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Two founders talk about how to build software businesses that are meant to last. Each episode includes a deep dive into a different topic related to starting, growing, and sustaining a healthy business.
00:01.00
tylerking
What's going on this week Rick
00:02.93
Rick
Oh man that was not expected well um, it's let's see ah that caught me off guard Tyler.
00:11.66
tylerking
So ah, this is the second time we started recording because ah it bugged out the first time and um, the first yeah I hit Rick with a really excited intro and then we toned it down here all right? Nobody thinks this is funny.
00:20.72
Rick
Um, oh yeah, the dude anyway.
00:25.49
tylerking
I actually had someone message me like I the my favorite part of your podcast is when Rick yells at you at the very beginning anyway, yeah both yeah.
00:32.45
Rick
Ah, that's that's sad, but that's like the best content we have. But ah so so my big update this week is last week you challenged me on whether or not we should be serving group health insurance clients at legupbelt and ah for those of you who may not be aware like leg I health focuses on Utah consumers specifically individual health insurance and oftentimes small business owners and ah employers will come to us and say hey we we don't do that but we it seems like you're focused on really good service and we. Like you just to be our agent for a group health and church. We're like no, we don't do that. So last week you you you didn't direct challenge me but you basically told this story about Justin Jackson and riding the wave and surfing the wave in the marketplace and don't try to fight the current and so.
01:16.71
tylerking
Person of.
01:29.47
Rick
That made me think and j d and I decided to give it a try and we already have a client two weeks later making making money.
01:33.30
tylerking
Ah, yeah, that's awesome. So is this one of the people who had already reached out to you and you just you just reached out back to him or like something coincidentally came up over the last week.
01:44.11
Rick
Ah, it was coincidental ah timing we were. We were so in the process of saying no to him but but because of our conversation. We just said wait wait wait. Yes, we will ah and so now there's a whole list of other clients. We could go after go back to.
01:49.53
tylerking
Um, okay, great cool I know you've said in the past that like individual. If if you are the agent of record on an individual health insurance plan I mean the the amount can that you make can vary but I have in my head like $40 per per person is it for a group plan like that times the number of employees.
02:10.98
Rick
Yeah, yeah, so it's about $500 a year for an average like client on the consumer side. Um, which it's it's not really a per person. We don't think about it like that's per household so a house a family could be like per employee. Yeah.
02:22.54
tylerking
I Kind of but like per employee I mean yeah.
02:28.28
Rick
So so on the consumer side. It's more per household. Um, so which could have multiple people associated with it on the business side. It's more perp employee and so this customer had I think 10 employees and we'll make $3000 a year. Yeah yeah.
02:37.12
tylerking
Neck. Um.
02:41.82
tylerking
Um, man that's sounds kind of like easy money. Cool. Um.
02:47.65
Rick
And but like the big thing is and and what we realized is our value Our core value proposition actually is the same which is we're helping underserved an underserved population. Um, get better access to Health insurance and have a better experience through education and just like basic customer service.
03:01.50
tylerking
The. Yeah, because you said last episode.. There's not that much competition for these people because I mean I think it's the same way like lessening serum serves businesses but it's the type of business Salesforce does not give a fuck about they're too small for the more profit seeking companies to really worry about.
03:06.78
Rick
And little bit of technology.
03:21.63
Rick
Exactly so and and and the cool thing about the small group health insurance market in Utah is that it's very similar in terms of networks and like product complexity to the individual market. So we already know what we're doing.
03:24.53
tylerking
Yeah.
03:37.31
Rick
Um, so it's just the only difference is like this whole like employer in the middle thing.
03:37.42
tylerking
Um, yeah, Cool. So Are you mostly now just like sitting around and when one of these opportunities falls in your laps, you'll take it or is there any talk of. You know, go back to people who've already reached out to you about this try to actually get some new leads.
03:53.94
Rick
It's a great question so that's JD is coming out for annual offsite next weekend. So this will be a big part of our conversation. Okay, we've got this one that was easy. We don't really know it's involved in servicing it yet. So we think it's easy, but we don't know.
04:07.00
tylerking
Hurt.
04:10.39
Rick
So yeah I think we'll probably go after it. Um, this also relates to legup benefits. Um, we have been primarily focused on reaching out to consumers and profiling them and that's continuing to work. But um, you know as part of our legup benefits strategy as well as this like reaching out to employers makes ah makes a whole lot more sense now. So I think we'll definitely need to think about our employer strategy this year but I was going to wait till I get benefits got further along. But now that this is here. It's like let's go after employers now and then like anyone we can't get group health insurance on as sort of a.
04:42.75
tylerking
Ah.
04:46.75
Rick
Ah, backlog list for Lego benefits.
04:48.55
tylerking
I Love how many flywheels you're creating where it's like every individual insurance Customer is a potential employer lead every group Insurance Customer is ah a leg up benefits lead every leg up benefits customer. If they have group Insurance. They're now a group lead if they don't now everyone who works there is now an individual lead like it's It's a very cool kind of like cycle of everything feeding into each other.
05:12.10
Rick
Yes, the only thing we're missing is the the monthly controllable sort of Ah, what do you call it when something's leading like the the the beachhead we don't have that like controllable front end that makes the arrest of the engine work. But once it once it goes.
05:23.38
tylerking
Um, yeah.
05:29.18
Rick
Once we have like the top the first of domino it. It definitely works.
05:30.61
tylerking
Yeah, yeah, it'll be really interesting assuming all this eventually gets really built out where you know you have like up benefits to Offer. You have like all this stuff. It'll be interesting I Assume what you should do then is say okay, we can get leads for any of these 3 products. And they feed the other ones. What's the easiest one like what's the best place to start From. Do you have an intuition there about which would be best.
05:57.17
Rick
Um, it's probably the employer side the the problem with consumers is they don't want to put time into this unless they're having a life event so that's challenging. Um, one life event is an employer benefits change so we can through employers create a life event by becoming sort of a catalyst at the employer.
06:02.74
tylerking
I have.
06:14.86
Rick
Um, so there's there's a little bit more control of our destiny with employers over everything else.
06:16.81
tylerking
Yeah, and and probably employer like group insurance versus like a benefits is probably just because like people don't know about like up benefits but they know they need group insurance does that sound right to you.
06:29.50
Rick
Yes, well I I think that there are there are employers out there know that they need to be able to hire and keep their people and they and are spending money on it like and it's ah.
06:39.45
tylerking
Are they like looking for it though like if you mom tested this. Do you think people are like yeah you know I've tried to Google for something like this.
06:47.00
Rick
Yeah I mean that's people's typing in help q Sarah Health Reimbursement arrangement reimburse employees for health insurance like that kind of thing but I do think that there's like I'm thinking more of like an outbound cold call calling perspective less of an inbound I think and like if we were going to have that model work reaching out to an employer and saying.
06:53.24
tylerking
Like um.
07:05.96
Rick
Hey you're spending this we could save you this you know jump on a 15 minute call to see if we if we can help you and there's like 2 routes like Aor or legup benefits pitch. That's way more controllable and and more like fundable from a revenue payback grid.
07:07.85
tylerking
Yeah.
07:20.11
tylerking
Yeah, yeah, cool. That's exciting all right I look forward to hearing more updates on that.
07:23.94
Rick
Cash Payback period Yeah, so yeah, my other only big update is J D's coming out this week and I'm excited and your advice and that it's been really Helpful. We're kind of going back to like hey maybe we should have like ah a like. But. Open bar tab at a bar downtown and just invitee some clients and if they show up. They show up if not like it's just us hanging out but we may like if it's Easy. We're gonna do it if not like we're just not gonna do it. So.
07:41.79
tylerking
Um, yeah.
07:49.14
tylerking
yeah yeah I think that sounds great. Do you worry at all about like or not I shouldn't say worry but like think about drinking culture being a Utah based company where you know half the people for religious reasons don't drink.
07:52.17
Rick
Has some big grounds.
08:07.56
Rick
I mean I drink responsibly ah drinking culture versus like having a beer I think like 2 different things like I think I go.
08:11.99
tylerking
Well yeah, but like in St Louis pretty close to 0 people object to the idea of drinking whereas in Salt Lake City 50% of people object to the idea of drinking.
08:25.75
Rick
I don't know if it's that aggressive I think people like I think most like most of the ah people who don't drink in Utah for religious reasons that I've come in contact with will gladly come to a bar and hang out and have a coke now would I would.
08:37.49
tylerking
Ok, so someone's passing those fucked up laws but all right.
08:43.40
Rick
Yeah, yeah, yeah, ah, but like I mean um, maybe there's a better event for Utah to be you to your point like maybe it's something less less focused on drinking but this is about baby and me more first and foremost. Yeah, yeah.
08:54.49
tylerking
Well or the flipside is like do right exactly. It's your company. Do whatever you want? um, cool. Ah so for my update I kind of mentioned last time that because I have this sabbatical coming up where I'm taking six weeks off work to work with you very excited about that I've been starting to. Figure out how to get stuff off my plate a lessnoing serum so that the company can operate more smoothly with me gone but then also like the side benefit is this is stuff I probably should have delegated a long time anyway, um, it's just like going great I actually feel like I'm in a better place. With my less annoying work than I've ever been in. Maybe like it's awesome. Yeah, and I I should acknowledge. So I think it's a combination I've delegated some stuff but also you know how things kind of ebb and flow and like sometimes there's just a lot of crap you have to do that. You don't want to do and then other times you're like oh wow i'm.
09:32.48
Rick
That's great. Are you delegating stuff. You don't want to do.
09:48.20
tylerking
You know there's nothing on my task list I think as I started delegating stuff I also just randomly coincidentally ended up with like a lull and other stuff so those 2 combined like I've got a ton of time. But yeah I've ah, there's just like nothing I've delegated is major to be clear. It's like.
10:06.32
tylerking
I'll give you a few examples when customers pay by check I was the only person who could deposit them I think we get maybe 2 checks a month how long does it take to deposit 2 checks on your phone per month like 5 minutes you know it's not a big thing right.
10:20.38
Rick
It's so painful I get to do this. It's like so like it it requires focus. You don't want to mistype it you got to confirm it then you're like did it actually get deposited. It's like there's a lot of emotional baggage associated with that.
10:30.40
tylerking
Yeah, and then like 1 more example and then you can yada yada through the rest but like we have a week a company wide weekly meeting every week people anyone at the company can submit topics for it and we just kind of discuss them be. We found a pattern where like. The most senior people would be the ones most willing to talk and so it's just like 3 of us talking to each other. So every topic we assign to somebody to give the first response to to make sure everybody over time. Everybody talks in these meetings I was the 1 assigning who talks to you. It's like hey new hire you're given the first. Reaction to this topic. There's a reason I needed to do that. So now someone else is again. We're talking 5 minutes a week but there were like 15 of these things probably and when you add them up. It's like ok I've saved like an hour or two per wee hou hour or two per wee hou hour of time like that matters.
11:17.89
Rick
What But do you feel like you're losing any impact by that seems like high impact type stuff.
11:24.85
tylerking
Um I think I am probably a little but so the advice I read it about this one is ah just because someone else would do it differently from you doesn't mean they would do it worse and two like. You kind of just have to let go of some stuff I think you have to identify like what really matters. What are the things where like you bringing your special founder perspective really matters and I think that all this stuff that I'm delegating will be fine and some of it. Yeah.
11:53.29
Rick
Most of most stuff doesn't matter.
11:58.39
tylerking
And some of it by the way, a lot of this stuff like why haven't I delegated any of this some of it. Yes, it's like well I have a sp I have like I know more about what's going on at the company. So maybe I can do this thing better. A lot of it is I was like no one would want to do this. And I didn't hire. We don't have an admin assistant. We don't have an office manager. We don't have anyone whose job. It is to just take whatever random crap I don't want to do and so I felt bad giving it to people but I just sent an email out to the company and I was like here's a list of stuff if you want to do any of this. Let me know. And 2 people reached out to do what I considered to be the most the thing I felt most uncomfortable delegating because it feels like kind of secretary type work 2 people reach out were like yeah that sounds great. Give it to me. Um, like it's literally scheduling my meetings for me and I'm like all right go for it. If you want? Yeah um so it's going really well I should have done this long time ago. Yeah.
12:45.99
Rick
Um, that's awesome I Want to call something I think like oftentimes that is I think everyone most people I should say everyone can do what you just did if they have other people in their lives who are willing to help them if you like have a spouse surf. Ah, roommate or a coworker a manager and you list out all the things like that aren't like super impactful or important for you to work on like and you go hey like does anyone else want to work own these things like some percentage of those things will just get gobbled up by people being more interested in them than you.
13:18.11
tylerking
Yeah, this is why like diversity and I don't mean like racial or whatever diversity, but just like having different types of people at the company is so valuable is like they're not I think I'm giving them the worst work and they're like yeah that's like. But basically what both of them said to me because I was like are you sure you want to do this and they're like you know I'm using my brain all day I can turn my brain off and spend 10 minutes doing this. It'll be like a little break. It'll be great. It's like ok um, anyway, so but yes, good point. Um I should have done this a while ago. What this led to though is both both of the last two weeks I did exactly what I said last episode I want to do which is Monday and Tuesday I had no meetings I I had I basically said I'm not going to reply to any emails unless they're you know urgent I just had two full uninterrupted days both weeks to work on. I see like individual contributor work right now that's design work for me which is great but I sat down and I didn't know what to work on which a few reactions to this number one I'm really disappointed in myself because it wasn't until that moment that I realized it's been like months since i've. Had I've given myself space to like think big about anything the fact that I didn't even have anything on my list to work on is like a really bad sign I think.
14:40.16
Rick
I Agree interesting. Well I'm now I'm curious like what you did with the time and what your epiphanies were.
14:50.54
tylerking
Ah, yeah, so I so have a topic to discuss on that like what I did I mentioned last episode like our designer. It was looking like she was going to leave she instead she got a different job but she still wants to do like 10 hours a week with us so she didn't fully leave but we have less of a designer than we used to. So I need to do some design work. So 1 thing I did is I just went through and was like what's all the stuff we need designed which was but but that's like kind of small stuff that's like oh we're going to have interns this summer and they're going to work on some minor projects I got to get those designed. Um, the bigger thing is.
15:25.41
tylerking
So I'm trying to yeah I'm trying to decide I have an answer to this but I'm you probably don't have enough context to answer this but like what do you think I should be spending my time on with this with this kind of like two days a week if if given assume all the like urgently needed designs are done. What should a Ceo be doing well, that's not the answer I wanted I don't want to work on growth. Yeah, okay so I think that's all fair I think cash is in a good spot.
15:46.21
Rick
Growth Employees Cash growth growth employee satisfaction hiring um and cash.
16:00.74
tylerking
We don't need to hire anyone right now employee satisfaction I totally agree with I think I probably over invest in that generally so I agree with all 3 of those and I think we're good there that these two days don't need to go towards that growth. You're probably right? Um, but fuck that. So I'm trying to think like what? ah um, well yeah, and and I'm working on that too. So where I kind of landed what I really like to do and I used to do a lot of is design stuff that we're never going to build like think 5 years from now. What do I want the product to look like or.
16:18.42
Rick
Ah, look up benefits.
16:37.12
tylerking
Ah, a specific example right now like um, right now our permissions like how you share context within the serum are very very simple which is good for like 1 to 5 user accounts because it's you basically never have to think about any permissions at all, but it breaks down for even like a 5 to 10 user account. Potentially.
16:37.99
Rick
Um.
16:56.31
tylerking
We have to get this Fixed. We're not going to do it anytime soon. But I've kind of been thinking like if I had an answer to this that could inform so many other things about our design. So I started designing like this thing that we do not have the developer resources to build anyway. Ah, it's a lot of fun I think it's really valuable but it is like. Much more of a big picture long term type of thing like strategy as opposed to like what we need right now.
17:21.38
Rick
So I think what you're saying is like the fourth thing a Ceo should focus on is long term vision and strategy. It's like the where the the desk where we're headed.
17:27.69
tylerking
Yeah, maybe well I yeah I think there's some value to that I'm not exactly I wasn't trying to make this as a statement that other people should learn from this but like um I I really enjoyed it like if to to some extent I'm like what do I want to work on and then it's that. But yeah I I do think there's a lot of value in it and I actually think if you don't do this because I haven't done this for a long time. You kind of stop having opinions and you stop having vision and it actually hurts with ah employee satisfaction thing you're talking about if you're like hey we're going to improve our task feature period the end. People are like like employees like all right cool if you're like 10 years from now our product might look like this look at how cool it might be ah, we're not going to get there without better tasks people are like yeah like I see where we're going with this? Um, so maybe I'm just rationalizing but I do think there's value in this type of thing.
18:22.91
Rick
No I agree I think I think so like I I I think very important things happen in idle time like thinking and and clarity.
18:35.20
tylerking
Yeah, um, so yeah, and yeah, idle time That's right I haven't had any idle time recently and I'm I'm getting I'm getting comfortable with it again and trying to figure out how to fill it. But but that's where I'm at right now you.
18:47.80
Rick
Idle time I wish I had idle time I miss idle time I need idle time I I'm going to Hawaii for 10 to 15 days I don't know how many days exactly the first few weeks of March so I hopefully get some idle time there.
18:58.40
tylerking
Um, oh wow.
19:03.31
tylerking
Is this going to be like you're still answering emails or are you kind of fully unplugging that's awesome. Um, right? That's why like when I'm doing my sabbatical I'm like I'm I'm still working one day a week
19:09.14
Rick
Yeah I mean I I can't not check email like that be weird. But yeah, yeah, yeah, I'll be on there a little bit. Well um.
19:19.79
tylerking
Cool back to you? What's next.
19:25.20
Rick
Just I don't know what's going on but we're getting like every 30 minutes we started getting a webflow form submitted on our website just complete spam so trying to combat that because it's pretty. Ah, it's pretty disruptive. Um.
19:36.89
tylerking
Yeah, these are like signups for the product or like contact forms.
19:41.64
Rick
No, these are contact forms on our marketing website and so implement a is it called Recaptcha is how you say it which was actually very easy to do sitewide and so I you know did that this morning see gonna see if.
19:49.20
tylerking
Yeah.
19:59.18
Rick
Has an impact but I didn't know if you had any advice on how to fight the the spam battle but like it was getting really annoying. Yeah.
20:05.94
tylerking
Yeah, we also we use that selectively might there's different versions of Recaptcha like what's the ui what is the user see for the version you're using. Okay, the problem with that is like if they're not using Chrome or they're not logged into Google.
20:15.72
Rick
It click a button that says I'm not a robot.
20:25.17
tylerking
They see like a much worse. They get a much worse experience. It's one of these like which of these tiles has a stop sign and they get through multiple of that you know what I'm talking about. It's not a big deal. But what we decide is like we don't want to do that unless we have some reason to think they're spam. So normally what we allow is one.
20:31.31
Rick
And.
20:43.89
tylerking
Submission without the captcha and then every subsequent submission they have to fill out the captcha. Ah no, we this is this is hardcoded. So yeah I guess you I don't know how you do that in webflow everything we do every everything I we do above and beyond what you've done. You couldn't do with webflow I don't think um.
20:47.66
Rick
And you have that built in the webflow. Okay.
20:59.78
Rick
Okay, yeah.
21:03.53
tylerking
Because we also have like you know if the word viagra is in there cut it out like we've just got some basic pattern matching of our own. But yeah Recaptcha seems to work well enough. Although we have had spammers that not all spam is bots like sometimes it's a person sitting in a.
21:05.58
Rick
Oh that's brilliant.
21:22.99
tylerking
Country where you can afford people for a small amount of money and that's like an actual person filling out the form and Recaptcha doesn't stop them.
21:28.56
Rick
Yeah, yeah, yeah, well it's slowed down today. So it look it does look like it's having an impact. There's one in there but it looks like a manual a manual submission like you were saying.
21:36.00
tylerking
That's good. Did it stop or just slow down. Okay, yeah, yeah I bet that that gets most of it So Cool. We. Also we also block like I P addresses. That's another way to do it like when it's a when it's a person. It's the same person doing it over and over as opposed to like there's there's no net like network of.
21:49.69
Rick
Yeah, yeah, yeah.
22:00.25
tylerking
10000 unique different people who are all doing it from different computers you know? and yeah, doesn't that suck.
22:05.98
Rick
Yeah, I'm glad that's over with well that was really annoying because my phone was just on boop boop boop boop. Um, what else is on your mind.
22:13.69
tylerking
Ah, we are I told you a while back. We renewed our lease on our office right? Um, yeah, so it's a 5 year lease um and I think I've mentioned this before but like when you sign a lease like this. They give you some kind of allowance for.
22:17.96
Rick
You did. We didn't talk about what are you gonna do? yeah.
22:30.62
tylerking
You know construction build out stuff. We're staying in the same space. So it's already mostly built out but we're making some changes. Um, that's already been set in stone. So um, nobody else listening to this will know but Rick you've been to my office before there's basically like a big block of private offices. Ah, big, open office area and then like a big kind of kitchen lunchroom area. We're knocking down the wall between the second two. So like just 1 big open space. Ah, and then the private offices so that's the main thing and they've done it. They they knocked the wall down. They're still building other stuff but it's ah. Like just completely transformed how the office works and now I have to figure out like how to lay the furniture out and all that stuff. Um I don't know how it's rear. We'll buy some new stuff. We don't need to get rid of anything everything we have will still serve the same purpose but we.
23:11.00
Rick
Are you going to be investing in new furniture or is this more of like a regitranging what you got.
23:23.86
tylerking
The thing is before because we had this this big space split into two smaller spaces. 1 of them was just completely unused. That's why we took the wall down. Um, so now we probably just will get like some couches and bookshelves and stuff like that but nothing too major but I wanted to just mention this in case anyone listening ever like. Opens an office or something like this I'm a very like I'm the type of person who might my instinct is like I don't know set up some desks and and worry about other stuff this can't possibly be what matters for the Ceo to be thinking about something I've learned through experience is like very very subtle changes to how the office is set up have. Just a tremendous impact on how people use the space and like that trickles down to who's friends with each other like just culture in general really comes from how the office is laid out I think did you experience that of people keep.
24:11.58
Rick
Oh yeah, we we made some shifts a couple of times and yeah, just the the way people talk like there's a whole like there's a whole industry around the psychology and behavioral sort of ah I don't know what the right term is but like. Watching how people interact in relationships form based on geography you know and then you take that into an office. It's fascinating.
24:30.47
tylerking
Heard.
24:37.00
tylerking
Yeah, like just an example I get to my point earlier that I'm like normally a little too practical about this I'm a person who does not really care about vibes like if you walked around my house. There's no artwork hanging anywhere I see Rick you've got 2 pieces of artwork I can see right now.
24:53.84
Rick
Are.
24:56.70
tylerking
Ah, we've got 2 pieces of furniture at the office one is a bar height like stool height table with seating for 8 people and another is a normal table like normal so chair height with seating for 8 people. There's really no difference between them just one's bar height and once. Chair height and just like everybody uses the bar height one and we didn't used to have that we got that later. We used to just have the seated one. No one used the open office at all and it's like there's no fucking reason for this It's just vibes. It's just you're like. Yeah, it seems more like a coffee shop or something I don't know what it is but I learned that lesson by not caring enough about this. The last time we did this and this time I'm like I am thinking through every inch of this office because it matters so much.
25:47.30
Rick
Have you thought about hiring someone who specializes in this.
25:51.21
tylerking
I have it has occurred to me I don't think anyone specializes enough in ours but like there's so much that it depends on what your culture is and understanding how the current space is being used and I think it would take so much time to. Download all the context to them now I guess getting ideas from them could be useful.
26:11.67
Rick
You You might like just schedule a few people to come by the office and give like give them like you know what are your quick recommendations and then you could hire someone to do more specific stuff if they're really awesome, but um I have ah I do not have.
26:19.65
tylerking
Yeah.
26:27.29
Rick
The design I like you do. But when I moved into my first kind of place by myself as a like professional adult I hired. Ah ah what do you call it I don't forget what they're called like design interiorior design decorator person and they handled everything and it was like wow this place is awesome.
26:36.66
tylerking
An interior decorator designer. Yeah, okay, that's why that apartment was so well put together all right that makes more sense.
26:45.00
Rick
Yeah, yeah, yeah, they they picked that with the furniture out. They just I had to give them a budget and then they'd run like choices by me and it was really nice but you probably like this kind of design thing I did not want to do that? yeah.
26:56.35
tylerking
Interesting I Actually really enjoy and and to be clear. It has nothing to do with like buying furniture anything. It's like we we basically have all the furniture but it's like you know you want it. So What I've found is everybody wants to feel like they're near the other people. So like so sorry to belabor this but like another quick anecdote we used to have everyone's main desk in the open office. Ah, after the pandemic we decided to flip it and everyone's main desk is in the private offices somewhat counterintuitively more people work in the open office now than used to.
27:31.49
Rick
Um.
27:31.73
tylerking
So before their main deskk was in the open office and you had to like if you went into a private office. It was just kind of like shared. They're all shared so it's like grab whatever's open and go sit in there more people worked from private offices in that setup than now which just I I now understand why it's true but I would not in 1000000 years have guessed that um, it's true because.
27:51.69
tylerking
When you have an assigned seat. You can't move to be where other people are and so everyone was spread like if 5 people were out there. They're all spread out across this huge space and it was almost like you were by yourself in there now. It's like everyone crowds around this tiny little standing height desk and everyone so anyway like. Part of this. It's is less like making it look nice and it's more like how do we make sure that no matter where you are you feel like you're a part of the same pod as everybody else who's there.
28:20.10
Rick
Yeah I love it. Um, and then you can observe if you can build in some flexibility where you can observe and then iterate Um, you know that's that would be fun too.
28:27.30
tylerking
Yeah, yeah for sure. So anyway I Really like it. It probably doesn't make for good radio because it's very visual and stuff. But ah I'm having fun with it. Yeah, should that be fun. Ah yeah.
28:35.54
Rick
So we should ah you should tweet some ah photos when it's done.
28:43.27
tylerking
1 more thing and then I'll hand it back to you so I've I've been doing a lot of design work like I just said working in figma you haven't really worked when like whether it's figma or photoshop or fireworks. You really haven't done much design at all right? Yeah, nice.
28:53.46
Rick
I mean outside of like a paint I see like when I need to edit a photo I use paint. Yeah.
29:03.31
tylerking
Um, so we ah you know about the concept of technical debt. This comes up a lot right? I'm sure most listeners know this. But in case you don't like the idea that when you write code if you cut corners If you you know, maybe solve for a specific case but don't handle other cases or whatever.
29:07.34
Rick
Oh yeah.
29:21.66
tylerking
Eventually over time your code kind of starts getting crafty and you have to go back and and improve it or it starts causing problems if you don't maintain it basically like if you don't pay your debt you you know have problems. Um I didn't realize until this week design debt is a thing. Ah the the design tools. Yeah.
29:36.64
Rick
Really.
29:41.60
tylerking
What What do you think I mean by that.
29:41.23
Rick
Well I mean the only way I could think about it is like similar to like Css files where like you could get like out of whack with like code that is unused and unnecessary and misconfigured like misusing the layers and like the. Filters and all the settings within a ah ah design file.
30:03.86
tylerking
Yeah, um, that I think that's like abstractly correct like back in the day everyone would do this in photoshop or something like it and I don't think photoshop really had many tools for teams to like create design systems and create components that could be reused. There's a lot of copying and pasting and just like. Positioning stuff so that it would look right? Um I'm sure big companies still had some systems behind this but with figma even though it's entirely visual. It's almost like a no-code tool because there's 2 ways to use fig but 1 is like you've got a canvas you just drag stuff wherever you want it to be on a canvas and you kind of eyeball it That's how I used to do it until somewhere recently. There's a feature in figma called auto layout which basically is the idea like I've got a box and then I want this text to be inside the box and I want 10 pixels of padding on the top and bottom and 5 pixels on the left and right and make the box like hug the contents of the text and so if I type more text. The box gets bigger that type of thing. Kind of visualize what I'm talking about and then you can do auto layout without ah within auto layout with an auto layout. You're effectively building the html code of a website kind of like you might do in webflow so you can say like you know make use this icon make it this color repeat it 10 times. Like have these components that are getting reused but it's it's all like it understands the logic where everything resizes based on the content inside of it. Um, as a result you're almost coding what this means is I went in and like I was working on this file that we made like a year ago me and tori the designer.
31:36.79
tylerking
And I was just like oh man, this component was set up wrong and the Auto lay. It's not right and I just I I spent like hours cleaning up something unrelated to what I was designing because it was such a mess I couldn't make my design in auto layout. Um, anyway.
31:50.57
Rick
M.
31:56.00
tylerking
So now I'm like there's like a valuable use of time and design is just going through all your components and cleaning them up and making them reusable. Ah yeah, design debt is a thing.
32:03.54
Rick
And is this like a legacy thing that tools are getting better at preventing or is this something that.
32:11.54
tylerking
I Actually think it's the opposite. Um figma keeps adding more powerful features without it's kind of like you know how we've talked about how um, no code doesn't really have version control or good testing features right now I Um so you can do.
32:24.60
Rick
Yes.
32:28.98
tylerking
Lots of functionality but like coding has all this tooling around keeping it like doing it the right way. No code doesn't similarly figma doesn't like there's all this stuff. You can't do in figma and so it's like really a house of cards. Yeah, um.
32:41.48
Rick
You have to be you have to be so self disciplined.
32:47.81
tylerking
it's it's extreme it's extremely frustrating because it's like 90% of the way towards writing code or thinking like a coder but there's all this abstraction. You can't do where you're like well I guess I just have to copy and paste this 50 times. Okay, and then if I want to change one of them I have to change it 50 times you know that type of thing anyway. Um.
33:03.62
Rick
Yikes.
33:07.30
tylerking
I Just I just thought that was interesting I don't have anything else say about that you go.
33:11.68
Rick
Get diff talk about this like last one you got here.
33:17.45
tylerking
Ah, yeah, this is about leg up benefits the the project I'm doing with you which we're going to talk more about in a second but um, so for anyone who hasn't been listening I am taking a six week sabbatical to work on a coding project for Rick Ah that's not leg up or not less knowing Crm related.
33:18.86
Rick
Okay.
33:33.57
tylerking
I could build it in the technology I already know but a I wouldn't learn anything and B Rick would have a hard time hiring someone to come in and take it over later because it's it would be very like specialized to what I how I like to code so I'm trying to learn more general like commonly used technologies like laravelle and and. You know, tailwind and stuff like that. So I've been I'm not putting any pressure on myself to get much work done until the sabbatical starts because the real like I've got six weeks like that's going to be great but I am trying to like basically I'm trying to see like am I once the sabbatical's over I know I'm not going to be done so like. What will it be like I'm trying to just dip my toe in the water like am I going to be able to be productive I think the answer is yes but the answer right now is is no and the reason is like because I'm learning stuff I'm not doing stuff to problems one so I spent like a few hours last weekend trying to get into this. Um. If I had known what I was doing I would have gotten into flow state and I would have spent 8 hours on it. But instead I was just like it was I was like dragging myself through this tutorial and like the moment I thought I had done enough to be able to quit without feeling guilty I quit I was like I'm done for the day.
34:43.24
Rick
Um, yeah.
34:45.83
tylerking
I think once I get the hang of the stuff that will change. The other thing is like when you're just learning something out of the 2 hours I spent on Saturday I bet I spent an hour of it trying to remember all the shit from the last time. Um. I really made almost no progress despite spending 2 hours on it because I was just like how do I start my virtual machine again like what's docker um people listening are gonna be like I'm an idiot but yeah, like it's just so hard to learn a new thing and it's I think people who are experienced take for granted like once you know it. A you don't have those startup costs and b you can get in in flow state so much easier. So I'm looking forward to getting there but I'm not there yet? Yeah ah I getting older sex though like remember how easy it was to learn stuff when you were younger.
35:26.89
Rick
You'll get there.
35:32.50
Rick
Well I mean if you were just doing this as your main thing like you would not be complaining about this. You'd make a lot more progress and that I practice are hard in general no matter how old we are.
35:39.89
tylerking
Yeah, right? Yeah, that's a very good point like spending 2 hours on this during a workday would be no problem at all. It's that I was like this is a weekend like I'm I'm not enjoying this you know.
35:53.24
Rick
Yeah, like this is my pleasure time like I don't want this? Yeah now I totally get it. That's one of the reasons like my newsletter is is doable is that I thoroughly enjoy the work and I've created a system around just doing the thing that I like which is which is like reading and like taking notes like.
36:07.64
tylerking
Yeah, yeah, that's important. But if you do that as you get older the things you like you stop learning and then you're just stuck and that's why so not everyone. But so many older people are so.
36:12.97
Rick
So um, yeah, like but you're due. Yes.
36:26.79
tylerking
Antiquated and how they do things because like it was too easy for too long I think so anyway back to you.
36:35.79
Rick
I've got to um before we jump into the legup benefits thing I've got a couple of just like little things. Um I don't know about you but I've I've been like using Youtube more and more over the last six months I can't really figure out why? Um, but I'm I'm using it more primarily for sports news. Um, and then you know more you know to to like just mostly sports news like Espn. It's better experience on Youtube to watch Espn videos than going to espn.com and then um I I've been dismissing like Youtube Premium for
36:58.98
tylerking
Um, yeah.
37:09.90
tylerking
Oh yeah I dismiss that so much.
37:12.66
Rick
Like for six months but then I realized like how much I'm spending skipping ads timewise like and annoying because I just want to watch like a 2 minute video or like ah and so and so I signed up for the three month trial and since I haven't been it like been required to skip ads I'm like I can't go back like the amount of.
37:18.30
tylerking
Oh.
37:31.30
tylerking
Um, yeah.
37:32.29
Rick
Energy and time I spent like skipping ads and losing context and focus on what I was doing is like totally worth the premium Youtube.
37:38.22
tylerking
Agreed and I sorry this the thing I skip is the Youtube Tv I confuse the two I am also a Youtube premium member even though I rarely watch Youtube but I'll spend almost anything to avoid watching an ad people are sitting there watching watching ads on hulu I just can't like.
37:43.26
Rick
Yeah.
37:51.34
Rick
Um, oh my gosh I hadno it.
37:55.82
tylerking
Pay the $3 and don't see the ads come on.
37:57.61
Rick
Yeah, yeah, especially when you're like trying to do something like fast. Um anyway, ah and and like multi like small things like it just adds up so quick context. Why yeah I'm doing the family one. So ah yeah, I'm adding like my work count. My.
38:07.20
tylerking
And do you have a family account. Yeah, that's the key you pay $15 and you get 4 users I paid for it for me. Shelley.
38:16.75
Rick
Like I have all my Youtube because I access youtube throughs so many different Chrome setting browsers. So.
38:24.10
tylerking
My mom and my dad and we all use Youtube music instead of Spotify. So it's $15 a month to get no ads on Youtube and streaming music I hate spotify I hate Youtube music too. But I I go.
38:31.16
Rick
I'm too I'm too stuck on Spotify like what Spotify is great I love spotify so I totally disagree with you on that um is Quora Deadcora Dot Com
38:46.20
tylerking
Kind of seems like it I mean it's been dead for a long time I feel like what? what do you? No I used it in the very early days. It has the what's the phrase like eternal September or whatever you know that phrase it's there was some message board at a university.
38:46.51
Rick
Is it dead.
38:50.21
Rick
Do you ever use it for anything.
39:00.50
Rick
You know.
39:05.95
tylerking
Ah, in the early internet like before Facebook and stuff like that and every fall so like every September the new class of students would come in. They didn't know the etiquette and stuff and everything got worse until they learned it. Um and then it would get better again, but eternal September is this phrase that like. Online communities are really cool and they're small and everyone knows the rules and as eventually as if it grows too much and gets bigger. You're just forever in September where there are so many new people all the time that they ruin all the culture and it it dies and I feel like Quora hit that like ten years ago for me.
39:36.61
Rick
It's funny. Yeah, it's true. Yeah, there's like it's like so not very valuable anymore. So much noise.
39:40.73
tylerking
But the thing is why do you want to use it. You want to use it for marketing I bet like at which yeah, but like also I'm not blaming you but like you're the reason it died as am I.
39:46.10
Rick
Yeah I do um but like I think I'm too I'm too late.
39:55.26
Rick
Um, I Do you think so because I think I I like I would use it for marketing but I would probably do it in a way that was not super annoying.
40:01.96
tylerking
I think that's true, 100% but also like a community of people that are just marketing to each other is not a community. You need actual users. Yeah anyway, but yeah I agree quoras.
40:11.39
Rick
yeah yeah I mean that's what Wikipedia got right? Is you know they've controlled like they figured something out to keep kind of like it just focused on content versus promotion. That's true. Um.
40:21.42
tylerking
Yeah, being a nonprofit certainly helps. But.
40:28.54
Rick
So yeah, it's dead and then the last thing that that was sort of like my rant or shout out is like notion a Ai have you been like asked to opt in.
40:37.72
tylerking
I have opted into the Beta and I nothing has I don't even know how to activate it I need to look into that.
40:46.48
Rick
Well, the the main thing that like there was like was you know, spell checking and like Ai and I was like grammarly is so much better than notion for that because grammarly is cross browser and cross device. Um, and you can set your customize your grammarly settings and so I just wanted to call out like. I don't know how much value is in notion ai maybe for like like prompts for new content could be useful but like for no I I didn't see what what was what would help me with it like so I didn't sign up for it. Um.
41:09.93
tylerking
So you signed up for it like ah grammar correction was what you wanted from it. Oh because the pitch I've seen us are good.
41:22.30
Rick
I Thought it was mostly like a grammarly competitor and so I don't really understand what it is.
41:25.90
tylerking
The pitch I've seen is it can do things like um if you take like if you have a meeting transcription. It'll summarize the meeting for you like kind of note related stuff. Um, again I haven't actually.
41:31.17
Rick
Oh interesting.
41:37.88
tylerking
I Think it must be broken like I have it turned on on my account and I cannot figure out how to use it so I need to look into that.
41:42.11
Rick
The other thing that's concerning is like I have a lot of like really valuable content and notion of my personal notion account and like if they started using that to inform like a model like I would I would have a problem with that. So.
41:52.98
tylerking
Right? I'm extremely I think chat Gps this way too where I think if you ask if you send any information chat to be gp t like I think it's public. Yeah, it's not even like just.
42:05.57
Rick
It's public domain. Yeah.
42:09.17
tylerking
Open a I has access to it I think like anyone has access to it. Ah and I want to use it for stuff but I'm I'm nervous. There are some questions where that doesn't matter, but there are somewhere words it's like I'm not pasting my company's code into this. You know.
42:19.58
Rick
yeah exactly so yeah I if you find a use case for notion ai'd be interested in hearing about it primarily because like I do want to start fiddling with Ai this year but like or ah I should say like um, generative Ai specifically um.
42:31.18
tylerking
Um, yeah.
42:34.21
tylerking
Yeah, okay I know some other people at less annoying have been dabbling with it more than I have so if they come up with anything I'll share it all right? You want to move on to the big topic.
42:36.81
Rick
But I have not found like an easy way to do that and use case. So.
42:51.00
Rick
Yeah, so um, I've spent a ah ah good amount of time. Ah so far this year so context ah Tyler mentioned. He's going to um, be he's interested in helping out legup benefits and we're pretty much aligned on like that's going to happen but we want to get but. We're we're going through this sort of trial period right now where um, the the first milestone is building sort of a generic app on the stack that Tyler mentioned earlier in the episode and and ah, but while we're we're working towards that milestone. We want to get aligned on like how comp would work when we're building. Towards like a meet more meaningful milestone for the business and so I've spent a lot of time thinking through the structure of um, how to compensate Tyler in a way that like maintains a startup to last model given that Tyler does not want to be a employee of leg up health. Um. Which is challenging because ah you you know if you part of the like what you want to preserve as a start to blast entity is equity staying operating in the business and so.
43:49.19
tylerking
Um, the.
44:03.48
Rick
It required a lot of thinking and um, you know we we've kind of talked to each other about what we both wanted out out of the ah um so so kind of like that. The timeline was Tyler and I Tyler expressed interest. Um I go well I'm interested too but like let's talk about this a little bit more see what we both want of it see if it's feasible. We did that we found out. It was feasible and then I used that sort of. Take the what what we both wanted out of it to sort of constrain. Ah a structure and I had already built a compensation. Um, ah, strategy for for legup that sort of for partners who join the company that are like special employees like. Ah, compensation plan that like gives them a significant portion of like this notional equity concept that is eligible for profit cheering that um you know reverse vests if they leave over the a period of time so it gets recaptured by the company. Um, and then ah you know and then Tyler says I want to help but then that. Like that doesn't work for Tyler broke the model right? because you're not an employee and like you contributing part-time for.
45:02.61
tylerking
Right? It it it broke because if your model as soon as a person stops working they start losing their their stake in it. But the whole point is that I would work I would put in the upfront work and I want.
45:19.98
Rick
Exactly exactly. So um, so so that didn't work and then like the other models out. There are more around like monetary investment. So like probably the best model for like the concept of what we want to do together is a sort of dollar investment strategy which if you go look at earn it.
45:20.53
tylerking
To see the benefit on the backend. Yeah.
45:39.97
Rick
Ah, not earnest capital but Calm fund is what they're called now they have like a what's called a seal or a shared earnings agreement and that structure is actually really useful. It's It's overly complicated for what we needed but like the structure is is pretty useful to think through this.
45:40.80
tylerking
Calm fund. Yeah.
45:57.33
Rick
Um, so I spent a lot of time sort of taking the seal taking our current compensation plan marrying the 2 for what I wanted to accomplish and what you wanted to accomplish and I built this basically non-employ ah shared earnings agreement model. Um, and so I have not spent a ton of time thinking through the inputs but I've built the structure. So so that we could have conversations you and me about like what's the value of what you're doing and and converting that to a dollar amount figuring out some like levers of like how that could be like how much should you get paid back on that from a profit sharing perspective at what rate and when.
46:26.30
tylerking
Right.
46:29.59
Rick
And then um, you know also like ah, an ongoing sort of residual equity piece for as long as you stay in the business that you know that that sort of thing and I put you know some some placeholders in for those things and you know anticipate us having a more depth conversation around like okay, what. What is actually motivating what does actually make sense here based on the work and the way that I've structured it too is that like we can kind of think about this as sort of phase 1 like 2024 like what are the milestones we want to hit. We can assign value to it figure out how to like handle the vesting of this thing. Whatever it is or the earning of the. Shared earnings and then sort of you know if this sort of isn't enough we can and you're like hey I need more six months from now you're like we just do it again and we re-up it and and add to it. So it's a very flexible that was a lot I don't know if that. Yeah yeah.
47:07.52
tylerking
Um, if.
47:13.75
tylerking
Right? right. Yeah, so let me let me prompt, prompt. Some things here so to me I first of all Rick sent this to me this morning. We've we have not talked about this so people of this could end up being a terrible conversation but people are going to hear our actual real conversation here or at least 20 minutes of it.
47:29.42
Rick
Um.
47:35.99
Rick
Me.
47:38.25
tylerking
Um, yeah I I think there's 2 concepts people need to understand to to make sense of what the conversation's going to be 1 is can we just get a very quick. Okay sorry I'll give the first one and then I'm going to ask you to give the second one first one is I just want to reiterate where Rick said that? um, we're. We're saying we're putting a dollar value on the the work I'm doing and like if you were just paying me money. You just give me that dollar amount and we'd be done that'd be it. But instead we're saying no, that's not going to get paid instead. It's as if I'm investing that dollar amount into the business and so I'm being treated just like an investor. Instead of like an employee you you said that. But I just want to recap? That's a super important point. So the big thing is what what would you pay me as an employee to do it. That's one part and then the second part is if I invest in your business as the like through a shared earnings agreement. With that amount of money how does that work can you give like a sixty second explanation of how a shirt earnings agreement works.
48:36.54
Rick
Yeah, this is the leg up shared earnings agreement and I have modified it substantially compared to like calm funds version of this but like basically there are a couple of key points. The first is. Um, the investment amount or the dollar equivalent in in this case, the second is the shared earnings rate which is like the percentage of shared earnings. You're eligible for um once shared earnings are earned payable.
49:06.52
tylerking
So that and that's that's mostly based on what you pay yourself like when you pay yourself that when founders pay themselves that's part of the shared earnings and as like a kind of quote unquote investor in this I get some percentage of that.
49:20.74
Rick
Yes, and then there is a threshold of ah so like what the part like I call it partners not founders but like the it's like the employee partner salary threshold which is like a minimum sort of portion up per partner. Um. Of of the shared earnings that need to be paid first before you know the the non-employ partners would get paid on shared earnings.
49:47.93
tylerking
So let me just say the numbers that you've plugged in here just to to make this so you plugged in $50000 is the amount of the investment. So it's as if you would have paid me that in cash if I were just like a freelancer or whatever. Um 5% is the shared earnings rate meaning when money's getting paid to.
49:55.90
Rick
But.
50:05.61
tylerking
Shareholders I get 5 % of that money. That's how I interpret that okay and the ah the threshold is one hundred and fifty thousand dollars so you can pay yourself one hundred and forty Nine Thousand or one hundred and fifty thousand dollars and pay me nothing but as soon as you pay me. Hundred and fifty one thousand dollars that extra thousand dollars is above the threshold I get 5% of that.
50:28.92
Rick
It's actually ah, slightly different than that if ah you so so whether or not I pay myself one hundred fifty thousand dollars a year. There is a term called ah ah partner earnings which is like calculated as like basically what is paid. To founders. Ah, ah, as like what is available after revenue and expenses. So it's like basically retained earnings and so ah ah yes, yes, yes so like whether or not I pay myself a dollar more you would still be entitled to a percentage of the retained earnings that are going back into the business.
50:55.62
tylerking
Okay, so if you keep it in the business that still counts as um of earnings here. Okay and there's you and JD so
51:03.99
tylerking
Okay, so there's you and JD are both partners. So basically like if there's more than $300000 of basically profit I don't from an accounting standpoint maybe profit's not quite the right term but something like that I get 5% of that.
51:06.60
Rick
Above and beyond the threshold.
51:17.39
Rick
The term. Yeah, the term we're using is partner earnings which is like a non-accounting term but takes into account basically dividends partner salaries and retain earnings.
51:30.80
tylerking
Yeah, okay, cool. Um, and then I think the only remaining concept here and it's good. We're talking about this because like I know this concept but like I got that 1 thing wrong. So it's good. We're having this conversation ah is after so there's the yeah, the multiple talk about that.
51:38.60
Rick
And.
51:46.79
Rick
Yeah, so then so there's there's 2 components to the shared earnings agreement in terms of what what happens what you get for that $50000 ah value investment 1 is a multiple of shared earnings and I don't know if 3 or 20 year is the right number. We can talk about that you and me um, but like you know, basically once you start earning that 5% it caps out at the multiple so right now I have plugged in here as a shared earnings cap multiple of 3 that was just what comfund had in their template i' like you could we could change it to 10 right now and see what happens. Um the way. The model is built.
52:04.78
tylerking
Um, go ahead.
52:22.11
Rick
Um, but you know if it was a shared earnings kept multiple of 10 your $50000 investment would be eligible for profit shared for shared earnings up until you get paid back 500 k and then the shared earnings would stop so that's the first component and then the second component is a residual equity.
52:30.87
tylerking
Yeah, so.
52:39.58
Rick
For um of a number of shares. Um so and this is designed more for like if the business were so were sold. Um, you know you would be entitled for a percentage of the business long term and I I put I just threw 2000 residual shares of the. Current 100000 shares and these are notional shares so there is like no real equity going around here. Um, just to be clear. It's like so there's no corporate governance crime rates associated with this. This is sort of like ah a notional pot of shares that in the event that there was a change of control. Um or a formal investment of equity into the business.
53:08.61
tylerking
Yup.
53:17.77
Rick
Then that provides sort of like a ah ratio percentage equity that would convert to to real money and.
53:26.35
tylerking
Yeah, so question on that. Um with the calm fund seal. It's real equity right? or is it. It's notional equity for them too. So if it if there's not a transfer of ownership and.
53:31.53
Rick
No, no yep.
53:42.70
tylerking
Ah, like like dividends are not include like like if if if calm owns 1% of a company but it's notional shares and that company's paying out like big dividends to shareholders calm doesn't get anything from that interesting.
53:53.50
Rick
I Don't believe so I need to I'll double confirm that but the the way I read it was this this this like residual piece is really about um exit value of of the business not about like ongoing any sort of distribution.
54:08.81
tylerking
Okay, um.
54:10.45
Rick
Would now so there is a scenario where let's say that. Ah the founder raised a series a it would convert to real equity in the in the event of a series a and then there would be eligibility like eligibility for dividends.
54:16.82
tylerking
Right? That feels a little weird to me because like in the in the spirit of aligning incentives I'm now like please go raise some money so that my so that I can start getting dividends right.
54:34.33
Rick
Yeah, it's weird but dip. Yeah, um, so so ah, so so right now like that 1% notional equity is not eligible for any sort of like the way it's structured current currently ongoing shared earnings but we could like structure this if that's ah ah you know you're identifying like a potential. Um.
54:35.44
tylerking
Um, ah.
54:52.18
Rick
Miss Alignment We could structure it so that that residual notion equity pays a ongoing profit cheering after the shared earnings are are going.
55:00.47
tylerking
Yeah I know that's how ah not called a tiny seed I think what tiny seed does is they're basically like there's a threshold like founders can get paid X dollars and everything above that it's like we're equity holders on that amount. Um.
55:12.71
Rick
Press button.
55:16.10
tylerking
But so to summarize how I understand this basically I'm an investor I invest I'm going to use the numbers we have here $50000 there's a let's say it's a 3 year um multiple so I maybe things don't go well and I never get anything if things go well. I'm capped at one fifty. So I expect a 3 x return on my my investment basically plus this kind of lingering 1% that in the case of calm only matters for an exit. It's like if you exit I get a piece of it. Potentially it could be adjusted to be like there's. Because you know if if you are in fact, a startup to last business I'm not expecting an exit so that's worthless to me. But.
56:01.32
Rick
And the the only other caveat would say is like if if like the if if there's an exit before the shared earnings cap is paid back that is calculated in against the exit value so that would be due to you at exit. Um as sort of liability.
56:16.11
tylerking
Okay I think it's a cool model like I think this is probably maybe our exact scenario here is somewhat unique but I think a lot of people deal with this thing. Ah where it's like startups are. Trading future upside for current money and how do you do that and what this this is an elegant way of saying we're taking the money like like we're we're defining the money in terms of present day value dollar amount and then we're basically adjusting for the risk. So like if there's a lot of risk you might want to. Bump up the shared earnings rate or the payback multiple or something like that if there's less risk you could bump it down but it's it's a framework for saying like those numbers get tweaked based on risk and then this kind of gives a clear way for the investor to get their money back.
57:06.60
Rick
Yes, and it also ah the the thing I love about it is it preserves Um, ah it avoids the the all the complexity of running a business that comes with like like real equity.
57:18.19
tylerking
Yeah.
57:20.21
Rick
Um, and I that's like what I I have so much respect for is ah is this guy named Tyler like I have ah tons of respect for him thinking through this. Um like I could not have done this with like I would not have it would take me so long to come up with this without the with platform that he had built.
57:23.22
tylerking
Yeah Tyler tringis.
57:34.70
tylerking
Ah.
57:36.45
Rick
He built out. He's they're so transparent with everything they do.
57:36.99
tylerking
Yeah, and this you know a lot of founders. Do this thing where they're like well I'm just going to raise a little bit of money without really, you know it's going to be a small amount of equity but having even a single equity holder changes everything like you have to send out updates to them and potentially have to have like abort of directors and you know. Have to manage a cap table and um I know a lessening serum I've been really appreciative of even though I have teammates who have a kind of percentage share of the upside because it's not real equity I'm I'm just so glad we did it that Way. So I'm very much on board with not asking for equity from you similarly.
58:13.78
Rick
Yeah, well look let's um, transition this to ah talking about what? um why this is like I think we should do that privately but like um I want you to know that I am committed to like I basically to do whatever you want pretty much to make this work I think I lost you So I'm gonna.
00:00.00
tylerking
All right apologies for whatever just happened are recording software died and Rick was in the middle of talking. So what? what were you saying Rick.
00:08.13
Rick
I was just saying that it would be like the 1 thing I think there's some point to cover is like all like all this is based on future value and so like part of like when you have a conversation with a potential investor or employee or in this case nonemploy partner. Um, ah. You have to be able to sell the vision of like why this is a good investment of time or money and so there is a model here of like Tyler like if we do this like pretty conservatively like what I've done before in the past other companies which is and Jd has two who's our other partner. Um, and we get to $3000000 in 10 years here's what this means for you. Ah, in these scenarios and and so I've actually walked through like he can see that he'll get you know it'll take ah actually up the the multiple a ten x so it's a 50 k investment now with a 10 x ah multiple cap. So 500 k at a 5 % earnings rate and he gets his um. He gets 813 k of the ah, let's see he gets his full $500000 back or he gets $200000 back in the first ten years um for his $30000 time investment. But let's say that we sold the business in year ten he would have an unpaid return of shared earnings available of three hundred k. and then um, if we sold at a 5 yeah ah 5 x multiple of 3000000 errorr which is $15000000 he would get another half a million dollars so total $1000000 return for his $50000 time investment this year um the way that like that input worked so I just.
01:39.63
Rick
You know it's not just putting the inputs together. It's also ah sort of walking the person that you're trying to get money from time from you know you know you help from into like why this will work and I you know we I have to cut you know in order for this 50 that like these inputs to mean anything they have to turn into real money on the other side.
01:47.67
tylerking
Ah, her.
01:58.99
Rick
At some point and you have to believe that they will.
01:59.84
tylerking
Yeah, right? Um, and yeah, anytime you're talking with any startup. It's like the reason there is a return is because of the possibility of nothing now. A big thing that calm company is all about if you read their thesis is they're like we are. We're not taking normal venture capital risk. You would be stupid to make this deal with just whatever random Joe Schmo startup out there because the the failure rate is so high a 3 x multiple is not enough to get paid back or or even if you put in 10 x or like the the idea is the winners need to pay a huge huge amount if you're doing normal venture investing. This is a model for a company that you view as being safer and more likely to get a base hit with.
02:38.17
Rick
Yes, yes, um, so yeah, like part of like for next steps of this conversation Tyler like what I'd be interested in is like what do you think like the way I'm thinking about this is like take it it like kind of one year chunks. Um, so like this is this year's chunk kind of February to February um, and like what do you think.
02:50.97
tylerking
Ah.
02:56.90
Rick
You know your contribution is worth this year. What are the Milestones like what's it earned that kind of thing and then like what's the risk multiple that like you think it's worth um and then like we'll agree on it. Um, and then ah if there's any like structural like changes we need to make before we like finalize the inputs and.
03:00.98
tylerking
Yeah.
03:15.54
Rick
Like the variables then we should make those structural changes. Um, like I think the point you make about like the the tiny um piece is interesting like why even have a multiple cap in the first place is very good question. Um, while while you're involved in the business.
03:26.10
tylerking
Well I get having a multiple cap if it's 5% is the way I because I'd never looked into the details the way I knew about the the seal but not the details way you do I viewed the multiple cap as like you go from 5 to one like the the company is basically the way Tyler Triis talks about it.
03:34.76
Rick
Um.
03:45.16
tylerking
He makes it sound like the company is buying back equity and then I get this residual amount. Um I didn't interpret it as but that residual amount is only for an exit. Um.
03:54.82
Rick
Yeah, yeah, that's how I interpreted it based on how the model works but like we should look at it together and and ah confirm that but and we can do whatever the hell we want right? like um that yeah so like the main thing. Um, but yeah, like so I think that's the next step is you and I like kind of go back and forth on like.
03:58.29
tylerking
Yeah, well and we can do whatever we want here to yeah.
04:10.51
Rick
These ah so these numbers and get to a place where you're like happy. Um, this structure is like generally like gives me a lot of peace of mind in terms of like like ultimately if we can agree like reasonably that you're happy like for the risk and then I'm just like pretty happy with like whatever you want to be honest, like Tyler gets whatever he wants everyone. Um.
04:22.71
tylerking
Um, yeah.
04:28.15
Rick
He's that good. Ah are yeah um.
04:28.33
tylerking
Yeah, the investment is $5000000 for now. Yeah I think the numbers you plugged in are pretty close I'm going to like um I was hoping to have time to do this on the podcast but I got to run pretty soon here. So um I was yeah I think my only pushback it.
04:36.54
Rick
Yeah, go ahead.
04:43.46
tylerking
I I would definitely love that 1% to have a or I love a way to not just like max out and be like well I don't care about this company anymore because um, I'm never going to be pushing for an exit you may exit but like that doesn't excite me I want like long term. Ah, that's one way in which I would love to be more aligned. Um, and then I think like the exact numbers you put in I think are very close to appropriate. Um I might just say like this is well 1 question I have that we need to talk about is is this for leg up benefits specifically or is this for the whole leg up ventures business.
05:15.85
Rick
It's the whole leg up health business which is a subsidiary of leg up ventures which would include leg up benefits Insurance commissions.
05:19.96
tylerking
Okay, okay, but like not that obviously I would not want this to happen. But if if leg up benefits totally flops. But Jd goes and kills it on the individual insurance side I still get upside of that. Okay, cool. So yeah I um yeah I think these numbers are pretty good. Ah.
05:27.67
Rick
You would have piece of that. Yeah.
05:36.42
tylerking
I think $50000 is a good like price to put on the upfront investment I'm making um well I got a run but um, all should just slack you about this should we set up a time to talk. Okay, yeah.
05:44.55
Rick
Go go I think we should talk live about it just to like make it like easy. Um, but like let's talk this weekend if you have time or whenever you're you're available. Um and ah cool. Well I don't know if this was interesting anyone that was like kind of intimate. Um.
05:54.51
tylerking
Yeah I'll reach out to you.
06:02.50
Rick
But and a little bit like probably unclear. But if if anyone's interested in this stuff once we finalize it I'm happy to um, make copies and anonymize some of this stuff and and share the the frameworks we've done if people are interested. Um, but if you'd like to review past topics and chi visit start last dot com I'll see you next week Tyler
06:16.28
tylerking
All right here.