Nov 17, 2022 · 1h 25m · my-first-million
Ranking The Best And Worst Businesses To Start w/ Billionaire Investor Andrew Wilkinson (#386)
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this episode of My First Million, hosts Sam Parr and Shaan Puri interview Tiny co-founder Andrew Wilkinson to analyze business model difficulty, share lessons from multi-million-dollar entrepreneurial failures, explore permanent capital allocation, and critique the misaligned incentives of modern venture capital.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. The hosts hold 46.3% of the talking time here. How this is scored →
The hosts as informed peer 5.5 Guest teaching 3.9 Guest disagreement 1.7 The hosts pushing back 1.8
speaking balance: gold is the hosts, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 1:10:03 Andrew attacks predatory crowdfunding founders
Andrew strongly rejects the morality of founders dumping overvalued startup rounds onto retail investors with near-zero probability of returns.
Hardest push from the hosts ▶ 1:04:30 Shaan pushes back against ratchet term sheetsShaan forcefully refuses Andrew's premise that non-binary ratchet term sheets benefit founders, citing adverse selection and mismatched venture incentives.
Biggest teaching moment ▶ 53:31 Andrew explains Canadian penny stock schemesAndrew breaks down how public investment bankers dress up two-location corner stores into thematic trends, earning huge warrants while retail investors end up as bag holders.
The host holds their own ▶ 57:03 Shaan proves his accurate EGLX short breakdownShaan cites his detailed prior research and financial forensics demonstrating why Canadian holding company EGLX was fundamentally flawed, correctly predicting its 90% collapse.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | The hosts as informed peer | Guest teaching | Guest disagreement | The hosts pushing back | Why |
|---|---|---|---|---|---|---|
| Debriefing the Sahil Bloom Episode and Public Persona | 4 | 1 | 1 | 1 | The hosts and Andrew kick off with relaxed banter about Sahil Bloom and public perception. The tone is entirely collaborative with light joking around comparisons to Warren Buffett and Chamath. | |
| The Pixel Union Journey: Early Regret to Public Exit | 4 | 5 | 1 | 2 | Andrew details the evolution of Pixel Union from Tumblr themes to selling for $7M, regretting it after learning valuation metrics, and buying it back to take public. Sam and Shaan ask probing financial questions while letting Andrew deliver the narrative. | |
| Operator-Led Capital Allocation Versus Spreadsheet Investing | 7 | 4 | 1 | 1 | Shaan demonstrates deep preparation by reading and analyzing Warren Buffett's operational 1972 See's Candies letter. Andrew builds on the analysis with insights from a personal dinner with Charlie Munger. | |
| The Creative Boredom of Passive Investment Management | 5 | 3 | 1 | 1 | Andrew outlines his purchase of AeroPress and the boredom of passive ownership. Shaan compares the product mechanics to SodaStream and category-defining verbs. | |
| E-Commerce Realities and the H J Muse Cat Furniture Failure | 5 | 4 | 1 | 1 | Andrew shares his painful $300k loss on H J Muse cat furniture due to inventory and thin margins. Shaan empathizes using his own background starting in restaurants and e-commerce. | |
| Categorizing Business Difficulty: Bakeries, Agencies, and Job Boards | 5 | 5 | 1 | 1 | Andrew categorizes business models by operational difficulty, contrasting his neighborhood bakery and design agencies with the low-overhead We Work Remotely job board. | |
| SaaS Capital Losses with Flow and Macro Agency Headwinds | 6 | 4 | 1 | 2 | Sam brings up Vista Equity and Robert Smith to ask about B2B tech demand slowdowns. Andrew confirms macroeconomic agency headwinds and recounts losing $10M on Flow against Asana. | |
| Hospitality Pitfalls: The Famous Original Pizza Venture | 4 | 3 | 1 | 2 | Andrew explains how failing with his Famous Original pizzeria taught him what a bad hospitality business looks like. Sam questions why pizza would fail given its simple ingredients. | |
| Startup Concept: Precision Sniper Rifle B2B Advertising | 6 | 2 | 1 | 1 | Andrew pitches a sniper-rifle B2B advertising service to target specific executives. Sam validates the concept with an anecdote about Jack Smith targeting AngelPad's founder on LinkedIn. | |
| Introducing Tenzing: Investment Banking for Bootstrapped Founders | 4 | 5 | 1 | 1 | Andrew introduces Tenzing, explaining how traditional investment bankers ignore bootstrapped founders generating $1M-$5M EBITDA. | |
| Expanding Financial Engineering for Bootstrapped Entrepreneurs | 5 | 4 | 2 | 4 | Sam playfully pushes back against branding financial advisory as a 'bank'. Andrew clarifies the advisory scope and explains missed tax credits and credit lines. | |
| The Mealime Exit to Albertsons and Permanent Equity Strategy | 4 | 4 | 1 | 1 | Andrew explains the acquisition and sale of Mealime to Albertsons, articulating why his long-term philosophy is to hold businesses forever rather than exit. | |
| The FTX Collapse, Crypto Realities, and Media Spin | 6 | 3 | 2 | 1 | The hosts and Andrew discuss the FTX collapse and crypto speculation. Andrew explains why treating crypto like currency trading keeps him focused on cash-flowing businesses. | |
| Uncovering Micro-Cap Reverse Mergers and Public Market Fraud | 4 | 7 | 3 | 1 | Andrew educates the hosts on how Canadian public reverse mergers legally exploit retail investors through promotional IPOs and warrants, describing it as legal stealing. | |
| Canadian Public Shell Schemes, EGLX, and Short-Seller Research | 8 | 4 | 2 | 1 | Shaan showcases his previous forensic short thesis on Canadian micro-cap EGLX, showing its 90% drop. Andrew complements this by citing Hindenburg Research's takedown of Nikola. | |
| The Collapse of Bird Scooters and Founder Liquidity Disparity | 7 | 4 | 4 | 7 | Andrew proposes his 'non-binary term sheet' mechanism that ratchets down valuation if milestones are missed. Shaan pushes back hard, pointing out founders wouldn't accept it and highlighting skewed incentives. | |
| Evaluating Down-Round Mechanics and Predatory Crowdfunding | 6 | 5 | 4 | 4 | Shaan outlines the dilution spiral of ratcheting down-rounds. Andrew shifts focus to criticize founders who opportunistically dump overvalued rounds onto retail crowdfunding platforms. | |
| The 'No Smart Money' Axiom and Venture Management Fees | 7 | 3 | 3 | 1 | Shaan reads his tweet asserting 'there is no smart money', highlighting that mega-funds extract risk-free 2% management fees regardless of returns. Andrew strongly validates this critique. | |
| Late-Stage Diligence Failures: Paradigm, Bird, and Metromile | 8 | 2 | 2 | 1 | Shaan monologues with deep knowledge on high-profile VC diligence failures including Paradigm's $290M FTX loss, Chamath's Metromile SPAC, and early secondary cashing out on Bird. | |
| Cultivating Independent Conviction and Avoiding Co-Investing Pitfalls | 6 | 5 | 1 | 1 | Shaan and Andrew conclude with the importance of independent conviction. Andrew admits his own past mistake co-investing with Howard Marks in distressed shipping equity. |
Statements from this episode (34)
Wilkinson started 5 to 10 other businesses that almost all failed
“Started another five to 10 other businesses. And almost all of them failed. Like it was incredibly, incredibly painful. And after that, I kind of swore off starting businesses and I've only just come back to it over the last three years.”
Wilkinson: Chamath stopped comparing Social Capital to Berkshire after underperforming
“In his annual shareholder letters, he would he would compare himself to Berkshire Hathaway. So he would track social capital's results versus Berkshire. And then one year he just stopped. And I think it was the one year that he didn't actually beat them. I thi…”
Wilkinson: Repurchased Pixel Union for $26M and Took It Public at $260M
“I think it was doing about four million dollars of annual profits. It had grown a lot. And we paid 26 and then we bought four 60 and a couple other businesses. And then we took it public at a two hundred and sixty million dollar valuation.”
Wilkinson: Spreadsheet Investors Underestimate Operational Execution and Organizational Change
“One of the big problems with investors these days is they're often what I call spreadsheet investors. They look at a business like a spreadsheet and they go, oh, it's easy. We'll just increase margin by 20%. Not realizing that in order to do that, you have to …”
Wilkinson: BlackRock does not build value compared to Warren Buffett
“BlackRock doesn't build value. They just index. They own a bunch of pieces of paper. Warren Buffett actually grows stuff.”
Wilkinson: Charlie Munger admitted he cannot talk CEOs out of their ideas
“Chris and I had dinner with Charlie Munger a couple of years ago, and we asked him how involved do you get with the CEOs? And he really said I'll never forget this. He goes, I've never been able to change someone's mind. If someone has an idea about something …”
Wilkinson: Agency and Pixel Union Achieved 30-50% Margins Versus 2-3% in E-Commerce
“Whereas in my agency or in pixel union, I was making. 30 to 50% EBITDA margins. I was making like two or three percent and the amount of work required to move physical goods around by inventory. I realized that while on paper I was profitable, I was constantly…”
Wilkinson: Agency growth is flat and linear like professional services firms
“Agencies are a little bit like a law firm or an accounting firm or our consulting firm where you've got this kind of flat linear growth that happens over time.”
Wilkinson: Lost $10M building Flow against venture-backed Asana
“I mean, I think a lot of people know the story of flow, the project management software that I built where I basically poured ten million dollars into it because I was competing with Asana and didn't understand the dynamic of when you're competing against you …”
Wilkinson: A high-volume, low-ACV customer base beats concentrated enterprise revenue
“I always think it's better to have 10,000 people paying you a small amount of money than a hundred people paying you a lot of money.”
Wilkinson details losing his capital overspending on a pizza restaurant build-out
“We, you know, hired the wrong management. We got the incentives wrong. We overspent on the build out to the point where we could never get our money back. You know, labor shortages, we had slippage.”
Wilkinson: Being seen five times makes people perceive you as everywhere
“There's, I forget where the quote comes from, but there's this idea that if someone sees you five times, they think you're everywhere. So if you're on five podcasts they listen to, They deem you a huge celebrity and a success or whatever it is, right?”
Wilkinson: Would pay $10k monthly for hyper-targeted executive ad service
“So I would pay 10,000 dollars a month to be on Dharmesh's radar everywhere he goes. And so I don't know how it gets done. It's like a advertising sniper rifle, essentially. But I really like the idea of something like that.”
Wilkinson: Canadian government covers 30% of small business R&D expenses
“The government will actually pay 30% of your R and D when you're a small company. And I just didn't know about that. And so I literally lit a million dollars on fire. I could have gotten a million dollars of these tax credits and I didn't write.”
Albertsons bought Mealime from Tiny for tens of millions of dollars
“And a couple of years later Albertsons came and they bought it for tens of millions of dollars.”
Wilkinson: Holding declining businesses beats selling for 1x profit
“Let's say the business is on a major downslope. You might get like one times profit. And so you're basically making a bet that it's going to die before a year, which very few businesses die that quickly. And so usually it's better off just to hold forever.”
Wilkinson: Tiny does not ever want to sell its portfolio companies
“I don't ever want to sell businesses. And the only reason we sold Me Lime was because Mitch wanted to sell the business.”
Wilkinson: Bitcoin is currency trading and speculation, not productive business investing
“And I think that Bitcoin is currency trading, right? Like just buy great businesses, do the thing, you know, and I think everyone is just speculating on this stuff and there's a ton of fascinating arguments for it and I follow it, but I have just fully steered…”
Wilkinson: Investors who missed early Amazon still had until 2010 to invest
“One important reminder is if you missed Amazon, you had until 20 10 to invest in it. There's a lot of time to wait and sit and watch to find these great businesses.”
Wilkinson claims the Canadian stock market is plagued by rampant fraud
“In, in the Canadian stock market, there's tons of fraud and there's very little enforcement and”
Sam Parr: Real estate value is the best indicator of true wealth
“I always like stick with like the best way to figure out you know, how wealthy someone is, is by looking at how expensive their home is, because it's kind of hard to like get a fake mortgage that way.”
Wilkinson: Supercast valuation was cut 50% after missing revenue milestone
“We raised at a ten million dollar valuation, which at the time was kind of a good you know, angel, angel round valuation, but it was structured so that within two years, if the business doesn't do a million dollars of revenue, that turns into a five million do…”
Sam Parr: Traditional venture capital model is not broken
“The game isn't broken. The game works as it should. The thing that's broken is people who are joining and playing the game and they maybe shouldn't be playing the game, but it works perfectly fine.”
Wilkinson: VC incentives push viable small companies into futile failure
“What I've seen is the incentive creates this situation where the founder is sitting on a business that could make them happy and give them a great lifestyle, but they have a gun to their head. And so they continue down the venture path, even when it's actually…”
Wilkinson: Raising from retail investors at inflated valuations is unethical
“I have a fundamental problem with taking money from someone when I know I can't give them a return or there's like a five percent chance and positioning it as, you know, you're investing in this super solid, awesome thing.”
Puri slams Chamath for profiting on SPACs while LPs lost money
“Chamath made money off of a bunch of his shitty SPACs because he's the promoter, and these funds manage billions of dollars, and they'll make hundreds of millions in fees along the way as a reward even if they lose their investors' money.”
Wilkinson: Benchmark manages $3B+ with roughly 12 to 15 people
“A Benchmark manages three billion plus with like 12 or 15 people.”
Wilkinson: Guaranteed VC management fees will disappear in the long term
“And so I think this is something that will go away in the longterm.”
Wilkinson: Tiny charges zero management fees on its rolling and private funds
“Our rolling fund and our private fund, we don't cover, we don't do any management fees whatsoever, because I'm allergic to this.”
Shaan Puri: 2% management fee on fund loses money on salaries
“My fund is so small that two percent management fee of my fund is 200,000 a year. It's less than what I'm paying people to doing it. I am taking a loss on my, on the salaries you know, with that management fee”
Puri: Diligence on massive VC bets is far less than assumed
“It just sort of shows in general that the amount of diligence you would assume happens on large bet sizes like that is actually you know, nowhere near what it could or probably should be.”
Puri says Chamath hyped Metromile before it sold for a massive loss
“Chamath took Friedberg's company Metromile public through a SPAC and said, Buffett had Geico, I had Metromile, a better business in all these ways. And like, I don't know, less than a year later, Metromile sells for a third of what it went public for you know,…”
Wilkinson: True value creation by Chamath Palihapitiya won't be clear for decades
“Chamath, we won't know if Chamath has actually built value for another 10 or 20 years. And frankly, like his, it's all very like secret. Cause I think a lot of his stuff is private. So we really have no clue how much money he has, how much money he made what's…”
Wilkinson: Lost $100k blindly copying Howard Marks into Greek shipping stock
“I totally trust this guy. I read his book. It's incredible. I'm going to buy into this weird Greek shipping company. That he just bought, you know, fifty million dollars of equity in. And so I put like a hundred grand into it and it goes out of business.”