3 Genius Business Ideas We're 'Borrowing' From Syed Balkhi
22 Feb 2024 (7 months ago)
- Syed Balkhi bootstrapped a company to a billion-dollar valuation without external funding.
- Unlike others, Balkhi provides specific and actionable business opportunities.
- The ideas presented are practical and have a high chance of success if executed well.
- The discussion includes insights on personal finance and a social experiment involving people's financial goals.
- Microplastics have become a concern among wealthy individuals.
- Joe Gebbia, the co-founder of Airbnb, was observed only drinking from his own glass water bottle.
- Balkhi noticed this and started drinking only glass water to avoid plastics.
- Balkhi's previous appearance on the podcast was well-received by the audience.
- Balkhi built his empire starting from a WordPress blog called WP Beginner.
- He identified popular WordPress plugins and businesses, acquired or invested in them, and grew his company's revenue to over $100 million.
- Syed Balkhi is a bootstrapped billionaire who built his company without external funding.
- He grew his business by being a "Barnacle on the whale," meaning he attached his business to a growing industry (WordPress) and rode its wave of success.
- Balkhi believes there is a massive opportunity in product high services with offshore markets, especially in industries with a high TAM (Total Addressable Market).
- He suggests taking this model and going to town, rather than spending years building software that may or may not work.
- Created a landing page using HubSpot's landing page tool to collect emails from people interested in a survey about founders' finances.
- Tracked traffic sources and conversions to see how much revenue came from the survey and each traffic source.
- Shared the landing page on Twitter and got thousands of people to give their emails.
- Invested in a company called Seahawk Media that offers custom WordPress development, website maintenance, and other web-related services at affordable prices.
- Seahawk Media also offers white-label services, allowing other agencies, hosting companies, and businesses to resell their services and add on revenue.
- Bookkeeping is another example of a large market that can be turned into a product/service offshore market.
- Accounting firms can set up offices in countries like Pakistan, India, and Latin America to provide basic bookkeeping and financial tasks at a low cost.
- The key to success in this model is the reseller and white-labeling model, which allows businesses to resell or add on the services of offshore talent.
- White label a service by partnering with an existing agency or team.
- Offer add-on services to your customers without building your own team.
- Example: WPBeginner partnering with Seahawk Media to offer professional website design and maintenance services.
- Extend this model to other industries, such as bookkeeping, by white labeling the services of a specialized agency.
- Charge a markup on the services and pay the agency a portion of the revenue.
- Use recruiters to constantly search for and filter talent.
- Focus on finding the top 1-5% of talent, rather than the average person.
- Have a system and process in place to intake and filter resumes.
- Syed Balkhi, the founder of WPBeginner, recommends creating add-on services for existing platforms like QuickBooks and Zero apps to generate extra revenue without additional work.
- The new generation of talent from countries like the Philippines and India has significantly improved in English proficiency and technological adaptation, making them valuable resources for businesses.
- Acquiring and optimizing a portfolio of undervalued or mismanaged apps within these ecosystems, each generating a few million dollars in revenue, can lead to a successful business.
- Balkhi is interested in investing in such opportunities and believes that the potential lies in developing software plugins or agencies that manage services within these ecosystems.
- Open source is one of the most powerful ideas of our generation.
- It gives freedom to anyone from anywhere in the world to look at the code and learn from it.
- Allows new programmers to read code from the best programmers in the world and contribute back to the project.
- Contributed code can be used on millions of websites.
- Syed Balkhi believes open source is a great business opportunity.
- Open source companies can make money through various means such as:
- Selling premium support and services.
- Offering cloud hosting for the open-source software.
- Creating a marketplace for extensions and themes.
- Selling white-label versions of the software.
- Open source businesses can be very profitable.
- Open-source software is controversial as it challenges traditional business models by sharing code freely.
- Open-source software provides advantages like affordability, self-hosting, and freedom from censorship, appealing to users in specific countries and situations.
- The long-term value of open-source software lies in its vision and community support, serving as a unique selling point in competitive markets.
- Successful open-source businesses often monetize through services, add-ons, premium versions, or support while keeping the core product free.
- Open-source alternatives to popular closed-source software can thrive by focusing on cost-effectiveness, affordability, and community growth.
- WordPress, Shopify, and Chrome's success is attributed to their large contributor base, which drives continuous improvement and innovation.
- WordPress powers 40% of the internet but its revenue is not as high as Shopify, which is valued at $100 billion.
- The collective market cap of the WordPress ecosystem, including companies like GoDaddy and WP Engine, is likely larger than Automattic, the proprietary company founded by WordPress creator Matt Mullenweg.
- Automattic, valued at $3 billion and once at $7 billion, is the steward of the WordPress open-source project.
- The speaker used WordPress for his business, which reached hundreds of millions of people and generated millions in revenue, while paying only $300 annually for WooCommerce, a WordPress e-commerce plugin.
- In contrast, Shopify would have charged 5-10% of revenue, costing the speaker tens of thousands of dollars per year.
- The speaker emphasizes the importance of providing disproportionate value to customers, making the business "stickier" than competitors who charge more.
- Costco is an example of a business that offers incredible deals to customers by selling goods at cost plus 10% and negotiating low prices with vendors.
- Costco's membership fee of $120 per year is a small price to pay for the savings customers can achieve.
- A subscription service for open-source software could offer access to various tools at a lower price or at cost plus a small percentage.
- OSS Capital invests in open-source projects with engaged users and a large market, helping them come to market and potentially disrupt established companies.
- Open-source software can be forked and customized to create specialized versions that cater to specific needs, making it disruptive in various industries.
- Syed Balkhi's OSS Capital thesis involves investing in open-source alternatives to expensive software, such as C Le.
- A "flipper" Venture fund model is proposed, where investors invest with the intention of exiting at the Series A round, capturing the valuation lift from seed to Series A.
- Syed Balkhi considered selling his company's shares for a 30% profit but didn't due to perception issues and the difficulty of overcoming them.
- Balkhi questioned the actual benefits of incremental wealth and the purpose of money beyond a certain point, as he felt he was already living his desired lifestyle.
- He posed a question on Twitter asking people how much money they thought they needed to live their desired lifestyle, with options ranging from $0 to $1 million, $1 to $10 million, $10 to $50 million, and $50 million and above.
- Balkhi's personal threshold number for a comfortable life was $10 million, and he emphasized that his motivations for work were enjoyment and productivity rather than material desires.
- He suggested that the biggest unlocks at higher wealth levels might be the ability to travel privately and make significant charitable contributions.
- The level of convenience increases with the size of a private plane, but the cost-effectiveness may not be worth it for everyone.
- Taylor Swift's use of a contracted service for a long-distance flight demonstrates that owning a larger private jet may not always be necessary or financially sensible.
- Money improves the quality of life up to a certain threshold.
- $10 million is a threshold where one can tell most people off and not need much from anyone.
- $50 million is another threshold where one can fly private safely and without much thought.
- At $30 million, one can afford a really sick house in an expensive area.
- It's important to have perspective and not let the goalposts keep moving.
- The cost of maintaining a large house can be overwhelming, leading to feelings of being owned by one's possessions rather than enjoying them.
- Holding costs, such as property maintenance and opportunity costs, should be carefully considered when making financial decisions.
- The income range between $200,000 and $500,000 can be a "golden handcuffs" zone, where individuals may feel trapped due to the financial comfort it provides, making it difficult to take risks or pursue other opportunities.
- Personal preferences and personality traits play a significant role in financial decisions, as some individuals may find contentment with a modest lifestyle while others may prioritize financial success.
- The tweet suggesting that $250,000 a year is enough to live a rich life is considered out of touch, especially in expensive areas like California or New York.
- After taxes, the actual take-home pay from $250,000 a year may be around $175,000-$180,000, making it challenging to save a significant amount of money annually.
- Acquiring a business with existing customers can be a cost-effective growth strategy for subscription businesses, especially in competitive markets.
- Reselling products or services can be a lucrative business model, as resellers can sometimes make more money than the main company.
- Acquiring resellers and bringing customers in-house can boost revenue and increase profit margins, as demonstrated by companies like HubSpot and Zendesk.
- Syed Balkhi emphasizes the importance of understanding the pain points of the audience when building successful solutions.
- Acquiring Groove, a help desk software, enabled Syed Balkhi to cross-promote his other solutions and reduce costs for customers.
- Compounding goodwill, which involves giving without expecting anything in return, is considered the best form of compounding.
- Syed Balkhi admires Guy Spear, a value investor, for his generosity and ability to build a network of talented individuals who support each other.
- Balkhi describes himself as a shrewd negotiator and a disciplined and firm manager who balances being a nice person with capturing value in business.
- He stresses the significance of compounding goodwill and building long-term relationships rather than maximizing short-term gains.
- Balkhi suggests setting a threshold during negotiations and not exceeding it, even if it means leaving money on the table.
- He emphasizes the importance of respecting others, even if they have wronged you, as illustrated by Adam Sandler's story of overcoming a professor's criticism to become a successful actor.