You could start a company this weekend, w/Noah Kagan

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1:20My father, he was an entrepreneur. He sold copiers, which nowadays people don't know what those are.

1:30And he was an Israeli immigrant. Yeah, he was an immigrant, didn't speak English, and just hustled. Noah Kagan is a serial entrepreneur. By my count, he's founded eight businesses, each worth a million dollars or more. He credits his dad for his risk-taking DNA. I used to follow him in his truck, and we'd go and deliver copiers. what excited you about that experience what lit that fire for you i like that he was able to create as much money as he wanted i like that he could take me to this arcade park and he's like here's 20 and i was like i get to play arcade forever i don't want to lift copiers like you when i'm older but some of this entrepreneurship thing you're doing is appealing to me.

2:25And I don't think my brother had that appeal. I have an older brother, two years. His name is Seth. He's a doctor and he just, he hates it. Really? Yeah. He doesn't like being stuck to a desk or not be able to work flexibly. And that's a, that's a common theme. Why is your brother still a doctor if he hates it? I think he's afraid. What do you think he's afraid of? I think he's afraid of the unknown of like doing his own thing. But not everyone's wired to be an entrepreneur, right? So when you talk to people who are trying to figure that out, I have to imagine for a lot of them you go, actually, you probably shouldn't go start your own thing.

2:59Is that true? Or are you like, no, everyone should be an entrepreneur? I think everyone should be an entrepreneur.

3:09Noah Kagan has a multifaceted approach to helping others scale their business ideas. He founded AppSumo, which connects early-stage software makers with entrepreneurs who need affordable tools. Then there's his online courses, his popular YouTube channel, and his new book of advice for people who want to start a company. That's called Million Dollar Weekend.

3:39You've got to have incredible talent at every position. It's like this huge push. There are fires burning when you're going home. Can you believe it? Such an idiot. And then you go back to, this is totally going to be amazing. There are so many easy ways. I have no idea what to do. Sorry, we made a mistake. But you have to time it right. Oops. Working out of a three-bedroom apartment. Stuff that just seems absolutely nut balls. Ten years later, we're like, well, that's just how you do it. We haven't made it just how you do it.

4:10This is Masters of Scale.

4:18I'm Jeff Berman, your host. Before Noah Kagan became an entrepreneur, he was part of the early teams at Facebook and the personal finance app Mint. While he was excited by the growth potential at those startups, he bristled at having to follow his boss's priorities. Now he's the founder and CEO of AppSumo. The software marketplace has grown from the germ of an idea to$80 million in revenue. Noah. Hi. Hello, Jeff Berman. Welcome to Masters of Scale. I was like, man, I guess I'm scaling. This is not a humble brag. Noah says he has always struggled with self-doubt, especially during the early part of his Silicon Valley career.

5:03I think I just felt insecure at some of these places. And at Facebook, you have literally a wonder kid from Harvard. Everyone there is from Stanford or Caltech. I've barely gotten to Berkeley. Back in 2005, Noah was employee number 30 at Facebook. He's talked often about what it was like to get fired nine months into the job by Mark Zuckerberg himself. And then he was on the ground floor at Mint. If you weren't around for the Mint era, it might be hard to believe that a budgeting app was super hot. But Mint was all the rage. Noah got fired there too. I always felt like I got these like so close moments.

5:39I started a games company called Kickflip while I was working at Mint. It ended up, you know, doing super well for a while. And then, you know, if you're Silicon Valley, people say you got to be a billion dollar company, they're shitting on me for making a company where I can live a good life and make millions of dollars. Like that's a bad thing. And then Facebook banned us and our largest competitor sued us. And so I was just like, can someone give me a f***ing break? And then it just felt like it's not working out for me here. They didn't believe in me. Noah left Silicon Valley and settled in Austin, Texas.

6:13He's grown a YouTube channel to more than a million subscribers by offering tangible advice about how to build a company. His site, AppSumo, is also about helping people grow their businesses. AppSumo is software deals for entrepreneurs. but it started out as a group on for software and specifically for small business owners or today you call them solopreneurs so if someone out there is an agency freelancer starting a startup like a video editing tool it's like 50 bucks a month which is like if you're just getting started it's a pretty expensive amount you can come to app sumo we have alternatives so we go out and find tools that are more or less getting started and then we negotiate a deal lately the deals are lifetime and negotiate like$50 for life.

6:56So none of our products that we promote on our marketplace have subscriptions. But you're pre-negotiating the terms for the AppSumo customers to get access to the tools, right? Yeah. Think of someone like you, Jeff. You went out and you're in Santa Monica and you're like, oh man, I created Jeffsoft. It's a new AI video tool. And you're like, how do I get customers? And you go out and look at the market and you're like, well, I can buy ads. I can go to the synagogue and pray. I can go on Twitter and hope. Or you come to AppSumo and we We have a marketplace of, you know, a million entrepreneurs that want to buy software and you do a deal with us and we're able to help you get that promotion.

7:28Were you solving your own problem in doing this or was this more of a market opportunity that you saw? It was my own problem. I think that's the best ones to solve. I was excited. I was excited to find like, I don't know, just all these cool tools that are out there. And I kind of started more as a hobby. It was just tools that I was like, oh, can I get my own deal on this? And then some of them need help promoting. So maybe I can promote and I'll actually even get paid for that. And so for me, it was a culmination of 10 years of work to get to that point of starting the business where I was like, I love promoting things.

7:58I love deals. I love software. Maybe I can do all that. That's my career. It was never supposed to scale. It wasn't supposed to be a business with employees. It was just supposed to for me to get my freedom number so I could actually just live how I wanted to live.

8:17I love the concept of freedom number. So let's give us give us freedom number and then I want to come back to AppSumo. So a freedom number is how can you do the thing you actually want to do? And what's the minimum amount of number of dollars you need monthly so you can eventually decide to quit or not? And for me, getting started with AppSumo, my freedom number is three thousand bucks. And most people, when they realize the number to actually do the thing they really want to do is so low, they're like, huh, maybe I can do it. So how do people figure out their freedom numbers? that literally, here's what my rent is, here's what I can take my rent down to, car payment, whatever, whatever.

8:52This is just covering the basics. Yeah. Generally, when people actually do the math, like how much is your rent? How much is your living? How much is your savings? Like, oh, maybe it's not so high. And wow, I can actually get there and get the hell out of this day job because you can waste your life at a day job. And I never wanted to do that. Okay, say more. When you've been fired as many times as I have, you realize like your job is at risk of one person deciding. There's a lot of people who have day jobs, but then you have a side hustle or something that's creative, there's upside to the income, and you have control of your destiny.

9:22If you can just give up 30 minutes a week, if you can just give up one Netflix show a week, if you can give up one thing a week and you keep doing it weekly, eventually you can have that business. And look, if you want to quit and do it, great. Or keep both. I've seen people do both and it works out great. I think most people think they have to take a big risk. I got to quit, like Reid Hoffman's famous line. Jump off a cliff, I'm like, and you build a parachute. Get the airplane on the way down. Which I was like, that sounds crazy to me. Like, I've never quit my job until my freedom number was hit and my side hustle was working.

9:50And then I quit. I never took the risk. Interesting. So, okay. So talk about how AppSumo got started. Yeah. You said you weren't building it to scale. No. What happened that you're still doing this 15 years later? I got excited about the problem. I think that's the thing in business. People are kind of missing out. They're like chasing AI now or chasing being an influencer. And I think just find areas you're just like, I don't know if I'm going to ever get tired of this. And I got excited. But how do you help people promote things? What did that ignite in you? I think I wanted to help other people that felt like they're not as popular.

10:25They're not. They didn't go to Harvard. They're not the elite. I wanted to help them succeed, too, because I felt like I wish someone would help me succeed. It's democratizing entrepreneurship. We call our customers the underdogs, like these people that that have ability and they just need a little bit of light on them. And so for me, I got really obsessed and interested. But like, how do you promote these software products? So I actually tried a lot of variations before it worked. I built a software review website because I thought, okay, I'll write reviews and I'll hire people to write reviews.

10:52So that was software taco.com. After a month, no one came. Then I built reward level, which was a cross, I can't even explain it. It was cross registration software for small business software. No one used it. And then I was like, there's a site called Mac Heist. And so I saw that this Mac heist thing did like Mac bundle software. I was like, oh, that's kind of interesting. Maybe I can do that for software deals on the web, not Mac. My interest was letting the geniuses create software. And my skill and my excitement is promotion. Let me try it for web software and I'll just do one. Let me just see how that works.

11:30To test his idea, Noah went on Reddit, checking out the entrepreneur chatter and identifying what software might be useful. He saw that people wanted a way to create and share memes and GIFs. Then he found a software program that did just that. It was called Imgur. I basically cold emailed a software creator. He was a college kid named Alan. He created Imgur. He's selling it for$24. Maybe I can cold email this guy. I'll sell it for some price and I'll pay him whatever I sell and see if he's okay with it. The downside for him is pretty small. Like, okay, maybe I lose a little bit of money. And the upside is, wow, there's someone who's now a marketer for free.

12:09What you want to do in business where people miss backwards is like, where are the customers? And I knew there's customers on Reddit. That's how Noah's business model was born. A blend of an affiliate model with some exclusive partnerships. He helped promote Imgur on Reddit and beyond. And he split the money from his sales with the developer. In the beginning of AppSumo, I was launching a few products a month. It was very limited. Third-party products, not your own ones. Yeah, and so we've helped launch MailChimp, Zapier, and all these products that are now pretty mainstream. And today at AppSumo, we launch around 30 up-and-coming new products a month.

12:44Wow. So what started working? How did you get traction and go? Yeah, with AppSumo, I got traction immediately. AppSumo, our first year was somewhere 300 ,000 plus, second year is 3 million. So a pretty quick scale of a bootstrap business. Yeah. And how are you deciding which ones to launch? so we have an algorithm that we've created proprietary that will basically go and scrape the internet for all up-and-coming software tools and then we have we call them the betalings and then betalings is an internal group that tests products and then we have a marketplace so after it goes through this gauntlet which is what we call it we put it on app sumo and then our customers end up deciding which products are going to do well and not well now you know app sumo today almost 100 million dollars a year in revenue which is insane it's insane i can't believe it Why is it insane?

13:29You know, I never thought I would get to this level. It's beyond my dreams. From Silicon Valley, I think I got insecurity about like, wow, I'm good at launching. I can get to this million dollar of a product of desire. And then can I actually stay with it and scale these types of businesses out? Because I think there might be two types of scale. There's scale zero to one to validation. And then there's scale one to N. Can you take that to a larger size? I would say some of the success of the biggest companies, as much as the founders are smart, to anyone out there, they're not much smarter than you.

13:59Okay, Zuckerberg, he is smarter than you. Gates, I've worked for him too. He's smarter than you. But most of these other people are not that much better than you. But they did it. They stuck with it. And then the market they actually chose was really unique and it just expanded so much. So for AppSumo, take our business, I guess. I'm pretty smart, pretty good marketing. But there used to be 10 software products. Now there's 10 ,000 for the customers we appeal to, which is freelancers and solopreneurs. So part of just being in that wave, we succeeded. I think what's changed in my perspective as I've gotten older is that a lot of success is just sticking with things.

14:38It's just sticking with it. And guess what? You don't have to do it yourself. Find someone else that likes sticking with it. And then how do you decide? Let's say, look, I'm sticking with my day job. This is going to be my side hustle. It starts to get traction. How do you figure out when you actually start to hire someone, turn it into a real business? hand it off to someone else to run day to day? Like, where does that inflection point come in? You know, I was thinking about this a lot in that every time we've tried to hyperscale and go beyond, I guess, the organic growth curve of our company, we f***ed it up.

15:09We hired a few other people and then we got to 20 people. And I was like, what are we doing here? Because you're hiring ahead of the demand? Ahead of the demand. And I think everyone has to take a step back, like zoom out of the fishbowl or the matrix and think about what kind of life are you trying to create? So for me, I want to promote great products. I want to work with good people and I want to live my life. Like I left Silicon Valley because people were like, oh, it's a lifestyle business. I don't know. It's like I'm making a few million dollars a year lifestyle. It's pretty damn great. Pretty good lifestyle.

15:34It's a very good lifestyle. But yeah, we rushed into hiring, rushed on. We have to scale it. And we've done that. I've done that now twice where I've had some huge catastrophes in the business that I've had to pull back from. And when I was running AppSumo earlier in the years, these catastrophes, I was like, I just got to go faster and we got to get faster because this is what you hear. And we hired a CEO because I was afraid of actually ruining the business. So I brought in this other guy named Eamon and I said, just make enough money so we can sustain and we don't have to risk anything because I'm too afraid I'm going to ruin all this.

16:03Like my father had the same experience where he did well and then he ruined it. And Eamon actually approached it from like kind of, I don't know, Midwestern values, very slow, very steady. And it was this year after year, like compounded growth where it was, he wasn't trying to 10x, He wasn't even trying to 2x. He's like, let's just try to 15 % growth. But because he wasn't pressuring himself to grow so much, he had a lot more creativity, a lot more flexibility. He ended up doing like 50 % growth, then 70 % growth, then 90 % growth. And so that's how I've shifted my leadership in our business growth, where I think this year in 2024, we're trying to grow 7%.

16:38Okay. And I just got, you know, every day I get a pulse and like we're already at 25 % growth this year. Because we're not stressing on how we 10x our business so fast and try to prove to anybody else. Right.

16:51When you brought on a CEO, you're giving up a level of control. If you're going to bring on a real CEO, you've got to give them some autonomy to make decisions. How was that for you? A lot of people aspire to make a lot of money and step out of the business. For me, I think I felt a little lost when we put him in because I was like, well, what do I do all day? Were you able to let go? Were you able to say, like, okay, like if this is your vision, then I'm good with it? And that's something I'm working on because he quit. But yeah, when he was doing it, I was doing my best to step back and say, like, what's the numbers we're agreeing on?

17:26What's the vision we're trying to go to? And then let him make the calls on it. And then I think there's definitely sometimes in my head like, oh, you're not a good CEO. And that voice does come up. How do you counter it? Do things within my own control that I'm proud of and doing that on a regular basis is helpful. I was biking yesterday. I was like, I can't get to the end of this ride. It was a 75 mile ride in Texas heat. I was like, well, no one else is going to pedal for you. You need to believe in yourself. And it was just kind of like, okay. And then I started pedaling and I kept pedaling.

18:00This is like midway through. And I was like, I can do this.

18:06Mark Manson said, you're the wealthiest guy that talks about himself the worst. Or the most insecure. And I think it just, I share it more. I'm probably more open. I think you're just more honest about it. So every time you challenge yourself or criticize yourself in one way, have one positive thing just to say right afterwards. And I find that actually like a really nice hack to kind of keep reinforcing my own self-worth. You mentioned your dad lost his business. Yeah. What happened? He was, you know, came to America. He sold carpets. Then he sold these copiers and he made a lot of bad decisions, right?

18:37He was drinking. He didn't do any budgeting, didn't do any financial management. Remember at times we'd go to Costco and he's like, you can have whatever you want here or I can go to the arcade and we could play all the games we wanted. And at some point, you know, I do remember him on his deathbed, just kind of drinking Sierra Nevada's. I don't know why I always remember that. Just feeling sad, you know, and he could barely afford that place. He was renting one room in a house and it was just from a lot of his own bad choices. And I was like, well, I guess in subconsciously, I'm sure that's how I felt many years running up.

19:04So like, I'm going to do the same. Just like be reckless, be a liability, make some bad decisions, to make bad hires, just self-sabotage. So how have you dealt with that? I mean, therapy is definitely a helpful one. I would say in the first decade of Absinthe, when we're on year 15, it was surrounding myself with people who have families, people who are stable, people who show up every day and they show up on time. And so finding people around me to support me that are, you know, what maybe I consider myself weaker in. I'm sorry that you lost your dad. and I'm sorry that he struggled in his business after inspiring you the way he did.

19:43How do you imagine he would have responded to your career at this stage? I don't know. I had one of my businesses doing pretty well when he was still alive and I think he just had so many of his own demons going on. I went to him and I was like, hey, we actually made a million dollars in this business. Quite a moment. Which is insane. I thought you'd get like a confetti celebration and it just doesn't happen. And I remember I told him it and he just was like, OK, that's fine. And, you know, I think a lot of success comes from some desire for that recognition from our parents or from someone. And so, yeah, over time, what I've tried to acknowledge is I got a lot of good from him.

20:20I got like mostly no fear of asking for things and going for it. And I've got some ways that he lived that I can actually learn to avoid or improve for myself. Still ahead, Noah Kagan shares lessons he learned from his early jobs at Facebook and Mint, his own scale story at AppSumo. and why he wrote his book, Million Dollar Weekend.