Hi friends,
Greetings from London!
Today I’ll share startup updates over the past week. Especially my plan for a $1B business, which I crafted in 1 day. Then in a future postcard, I’ll share more London travel stuff.
Building a Billion-Dollar Business Series 📺🍿
Leo is “Building a Billion-Dollar Business”® while doing his “One Year of Travel, New Year New Me”®. He is currently founding a technology startup which he hopes will be the largest in the world. Follow along!
Table of Contents
Update: The engineer I recruited 2 weeks ago is no longer with us. Huge setback for Peers. I will talk about this in more detail later…
Aadhar (our engineer) told me he needs Product Requirement Documents (PRD) for every thing. This is my first time writing one, and I have no idea if I’m doing it correctly...
The designer I hired 2 weeks ago started with the wireframes:
And made a design of the home page (in light & dark mode).
Total Spent: $286.04
I started drawing some diagrams myself:
It’s quite hard as I have to imagine something that does not yet exist. I try to simulate the experience of a user (in my brain) as they use the app.
Yesterday, I crafted a vision for building a $1B business. I slept for 0 hours last night (7hrs laying in bed awake) — probably because I was so excited to share.
So I brought Aadhar and Gidon together for a meeting. This is only the 2nd time we’ve all been together on a call.
I’ll share the presentation with you guys.
Peers Presentation (6/30)
Aadhar presented a Tech Demo of the website, which he built in <24 hours:
You can visit the website live on peers.club
The classic strategy of social media companies is to raise money, acquire users, raise money, acquire users, raise money, acquire users, and repeat.
The problem is: “When will you make money?” To which the answer is forever: “Someday…”
There are a few additional reasons why the strategy is suboptimal:
Users are not paying you so you are running on borrowed time. By relying on outside funding to sustain your business, you are stressed and not in control over your own destiny.
Every time you raise money, you’re giving away a part of your company.
Competitors can swipe away your users. From Feb to Mar 2023, BeReal’s users dropped from 10.4M to 6M DAUs (-42%).
While this strategy may work (eg. Instagram was acquired by Facebook for $1B with $0 revenue), it can also fail (see dozens of failed companies). Fun fact: Twitter has lost $1.3B from 2010 to 2021. What a terrible business... I’m here to make a billion dollars, not lose a billion dollars. 😂
I propose a new strategy, called:
We’ll do so with a Creators-First Philosophy:
We align our incentives with creators.
When creators get paid, so do we.
On Peers, creators will earn the full $5 from a $5 subscription.
How does this work? (example)
By prioritizing web (not mobile), we can avoid the 30% fee that Apple or Google takes, as credit card processing fees are way lower. Creators will receive the full $5; Fans will pay the difference.
Our Go-To-Market strategy is:
We’ll onboard creators from Gidon’s talent agency onto Peers.
Update: I was told this isn’t a viable option, as there may be some legal issues involved. Regardless, the general strategy still applies.
Now the path to $1B…
How much annual revenue do you need to be worth $1B? (Guess)
Probably around $100M…
So how do you make $100M?
Let’s see if we can do it through subscriptions.
Twitch has ~5.6M subs (2023).
Patreon has 6M patrons (2020).
If we assume Peers has 5M subs, averaging $5/mo, and we take 10%, then our annual revenue is 5M * $5/mo/sub * 10%/transaction * 12mo = $30M.
Gidon & Aadhar both told me my numbers are wrong because apparently— revenue is based on the total subscription price and not on the percentage we take.
If that’s the case, then even better. Instead of $30M revenue, we are at $300M revenue.
I thought subscription revenue was similar to Gross Merchandise Value, but perhaps I’m wrong?
Can you help?
For example, if fans buy a $5 subscription, and $4.50 goes to fans and $0.50 goes to Peers — then is our revenue $5 or $0.50?
Somebody help! It’s a huge difference (factor of 10). Please do tell me if you know the answer!
We can also bring influencer marketing to Peers.
Imagine if brands can write a customized post / copy / image that is endorsed by the creator and broadcasted to all of their superfans at once.
Imagine if creators can scroll through their inboxes and click one button to receive $20k bid.
We can introduce an artificial scarcity (eg. 1x branded post a day) to preserve integrity, avoid spam, and maintain price.
If we capture 10% of the current YouTube marketing spend in the US & UK, then that’s $120M. If we take a 50% cut, then that’s $60M in revenue.
We’re pretty close to a $1B company now…
Note: I haven’t included revenue from tips, even though it is a core feature — mostly because I don’t have clean data. The closest analogy would be Tencent Music, which makes $3B in revenue from tips / micropayments. If executed correctly— I believe tips can surpass subscription revenue.
Of course, we plan to expand:
Creator Expansion. We’ll bring on creators from TikTok, Instagram, Facebook, and Snapchat.
Regional Expansion. We’ll be accessible in LATAM, EMEA, and Asia.
Feature Expansion. We’ll add Badges, Merch, and eventually NFTs.
Market Expansion. Unless WW3 happens, the creator economy will grow & influencer marketing spend will increase.
Yay a billion-dollar company. My job is done.
After this segment, Aadhar wanted to address his future association with Peers. We had a 15-minute discussion that ended with ‘Let me get back to you.”
……….
Ugh, I felt sick to my stomach.
I had to go outside and take a walk.
If he leaves, then it’s a big setback for Peers. I’d have to recruit an engineer all over again. And I really believe in Aadhar. He can definitely take us there. He’s that talented. But he’s also confident in himself & makes his own decisions in life.
I knew I had to be ready to let him walk.
I knew I had to be prepared mentally.
So I sat down in a restaurant and wrote down a decision tree:
Let’s say he leaves.
“Would I want to continue?”
That’s the big question.
And I wasn’t sure…
So I said: I will evaluate after 1 week.
Turns out the left path won.
When he told me later that afternoon, I wasn’t even upset. I was actually delighted — probably because the uncertainty was gone.
He asked for 10% equity, $4,500 monthly payment, equitable market rate post-funding.
The $4,500 was the killer. I’m broke & can’t afford that right now. And it doesn’t “feel” right.
In a last-ditch effort, I offered to buy him round-trip tickets from Bangalore to Europe, so he can meet me & Gidon in person — but he declined for another valid unrelated reason.
We left on good terms, but — where does that leave me?
Well, I stopped the design work today.
The whole project is now on pause.
I have to decide if I want to continue.
If I decide to stop, then what else would I do?
Maybe I’ll write a book?
Leave your thoughts below…
Best,
Leo A
Regarding your question on revenue, if all of the money passes through your business (you collect all of it, then pay the creator their portion) then it’s all revenue and the portion you pay the creator is an expense for your business.
Also, a travel book would be very interesting.
...great read and good luck Leo...the business will always be there but the travel book is going to be freshest in your mind now...get that out of the way and then free your mind to build the business you are already thinking of or something else entirely...