Why GEO Startups Are F**ked

0:28I do want to talk about all these GEO startups, right? They're still to Constant Contact, right? Their current AR is only$50 million? Well, that's 2015. This is old data. SEMrush, so current AR is higher than this. This says 171, but it's higher than... It's$400 million. Yeah, yeah. But they raised$40 million, right? And then you have AirOps. They just raised$60 million,$8 million ARR. And then Profound 2024, they raised$60 million,$3 million ARR estimated, right? Peak AI just raised$8 million and$715K ARR. My point is how... Wait,$750K? Yeah, 715K ARR. It's probably higher than that. And they raise$15 million.

1:02$8 million on peak,$60 million for Profound, and then basically$60 million for AirOps. TechCrunch, GEO.

1:14I don't know why it's putting geothermal. I'm trying to type in GEO on TechCrunch. As you pull it up, if you look at traditional SEO platforms built in pre-2015, they raised$126 million combined over 6 to 8 years. AIGEO tools 2024 to 2025 have raised$168 million in 12 to 18 months. Only$11.7 million in proven ARR. And so that's 0.07x revenue. I don't know what Profound's doing in revenue. There's another one that's called Scrunch. Oh yeah, yeah. Did they raise money? It's P-E-E-C. That's what I said, peak. I said it. That's what I said. Oh, but mine is they raised$21 million. Even more. So my point is, I'm like, my thing is like, are these GEO startups like, are you fucked?

1:59Like, what is going on here? Because it's point zero. Annual reoccurring revenue is now more than$4 million for peak. Great. So here's the thing, though. If we go back in time, pre-2015,$126 million raised for traditional SEO platforms. Now, the revenue now is a Bright Edge 120, you know, SEMrush 400. Let's just combine those two, like 520. Let's add an HRS. Well, they didn't raise money. $520 million, okay? So you basically have like a 4x revenue per dollar raised. On the AIGEO tools right now, you have 0.07x revenue per dollar. Now, that's not saying they can't figure out some new things to grow into it.

2:35But I'm just like, what is the moat here? Like everyone's talking about LLM service tracking, all these things. HubSpot bought a company. There was an analytics company, Amplitude, that gave away a lot for free. We're giving stuff away for free. We're building around this area too. So like, what is the moat? There's no moat. I do. You know what? I actually like the spot that you're in and I'm in here because basically you upsell them to services and you're okay. So we have the infrastructure for this. Yes, because what I believe is going to happen is these AI tools, we're seeing it. They have these content writers that help them get quick rankings.

3:07And it's not going to be as effective unless you combine services like digital PR and link building. Some of them are doing reciprocal link farms, which I don't think is going to last. the only real way to keep scaling this in the long run as these algorithms get more competitive is digital PR you and I can offer that our competitors are going to struggle to build that infrastructure we need CRO too, we need a human in the loop to review we need all this other stuff and then it just grows and grows I think the model here, if any of them are listening is you want to build services in the back end and that's how SaaS eventually goes into services anyway and it becomes service as a software one of my favorite people who speak on this is Ryan Dice and he's like, man everyone takes their agency revenue to go build software companies because they think it's more lucrative and sexy and their services business is funding software that keeps losing money and their services business keeps growing because it's easier to generate revenue and scale up i'm not saying it's more scalable it's easier to just hire more and scale up than it is to collect software revenue because it's so much more competitive and expensive and the pool for people paying for services is just much more massive.

4:16Yeah. And I agree with him on this. It's like people don't want to do services because - Dude, enterprises are used to paying for services. Dude, I have a friend who has a service-based business. He's been in business for, call it roughly how old I am. And he didn't take any outside money. Take a guess how much profit he makes on an annual basis. He's the only shareholder. 200 million a year? No, around$500 million a year. I was going to go 500 first, but the way you said it made me want to go lower. Okay. No investors. Uh-huh. No debt. Yeah. He doesn't really acquire companies. He's acquired some over the past, but doesn't really acquire companies.

4:56He does every once in a while. He's just been doing it a long time. Has over 10 ,000 employees. How long has he been doing it? Roughly the age I am. So roughly 40 years. 40 years. Yeah. Roughly. Yeah. You just keep compounding. Yeah. This is why, aren't you so grateful to have what you have right now? Yeah. Are you so grateful you didn't sell? Yeah, I'm happy. But 40 years, that's a long time. And he's not on the Forbes list. No one would know that he has money. But 500-ish million a year in profit. That's an exit every year. That's an exit every year. That's so much. And let's say he doesn't collect all the money and he only sees 300 because of cash flow.

5:33Who cares? He can't even spend$300 million. You buy whatever you want. Like that's like filthy rich. And if I had to guess, because he's still growing, the company, my guess is probably worth, call it$10 billion. You know, some could say less, some could say more, but I know some of the offers that he's gotten, some of the offers were way better. They do quite a bit in the AI space right now, but let's just say the valuations are lower. So let's call it, you know, $5 billion to$10 billion valuation. To be conservative on the five, I think he can do potentially better than 10 because I've seen him get offers better than 10.

6:13But yeah, it's really good just having optionality. And like you said, you get to exit every year. Dude, okay. So Dyson, I think the founder owns the whole thing basically because nobody would have given him money. He failed for the first 14 years. Dyson, the vacuum. Does he own the whole thing? I think he does. So 2024, 6.6. This looks like euros here. 6.6 billion in 2024. 2023 was 7.1. I don't know what 2025 was, but sluggish economy growth. What does it show you? He owns 100%. Yeah. And dude, this guy failed for 14 years. And he, I think he had over 1500 vacuum inventions and he kept working on it in his back shed.

6:50Nobody believed in him. He kept trying to get money. He couldn't get it. Same thing for Raising Cane's. How old is he? Okay. He's worth$14.8 billion. How old is he? He's like 76? I'm trying to pull that up. 78. 78. Okay. So my point of Raising Cane's, this guy's like fairly young right now, right? You know that have you had the Raising Cane's chicken fingers ever? I didn't even know there's a Raising Cane's here, but I saw his story. He's worth a crap load of money now. Okay, so that company's worth$20 billion. He didn't take outside money. I don't think he took like very small outside money to save the company.

7:16He took like a bunch of debt that he shouldn't have taken, right? And he almost lost everything. And so but he actually said this, he's like, look, if you end up selling your company to private equity, your baby will no longer be special. And that's why he always wants to be involved. That's the same thing with Dyson, right it's the same thing with with with what you're doing too and so uh trader joe's you know what trade you know trader joe's remember um it started in monrovia which is right where i grew up in arcadia okay you're right 22 billion dollars i didn't know he was worth that much i knew he was worth like five billion or something like i've never had it i actually want to try it yeah me too now so when you land in lax there's one right there um maybe i'll stop by next time which term oh you just think by the airport not inside by the airport yeah okay trader joe's the founder sold, this was like in the seventies.

8:01Um, and he wrote a book about it. He wrote about book about his journey. The one thing he regrets at the end of that book is what? Selling. Exactly. He regrets selling it. He did consulting and real estate and he sold his baby. And he, what he says is he see people, he sees people that sell and all he sees is regret most of the time. So how lucky are we to be in control of our destiny to keep compounding for a long time. And that's what we want to, The message I think is just keep going. I actually have a bookmark on my ex thing. It's no longer called philosophy. It's just keep going. Because I realize all the shit that I save that you see me post on my Instagram is just keep going.

8:35Yeah. Yeah. I'm with you. Just keep compounding and going. If you love what you're doing, I think the moment you don't love what you're doing and you really don't want it and you can look yourself in the mirror and be like, I really don't want to do this anymore. But I'll mean sell it. Totally fine. Yeah. Totally fine. you have something you want to add? no okay I'm going to pick another company here so what's a pop quiz for you okay what is the best bootstrap company ever that does 17 billion dollars a year and 3 billion in profit? the best bootstrap company? or just tell me which company do you think this is?

9:10I know the biggest bootstrap company but that's not them yeah go ahead go ahead probably Cargill Cargill Cargill Cargill is probably the biggest bootstrap company but they don't do that I think they do 160 billion in revenue okay Family owned. Do you know what... Here, watch. I'm giving Neil a headline over here. Inside billionaire Gabe Newell's new$500 million super yacht, which has a submarine garage and its own hospital. Who is this guy? I have no idea. You didn't play games. Of course you wouldn't know. So I would know. Valve. So Valve is... Half-Life? Half-Life. Yeah, yeah, yeah. So Half-Life, which led to Counter-Strike and everything.

9:43So Bootstrap... Wait, he still owns it? Yeah, yeah. So$17 billion in gross revenue,$4 billion in commissions paid out, $3 billion in profit, only 336 employees. $3 billion in profit last year. Or in total. Yeah. Last year. Yeah. Look it up. Wow. What's his name? Gabe Newell. N-E-W-E-L-L. He's 63 years old. Mm-hmm. And they have one of the greatest. I love it. Forbes is like he's worth$11 billion when he does$3 billion in profit per year. How many years has he compounded the profit? Yep. But yeah. By the way, let's talk about the Forbes thing real quick. Like you can, it's nice to look at, but you can never trust it.

10:22No, it's so off. Yeah. I know so many people who are on the Forbes list that have money. Dude, remember that California's trying to pass a wealth tax where they charge people. That didn't go through. They're going to try to get on the 20 to 26 belt. So if you have over a billion dollars, you would pay five, you would pay 5 % of your net worth and you owe them the cash. And whatever you defer, you pay I think like 5 % or 7 % interest on per year. So it compounds. I don't know if it'll pass. And I'm not saying it should pass or not. I'm not trying to get into a political discussion. But here's what's interesting.

10:58Forbes does this rich list, billionaire list for marketing. So someone said there's like 200 billionaires in the state of California or 200 and something. I don't know where they're getting that from. But I'm assuming it's someone like Forbes. I could be wrong. I personally, like personally know seven billionaires. All right. That are close to me in Southern California, not California. I'm talking Southern California. That's a good amount of billionaires. Yeah. And like really know them. And I know their business as well. Cause like they'll hit me up for marketing advice. And some of them generate amounts like 300 million a year in profit with no investors.

11:39and no one knows who they are and they have ugly, boring businesses. And they've been doing it for many years and they own hotels and apartment complexes or they parked in a lot of stocks. And they've had these businesses for a long time. Most of them are quite a bit older than me. Call it 20 plus years older than me. I'm 40, so contacts are 60 plus. How many of them do you think are on the Forbes list? Zero. Two. Out of seven. Out of seven. Yeah. So I think - And out of the ones that I know who are worth the most, the Black Friday Cyber Monday weekend is where systems get stress tested. Traffic surges, inventory moves fast, and every second counts.

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12:49This Black Friday, join the thousands of new entrepreneurs hearing for the first time with Shopify. Sign up for your free trial today at shopify.com slash marketing school. That's shopify.com slash marketing school. Go to shopify.com slash marketingstool and make this Black Friday one to remember. The three that I know that are worth the most are not on there. Are not on the Forbes list. Because it's better to be wealthy anonymous. Yeah. But I think part of the reason us saying this too is like if you look at compounding, which is what Neil just mentioned, if you're at a certain, even if you're like, let's say, I don't know, 40 years old or whatever, and you have a nice exit or something like that, you're going to compound to a very healthy amount over a long period of time, unless you're like really stupid with your money.

13:32So guys, long term, if you love what you're doing, stick with it, keep compounding. And there's no doubt that you'll do very well. Yeah. Dude, the richest guy that I know, there's a group of four of us that are on a text thread. And he was trying to figure out how to grow his declining business. And it's only been declining during the downturn, but it's been doing well. The business is more than 30 years old. And he's like, man, we're having a really bad year. I need help if any of you guys can you know give me advice on growth or any ideas on how to implement AI to make things more efficient he's he's on the older end and he's like Neil what can I do to get more business from chat GPT and then I'm like I'm like is it really bad this year and he's just like yes profits down we'll only do 670 I'm like 670 670 he's like yeah a million I'm like and profit And he's like, yeah.

14:28And I'm like, that's really a bad year. Perspective, right? And I'm like, I didn't ask him. And I'm like, I wonder what a good year is like. And it's self-owned by him. No one else. Probably like 1.5 billion. Yeah. Even if it's only a few hundred million more, he probably gets close to a billion dollars in profit on a good year. And by the way, guys, we're not saying money is everything because I do believe that if money is your goal, you're going to live a shallow life. And Neil and I have seen this. Like we have very successful friends that have some of the ones that are wealthiest, they end up being the most miserable.

15:00Right. So money, we're not saying money is everything, but money is a nice scorekeeper. So that's what it is. So Naval has this topic here. Actually, no, I want to talk about this because we're talking about friends right now. So before we started recruiting, not recruiting, recording, we talked about the difference between a real friend and a transactional friend. And a real friend, we should define this. So in your mind right now, what is a real friend versus a transactional friend? A real friend is someone you can count on. I really just break it down to that. Like if I really needed something from you, even Noah, who's recording this, I don't hang out much with Noah.

15:39I actually really hang out with you more so when we record it than anything else similar to Noah. But I genuinely, if I believe I needed anything from either of you and I texted you, I think you both would genuinely do your best to try to help out. And not think about what I can get back from it. Yeah, totally agree. To me, that's a real friend. You don't have to see them all the time. They're there in your time and ease, whether it's, I'm not talking about financial support. Sure, if they can help out financially, sure. But I'm talking about more like emotional, you can rely on. They're there like if someone gets sick and you need help, whatever it may be, your tough moments in life.

16:11And people usually don't have a lot of them. And people may think like, I got a ton of real friends. Well, when shit gets really bad, excuse my language, if you reach out to most of them, most of them will not be there to help you out in your time and need. They'll disappear. Exactly. Correct. And then let's define a transactional friend. What do you think a transactional friend is? And then I'll give you the story. Transactional friend is you only hit them up when you need something and they probably hit you up only when they need something. And this is weird because we've made a lot of internet friends.

16:43And I would say most of our internet friends that we made are transactional friends. Whereas some, there's a very small percentage that become real friends. So when I was in Thailand with Patrick Campbell last year, had a ProfitWell, we were talking about real friends versus transactional friends. And he's like, a transactional friend is someone who always wants something. But a real friend is, to your point, going to be there no matter what. And then we mentioned someone and he's like, this guy's very popular. Just leave it at that. We'll just leave it at that. He's like, this guy's extremely transactional.

17:16And he looked at me, I said, Eric, you know, you're different. You're a transactional friend when you start, but you're a real friend once you let people in, right? It's kind of similar to you too. You don't let many people in, right? But my point is, you know, we talk about business, we talk about money, we talk about being more successful, things like that. But what matters ultimately at the end of the day is the real friends, right? Because Neil had a situation where someone would always go to him and ask for something, always. He would be very engaging, right? But the moment Neil goes back to him and asks for something, that person ignores him.

17:48Not only that, actually, I'll just leave it at that. Well, I don't want to reveal any more. But the point is, you don't want to go in life just thinking about money and then just thinking about how you can get more out of people because people can see right through that and they don't want to engage with you anymore. And by the way, I wasn't asking for anything that's material or anything like that. It actually would have helped them out, but I was just curious and I messaged them. but for me I like the definition of how you see friends versus transactional friends I look at it mentally as friends and acquaintances so to me you're not a friend unless I can really count on you and you can count on me and I don't care if you're rich or poor if you're a shit person you'll never be a friend and I'll give you an example of this and it doesn't have to be something that you do for me.

18:38A lot of it has to do with your character. So I was meeting with someone who was trying to convince me to let them manage my money. And they're like, you're married, you got kids. What's going to happen with your legacy? Let me manage your stock portfolio, your cash, help you set up, you know, will and trust. And all of a sudden I'm like, dude, I already got a lot of this stuff all figured out. And they're just like, who's going to manage your state, take care of bills when you're gone. Don't you just want peace of mind? And they work for a really, really massive bank. Everyone's heard of their name probably globally.

19:12That's how big the bank is. So they're trying to pitch me. They bring me into their office. I don't know how expensive their office is, but it's probably over a billion dollars. So it's super expensive. And this is just one of many offices, right? This is a really large organization. So when I'm going in there, they take me out to dinner. They're trying to wine and dine me, add a few buddies with me, because sometimes I travel with friends. They were really rude to the waiter. And they told the waiter, hey, stop interrupting me. I'll tell you when I want you to come over. Can't you see we're talking business?

19:54And usually when you get wined and dined, they try to pay for everything. And they were. They invite me to things like Formula One races, golf tournaments, tennis tournaments. I'm talking about the final, right? These are really expensive tickets. Yeah, all this stuff. And I get invited a lot by this bank because they want a relationship. And they even offer to invite my dad and get him a ticket. And I'm like, dude, I'm good. I'll just buy my own ticket. at that dinner, they tried to pay for the meal. I refused to let them pay for the meal and I paid and I tipped the waiter double, right? And you know me, when I eat, I'm a really cheap date.

20:35Would you agree with this? Yeah, yeah, yeah. Chicken, chicken salad, always chicken salad. Chicken salad or just chicken. Or if I go to sushi joint, it's avocado with rice. I don't even eat fish. So like, and I don't eat much. No, you agree with this? You're undernourished. Yes. So I just, I don't really have appetite. So I'm a really cheap date. So if a bill comes out to$100 of that, maybe 20 bucks is me. So if I go to an expensive place, I don't know what the bill was. Call it, you know, like six,$700. No more than 40, 50 bucks of that was me with four, four people. And I will never work for them and they want to be a friend with him, work with him or her.

21:14Yeah. Right. and I will never let them be a friend and they still hit me up and they want to hang out because friendship to me is not how successful you are it's not just how you can rely on them because I could probably rely on this person if I needed it but they're just a shitty character it's just like if you don't have a good head on your shoulders why do you want to be around that person and I think the same goes with business like when people talk to me about growing your marketing and make it successful or growing your business, dude, yes, we both want people who grind really hard. We want people who are smart.

21:56We want people who understand systems and processes and can execute really well. But if they're not a cultural fit and they don't believe in the vision and we're not similar from that aspect on our values, screw them. I don't care how good they are. I don't want to work with them. And by the way, you guys might be wondering, like, well, how does this relate to business or marketing? It has everything to do with it because everything is driven by relationships. And your life is so, your time is so limited that you don't want to waste your time spending it with people that have low character. And it's not, it takes work to become kind and it just shows you that these people didn't put in the work, right?

22:31So that's why we think it's important to talk about friend friends versus just acquaintances at the end of day. It's everything. Because we realized as we've gotten older, relationships are everything. yeah so that's why by the way guys like just because you become famous as a content creator or whatever doesn't give you permission to become a transactional person because it's so easy to see through that yeah so easy yes and what is what feeling does it give you it gives you the it yes it gives it anyway guys that's it for today please don't forget to rate view subscribe and we'll see you tomorrow