How We're Raising Money for SingleBrain (The Clean Story for VCs)

0:00Neil Patel:And can I speak freely? Yeah. I don't want to talk about numbers, but here's a problem with that narrative. So going back to your business, you grow organically. You've been releasing new divisions, new products, single brain. The list goes on and on in a good way. I don't mean in a negative way. You've been seeing growth from it. You're profitable on a monthly basis. You used to put some of your balance sheet in crypto. I don't think you have much debt unless it's government debt like SBA or anything like that. So it's pretty flexible. correct uh which sba is some of the best debt you can take the best the best yeah you know uh although i think they limit you to like 5 million or 7 million or something like that for a tech business or um and the rates are the payment terms are actually very favorable compared to most banks uh or traditional debt you just can get much more dollar amount from uh a bank uh if it's not sba so where are you putting your excess cash flow right now if it's not crypto well i'm trying to hire more talent so you're just reinvesting by just growing the business

1:03Eric Siu:organic but like because it's been all organic right i'm just like now i'm like well first the fable file was like well you need to go recruit these people first go get these people right and then i was thinking about i was like wait they're all on deck they're all ready they're all bottom with the vision and then the thing is now that we've done a few of these uh single brain pilots they all want more and more and then when we showed the single grain clients they're like we showed one on the initially i went into the call just to listen to what they were saying because they're like one of the larger clients.

1:29Eric Siu:And it was like 20 minutes of just saying like, yeah, you guys are missing the mark here, da, da, da. You can be better over here. Unhappy, right? And then rightfully so. And then the last 10 minutes, I'm like, hey, how about we give this to you guys? Showed him that. He's like, showed him single brain. He's like, I'm speechless. And then he's like, we need this for everything, right? I'm like, great. So now I'm like, okay, well, if the momentum's this way, then I'm like, I need it. I should go raise something right now. For single brain and split it up. Both of them. Like single brain falls on their single brain anyway.

1:58Eric Siu:So then you'll go out and you'll try to raise money. Exactly. Yeah. Because there's a big firm in New York that everybody has heard of. They've backed like OpenAI, Anthropic, Shopify, Databricks. And they wanted to meet last year. I said, hold on. This year, I'm like, oh, we got something. So I think I'm because if I own 100 % right now and I'm raised, we raise on like everything combined together. I don't need to dilute myself too much. So, yeah. And would you take a lot of money?

2:23Neil Patel:What's a lot of money? like or how much do you want to take a range 15 to 25 so 15 to 25 million to just scale faster decent amount yeah i think it's worth it i think you should spin off single brain into a separate company i know it can be separate and the raise i think you will actually raise quicker and you would lose less and give the reason i have a sense for

2:49Eric Siu:what your reasoning is i don't want to guess it yet but you give the reason you give the reason because I think I know what you're talking about. Go ahead. Okay, so half your company,

2:59Neil Patel:forget the revenue split. If you just look at it, and I'm pretty sure the agency actually does more revenue because it's been around longer. So majority of your revenue is an old school model that has a terrible valuation. The new company, Single Brain, has a lot of potential. It doesn't have the revenue profile of your older company, but it's much more sexy. You can raise money based off of vision without existing economics. If you include your existing company, it muddies the water because some people pay you for the old business, some people pay you for the new business. Investors like deals with no hair, that are clean, that are simple.

3:40Neil Patel:And I actually believe it would be easier for you to raise money just for single brain. So second, if I think Eric is a good operator and entrepreneur, but would you agree sometimes things go bad that you can't control for all entrepreneurs? Elon Musk had a lot of rocket failures before he had some success, right? We all take risks. I don't care if you're Elon Musk or Mark Zuckerberg or Bill Gates, everyone's had failures. No one has 100 % batting average. If you do, you're not really taking enough swings. If you keep them separate, you also will have an agency. You can hire someone to grow it and you'll still have a business that is owned by you that grows that doesn't have a lot of money being raised against it because if something goes wrong for the investors to get back their 25 million let's use that number they would take everything and you would get nothing for 10 years plus worth of work and i look at it as and i know you're willing to take that risk if you had the agency separate i don't think single brain needs 15 to 20 i think you can get $10 million on a round with great terms, maybe you'll lose 20%.

4:52Neil Patel:You can even do it on a safe. You go push really hard on it. And then six months to a year later, you go and do a bigger round at $30,$40 million on single brain and you spend your time focusing on that. So we should unpack a couple of things for the audience here.

5:07Eric Siu:So the first part, there's two parts that Neil had here. The first part is exactly what I thought he would say. It's the story. When you have a story that the investors can get around when something's hot, they love things that are hot, right? They're going to pile into that. Now, the second part, I didn't know your angle on that. And I think it's actually a very smart angle. But here's the thing, the challenge with this. So the firm, the one that reached out to us a year ago, they're all in on the services as software narrative. Because you saw Sequoia talk about it. You saw Andreessen Horowitz talk about it.

5:37Eric Siu:You saw Y Combinator talk about it, right? So they're all in on agencies doing this. So I would need to gauge him, this guy, to see how he really feels, like together or separate right to your point it's cleaner if it's separate and i would prefer it to be separate because then it's like i still have 100 of this thing over here that's cash flowing it's a lot easier um uh do you want me to introduce you to vcs i'll think i'll think i want them to all bid against you so yeah i i can introduce you to some but keep in mind west coast vcs are a little different than uh than east coast vcs so west coast vcs they tend they're like lemmings they follow each other right and then um the east the east coast ones are they They just go where they don't go.

6:18Neil Patel:I know investors in all places of the world, but if you want some intros, I can make some intros.

6:26Eric Siu:I'll take them. I already have a couple lined up. I'll take even more. I was going to ask you anyway.

6:30Neil Patel:Yeah, just remind me tomorrow. I'll do some text intros, but just go with the narrative of single brain and just say, hey, this is where I want to spend my time. People will love that narrative. It's an easy, clean pitch, and maybe they don't give you 10 million, maybe they give you 7 million or whatever, but if you just take that chunk of money to get started you can grow extremely fast because you don't have to be profitable people love the narrative and just go push hard you know what

6:54Eric Siu:the other thing is i saw yesterday one of like a kind of single brain adjacent competitor 136 million dollar round right and then i saw chamath for his services business 132 million dollars i like what is going on chamath was able to raise a lot of money i believe because of his brand

7:10Neil Patel:relationships yeah yeah and that was uh that was not so good that was a salesforce led round yeah mark benioff and then uh yeah which david sachs yeah but uh and benioff posted something on x with him and chamath i forgot where they were in europe but it was something oh they're like partying or something no not partying it was just more like hey with one of the besties or something like that yeah you know benioff wrote him a check for benioff that is not a big check i'm curious i

7:35Eric Siu:mean those of you listening right now do you like this format more where we're kind of just like shooting the shooting the poopoo or because i i enjoy this because it's a real conversation

7:42Neil Patel:so yeah yeah but i can definitely i i have some solid introductions for you for people take time one of you met remember we went to a dinner at avra with one of the buddies that are an lp and they're fun yeah we're we yeah he's chill yeah he's his deals in europe he'll fly to him and all that kind of stuff he has like some amazing lps in his fun but um are you an lp uh-huh okay but like uh i don't want to make you money why not i'm just kidding i don't know what fund he would invest in some of the funds i'm not an lp in and so i probably wouldn't make money in the deal you're doing but i'm an lp in some of his older uh funds yeah it's okay you're welcome to invest as well neil but i i think that would be a really good fit there's a lot of people that can do like seven to ten million dollar rounds and just be like go because it's a huge idea and i

8:28Eric Siu:think people love it it's not a i think it's great so i think neil's number two is actually a great idea. My only issue is with the ones that reached out, especially that company that this one's well known. Again, if they want services, software as a narrative, my sense is most VCs aren't going to want that. And it's going to be cleaner. But some of these people that are in on that narrative,

8:47Neil Patel:it's going to be different. Here's a problem. And can I speak freely? Yeah. I don't want to talk about numbers, but here's a problem with that narrative. They're going to look at, hey, single brain, oh, you're doing this narrative. Cool. You already have enough cash flow. I want to see your growth rate from implementing you're talking about when they're combined right when they're combined because the problem is already combined i don't think the growth is going to be appealing enough for them to write a 15 to 25 million dollar check because you have too much legacy revenue yeah and it's not like you can switch it all over the next day and make it all this new ai enabled service type revenue so i believe if you just created the new co that just did this you've already been building a good brand i think it's a much easier sell i don't like by the way, this episode was great.

9:29Eric Siu:You know why? Because you learn about how, so Neil has this ship right now, right? And he's like, okay, well, what do I do with the cashflow? Well, okay, what's going to grow the fastest? Okay, probably maybe SpaceX stock is going to grow faster, right? For me, it's like, well, what's going to grow faster? Well, I have this new thing right now that has the wind behind it, right? And then it's about how do you structure this stuff at the end of the day?

9:49Neil Patel:So yes. And Eric and I, although we're similar ages, we're in different stages of life and there's no right or wrong stage um i have kids they're growing they're they're growing up um i also have been an entrepreneur a lot longer than eric 14 years longer so i'm just in a different stage in life like eric created single brain i think it's a cool idea i don't have it in me to do another one like you don't even have it in you to work when you're 25 you're like i don't want to do the work well no when i was 25 i was working a lot of hours and I would still get my hands dirty. When I met you, you're like, hey, hey, I don't want to do the work on this one.

10:27Neil Patel:Can we find someone else to do the work? That's true. But some of those businesses, like the retirement home community, our online websites, like a place for mom and stuff, they weren't passion projects of mine. I was always willing to put in the work when I was younger into my own businesses that I was 100 % owner in or 50 % owners that I truly loved and I was passionate about. But there was a lot of businesses like, hey, let's go create an insurance lead gen business or...

10:53Eric Siu:All right. So I wanted to take a moment to tell you about my podcast co-host, Neil's agency called MP Digital. And they work with a whole host of global companies or a global organization. Also, Neil has SEO tools such as Ubersuggest and Answer to Public. All you have to do is go to npdigital.com to learn more. And we'll see you on the other side.

11:12Neil Patel:A place for mom competitor for... We made a poker site. Or a poker site. Yeah. Those businesses, I never had the passion on those subjects. So I never cared to put in a lot of time, but I was willing to put in some resources like money specifically nowadays i'm not willing to put in a time into a new business

11:29Eric Siu:like i just nor do you nor do you need to yeah i i think the passion is also that the passion of

11:35Neil Patel:compounding your money is more fun it's easier for me to just take profit that i'm making and dump it into like spacex or the stock market than it is to go work and you nailed it it's easier for me to make money off my money at this point in my career in life than it is to go start another company. I look at that as just painful. I look at it as just deploy the money I make every month and why grind it out? Now, I probably will make less money because of that, but I'm okay with that. If someone sends this clip to your wife where you said, I'm okay, she's going to hold it to you. No, but she also knows that I enjoy working.

12:11Neil Patel:So like when I travel and go to conferences and stuff, it still it breathes life in me I can't sit at home and do nothing but when you look at it when I speak at conferences and network and new meals and all that kind of stuff that's a lot of hours of my week but to me that is not working that's just chilling with people I like and having fun and networking and just shooting the shit

12:36Eric Siu:well I'll come back to how we spend our time at conferences because I want to call you up for this so we well let's just talk about it first So Neil's an Indian person. I also had another Indian friend that spoke at one of my conferences. And Neil and him both spoke, okay? And the other guy was like, I saw him watching every single talk. He was like fully engaged for two days, right? Yeah. And he's like, you know, Eric, I'm just a student of all this and I love it. I can't stand people that come in and just like, they just do a talk and they leave, right? And I was just thinking about you because Neil comes in and just leaves.

13:11Neil Patel:But anyway, that was just - Not leave the conference. I mean, sorry, not leave the city, leave the event. Yes, leave the event and then you do other meetings. I'll do other meetings or even then I chilled with other people during lunch. We're talking about deals and stuff like that. That I enjoy. I do not have fun in listening to sessions. I'd rather send one of my team members and have them listen to sessions and take notes and then implement whatever they learn.

13:33Eric Siu:So speaking of single brain right now, I'll tell you kind of the interesting that we're doing with this. So keep in mind, guys, this is managed revenue agents that we build for clients. When we start with them, it's a pilot. Okay, so it's like, okay, you pay us, I don't know, 25 grand or something for a pilot, we do it for 45 days, right? And my CTO and I were on the call. Then what happens afterwards is we start to charge like a monthly fee, like 510 1520 grand or whatever. But after that, Neil, because it's so ambiguous, it's like, Oh, Neil, you want us to say, Oh, your your anthropic bill is$10 million.

14:01Eric Siu:Okay, what if we cut that by 90 %? Will you pay us 5 %? Okay, we get a performance on that, right? Or if it becomes, Oh, you want more creators right now? How much are you paying for creators right now? $500 per creative? Okay, we'll charge you$50 per creative? Oh, how much are you paying for this? So it becomes more outputs and outcomes based by just saying there's a tier. It's like pilot, then there's a base fee. And then it's like after that, we'll negotiate. And I think a lot of outcome based pricing is coming for stuff like this. It's just you can't map it out immediately because it's too early.

14:29Eric Siu:You can't go for the ask immediately. So you go for the pilot first, then the base, and then you go for outcomes.

14:34Neil Patel:I totally agree with that. And I think it's a slow roll. It takes time. People have to be patient for many years before this fully gets implemented. Yeah, totally.

14:42Eric Siu:And I think that's a boon for me. I think that's a boon for you as well. Yeah. And I wouldn't be surprised if you buy a bunch of these implementation companies as well.

14:50Neil Patel:We're already starting to look for some of them.

14:52Eric Siu:Yeah, I'm sure.

14:53Neil Patel:The problem right now is everyone just wants crazy multiples. And I'm like... What are they asking for? Someone asked me for like 25 times profit, 20 times profit. I'm like, no, thank you. And there's a lot of them popping up. And they're all like, this is the new future. I'm like, cool. They're like, it's so well. We have so much demand. You look at them every month. You're like, okay, so where's your growth rate? where's the crazy growth that you're telling me you have so much demand? What is the crazy growth rates that they're giving you right now? Some of them are telling me like they can triple every single year and we're seeing more.

15:21Neil Patel:Well, they're not. We're seeing closer to like 30 to 40 % growth for most of them. For a year? Per year. That's not triple. Never. I'm like, no one's going to give you 25 times because growth is going to slow down as a ton of competitors enter the market. There's also going to be more demand, but people are going to be willing to pay a lot less for this than they are willing to right now. I think in the future, or let me rephrase, people will spend more money on it, but for the same project and the same hours, I believe in the future, people are going to be wanting to pay less for that because there's going to be more optionality.

15:57Neil Patel:There's going to be more efficient ways to do it. People have learned a lot from it. But in total, in aggregate, I believe companies are going to spend more in total on it.