort by the number of solo founders who have never hired an employee in their life, who are making at least 10 grand a month in revenue, it’s like 50 people.
Of course, most people have not uploaded their product to Indie Hackers. It’s orders of magnitude. I’ve had more than that on the podcast. But out of the thousands who’ve tried, the numbers seem pretty small. Why aren’t you dissuaded by the chances of failure? Why aren’t you dissuaded by the idea that you might just fail and not make as much money as you would otherwise?
One of the things that I care very little about and this also goes into how I deal with and work with, in some cases, sometimes it’s friendly sometimes not so friendly, the press is, I just know it’s a numbers game. Like as long as you’ve got the sort of genes to not be scared to like swing, swing, swing, swing, swing. It’s just a matter of time before you hit that one thing that really works.
You could have 99 things not work and one thing worked really well and that’s all you need. Everyone forgets about the things that don’t work. I mean, does anyone talk about the Amazon Fire Phone anymore that failed miserably?
No, we’re talking about how Bezos is making like a billion dollars a day. So I think, to answer that question directly, it’s I’m confident my ability to keep swinging, which means I don’t get dissuaded by the chances of failure because I know one day I will hit. It’s just a matter of time.
Yes. I think that point is so underrated because if you really understand that and you’re really willing to put in the reps and just keep taking swings, then you’ll work to, I think, create a lifestyle and environment that allows you to keep taking swings, right?
If that means living more cheaply so that you can start your next project. If that means even having slightly less ambitious projects that aren’t going to take three years to build, but you can get them out the door and see if they succeed or fail in a couple months.
I think that’s really one of the keys to being able to succeed. And most of the people that I talked to did not hit a home run on their first at bat. It took me six, seven years of building startups before I started Indie Hackers.
I had DHH on here the other day, talking about work-life balance. 37 Signals as a company existed for five years before they launched BaseCamp. There’s so much said about how easy it was for them to launch BaseCamp and how much somebody who’s successful can’t understand the plight of somebody who’s not.
But how many people were really putting five, six years into it? How many people were just expecting to succeed after one or two years, and then complaining that they haven’t. It’s a lot.
That’s why I appreciate what you’re building. A lot of the mainstream press, where they have to generate clicks, more people will click a headline that says BaseCamp goes from zero to 5 million in one year. I mean, look at all the people posting their Inc. listings right now.
This is like clickbait 101 stuff. It’s way less sexy to say, “BaseCamp start off as an agency, barely made payroll first year. Five years later finally launched their first tech product,” which is three years late, by the way.
Now it’s a success. It’s less sexy to talk about the marathon. Sprints and quick success always get more clicks because that’s what people want, but it’s not how it’s actually done, usually. So again, that’s why I appreciate folks like you who really shine a light on the marathons, not just the sprints.
It’s pretty fascinating how badly everybody wants that quick story, though. They’ll say they don’t. They say, “Oh no, I want the most realistic picture,” but you put the realistic picture out there and everybody ignores it, and everybody focuses on the quick success.
Somebody can literally say, “It took me seven years to succeed and I did all this stuff, and then I finally got there.” Then people will be like, “Wow, you got there so fast. How can I succeed in the next six months?” It’s like, wait, that’s not what I said.
I said it took me seven years to do all this other stuff and build an email list and pick up all the skills and I’ve failed a bunch of times, but no matter what you write, people really crave that fast success.
I think it’s unfortunate. I think it’s much better to take a lot of at bats, to take your time, to realize, as you said, it’s a marathon, not a sprint, and to enjoy the actual process of starting a business, instead of trying to rush to the finish line as fast as you possibly can.
I would underscore, Courtland, and say, I think the main reason people don’t do that as the first point you brought up, it’s keeping your baseline expenses low so it’s easy to pick up the bat and swing again. Most people spend way more than what they should be spending.
I would just encourage everyone to focus one Sunday a month on decreasing your expenses. That’s almost, I think, probably 10 times more powerful than spending that same day on how to drive 10 grand a month in new sales.
The tricky thing when it comes to expenditures is that it’s so easy to go in the upper direction, but it’s hard to downgrade. It’s really easy to improve your quality of life. To start eating out more, eat nicer food, or move into a better, bigger apartment.
But when you think about downgrading, it just seems so painful. But the thing is that you just acclimate, it’s like getting a shot. It hurts at first, so you don’t want to get one, but then you do. And you’re like, “Oh, it wasn’t so bad.” And you just adjust to the new normal.
So I think that’s great advice. What was your financial situation like after you sold your company, Heyo? You said you sold it for a loss, and you started your podcast. How much money did you have in the bank?
Yes, I started and I actually, I’m looking it up as you’re asking me the question. I started keeping track of my net worth, just because I figured one day when I’m 50, if I want to give a — someone writing a bio on me or something, like my history, this document, will be really valuable.
I’m just opening it right now and scrolling down to see how much history I have. Yes. Okay. So I have October 29th of 2015, which is right after I sold Heyo and launched the podcast, which I’m scrolling over to my net worth column.
I had, in terms of what I calculated as my net worth, about a hundred thousand bucks, so I was 25 at the time. Then scale up, yes, the podcast is what took me past a million. I measure two things. I measure net worth and I measure cash in under seven days.
So if I wanted cash quickly, how much cash could I pull in under seven days. And now those numbers put together, are there are much larger than a million dollars and the podcast is really what got me there.
So let’s talk about growing the podcast and helping you get there because as we mentioned, most podcasts don’t make very much money. You were able to figure out this hack where instead of selling ads on a CPM basis, based on how many people listened to your podcast, you would sell ads based on a CAC basis, based on how expensive it was for your sponsors to acquire customers through other channels, you would try to basically match that or beat that on your podcast.
So if, for example, I don’t know, ConvertKit came to you and said, “Hey, Nathan, we usually spend a hundred dollars a year to acquire a customer.” You might say, “Well, listen, I’m going to get you customers for $90.” Right. So pay me $20,000 to sponsor my podcast and I’m going to get you whatever that is divided by 90, that number of customers.
230 customers, exactly. Yes, that’s exactly right. And what that also did is I would put that calculation in the SOW, the statement of work, that we signed for the sponsorship. I’d put that in there, I’d say ConvertKit’ s expectation for this $15,000 spend, because it’d be five grand for three months paid up front.
So for 15 grand, their CAC on their other channels are about a hundred dollars to get a new customer. If Nathan can bring in x amount of customers, it is clearly up from other channels, which means it’s very obvious.
Everybody knows. There’s no ambiguity. It’s very obvious if ConvertKit would renew that sponsorship for a full year. I either beat the number, or I didn’t beat the number. There’s no ambiguity. So that allowed me to really focus on getting the amount of customers I need into those sponsors so that they could renew.
And how exactly did you go about beating those numbers?
A couple of things. I think one of the big secrets in podcast advertising is people always assume that mid rolls are either profitable or they’re not.
For me, what I do is I tell my sponsors, “Yes, this is for podcast placement. But if I know I need to bring you a hundred customers in a month and I’m only at 86 and there’s a week left in the month, guess what I’m going to do? I’m going to put you on our blog. I’m going to email you to our lists, and I’m going to figure out a way to get above that number.”
So the trick is, in terms of hitting those numbers, is really to not just use one media asset that you’ve built, in my case, the podcast, but try and use all your media assets to drive past that number.
I love the alignment of incentives here, where if you actually, contractually hold your feet to the fire and you have to get them to these customer numbers, then you’re going to think outside the box. You’re going to think about, “Okay, what channels can I use to get them those customer numbers?”
Yes, they’re ostensibly my podcast advertisers, but I have all these other channels. I have my email list. I have my Twitter, I have my blog. I can use these to try to help these companies hit their numbers, so they reinvest with me as a podcast host.
We haven’t really talked about what your podcast is about or how you go about producing it. When I think about you, I think you’re a guy who’s like really into different hacks. You always seem to find ways to do less with more.
The number of episodes you’ve released on your podcasts is absolutely insane. The entire format of the show, I think, is sort of part of the strategy. How does your podcast work and what’s it about?
I’m curious, Courtland, so I can tell you what I think it is, but I’m curious from your perspective. You’ve listened to one or two episodes. How would you – if you’re talking to someone else like, and I’m not there, so you know I won’t be offended. What would you say about the podcast?
I would say Nathan’s podcast is one where he brings on basically the founders of successful SaaS businesses and just grills them on the numbers. He asks all sort of acquisition numbers and retention numbers and revenue numbers and expenses and gets the story behind what they do.
About 15, 20 minutes, I think, it’s the length of your episodes. So they’re very fast. They’re very rapid fire, and they’re really no bullshit. Behind the scenes, from what I understand, your calendar’s crazy.
I’ve seen screenshots of you recording something like 20 episodes in a single day, the entire thing just blocked out. You’ve done, I don’t know how many? Over a thousand episodes of your podcast now?
Yes. We’re about to pass 3,000 recorded episodes.
3,000 recorded episodes and it’s been five years, which is insane. And I think one of the things, a lot of people don’t understand about podcasting is when you’re thinking about download numbers, it’s not just downloads per episode that matter. If you release more episodes, you’re going to get more downloads overall. If you released five episodes a week, you’re probably going to get five times as many downloads as you would if you release one episode every week, which allows you, I think, to basically get more sponsors and charge more money.
Well usually, yes. So the way people game the CPM model is they do exactly what we just described. You’ll go to these podcasts and they’ll be a daily thing, but it’s like two minutes. It’s like the founder, the host talking about their favorite quote.
But what happens is, let’s say you only influence one person. You have one person listening. Well, if you release one episode a week, you get 52 downloads a year. If you release one a day, you get 365 downloads a year, which do you prefer?
Most people would prefer 365 downloads. But what I’m trying to measure is actually influence. Can I get customers from my audience to make it worth it to my sponsors? There is a blend. What I am playing for – my show is never going to be serial. It’s probably never going to be Tim Ferriss or Joe Rogan level. It’s never going to do 10 million downloads a month.
But what I can tell you is, every single day when we released an episode, that episode will 100% get at least 6,000 downloads in the first week and about 10,000 downloads in the first two months that it’s live. So it’s basically me doing a webinar every day to thousands of people. That’s valuable to me because it’s all hyper-targeted on B2B SaaS.
How do you actually get to those numbers? Because I think even someone listening, who’s like, “Okay, I’ve got the work ethic, I’ll hit it consistently. I’m not going to quit.” When you first released your first 20, 30 podcasts and you’re still getting like 100 people listening to an episode, it’s pretty easy to feel dejected. How did you grow your listenership?
You have to realize what you’re building. So if you’re building a consumer play where you care about number of downloads, fine, go build that. But let’s say that example you just gave, those a hundred listeners, it’s the Fortune 100 and it’s every CRO right from the Fortune 100 and you only get a hundred downloads per episode. You’re never going to be bigger.
You know how much money people would pay for that podcast, for that access to influence? Major, major, major ticket prices. So that’s what you have to understand is are you trying to just go for volume or are you going for influence? And if you’re going for influence understand, that’s very different than the volume game. In fact, by nature, if you’re playing the influence game, you’re going to do less volume and vice versa.
There’s been a lot said recently on the topic of just paid content. It’s been really growing, I think the last year or so, especially recently with the advent of Substack, it seems like everybody’s got a paid newsletter now. What’s cool about it is it seems to be working. People are actually paying for content, but it’s consistently what you say.
You’re more likely to have people pay for your content and pay more money for your content if you’re helping them make money or if they’re influential, than you are if you have like some sort of very mass appeal podcast, or mass appeal newsletter that doesn’t really help anybody make money. It’s going out to the everyday person. And it just isn’t really tied to improving people’s lives in a very measurable, financial way.
One of the metrics I wish we had for this – I’ll call it this Substack movement, is churn. We don’t know – we know there are successful newsletters with thousands of people paying $5, $10, $20, $50 a month.
What we don’t know is how sticky are these things? It reminds me back in the day when I used to interview people that ran membership sites and I’d always be impressed by their numbers except their churn because churn would be something like 30 or 40% a month. A month, not a year, a month.
And it’s because they have to continually upload new content every month to get people to stick and convince people to consume the content. Even if you create quality content and they don’t consume it are still likely to churn. My question to you would be, do you think this lasts or is it sort of a flash-pan sort of situation?
I think readers willingness to pay for content will last and, in the aggregate, I think the broader trend of people will pay for actually good stuff will last. I think in terms of what people write and how they deal with this churn problem, which is very real, that will evolve over time.
I think people haven’t really – the playbook hasn’t really been written for the indie hacker who wants to create a media business and figure out a way to continually turn out this new content that’s novel and refreshing enough that people don’t tune out after a while.
It’s sort of an example I like to talk about is education versus news sort of dichotomy like educational content is wildly popular. People pay a lot to take courses. People pay tens of thousands of dollars to go to school, but education is almost a hundred percent churn.
Nobody takes algebra like 35 times the rest of their life. Once you graduate from a particular educational challenge, you’re done. I think a lot of the content people are putting out in the form of courses or like how-to guides, that stuff will have super high churn.
But also, I think when people create these newsletters, one of the things they’re not realizing is that you have to be, for lack of a better word, newsy, in my opinion. I think you need to be constantly fresh. You need to be talking about current events. You need to be up to date like Ben Thompson is with Stratechery, for example. He probably has very low churn numbers.
He’s been growing his revenue and a subscriber base for the last six, seven years. His content is almost always focused on what’s happening right now in the world, which I think number one, relieves some of the burden of having to be super creative and figure out what to write about, because guess what it’s always coming in. It’s always like top news headlines.
And number two, I think it’s something people don’t graduate from. There’s never an age at which you’re like, “You know what? I no longer need to know what’s going on in the world. I learned everything that was happening the past 10 years, 10 years ago, so I’m done.” He probably has low churn numbers. So I agree with you.
I think that there’s some real structural problems with a lot of these content businesses and not many of them will stand the test of time, but I think some will and they’ll figure out how to engage an audience consistently over a longer period of time.
This is why I think less about, should I launch a paid Substack newsletter and more about branding how I think as a product. What I mean by that is, I guarantee you, when the congressional testimony was happening, whatever it was, last week with the four big tech CEOs, there were people watching who know of Ben that were wondering, “I wonder what Ben thinks about this?”
They’re going to read his newsletter that week because they want his voice brand analyzing and reacting. That’s where I think a lot of people get mistaken is, they think it’s more about the medium. Do I have a Substack newsletter? When really what it’s about is what is your brand of thinking that makes people curious about how you’re going to react to current news.
Like for me, people, anytime something pops up the B2B SaaS world, people will wonder two things. One, has Nathan grilled the CEO yet? Two, does Nathan think this thing is going to work or not work? If I can stay relevant and write about those things with my brand and voice, I think that’s what creates super high retention on the content.
I think that’s so true. It also gives you sort of a moat where nobody can come and be a new Nathan Latka. People who have listened to your podcast, who like your personality, who trusts what you have to say and want to hear your opinion on the news, they can’t find a replacement for you. It doesn’t exist out there.
That’s such a good way, as you said, to prevent churn, to keep growing your brand. I think the podcast that you have, and the podcast medium in general, is probably one of the best mediums besides maybe YouTube for developing a personality-based affinity with your audience.
Yes, I agree. So what drives – to your question that you asked four or five minutes into us chatting about other revenue streams and magazines and books and things like that. The way I think about my business today in terms of just media is, we’re in a world where whoever can keep attention the longest wins.
My mousetrap, my onboarding to your attention is podcast, but that’s only 15 minutes a day. How do I get to the 16th minute to 17th minute, the 18th minute, the 19th minute? This is how I think about building other media brands.
When people were flying, I was thinking, “How can I get that hour-long flight? How can I get your attention on that?” That’s one of the reasons we launched the magazine, is because I knew that I could get into airports because the book was already in airports and I could get another hour of these people’s week if they’re flying ones per week on an hour long flight.
That’s how I think about all my media, is take my current audience, send them a type form, ask them where else they consume content and then go launch my voice and brand in whatever that medium is to get more of their day.
So let’s talk about your magazine because it’s not often somebody decides to launch a physical media product in an age where pretty much everything is digital. I think the way that your brain turns over the problem, which is the scarce resource is actually attention.
People have only so many hours in their day, there’s a ton of stuff fighting for their attention. And what you’re trying to do, if you have a media business is get more of those minutes, more of that time by ideally hitting them in places where the competition is less or providing more value. What was your thinking behind starting a magazine and how did that process go?
Yes, the first thought is it’ll get a lot of attention just because it’s the opposite of what everyone else is doing. Magazines are going out of business right now. So the people are going to stop and go, “Wait, why is Nathan launching a magazine?” So that’s one big piece. The second piece is to our conversation earlier, we talked about keeping life expenses low when you’re launching new business lines, keeping production and expenses low on that new idea is also important.
I’m able to get the magazine out for very, very cheap, because if you look at it, for example, like all these – this is the July 2020 issue. This is the one that just came out, like all these headlines. It’s basically just a podcast recording, transcribed, with my design team adding charts. My all-in cost to produce this, just the content, is under two grand a month, but we sell it for 29 per issue. It’s a new, profitable, attention-grabbing distribution channel.
What’s cool about this is you’re reutilizing the same skills over and over again. If you stay in media, you basically learn how to tell a story or you learn how to generate controversy or you learn how to write a headline and you’re doing that with your podcast and then you move to the magazine medium.
Not only can you reuse a lot of the content like you’re saying, but it’s basically the same skillset. Well, how do I get people to read this magazine? How to get them to open when they see the cover, how do I get them to keep reading once they hit an article? Probably no different than the same tactics that you use to make an episode of your podcast engaging, etc. My question for you here is what have you learned about producing compelling content and getting people to care, and I guess, grabbing people’s attention in a world where it’s so competitive to get people’s attention?
In my opinion, to really understand this you have to study how people are consuming that content. Podcasts are usually consumed where someone’s driving, they’re at the gym, they’re washing dishes. So you have to have – audio typically works better in terms of retention, if it’s very dense information, tight and dense, much denser than writing a longer form story.
So podcast keeping attention is about at the beginning of the episode saying like, okay. SaaS CEO, “How much are you charging customers? What was your last round valuation?” The CEO says, “I’m not telling you valuation. And I say, “We’ll get back to that in five minutes.” Because then people are going to keep listening to see if I come back in, like that open loop.
With the magazine, and this is very similar to a book, there’s no ears involved. It’s actually all physical touch. So literally, if you look at how this magazine looks, and those of you listening you can’t see this, but like we spent a lot of time deciding like the weight of the back cover and the front cover.
Because when you open it and you start flipping, if the weight of the cover is not, there’s not a big enough Delta between the weight of the inner pages. When you, when you flick it open for the first time, more than just the cover will pop out. So when our cover pops out and you look at this, what you see is like very dense information on SaaS metrics, which is meant to drive your curiosity to future pages.
That’s what gets you flipping. And then ultimately what you want to do is no matter where the reader opens to in the magazine, there’s something that catches their attention and makes them keep reading. And for me, it’s just a data export.
I just take all the data I captured from the podcast in terms of revenue of SaaS companies, valuations, customer counts, I just print it in the thing. We’ve seen investors and folks on their desks when I visit, they will have this open and they will have circled like deals to go after. I’m like, “Okay, I’m doing this whole physical media thing right.”
Yes. And that goes exactly back to what you were saying earlier about, wouldn’t you really want to have a podcast that was only listened to by the hundred top CEOs? Well, your podcast and your magazine are listened to and subscribed by actual investors who are investing tens of millions of dollars.
It’s making them money. They’re making real business decisions as a result of that. That is super valuable in terms of the advertisers that you can get. It’s super valuable in terms of whether or not people will pay to subscribe.
Of course they’ll pay to subscribe because this is actually, 30 bucks a month is a rounding error compared to how much money they might make if they catch a deal in what you’re doing.
I love the fact that it’s not just pure entertainment. It’s not just click bait, but it’s actually real numbers, real data. It all works together so nicely since this data is actually coming out of your podcast interviews.
That’s right. And by charging 30 per issue it allows me to use the subject email line, the most expensive magazine in the world, which gets people paying attention.
I had Sam Parr from The Hustle on earlier this year and he recommended a copywriting book called Advertising Secrets of the Written Word by, I think, Joseph Sugarman. It’s a classic. You can’t even find it on Amazon. It’s all sold out or it’s only hard cover copies for like 150 bucks or something crazy.
Or it’s super – it’s like 800 bucks.
Yes. Just like crazy. But you can find the PDF online if you look for it. There’s just so many different copywriting tips to it. I’ve noticed in your post on Indie Hackers, for example, or the things you’ve written online, you seem like a seasoned student of long-form copywriting.
You’re always engaging with your first sentence. It’s always short. It’s always easy to get in. Then you always open, what I call story gaps, where you basically arouse someone’s curiosity like you were saying by like asking a question, but then not answering it until later.
So people keep reading because they have that question in the back of their mind, which is pretty much what any good TV show or book or story does.
You nailed it. I mean, there are a lot of ways to get attention in today’s world. I have found myself defaulting, though, to one tactic that just work the best, which is curiosity. Looking at my last Indie Hackers post, we tested the headline I wrote for Indie Hackers versus the one we used on Product Hunt versus the one that I emailed out to my list, they’re all different.
So the one we put up on Indie Hackers on August 6th, the headline is, “Why hackers are taking money from Founderpath.” Probably what I should have said, because no one knows what Founderpath is, is “Why hackers are taking so much money from this weird new tool.” And then don’t mention Founderpath until the last sentence.
But it is very difficult for people for most people – I haven’t been able to hire anyone for this – to figure out how to generate an open loop in the first sentence that also directly correlates with whatever it is you’re trying to get attention on. That’s the hard part.
You did a post when you talked about how your magazine was making money on Indie Hackers. I love the intro. I think it’s the first or the second sentence. It says, “Even my mom laughed at me. More on her in a second.”
You go on to tell the story about you putting together this magazine. Let’s go through that story because I think it’s pretty fascinating. What are the first steps to actually creating a magazine when you have no idea what you’re doing, and you’ve never created a magazine before.
Yeah, so the first step is to figure out, what are you going to put in the magazine? Why are people going to read this thing? What I thought was, well, founders and investors love Excel files. Can I make like a physical Excel file?
Because when I read Inc. – actually, that’s how I started. Whenever I was flying, I would just buy all the other magazines. I would look at whatever held my attention, I would make a note of it and say my audience probably would like this, too. I loved anytime in a magazine where I saw a big chart with revenue data or valuation data or things like that. Or a hundred ways this CEO got their first a hundred customers or something like that.
So I knew that I wanted to do like a lot of listicle stuff with data that people can’t get anywhere else, even PitchBook, Crunchbase. If you search any software company, like Gitlab, plus the word revenue or IPO or valuation, we ranked number one, even above TechCrunch, above Bloomberg, above Forbes, all these spots because it’s so focused.
That is how I started the magazine. It was actually with the open loop, which is “Why are people going to literally open this every day. When it arrives in their mailbox why will they open it?
How do you actually get the physical product printed? Who do you talk to about that? How much does it cost?
Yes, these are good questions. So literally the first version was, we put a big PDF together. I walked to my local – I emailed [email protected], walked to get my code, which I took to the local FedEx store, and I just printed it at the FedEx store.
I then walked into the front of the store and said, “Hey, can I pay to put the cover, make it glossy?” And it was like 60 bucks, something ridiculous high. I’m like, “Okay, well this isn’t going to work, and I also don’t want to physically mail all these, myself and everything.” So I started searching for options to do this at scale.
The one I landed on was a company called SmartPress.com, which is pretty darn good. We now ship thousands of magazines and the magazine altogether has done over a hundred thousand dollars in revenue and it’s still been profitable. So they handle, the process today is I upload the PDF. I upload an Excel file of all the shipping addresses of the buyers. And they take everything from there. SmartPress.com.
And how did you get your first customers for your magazine? Because I imagine it’s a little bit different than putting out a digital product or a podcast.
This is simpler than you would think. It sounded like this, “Courtland, I’m launching a magazine. It’s going to be the most expensive magazine in the world. Every VC is going to read it. It’s 29 bucks. I’m thinking of putting you on the cover first. Will you buy a copy?” And whoever said they’d buy a copy first, that’s who I put on the cover. I forget who it was, but, but that’s how I got my first sale.
That’s pretty interesting. Just got cold email to somebody that you didn’t know or was it like a previous podcast guest?
No, no. I emailed all the CEOs I interviewed on the podcast, probably a thousand.
Basically just advertised your magazine to a thousand CEOs and promised to put one of them on the cover. How many people subscribed as a result of that campaign?
I do not know the exact numbers off the top of my head, but it wasn’t big numbers. I’m talking less than 10 sales on those first couple issues. What really started to scale – like here’s a good example. The next issue coming out we’re putting Diego Gomez on the cover for two reasons.
One, he asked and said he would market the heck of the magazine if we did it. But then I had to say, well, it’s like an event. People who pay to be on stage are usually terrible speakers. So I had to make sure there was compelling content behind it, otherwise the magazine would flop.
I did an interview with Diego and he told me how they went from 13 million revenue last year to 24 million in terms of run rate today. So they’ve doubled even during COVID, they’re also in Brazil, they are hiring people away from HubSpot and a lot of people are saying that they are the next HubSpot, which is interesting.
So that’s the subject line. He just emailed me this morning and said, “Nathan, we love how the rough draft looks. We’d love to buy several hundred copies. What’s the cost?” Great. We’ll give you a bulk discount of $25 per issue. You can start to do the math, basically just the person I put on the cover and just the bulk order they placed makes that magazine highly profitable.
You’ve also done similar things with your book. I’m hearing this recurring theme of you’re going to put out some content, you contact someone who’s famous or successful and you say, “Hey, will you be my partner in this? I’m not going to do this unilaterally, but if you will agree to order some magazines or promote it or do something, then I will put content about you on the cover or inside the magazine.”
From our previous conversations, I know you’ve done same with your book. So give me the story there. How did you write a book? Why did you write a book and how did you actually grow the sales?
I wrote a book because I was jealous of Ryan Holiday and I wanted to see if I could sell more books than him. That’s the real answer. Same thing with everyone who was like a big writer. I’m like, this is a new board game to play. Let me see if I can write a book.
It also was like sexy that I failed high school English and sending the bestseller article in the Wall Street Journal to Mr. Bone, my English teacher in high school, will just be amazing. So that’s why I wanted to do it. But what prompted me to actually start writing was organically when the podcasts started ranking really high in the business category on iTunes, book publishers with business authors started reaching me, asking to put their writers on my show, their authors on the show.
What I started doing was taking a screenshot of their Amazon rank before they came on the show, which was terrible usually, and a screenshot after they came on the show, which was always way better, because the show drove sales.
I would send that email to the publisher after every interview and let them know, “Just so you know, we killed it here.” What happened is a couple of them started saying like, “Well, crap, if you can sell so many books, whenever you want to write a book, tell us because that’s the biggest issue we have. There’s a great writers that can’t sell.”
They don’t want to give that writer a big advance. They need people that can sell who happened to also be potentially an okay writer. You can fix the writing. It’s harder to get the sales. That’s what happened is I signed with an agent named Jim Levine in New York who was also the agent to Ray Dalio Principles.
I had no business being signed with this guy, but what I did is I brought him preorders. It was like crazy. He’s like, “Wait, people have committed to spending thousands of dollars to buy your book and they don’t even know what the book’s going to be about?” And I said, “Yes, Jim, they came on my podcast. They loved it.” That’s what we did. He helped me then fine tune the book outline.
He emailed it to about 10 publishers, three or four of them wanted in person meetings in New York, and in those in person meetings, I had my backpack on my side because I knew eventually if they were interested, they’d say, “ How do you plan to sell the book?”
And I’d look them in the eye. I’d pause for a minute. I’d clench my jaw. I look very confident. I’d slowly look down at my bag, reach in, ruffle around, pull out these six copies of these printed purchase orders that were already signed for thousands of dollars.
Face them down on the table, push them slowly across the boardroom table to the publishers, be quiet as they read them, they look back up and go, “You have $30,000 in presales and you don’t even know what the title is?” And I said, “We’ll have no problem selling the book.”
Was the ultimate, Indie Hacker, MVP smoke test, whatever you want to call it. You haven’t written a book. You don’t know what the title is, and you’re getting sales, $30,000 in sales, which is crazy. How did you get that many people to preorder your book?
We put together a one pager, just like we do with the podcast. We called it Book Sponsorship. We didn’t even try and hide the fact that we were going to basically sell branded content in the book. What it was, is if you preorder and committed to spending $5,000 on copies, I couldn’t even tell them how many copies they were going to get because I didn’t know what the price of the book was going to be.
So what I had to do is get them to sign purchase orders for just an amount of spend. We’ll buy as many books as we can with five grand. What they would get for that is, in some cases, it was like three sentences talking about their company in the book. In some cases, it was sort of a full example of them plus a screenshot of their business in the book but like of their home site or something. If they paid like a lot, I would even type the link back to their website in the book.
A link that nobody can click.
Nobody can click though, because what I’m selling is ego, here. What I’m selling is I told these people, “This is going to be a bestselling book. It’s going to be with a top publisher. I’m already signed with Jim Levine, look at these other books he’s published. Do you want a spot in the book?” I email a thousand. I don’t care if 950 say no. If I got five that all committed to five grand, boom, that’s all I need.
You’re doing a lot of smart stuff and I want to go over some of it just in case people have missed it. The first thing is that you’re very keen from endeavor to endeavor. I think you’re very consistent at looking at things from the other person’s point of view and trying to figure out what it is that they want. And then thinking about how you can get it to them and then crucially demonstrating to them that you know that, and you can do it and you care. Only then do you ask about what you want.
So it’s really apparent with your podcast story, how you’re showing these publishers, “Hey, I know you’re trying to move books and hey, here’s how I can prove that I’ll do that for you. Here’s the Amazon rankings before and after,” Probably nobody does that. Publishers email me to get authors on this podcast. I’ve never replied like that.
So it’s super smart and just mutually beneficial if you want to establish a relationship and get more pitches like that. With your book, it’s the same thing. You understand the CEOs who come on your show, they’re human, they have egos. They want to be in a case study in a bestselling business book.
If you appeal to that, you’re really giving them something that they want. Then you can ask them to buy a bunch of books. I think that feeds into the second thing, which is the way that you’re asking for what you want is in alignment with what they want. So you’re not just like, ‘Hey, give me a bunch of money and I’ll put you in my book.’ It’s very much a sponsorship, but you’re, you’re saying, “Hey, if you support the book and buy a bunch of copies, I’ll put your case study in the book.”
The difference is really subtle, but I think it just feels much better if you’re in that person’s shoes to be able to tell others, “Oh yes, I really supported Nathan with his book. I’m a case study in the book, too.” That’s just more in alignment with the way that they want to look. And I think it’s really underrated.
Another example from a case study that I’ve read actually is there was a social network. I forget the name, but it was a Q&A site. They experimented with paying people to answer questions on the site and it didn’t work. Nobody was there to make money. They had jobs that just wasn’t in alignment with why they were there. So they changed it. The new system was they started giving people reputation points for answering questions on the site.
That works spectacularly. Because people were there to sort of boost their egos and be seen as smart and help others. They wanted like a credit system proving that that’s what they were doing. They didn’t want money. It matters to align with how people get rewarded with what they actually are there to do.
I think the final thing that you do really intelligently is that you’re not afraid to write a lot. Like you said, you sent out this one pager, you’re doing these long posts on Indie Hackers. All the wisdom on the internet right now says, you need to be concise. You need to only have like five words on your landing page. I think that’s bull. I think you need to take the time to convince people and sell them.
That often requires writing a lot of words. You just have to write those words intelligently and be compelling, get people hooked in the beginning. This goes back to all those copywriting books. You really take the time to do that. I think that’s super smart.
You did a great job summarizing those three points. But I imagine if you’re listening right now and you are an indie hacker, you might be thinking, “Well, wait a second. What if the book wasn’t a bestseller?” Does Nathan refund everybody? Or wait a second.
Doesn’t Nathan get really embarrassed if he had people on the podcast and he said it would get a million downloads and only gets one download? Why isn’t Cortland pushing Nathan on this thing?
What I would tell you is yes, that’s a massive risk. There is a lot to be said for just Elon Musk saying, “We’re going to Mars.” And me and my own little world, that’s much smaller than Elon Musk’s vision saying, “We will have a billion downloads.” You make things happen by how confidently you say them, and that’s key. And by the way, when you have 30,000 in presales, you can use that money to go buy newsletter placement in The Hustle, which will help make sure you become a bestseller. It all fuels together.
Yes. I think it affects your mindset as well. If you set this goal for yourself, you’re going to be a bestseller. You’re going to go to Mars. Then you tell a bunch of people about it. You’re holding your feet to the fire at this point where you have this extra motivation that you might not have otherwise.
If you fail, it’s going to be embarrassing and it’s going to suck. But because you know that you’re going to work harder. If you tell your podcast sponsors, “Hey, what’s your CAC? I’m going to beat that.” You’re going to work harder to get them a better, lower cost of customer acquisition. I think it just works together in so many ways.
It’s true. This sums up one of my favorite sayings that I live by every time. I think about now a lot when people are sitting at home, bored, they can’t go out, there’s mental health issues. There are emotional issues in general.
One of the big things that I think Walt Disney has actually said this. He said, “One of the interesting things about people is we tend to become what we imagine, but the issue is very few of us have large imaginations.” There’s not a lot of imagining going on.
I would just encourage people to block off 10 minutes once a week with your coffee in the morning or your latte, and just give yourself permission, just barf imagination onto your notebook without any reservations. I think that’ll do powerful things in terms of your psyche.
So in terms of your imagination, at some point you had this triple media threat going on, you’ve got a book, you’re a published author. It did become, I think, a Wall Street Journal Bestseller?
It did, yes. No New York Times, but Wall Street Journal.
Yes, so you check that box. You’ve got your magazine, which is going strong and growing. You’ve got your podcast, which is, getting tens of thousands of downloads and generating hundreds of thousands, sometimes millions of dollars in revenue a year. You turned a corner where your businesses after that are more SaaS based.
So you’ve got GetLatka.com, which is a giant subscription-based database of SaaS metrics and information that people subscribe to. And you’ve also got Founderpath, which you referenced earlier, when you talked about the most recent posts you made on Indie Hackers where you’re basically helping founders, helping finance companies. Why not continue with the sort of media stuff? Why not build a media empire? Why go in the direction of SaaS businesses?
Because I read Bloomberg biography many years ago and you start to learn that Bloomberg Magazine was meant to deepen the moat for the Bloomberg Terminal. You start to realize the power of media brands relative to actual products on the back of other software, physical products.
The answer is both. This is a unique situation where it’s not a one plus one is two sort of thing. It’s a one plus one equals like eight or nine sort of thing. Why does Bezos own the Washington Post? Well, if the number one way that Amazon markets are going to get hit is by government regulation, guess how we can fight back against that?
He has the Washington Post. Now he’ll say that he obviously is never going to do that. But you’re silly if you think that media plus product is not more powerful than just all media or all product. There’s a lot of big media brands right now that I think would do them a lot of good to actually launch a sort of product and use the media brand to build a moat around the product.
At what point does that switch sort of flip in your brain when you say, “Okay, my media brand is big enough, strong enough that I should start building products?”
When you have sponsors that don’t blink when you’re increasing your sponsor fees. Because what that means is, they have a product and they’re willing to pay you almost anything to get in your channel. Maybe you should go build that product.
Or build that product with a spin. It’s clear that you have influence and purchasing power under you. You should use that so that you get the margin, not go build mailchimp.com, right?
How do you decide what product to build? You could do what you’re saying. You could say, “Okay, my sponsors are paying me to get on the show. I should just build what they’re building, but it doesn’t seem to be the path that you took with Founderpath and with GetLatka.
So the way I did this, and I cannot, and I would never say that I knew that this was what was going to happen when I launched the show it back in 2015. But what happened was you mentioned this earlier, I’ll have one day a week where it’s literally 20-minute interviews stacked on top of each other for seven, eight, nine hours.
I’ll knock out 20-30 interviews in a day. So there’s 20 minutes reserved for the founder, but we only record for 15, which means there’s five minutes of downtime after we’re done recording. And what started happening is in that downtime, founders started saying, “Nathan, I think you understand my business in 15 minutes, better than anyone I’ve ever talked to.” What would you value it at?
Or “Hey, we’re looking to raise, who do you think I should raise from?” Or listen, “Nathan, I know that episode just sounded really great, but actually my cofounder is about to leave, and my wife has divorced me. I need to sell the company. Can you help me sell it?”
What happened is I started helping founders do all these things. One of the things back in 2016 that a lot of them asked me to help them do was they started asking me to help them raise debt. What do you mean, Damien VC? What do you mean, debt?
I started learning, “Oh my gosh, there’s this new thing where if people are not wanting to go after some billion-dollar VC backed thing, but they just wanna build a $10 million, $5 million, $1 million a year business that generates a lot of profits that they can live on, and the cashflow, a lot of founders were starting to use debt. I started getting very, very close to debt providers because I was helping them do loans into the founders I had on my show.
I sourced many, many millions over a hundred million dollars’ worth of debt. They call it loan tape into some of the largest debt providers today for software companies like Lighter Capital SaaS Capital, Clear Bank, Timia, Hercules’, CIBC, there’s, there’s about a hundred major players in this space.
I kept a big Excel file of all the players and my founders and did matchmaking. What I realized, Courtland, is when you started looking at these debt deals that like, I’ll pick on Miner Capital. I like those guys, but I’m going to pick on them for a second. They do debt deals that are what’s called an RBF, revenue-based financing.
And it’s very difficult to actually calculate the cost of capital. But what I realized was, when I helped a founder raise, I think it was like 500 grand from Miner, back in 2016, and I watched that founder, how they paid back the loan, the effective interest rate was over 25%. I’m going, “Oh my gosh, there’s a real opportunity here. This is a healthy SaaS company. There’s a real opportunity to get them capital way under 25%.”
And that was the Genesis for Founderpath today, which is again, there’s so many founders taking money from Founderpath.com. It’s something I’m very excited about.
So this is yet another advantage to starting with the distribution, starting with some sort of media endeavor is you get to talk to so many different people. If you have any sort of successful media business, you’re probably putting out content at least once a week, often more often than that. And you’re going to get a lot of reps in, you’re going to learn a lot of things.
You’re going to build trust with your listeners who will say, “Okay, well, Nathan is talking to these other big shots. He’s a connector. I should get to know Nathan. I should ask him for advice. He knows what’s up.” You get to spot trends.
Because you’re constantly meeting new people and talking to new people and seeing what they’re doing. Just like you spotted this sort of debt financing trend. It’s just such an unfair advantage to start there, I think. And it’s usually the last place that founders start.
When you start to learn.
Yes, exactly. You start to learn. It’s forced learning. Like anyone could learn. Anyone at home right now could learn. But if your business doesn’t depend on you learning, well, then all the motivation to learn has to come from you.
You have to get up every day and say, “I’m going to set aside this many hours to read and learn and talk to people.” But like, you’re probably not going to be able to do that. But if you have to get up and go to work to produce a podcast every week, then whether you want to learn or not, you’re going to. That compounded over years and years of learning, it’s just like such an unfair hack. You just have this wind at your back that’s pushing you to learn.
Yes. My learning velocity, I would argue, is top 0.5% of anyone in the B2B SaaS space. In my opinion, like you’re going to ask, “How do you quantify that?” I’m just saying, I think I get exposed to more data points at a higher velocity in B2B SaaS than almost anyone else in this space.
So the people listening to this are indie hackers. They’ve never really considered raising money. They also haven’t considered this new trend, really raising debt. Talk to me about this trend of revenue-based financing and what makes Founderpath different and why people might consider going down this path when traditionally they just wanted to bootstrap their companies.
So a couple of things here, most founders don’t realize how valuable their $10,000 a month of revenue stream is. Banks won’t value it. Banks won’t give you a loan against it because they don’t understand software. It’s not like a house mortgage. There’s no house to take over. So you can’t raise debt from a bank at a SaaS company, unless you raised VC.
And then SVB, CIBC will put money in but they’re really just trusting that the VC did good due diligence and they’re banking on the VC. But what if you have $5 million bootstrap company you don’t want to raise VC, does that mean that you shouldn’t be able to get debt? No, you’re probably healthier than the VC backed company that’s earning money.
You’re a better candidate for debt. So who’s servicing that need? And really the only answer was these sort of Lighter Capital, SaaS Capital these ones I already talked about. That’s why I started helping them build their loan tape.
But when I looked at their terms, they were very confusing, I said, “There’s gotta be a way to get money to founders at cheaper interest rates and when those companies are much younger,” meaning maybe they only have 10 grand a month in revenue and 12 months of history. My ultimate goal is to be able – we built this tech platform that Founderpath.com where founders can connect their Stripe account, their QuickBooks, their Zero, their Google analytics, etc. We generate a credit score and the better your credit score, the cheaper we can give you money. Right now we have 1500 companies connected to that. We’re tracking almost 25 billion real time and private SaaS company annual revenue, and almost 30 billion in expenses.
Expenses are greater than revenue because some of the companies that have connected have raised VC, so they spend more than they make. It’s a massive data set, which allows us to have a very good credit score, which allows us to really understand SaaS companies, even at fairly early stages.
So Courtland, my goal is to be able to like a year from now, almost close my eyes and say anyone that hits $10,000 a month in revenue, that’s connected to a Founderpath, I can write you a $30,000 check at a very low interest rate.
You click a button, you take the money because what happens is Founderpath then become basically on the balance sheet of every SaaS company on earth. That’s more than 10 grand in AR and then you can help the founder do anything else they want.
Raise more debt, scale, sell, raise equity, maybe one day if they decide to go down that path. That’s the ultimate vision is how can we build founder out to the point where there are billions and billions of dollars flowing through it, getting money to early stage SaaS founders.
So I want to understand the early stages of how you built this business. I think because you started in media first, we have to understand just like the fundamentals of how you run this business, because there’s only one of you, there’s only so many hours in the day, but you’ve got the podcast still coming out.
You’ve got your magazine still coming out. You’ve got your online database, that subscription is still being updated. How’s all that working. How much time do you spend on Founderpath?
Yes. So almost all my time today is spent on Founderpath. Everyone knows Drift, Drift has a book. He wrote a book and they also just launched a podcast by the way. They do all these things inside the company. I just did those things first and now the product that they’re all promoting is Founderpath.
All my time is spent connecting with B2B SaaS founders. Some of them, it’s just the podcast episode, others the podcast episode turns into, we featured them on GetLatka and then they really like me, and then they connect on Founderpath and ended up taking money from Founderpath in terms of debt.
It just really depends. I mean, one thing I will underscore, though, is GetLatka, all the data we capture there is data that we get publicly by interviewing the founder or from press releases or things like that.
It means a very powerful dataset. A lot of times, by the way, I get these big founders on that have raised a bunch of money. They come on, they brag, they brag, they brag. They say that they’re the fastest growing in the space and I say, “Well, what’s your revenue?” And they’re like, “Well, we went from $1 to $3, it’s 300% year over year growth.” I’m like, “That’s like, not great.” And “Oh, by the way, they’re burning $3 million a month.”
Then when I hit them really hard like this, they get mad when we list them on the website, and they complain to press. Then the press hits me really hard. Vox wrote this disgusting hit piece on me, which by the way, Vox is going to be bankrupt here shortly anyway, because they don’t understand how to run a business, but it’s nasty headlines.
They saw that Nathan Latka search was increasing so they wrote this hit piece but they did call me a bestselling author and the top podcast or in the headline, they just put con man on the end of it, which was like a beautiful thing of who knows what we call that. But point being is like, GetLatka data is a whole different company, the Latka Agency, LLC.
Founderpath is a Delaware C Corp, where it’s a FinTech company, really. There’s a balance sheet business. There’s a fund that we use to do the loans. Then it’s a tech business, Founderpath, that does the actual underwriting and understanding.
Actually, Founderpath the tech company is a lot like Baremetrics or ProfitWell. We give away free analytics tools and then we’re generating a credit score to then help us understand where we should loan money to.
So who’s working with you? Do you have employees? Do you have contractors? Who is helping you out?
Yes. So on the Founderpath side I really wanted to find someone that was opposite me that was also an engineer. So I wanted to find someone that again was sort of launching and making a lot of things. I’m like, “Well, wait a second. I should just go find who The Product Hunt maker of the year was in 2016.” And his name was Mubs, Mubashar Iqbal.
He essentially is the co-founder on Founderpath. So he has done all the development work. I tell him, “Mubs, do not stop launching side projects. Connect your side projects to Founderpath to help us build better analytics for indie hackers.” Because remember, there’s a lot of people using Founderpath that don’t want to raise debt. They use it just to track all their analytics and get recommendations and benchmarks.
So we have now two full time engineers on Founderpath. I am obviously leading on marketing distribution. We have unbelievable advisors. We have a major announcement, the top bank in the world. I’m not going to say which bank, but the top bank in the world, the former CFO and CIO is actually joining on as an advisor.
We have a lot of pension funds and family offices wanting to give money to early stage SaaS founders, but they don’t know how to do that analysis. They want to put that through Founderpath since we do great analysis. So we’re growing very quickly.
Our goal is to, next year, in 2021 put out a hundred million dollars into B2B SaaS companies. This year we’ll easily pass 10 million, but next year we want to keep basically 10x-ing year over year to the point where in 2022, 2023, we’ve got a billion, $2 billion flowing through the platform.
That’s super cool. I had no idea Mubs was helping you out with Founderpath. He is a machine. He’s a previous Indie Hackers podcast guest. And you mentioned his side projects. He’s the most prolific builder of projects I’ve ever seen.
He literally just like, I think a few days ago released www.IndieHackers.tv, where it’s sort of automatically grabbing all the best and most discussed videos from Indie Hackers and putting them on one website. He’s just every week, it seems like, he’s got something new.
That’s exactly right. And that’s the exact sort of DNA I wanted on the founding team of Founderpath because he is who Founderpath is for. If one of those side projects starts to take off and gets 10 grand a month in revenue, he can juice it up by getting 30, 40 grand from Founderpath to keep scaling it. I love working with him so much. It’s the perfect sort of fit.
A business like Founderpath is obviously very different than running a podcast, writing a book, publishing a magazine. You actually have to do this hard analysis of generating these credit scores basically off a pretty limited data set.
I mean, there’s a lot there, but that’s a whole career path in and of itself, just being able to value a company and assess risk. How are you handling that part of Founderpath and how much of it is a work in progress?
Over the past four years I’ve helped founders get almost a hundred million dollars of loans from other debt providers. I would sit on the calls when those debt providers would ask, like the underwriters would ask the founder questions and I would take notes. One of the underwriters one day would say, “Well, what’s your customer concentration risk?” And I’d write down customer concentration risk.
I would then figure how to code those things into Founderpath. So basically I had this massive list of hundreds of things that other debt providers would ask founders. And I said, Mubs, we have to build this into the analysis to get the credit score. So for example, if your retention in month 13 is really poor, annual renewals is really poor, your credit score gets dinged. But if your churn is really, really low, in other words, you retain a lot of your customers keep a high credit score.
The higher you keep your credit score, even if you only have 10 grand a month in revenue, we can get you capital that is super, super cheap, like under 15% interest rate, which compare that to VCs that need to make 40% annually to be a top performing fund, 40% IRR it’s such cheap capital. The idea is not only cheap capital, but how quickly can we get it out?
We have had someone connect to Founderpath.com and in under 24 hours get a $250,000 check wired to their bank out of the system, loan is done. So fast and cheap is really what we want to build. And again, that’s not even my original idea, Amazon. What is Amazon? Fast and cheap. It’s just, I’m going to apply those same human principles that everyone wants, fast and cheap to SaaS data.
Yes. It’s pretty cool to go to your website and play around with the calculator. You just put in, ok, how much capital do you want today? If I put in, I want 250k, maybe I want to hire a couple of expensive developers.
On the left, you say, “Okay, well here’s the cost of the loan. Here’s the interest, here are the fees, $0 in fees. Here’s the interest rate, 15%. Pay it back in four years.” I can just basically click “apply” and just going to run all that magic that you just talked about.
We worked very hard on this very critical sentence. It’s maybe the most important sentence on Founderpath. What does the sentence right above the purple apply button say when you type in 250 grand?
It says, “Can you spend $250,000 today and add more than $6,958 in new monthly recurring revenue?” It’s telling me this is how much money I need to make in order to make this loan basically free.
Exactly. Exactly. So to that point --
You’ve got to put this in bold, man. It’s in light gray text. I barely can see it.
I know. We’re still experimenting, but that is the sentence. That is the sentence. Think about it, seven grand a month. Let’s do an Indie Hacker example. Let’s say someone’s listening right now with only 10 grand a month in revenue. So if you type in 30,000, what’s it say? What would the loan be on that? Let me see.
Yeah. Thirty thousand, it says --
Eight hundred and thirty-five. So if you want to get – if you’re doing 10 grand a month right now in revenue, you go to Founderpath, you type in 30 grand is what you want, the question is: “Can you take 30 grand today and add more than $800 in new monthly recurring revenue, or about 10 grand in new ARR?”
So think about that. Can you take 30 grand today and add 10 grand in new ARR? That’s $3 CAC. Most people can spend a dollar and get a dollar. Imagine taking $3. You can get $3. You just like seriously increase your valuation without giving up any equity using cheap debt from Founderpath.
Why aren’t banks doing this? Like why haven’t traditional institutions figured out how to basically do what you’re doing?
Two reasons. One, they’re FDIC insured, they’re OCC regulated, which to anyone else, what that means is the regulatory risk of doing this is too high to jeopardize their banking business. They don’t want to lose their FDIC sort of insurance by getting into a new asset class. That’s why SVB doesn’t do this with non-VC backed companies.
Give me your vision for the future here. We’ve talked about a few trends. People are paying more for content. People are working more remotely. There’s this new trend where founders are just raising more money, indie hackers are raising debt. What does the world look like five, ten years from now in your wildest guesses?
More polarization. So you’re going to on a net basis, have less volume of software companies raising VC, but the ones that do are going to be much larger rounds. And the reason is because the federal government, especially if Trump gets reelected, printing money. All that money is flowing into corporate bonds, ETFs places it’s never flowed before.
All that money, though, eventually finds itself, a lot of it, in VC funds that now have to deploy more money and generate bigger returns, which means they have to do bigger deals. They have to like an idea, and it has to instead of it being a billion dollar exit, they have to see a clear path to a $10 billion exit to write their initial check.
So everything’s going to be more polarized, but with more money in the system, if somebody understands data of software companies and just early software companies in general and founders, they can deploy more debt at scale.
So I think you’re going to see a lot more quantity, number of founders doing debt. The asset class of B2B SaaS debt will be growing, but also on the VC and equity side, that asset class will grow, but it will go to a smaller number of people at the top.
Very interesting. And what do you think about the indie hacker side of things? There are more and more people getting into this. More and more people starting companies. It’s easier than ever to start a company, arguably.
I mean, there’s so much technology to help one person accomplish so much, but there’s also, arguably more competition as a result of that. We were just talking about these distribution channels becoming a little bit clogged up. There’s so many people fighting to get you to subscribe to their newsletter on Substack. How do you see that playing out? And I know I’m asking you to speculate here.
I think about this a ton. The power. I mean, you have so much more power today, even if you’re at five, 10, 20 grand a month in revenue than you did three or four years ago. Look, Amazon brought down the price of hosting, right? Moore’s Law has generously made tech, everything much cheaper, which is why we can launch companies now without having to put servers in the back closet.
So this scarcity now in terms of building a great company is actually not capital, it’s attention. And the way you win attention as an indie hacker is by building media. So the big companies, a decade from now are going to be ones today launching media brands alongside their software products. That’s the future.
I think the same thing. I mean, and people complain so much about the competition. Every SaaS idea is taken and everyone’s making so much money, but again, if you can build some of these personality driven media businesses, whether you’re a Youtuber or a podcaster or a blogger or a newsletter writer, however you get started, you can carve out your niche.
No one can compete with you because you’re the only person with your personality. You can use that to grow into a bigger and more successful media company. And hopefully do what Nathan is saying, go on to build products that actually make millions of dollars and work nicely with their media business.
Nathan, it’s sort of a tradition on the podcast. I always ask people, for the last question, what’s your general, high-level advice to indie hackers who are just getting started, who maybe don’t have an idea yet, or maybe they’re just getting started writing the first lines of code for what they’re building.
My usual answer would be build the attention first, the product second, but we’ve beat that to death already. So I’ll give something fresh here, which is like momentum is always key.
The difference between, in my opinion, Elizabeth Holmes at Theranos and Elon Musk, is Elizabeth was pitching a vision and eventually people stopped believing her and dug deeper and realized what she was projecting isn’t actually true and ultimately there had been fraud.
There are things that big visionaries say as if they already exist that do not exist, that don’t get in trouble and end up building billion-dollar businesses. The difference between an Elizabeth Holmes and an Elon Musk is in my opinion momentum. Do people still believe you can do it? So even at the early stages, start putting big visions out there, and no matter what you have to create week over week momentum.
Put out a big vision and follow up with the weekly momentum. Nathan Latka, thanks so much for coming onto the podcast.
Can you let us know where we can go to find your podcast, Founderpath, and anything else that you’re working on?
Yeah. So if you want to chat with me, Twitter’s great @NathanLatka. That’s L-a-t-k-a on the end. And then again, if you’re curious how much money you could get and what it would cost you just go Founderpath.com.
You don’t have to put in your email. There’s a scroll down to the second section. There’s the calculator Courtland and I were using. Just type in how much you want and see how much you can get. I’d love to work with you.
All right, thanks again, Nathan. Listeners, if you enjoyed this episode and you want an easy way to support the podcast, you should leave a review for us on iTunes or Apple podcasts. Probably the fastest way to get there if you’re on a Mac is to visit indiehackers.com/reviews. I really appreciate your support and I read pretty much all the reviews you leave over there. Thank you so much for listening and as always, I will see you next time.
Did you know Indie Hackers has a newsletter?
Sign up to get insights, takeaways, and exclusive content from each new episode, directly from the host, Courtland Allen.