Sam Parr on Bootstrapping a Multimillion Dollar Company – EP 76

Interview with Sam Parr

Getting Acquired for Millions with Sam Parr

Sam Parr is the Founder of The Hustle, a fast-growing media company that serves up important business news to over 1.5 million people daily.

He bootstrapped the company from his kitchen table back in 2014, and by 2021 it was valued at $27 million and acquired by HubSpot for an undisclosed amount.

At 30 years old, Sam was set for life… Though it hasn’t stopped him from creating or starting new ventures.

Sam has built and sold multiple companies and is always looking to buy undervalued assets or invest in cool startups.

He also co-hosts My First Million, which is one of the top ranked business podcasts in the world. And for good reason. Not only is it informative, but it’s super entertaining! The show involves interviewing entrepreneurs, breaking down successful companies, and sharing a ton of interesting business ideas that listeners are encouraged to go start.

In this episode, I talk to Sam about the company he built and sold for millions, how he structured the acquisition, online businesses, investing in real estate, and lot’s more!

Featured on This Episode: Sam Parr

✅ What he does: Sam Parr is the Founder of The Hustle, one of the fastest-growing email newsletters, which he eventually sold to HubSpot. Sam is also a serial entrepreneur, investor, and host of the My First Million podcast.

💬 Words of wisdom: “Make a list of 50 people who you admire who are way out of your league and cold email all of them and keep following up until they tell you to F off.” – Sam Parr

🔎 Where to find Sam Parr: Twitter | Instagram

Key Takeaways with Sam Parr

  • Sam’s start as a serial entrepreneur.
  • Getting acquired by HubSpot and how a $20M+ valuation was determined.
  • Sam breaks down the acquisition deal structure he negotiated when selling The Hustle.
  • The Time Billionaire concept.
  • Why starting and scaling a business is like going to war.
  • Why entrepreneurship doesn’t have to come at the cost of everything else.
  • Drawing inspiration from your circle of influence.
  • A look into Sam’s investment strategy
  • The strategy real estate investors use to pay little to no taxes on their investments.
  • How to protect your wealth through real estate investing.
  • Sam shares one step that you can take towards financial success and financial freedom today!

Sam Parr – The Time Billionaire Concept

Sam Parr Tweetable

The bigger the deal, the easier it is to get financing.” – @thesamparr Click To Tweet Make a list of 50 people who you admire who are way out of your league and cold email all of them and keep following up until they tell you to F off. – @thesamparr Click To Tweet

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Read the Full Transcript with Sam Parr

Justin Donald: All right. Sam, so glad to have you on the show. Thanks for making it.

 

Sam Parr: What’s going on?

 

Justin Donald: Hey, just living the dream. As you know, we both live in Austin and it’s been pretty fun seeing how much our worlds have kind of collided and the relationships, the friends we have that we share together. And so, it’s been fun getting to know you here, just so excited to kind of dig in on you and all the cool stuff you’re doing.

 

Sam Parr: Likewise, let’s do it.

 

Justin Donald: All right. So, how did you kind of get started in this world of entrepreneurship? You and I before we knew each other, we’re living in St. Louis at the same time, probably proximity-wise, living pretty close to one another.

 

Sam Parr: I live in South City, St. Louis. Where do you live?

 

Justin Donald: Yeah. So, I lived downtown for a while then I lived in kind of the Brentwood, Rock Hill, Webster area.

 

Sam Parr: Cool. Yes. Enough far.

 

Justin Donald: Yeah. I used to have some friends in South City, went there all the time. So, cool part of town. St. Louis is a unique city. There are all these small little pocket neighborhoods and just there’s plenty to do. It’s a cool place.

 

Sam Parr: But I’m happy to be gone. I was raised there until 18. I’m happy to be gone. I lived in the city and the crime has gotten worse and worse and worse. I do not want to be there anymore, but I’m very happy. I was raised there and I’m very happy I don’t live there anymore.

 

Justin Donald: Yeah. I would agree with you. The crimes getting worse and worse in a lot of cities. I’m from Chicago originally then moved to St. Louis, and the crime in both places has really risen in many parts of town grown rampant. But I was really excited to get away, and I think I didn’t have a strong comparison of what else was out there. And when you look at Austin, just this mecca of entrepreneurship and tech and investing, it’s just really a cool place to live and to kind of create. Don’t you agree?

 

Sam Parr: Yeah. It’s awesome. I like being here. So, I live here probably eight months of the year and then the rest of the time I live in New York. My wife’s from New York, so she likes to be around her family and so we go up there. I enjoy that split. I like Austin for eight months out of the year and I find myself very happy here. And then I’m like, “All right. I need a little bit more action.” Like, the way that I describe Austin, it’s incredibly easy to live here. Like there’s not much bad stuff. There’s not like a terrible amount of crime. It is expensive but it’s not as expensive as other places. People are very friendly. People are very nice. There’s wonderful people here. But sometimes I miss like a little more action and a little more happening and stuff so I like to go to New York. And then when I’m in New York, by about month three, I’m like, “All right. I’m exhausted. I want to go home.” So, I’m happy to do the split.

 

Justin Donald: Yeah. That sounds like a good way of doing it, and I had the pleasure of getting a chance to meet your wife. I went to Cody Sanchez’s parties, technically her husband, Chris’s party. And just you’ve got so much going for you from marriage to business being an entrepreneur. Big exit. But before we get into all that, I’d love to just talk about how you got started, like how you even decided that you should be an entrepreneur or that you could be an entrepreneur.

 

Sam Parr: Yeah. My parents were entrepreneurs. So, in Missouri, my dad and mom started a fruit stand like literally like a fruit stand on the side of the street, like what you’re picturing in your head. And eventually, my mother got her master’s and became a teacher. And my father, and with her but she just wasn’t there 24 hours a day, they kind of grew that. And so, they turned it into a produce brokerage business, which sounds glamorous but it’s basically you buy a million dollars of onions from Walmart or from a farmer in California, and then you arrange a trucker to come pick it up and then you find a buyer for Walmart for like one $1.1 million and you’ve just made $100,000 of profit. And so, that was my parents’ business growing up. And it wasn’t like a home run. It wasn’t like Silicon Valley money but like I bet they’re making a couple of hundred grand when I was in high school or maybe more, I’m not sure. So, it was like a good business but that’s where I learned what entrepreneurship was.

 

And so, I moved to Nashville, Tennessee because I had an athletic scholarship to go to college. And when there I met this guy named Mike Wolfe who started this TV show called American Pickers, and I worked for him and he was an entrepreneur. And I was like, “You know what, I’m just going to do this.” And throughout the years, I’d always had like a little website that was making like $100 a month or I’ve done like little things but in Nashville, I opened my first legal business where I got like a business license and everything, and that was a hot dog stand. And then after that, I dropped out of school and I eventually got a degree but I left school early and I moved out to San Francisco because I had cold emailed the founder of Airbnb, and he was like, “You want to come out here and interview and work here?” I go, “Hell, yeah. I’ll be right there.” So, I just left everything and moved out there and started a company out there, sold it, started another company out there, this thing called The Hustle, which is what a lot of people know me from, and I sold that. And so, I just kind of been like scheming from a very young age, for instance, my teens.

 

Justin Donald: Well, it’s incredible the success that you’ve had at such a young age where you’ve actually sold, you’ve started and sold many businesses, and I’ve got to imagine that they weren’t all in the ranks of The Hustle. And by the way, I’m a subscriber of The Hustle. I am probably pretty early on in the evolution of The Hustle.

 

Sam Parr: Thank you.

 

Justin Donald: Yeah. It’s fantastic news and always interesting stories. Even the offbeat like it’s a weekend edition, there’s no market anything, but let’s tell you this story about monopoly or whatever it is. You know, there’s always something cool to learn. So, with this business, it’s interesting because we live in an era where valuations are through the roof. Different types of businesses have different types of valuations. Some have a multiple on EBITDA or some sort of calculation on profit. Others have a multiple on revenue. With your business, you’ve got kind of like an email-based business, a content-based business. How would you describe it categorically? And then how was this business valued in the exit?

 

Sam Parr: So, The Hustle made money in a couple of different ways. Prior to COVID, we had conferences and so we would make seven figures a year doing conferences where we would have tens of thousands of people come in different events. The second thing that we did was we have the daily email. And when we sold, that was doing well over $10 million a year in revenue. I don’t remember exactly but the year we sold, we sold like in January, that fiscal year for the future 12 months, we would have done about 20 million in revenue and a lot of that would’ve been ads. And then finally, we own this thing called Trends, which was a paid subscription newsletter and paid community so that was subscription revenue. That’s a pretty typical business model for a media company. Media companies typically probably sell for two to ten times revenue, depending on growth rate. More likely, it’s always in like the 4X range depending on your growth.

 

For us, when we sold, I don’t remember the exact number but I’m going to round up and say 2 million subscribers. I think it was close to 1.7. But with 2 million subscribers, the math was really simple. It was basically, I always thought, a WeWork or a SalesForce was going to buy us, and then HubSpot hollered at us and I was like, “Oh yeah, that’s smart.” Because HubSpot sells stuff to small businesses. We had millions of these people who were mostly business owners or small business folks reading us, and they just said like, “We’ve been advertising with you. We know how much money we make when we advertise with you and we know how many leads we get from when we advertise with you. We should own this.” And I was like, “Yeah. That’s a smart idea. I think you should.” And so, they valued it by like basically how many customers do they have and what’s the lifetime value of those customers, and how many customers do they think they can get from The Hustle over the next five years.

 

Justin Donald: Yeah. It’s interesting because you have some groups that will come in, and by the way, a strategic acquisition is always such a great acquisition, especially if they don’t have to make money from it. If they’re making their own money and this is a value add or this is some sort of perk to the network that they’ve already built or the customers and clients they already have. But it’s interesting because some companies are going to buy you based on today’s values. Some companies are going to buy you based on tomorrow and future value. Some companies are going to do it based on a multiple. Some companies are going to do it based on whatever their metric is. So, in this case, they’re valuing it based on what’s the total value of a customer today and then in the future. And so, I’m curious how much of this a) aligned with what maybe you thought you would get as an exit? But then b) also where in this equation does it transfer from what it’s really worth to what the future value of the company is?

 

Sam Parr: So, I’ll try to answer this. So, we sold I think the deal closed on like the last day of January but we had been talking to them for 90 days prior to that. So, when we started working with them, that was in October of 2020. Am I doing my math right? And that was like we didn’t know that the economy was going to boom. There was a lot of uncertainty and, frankly, I had a lot of fear. I was like I don’t know what’s going to happen in the next 6, 12, 24 months. I’m really nervous. I don’t know what the world’s going to look like. I had heard a little bit about Facebook and Apple changing some of the things that they’re doing with tracking. I thought that might have an impact on us. And so, when they wanted to buy us, I was like, “I think we could be worth a whole…” Our business… The cool thing about media is if you’re willing to run it for 20 years, it’s pretty straightforward. And I thought if I’m willing to run this for a little about a while longer, I see a path to a $100 million a year in revenue.

 

But there’s a lot of uncertainty right now. I’m 29. When I was talking to them, I was 29, I think, and 30, and I was like, “I could just… I’ve only been at this for four years like I’m set after this. Maybe I should just take it and not worry about what it could be worth in the future.” And that’s what I decided to do. And then the second part of the question was what did you say? It’s something about what it is now versus what it will be in the future.

 

Justin Donald: Yeah. Do you feel like you got present-day value or do you feel like a premium was paid based on what they were projecting and what maybe you thought it was worth in that moment?

 

Sam Parr: So, the value of the company, it’s hard to say because we closed, like I said, on like the end of January. And then literally like the first… And I was given a large amount of HubSpot stock. When the deal was announced, I think their stock was $350. And then like the next day, it was like $600. And then like the peak so far has been like $850. It’s in the sh*tter now. So, like it’s hard to sit like when the stock was $850, I was like, “Oh, like whatever people think I sold, it was actually way more because the stock is just crushing it.” And so, I think I sold for a fair price. I think that I probably had I hung on for six months, I could have gotten a whole lot more because I think the ad industry actually would have played in our favor but I didn’t know that at the time. So, I’m happy. I have zero regrets.

 

Justin Donald: Yeah. I mean, for what it’s worth, I think you made a brilliant play. You took chips off the table. You were able to figure out how to exit an operating company that I’m sure took plenty of your time to be able to kind of reinvent yourself, have cash, be able to make some moves, and kind of have time to figure out what’s next. I think it’s brilliant. Unless you desire to be a long-term operator, I think you made a great move. And when you can transition from entrepreneur to investor, I think that the fruit of that gets more and more ripe and just gets more and more exciting.

 

Sam Parr: I think I will be an operator again but when I was like 21, I just said, “I want X amount.” I said, “I want $20 million by the time I’m 30.” Because if you have 20 million by the time you’re 30, you’re set, 20 million liquid, that you’re pretty much set. You can definitely blow through that but it’s kind of hard to screw that up. And I was like, “If I can get that, then that means like my children will have everything they ever need. My wife will have everything she ever needs,” which I didn’t have kids. I still don’t have kids and I didn’t have a wife then. But I was like, “Then I’m good.” Then I don’t have to worry about, “Is it going to be hard to buy my children braces or I want to go start this business but also I need to make sure my family has health care.” Like, I was like I just want those decisions to be eliminated. So, if I can work backwards from there, I think I’d be in a really good spot in life. And that’s what the goal was, and it worked out.

 

Justin Donald: Well, I think that’s a really exciting place to be because 20 million by 30, well, first of all, let’s just look at 20 million. Your top half percent in the United States, I mean, beyond that, even better that in the world but let’s look at just the United States. You’re in the top half percent at 20 million. In fact, once someone eclipses $30 million in net worth, they’re actually a small percentage. Just 200,000 people in the United States actually report via tax purposes so they’re more, but incrementally more, probably. So, 200,000 people have a net worth of 30 million or greater. And so, it puts you in a really small percentage of people worldwide throughout the U.S. It’s really cool. I want to just pay you congratulations on that. I’m also curious to hear if you’re willing to share kind of how that split was. It doesn’t sound like you had an earn-out, which is really nice. Often these deals, you have an earn-out where you have to stay on for a year or four years or whatever it is. Maybe you had the option to but it sounds like you were paid partially in stock and partially in cash. And I’m curious what details you can share or are willing to share and obviously feel free to not share anything you don’t want to.

 

Sam Parr: I was given tens of millions in cash upfront and then a large amount of equity that was given just to me. When I sold the company, I had just hired a guy who was going to run the business and I told them, I’m like, “You, guys, like this is horrible timing. I just committed to this guy. Now, I’m going to go back and renege on my promises to him, and the setup was going to be that he was going to run the company. So, in order to make this deal go through, all I’m going to do is host the podcast. I’m not the CEO anymore, and you have to hire him.” And they were cool with it. So, it worked out to where like if the definition of an earn-out is like you have to achieve something in order to get paid, I did not have that. I was given stock at best over a very short amount of time but I didn’t have to like earn it if that makes sense. And I also get paid to host a podcast. And now Jordan, the guy I hired, he… I think HubSpot media has like 75 or 80 employees. I mean, this is going to be a kickass thing. We just crossed one year and I work with him on running the show, although he’s like way better than me. So, there’s not much that I can do.

 

Justin Donald: Well, that’s awesome. It’s great because I know you enjoy the podcast and so you’ve got a podcast that you get to do. You’re paid to do it, which is nice and somehow you’re able to do what I think is the best of both worlds where you have a really nice exit and you exit your way out of having to stay on in any capacity you don’t want, any responsibilities you don’t want, any metrics that you need to hit. So, great job negotiating that deal. That’s fantastic.

 

Sam Parr: Well, part of that was their idea. They were like, “Well, we don’t like earn-outs.” And I was like, “All right.” And I think there’s pros and cons like they, what do they call it? Like the second bite of the apple. Like with an exit, if you like sell 70%, it is cool to see if you could hold on to it. But the problem is, is that your time is spent doing that. And so, it’s not necessarily a problem. It’s just part of the game. So, it’s like, what game do you want to play? And, for me, I was kind of clear with them. I was like, “I want to own all of it or I want to own none of it.” So, like it’s, “Which one do you want?” And so, yeah, I don’t know if my personality, if I could work just owning like 10% of it or something like that. I don’t know if it would’ve worked out that well, but maybe it could have. If you’re selling a company for a billion dollars and you’re like, “I think we could sell for, I think this whole operation, we’re worth 10 billion in like five years,” then, yeah, it’s cool to like continue doing it. But HubSpot is – what’s their market cap like at its peak? Like $45 billion? We’re not like that big of a needle mover, I mean, when you think about it on a big scale.

 

Justin Donald: Yeah. I like your analysis. I think that’s great. I coach a lot of entrepreneurs that have had big exits. Most of the people I bring on have had nine figure exits or in the process of. And so, one of the things that we discuss is this exact thing like how do you get the best of both worlds? How do you have a nice exit? How do you get a lot in cash that way you have the means to be able to do something with it? But how do you also get a piece of the upside without the handcuffs of time where you’re locked into performing? So, if you can negotiate 10%, 15%, 20% of the company with no performance needed, you just get that piece, well, now you got upside. And generally, if a strategic is going to buy you, in the right strategic, they’re kind of looking at buying you and seeing what you can do at like a 10X, they think they’re going to 10X the investment at least. Or depending on their metrics and how far along you are and where they are, that generally is kind of like that PE numbers, they invest, how do they 10X? So, in my mind, I want to help people get a piece of that 10X but as long as it just doesn’t require their time.

 

Sam Parr: Yeah. And the decision I made early on was I was like I want to be a time billionaire. That’s something I think I saw Tim Ferriss say years ago, and I was like, “I love that idea. I want to be a time billionaire.” That’s really all I care about is my time. I want my time because when I was running a company, everyone’s like, “Well, you’re the boss. You could do what you want.” I’m like it’s kind of the opposite. The more people I have, they own me a little bit like I serve them. I serve my employees a bit. And so, I can’t just like bail because they need me. So, I was like, “I want time.” That’s really what I wanted.

 

Justin Donald: That is powerful and so the truth. Like, I’m so glad that you shared that and I like the concept of being a time billionaire because one of the things I talk a lot about with my community is owning your time, buying your time back, owning freedom to do what you want when you want and being a time billionaire falls right in line with that. But the words that are so true and so powerful are what most people miss, which is you think you own your business. The larger you scale, the more people you have, the more responsibilities you have, whether it’s in operations or whether it’s in strategy or wherever it is, vision, the business owns you. It is very hard to run a business that doesn’t own you. Very few people do it. Very few people can actually not show up, not interact with anyone for a year or greater and actually have success in the business. Most people, the business would implode but the true definition of a business owner is someone that can actually remove themselves from the operation for a year or longer and have it maintained and ideally grow over that timeframe. That is really hard to do.

 

Sam Parr: Yeah, it’s hard. It’s hard. I think that like when I was running the company, I was just pretty burnt out. I needed time and like I don’t want to do this, and then I realized, well, I actually do want to do this. But it’s a lot when a huge percentage of your net worth is tied into one thing. You know, it’s like there’s a difference between doing it because you love it and doing it because you kind of have to. I started the company because I loved it, and then it became like, “Oh, I have to do this.” Now, it’s a little bit of a different scenario where I’m like I do it because I want to do it, and I’ve not started anything yet, but I do already feel like I’ll be starting it from a little bit of a different place, and I think that will be a lot more. I think that’s going to be more fun.

 

Justin Donald: For sure, and you can make different decisions. When you’re not worried about making money and you have cash to inject in the business or you have a track record so it’s easy to raise money, well, now you’re not worried about who’s running it. You can bring in great people that cost more that have a track record and really kind of influence that C-suite from an operations standpoint, a CEO standpoint. I mean, that’s really where the magic is when you have the ability to do that, when you have the ability to hire right, when you can pull yourself out. So, I think that that’s great. Like you, I’ve been an entrepreneur. I’ve started companies. I’ve done the whole ground-up hustle and just the craze of raising money and having institutional investors and kind of being at their beckoning call. It is a grind and it is hard work and it’s so rewarding. But for me, it’s rewarding once. I don’t want to repeat that again. I think that there’s something about earning your stripes and having this badge of honor of work ethic. But once you have it, it’s not about how hard you can work, it’s about how smart you can work. And that means surround yourself with the right people. It means work on a schedule that you like. Like you, I’m going to work probably the rest of my life but I want it to be in the quantity that I want. Some weeks I might want to work 30 hours, some weeks I might want to work 10 hours, some weeks I might not want to work, and I might not want to work for five weeks in a row and I want to have that ability. And I think that’s important.

 

Sam Parr: I agree with that and I’m enjoying that life right now but on the other side of it is like I felt like starting a business was like a war. And our friend, Chris, is a veteran and I’ve got a couple of veteran friends and they say it was really hard. It was so challenging. And then I go, “Well, how’s life now?” They’re like, “I’m bored. I want to go to war.” You know what I mean? So, like if we talked a lot of… I don’t know about a lot but my veteran friends, they’ll say, “It was so hard and it was so scary and it was so stressful and it was the happiest point in my life. And I wish I could do it again.” And sometimes that’s how it feels when I’m starting a company and you just kind of like train. You know, it’s like an athletic event. It’s like I got to train and put in the base miles and chill and chill. And then when I’m ready to go race, I’ll go all in and I’ll freaking race. And I’m not ready to race right now. I think I will be soon, though. I’ll be ready to go to war soon.

 

Justin Donald: Yeah. And it’s interesting because I know figuratively, we could talk about going to war from a business standpoint. You’re actually talking about real war, real veterans that served our country. And to a degree, as an entrepreneur, it’s like you’re going to war, you’re going to war against your mind, your body. You’re really digging in and like you, I totally agree and totally recognize that there are these cool things that you get from culture to relationships to achievement to doing the thing that no one else thought you could do. Some of it is external where it’s like, “Ha, this is cool. I was able to do this. Everyone doubted me.” But most of it for me has been internal that I want to prove to myself that I can do things or that we can achieve greater this year than last year, or we can have an exit or whatever it looks like. And I think that once you’ve gone through it once, the second time and the iterations beyond that get so much smarter, so much more strategic. And so, I’m excited for your next chapter when it’s ready but my strongest encouragement is don’t rush it because there’s just so much to learn.

 

Sam Parr: I’m not rushing it. I’m not rushing it. I built my life kind of following a couple of different people. But have you heard of Felix Dennis?

 

Justin Donald: No, I don’t think so.

 

Sam Parr: So, he wrote this book that’s horribly titled How to Get Rich. But basically, he was kind of like, he’s almost like Richard Branson meets Mick Jagger. So, he’s this like British entrepreneur. He’s dead now but he was like kind of a degenerate. He would party and everything. But he started back then in England a chain of magazines, which eventually he launched a ton of them, including Maxim magazine, which we knew about in America. But altogether, when he died, he was worth like $800 million, $900 million, and he was a writer. So, like he owned a media company. It’s now called Dennis Publications. It still does hundreds of millions of revenue but it’s based in England so you probably don’t know about it. But he wrote this book that a lot of people did know about and he called How to Get Rich and he wrote like… And because he’s got this Mick Jagger side of him, he’s like pretty blunt and he’s like kind of vulgar but then he’s also like a poet a little bit because he’s into writing. And so, he does a really good job of explaining and goes, “If I could do it all over again, I wish I could have gotten as rich as I could by age 35 and then just retired. But instead, I became punch drunk like an old boxer and I keep getting in the ring and it actually hurt my health, it hurt my relationships, and I actually don’t like that I did that.”

 

And then I looked at Travis Kalanick. Travis Kalanick started a company that he sold when he was like 30 or 31 called the Red Swoosh, and that made a little bit of money for him enough that he was like kind of set. And then he started Uber. And then Mark Cuban started a company called MicroSolutions that he sold when he was 31 or 32. And then he chilled for eight years, and then he started Broadcast.com that he sold for a billion. And I thought, I actually think combining what all of these people are saying and some more folks that I research, I actually think it’s an interesting place to like get a little hit, a big hit or a hit in your 20s or 30s, chill for a minute, reflect, find the next thing very methodically and then go all in, and maybe that can be even huger. That could be even bigger. And that’s kind of the lifestyle that I’m modeling out for myself. We’ll see if it works but that’s like I was heavily inspired by Felix Dennis, Mark Cuban, and those folks.

 

Justin Donald: That’s awesome. And their stories are neat because that is the case, right? There’s that compounding effect. You take time, you figure it out. And for me, I took time. I took a year off and just traveled and relaxed, hung out, journaled, read tons of books and it was instrumental in my next season, my next chapter. And I just am excited for when people are able to create that for themselves. I just think that’s the magic. And ironically, you’re talking about Richard Branson. I’m going to go hang with him for a week a little bit later this month and I am excited because there are so many things that he was able to figure out. And he was able to figure them out when he had some learning disabilities, some dyslexia. Even today, he doesn’t do a lot of emails or reading or anything like that. He has assistants that really do this for him and on his behalf, and it’s neat to see how he’s kind of layered his success through human capital and through relationships. But the guy has done some awesome stuff, and I’m excited to pick his brain on it.

 

Sam Parr: That’s badass. Yeah, that’d be fun.

 

Justin Donald: So, some of what I think is important is relationships, right? Like, who do you know that’s done the thing that you want to do? Who is playing the game of life and business at a higher level? And there is just ample opportunity to get to know people here in Austin, obviously, in New York as well where they’re just playing a whole different game than what we’re playing at whatever level, even at the height of the game that we’re at. And I think it’s so fun to hang with those people because it’s so intellectually stimulating to hear the way they think, the way that they look at life, the decisions that they make, how they make those decisions is just incredible. And I feel like those relationships have really helped me grow into the investor entrepreneur that I become today. I’ve got to imagine the same is true for you and I’m curious who some of those people, some of those influencers are.

 

Sam Parr: So, because I hosted this event, we had this event called Hustle Con. We had the founders of WeWork, Casper, Away Travel, Headspace, Bonobos, like if you can think of like a big company that was around from 2012 to 2018, they probably spoke at our event and I got to hang out and meet all those folks. And so, that’s been fun. But maybe there’s two people that I could use for this example but my best friend is this guy named Jack Smith. You probably never heard of him. He doesn’t talk online a lot. He stays super low-key. He started a company at 22 that he sold at age 28 for $800 million in cash that he raised very little money for. And he lives on a beach in Hawaii, in a house that he rents for not that much money, him and his wife. His wife started this thing called Coffee Meets Bagel, which is a popular dating app. And he likes to meditate, he likes to go to retreats, and he likes to eat healthy, and he doesn’t want anything. So, I’ve known Jack when he was poor. Now, he’s wealthy and his lifestyle has mostly stayed the same, and he loves exploring ideas and just starting projects.

 

And I think that’s how Vungle kind of came to be, and that’s how a couple of his other companies that he started came to be. And so, he’s someone I really look up to where he just is curious and he just follows his curiosity. And even though he’s wealthy, he wants nothing. And I think that like wanting oftentimes can help you achieve but desire and wanting stuff can actually make you depressed. He wants nothing. And so, I am heavily inspired by him. He’s one of my best friends. The other guy is this guy named John Arrow. Do you know who John is?

 

Justin Donald: I know the name.

 

Sam Parr: So, John started this company called Mutual Mobile. It started here in Austin. It’s basically like an agency but they build software instead of like a traditional ad agency. And so, big companies like Nike and Walmart hire them to build stuff. I don’t know all the numbers but I think I imagine it grew to like 500 employees. If at that 500 employees, I bet you it makes somewhere between $50 million to $100 million a year. He’s the CEO but he sold a portion of his business like eight years ago, and he basically works on it two days a week and the rest of the time he owns a plane and he flies from city to city that he wants to explore. And he’ll just message me and he was like, “Hey, you want to go fly someplace?” And we’ll fly and I was like, “Yeah.” And he’ll tell me all these stories. He’s like, “You see those vending machines,” like we’ll be walking around downtown, “You see that vending machine?” It’s like a vending machine on a Segway machine. He goes, “You see that?” I go, “Yeah, that’s crazy.” He goes, “I own that. I actually bought these Segways off Alibaba and I put this vending machine in it and I have it trolling around the city, and I’m just tracking it to see like is this kind of interesting.” And like that’s a project that he has.

 

And then another time we went on a run and he goes, “You see that QR code on that stop sign?” He goes, “That’s mine. Every time someone scans that, I give them $1 and it brings them to this website and like I’m working on this new project.” And there’s been like 10 different times where I’ve seen something in the wild or he’s like, “Yeah, I’ve heard about that. You know, I actually started this thing.” Like, he’ll tell me about these little things that he’s starting. And it’s just so fascinating that he’s incredibly successful but is constantly tinkering on things that almost seem like games. And I love those, I love those people, and he’s very cool to me because he does all those things.

 

Justin Donald: Yeah. That’s awesome. And it’s what really happens for people when they figure out and when to them money, business, investing is just a game, right? When it goes from like survival to lifestyle to truly it is a game, that’s when the fun often happens. You don’t make decisions for money’s sake. You make decisions based on lifestyle choices or interests or what creates passion or things that just utilize your gifts well, your naturally-born gifts. And so, I just think that the more you hang out with people like that and the more curious that a person is in general, I mean, that’s just a recipe for so much fun, so much success. And I’m with you. I’ve got a lot of friends that are the same way where they just have these really cool ideas out of the box. I don’t know that I’m much of an ideas guy but I get some and I run with the ones that I get. So, I don’t get hundreds. I don’t get thousands. I’m much more a copycat. I saw this, I heard this, I did it, and then maybe I innovated once I actually became more of an expert at that thing.

 

Sam Parr: So, well, that’s fun. I’m a little bit like you, too. And that’s fun because once it gets, to me, I was like I’m doing this for money. And then a while, I’m like, “That’s not actually motivating to me,” and I’m like, “Well, why am I doing this?” I’m like, “Well, I just…” Because sometimes I would try to stop myself from doing things. I’m like, “Why am I spending my time thinking about this?” I’m like, “Well, you know what, it’s just my art. This is just my art and I just have to express myself so I’m going all-in on it,” you know? So, that’s how I kind of look at little projects. It’s just art to me.

 

Justin Donald: I love it. That is great. I look at these projects as art because I enjoy this thing regardless of the time factor.

 

Sam Parr: Yeah.

 

Justin Donald: I think that’s powerful because I got to a point where I decided I don’t want my time to create money. If it’s going to be something I enjoy and it is… So, either it’s something I enjoy or it’s really a high ticket like I feel like I’m being compensated well for that time. And ideally, it’s a combination, a merger of the two of those. I really enjoy it and I’m well compensated. But if I really enjoy it, I don’t even have to be compensated. That’s just where I want to spend my time. That, to me, is the magic. And one of the things that I think is neat with you is you have transitioned from entrepreneur to investor, and you may have done some investing along the way but I think we can all agree that you’re flat out an entrepreneur. The skillset between being an entrepreneur and an investor is totally different, though, and most entrepreneurs don’t do well as an investor. And then you’ve got this unique breed of people that can really span both. And there’s a lot to learn in that gap, right, this integrity gap of what you think you know and what you actually know. But you’ve done really well in your investments and you’ve done well in a very high risky way of investing. I’d love to hear about it.

 

Sam Parr: I’ve done well because I have… So, I don’t like investing. I don’t particularly like investing. I find it to be incredibly boring, but it’s so easy. Like, it’s so much easier to make money that way. It’s like when people talk about making your money work for you like it’s just so much easier that way. So, I invest in a couple of things. For one, the most of my net worth is HubSpot stock, Airbnb stock because that’s where my wife works, she’s been there for a very long time, and just Vanguard Total Index Fund. And then I also started an Angel List like Syndicate. We’ve invested maybe $15 million and we’ve invested in 70 or 60 startups. I would say our returns so far are actually going to be amazing. The reason they’re going to be amazing isn’t necessarily because I’m a good investor. It’s just because I know a lot of people. And angel investing is kind of funny where it’s like it’s all about who you know and just like do you know the people starting companies that are eventually going to raise from Andreessen Horowitz? And because of my job, because I live in San Francisco for eight years, I do know those people.

 

And so, it’s like a huge, unfair advantage and it’s really not the fact that I’m good. It’s just that I just know those people and they just call me when they need something. So, I’ve been very lucky in that regard. I’m also investing in real estate, but again, I feel like there’s no skill here because I bought some stuff in Austin and like it just grows. Like, maybe there’s going to be a time where it doesn’t grow but I feel like any idiot could make money in some markets in real estate, and that’s kind of what I’ve done now. I just bought a ranch last three weeks, two weeks ago. I’m turning it into an Airbnb. So, I bought a 20-acre ranch. I’m turning it into Airbnb. I’m calling it Marathon Ranch. It’s like a fitness-style Airbnb. I intend to buy a few more of those. I think that could be cool. And I think that’s kind of cool because it’s more entrepreneurial and that it’s like, how do you just take something that could be an okay investment like I bet you can make 15% cash-on-cash return just on its own but like, how do I just make it sick and fun and exciting? And in doing that, it will likely make 25% to 30% cash-on-cash. And that is exciting to me.

 

Justin Donald: That’s cool. I love hearing that, and it’s great to hear that you’re diversifying away. You know, at the beginning, your net worth was tied up predominantly in one company, in The Hustle.

 

Sam Parr: A privately held company too.

 

Justin Donald: Right.

 

Sam Parr: Yeah.

 

Justin Donald: And by the way, who knows what could happen? You could have a pandemic and it could implode, and unfortunately, that happened to a lot of people, a lot of small businesses, a lot of private businesses. But you have since taken some chips off the table. You’ve diversified it out, you’ve got exposure in public markets and public equities. You’ve done so in a smart way via index funds, low cost, but kind of high reach, a lot safer type of investment. Now, you’re getting into real estate and I love real estate for the mere fact that it’s just going to keep going up and up and up because we’re printing more and more money and especially if it’s in a hot market.

 

Sam Parr: It just takes so long. Like, I’ve got two real estate projects. The one is the ranch that I have. So, that’s like turnkey. I bought it. I paid them exactly what they wanted and I bought it completely furnished and I already have guests coming on April 1st, so that was ready to roll. But I’m going to build five cabins there. That’s going to take a long time. I bought a lot that I’m looking at right now, it’s outside my house, that I’m building a house on, and I yelled at the architects many times. I’m like, “Why is this taking so long?” Like, I think, yes, it’s taking long because of pandemic and permits are backed up but also, people can be mad at me if they’re in real estate, I think they just don’t hustle the same as like internet folks. I think like the culture is different and I don’t know. Maybe you could tell me if that’s true. You’ve got way more experience but I feel like they just don’t hustle or something. It takes so long to get anything done.

 

Justin Donald: Well, the problem is you have to rely on the city, and the city does not have the word hustle anywhere in their vocabulary. So, you might have entrepreneurs and real estate professionals that are good at hustling, though I don’t know that anyone’s as good as like a scrappy entrepreneur, right, that basically has to hustle for their livelihood and to stay afloat. But I think you’ve got a lot of entrepreneurs in the real estate game, but when you’re stuck in that bureaucracy of the city and permitting and, yeah, there’s a whole world where hustle doesn’t exist.

 

Sam Parr: It sucks and it takes so long. I was thinking this thing was going to be 18 months and in my head, I was like, “But it might be 24,” and it’s looking like it’s going to be 24 and I’m dying. I’m dying because a) it does suck just to have that money just sitting in this frickin thing but whatever. I’ll make it back. But b) just out of principle I’m like, “You guys, this is an unfinished project.” I need it like it’s hard for me to sleep at night with like an unfinished thing. I pull all-nighters because I’m like I have this idea, it’s got to be a reality, and I just cannot stand this lack of dopamine hit or something where this thing is just sitting there. I’m like, “Oh my God, I’m dying here.”

 

Justin Donald: Well, I can relate so well because we’re building a house, as you probably know, and we’re already eight months beyond when we were supposed to have closed. And so, it’s that whole story of permits and just not getting what you need from the city, mess-ups on the contractor side, the whole works. But the one nice thing about here is the property is just going to go up. So, what I love about business is you can have astronomical returns but you can also lose a lot, right? You could lose everything. What I like about real estate is that you’re not going to lose everything. You’re going to make, I mean, you’re probably not going to even lose money if things go wrong but your upside is kind of capped. But at least in a hot market like Austin, you have upside that every year it’s probably appreciating at least 15%, if not more. And that’s nice. Even while it sits there as raw land, even as it sits there and the architecture designs aren’t done and they’re dragging their feet, you’re at least not losing money even though it probably feels like you are or it’s not growing the way it could.

 

Sam Parr: It’s like a cool forced like savings thing, too, but no, I’m not losing money and I’m definitely making money. It’s just like out of principle I just can’t stand lack of hustle. It bothers me. And frankly, there’s definitely a reality where I’m being too harsh and it’s just the government’s fault, not actually the people-working-on-it’s fault. So, I acknowledge that. But the reason I got into real estate is because I was like, I’m going to continue starting internet companies. And when I started my business, I started with no money and it made a lot of money, and I can do that my whole life with internet companies. But there’s a reality where what did happen with COVID, our conferences went to zero. And so, if I own some other type of business, it could have gone to zero too. There’s a reality with Internet Things that I can get to 10 million run rate in like two or three years. I could go from 10 million to zero dollars also in one or two years. And so, I was like, I want to continue doing that but I’ll take all my money from there and pile into real estate and in real estate, I’m like if it knocks it out the park on average, I’ll get like a 10%, 15%, maybe even 20% cash-on-cash return. But like a home run, like a really good thing would be like 10% a year on average.

 

I was like, “That’s sick.” And at worst, it will like maybe lose 10% or something like that, or I’ll lose a single percentage point, maybe 20% or 30% but it’s not going to go to zero. And so, I was like, “That’s pretty sick.” And the cool thing about building apartments or whatever I’m doing, I’m like, “I bet I can give it to my family members or my kids one day,” and like they’re not totally going to mess it up. Whereas if I ask them to work at The Hustle like you got it or you don’t. You know what I mean? But like with real estate like I could definitely give this away to people and they’re not going to completely screw it up.

 

Justin Donald: Yeah. It’s good to have that as a portion of your portfolio, no matter what. And there’s also the tax advantages to it or the money that you make is you’re paying very little, if anything, on the income from your real estate, whether it’s cash flowing, whether you sell it.

 

Sam Parr: And I just learned about cost segregation for depreciation, and I’m like, “Oh my God.”

 

Justin Donald: Yeah.

 

Sam Parr: I get it.

 

Justin Donald: If only you had been in real estate before the exit where you could do a cost seg, what happens, and for those people that don’t know, if you’re a real estate professional for tax purposes, you can actually do a cost seg on a property, which is an accelerated depreciation. You can take it all in that year and you can offset your earned income. And so, there are a lot of people that make a tremendous amount of money like millions upon millions of dollars, and every year they’re able to offset the money that they earn and pay very little to nothing in taxes. And so, that’s the beauty, part of the beauty of real estate.

 

Sam Parr: Yeah. I mean, the country, what I’m learning, was built for a couple of different occupations but it was built to own real estate. Like everything is… We are entirely incentivized to do that. I’m also learning that the bigger the deal, the easier it is to get financing and probably the easier it is to pull off. Because if you buy a primary residence, to say it’s easier to pull off is it’s not exactly right but here’s why. When you buy your primary residence, they’re using your W-2 income as collateral. But if you buy something bigger, I don’t know what that threshold is like maybe $5 million in something that has more than like eight units or something like that. I’m not an expert there but I do know that buying bigger things, the building is the collateral and oftentimes banks will like underwrite it and do the analysis for you. And I’m like, “Oh, it’s like I’m making more money and taking less risk. This is way better.” So, that’s kind of interesting.

 

Justin Donald: Yeah. And the stack on to that, you find the right bank and they’ll actually lend you as a non-recourse loan where they can’t come after any of your assets if something goes wrong. They can only take that asset, that building back so that protects you even more. And you know, if you do agency financing and so this is a world I’ve done a lot in just in terms of real estate and big deals but you can get incredible debt like think about the interest rate that you get on your home on a 30-year note, and you can do that in some cases, even a 40-year note. You can do that with agency debt or government debt like Fannie Mae, Freddie Mac, where it is non-recourse. If anything goes wrong, their only way to recoup their dollars is to take that asset back. That’s it. They can’t go after you for anything else. So, it’s a great way to kind of protect your wealth. And a lot of people beyond that will do investing via their balance sheet. So, instead of actually putting money into a deal, they just leverage the assets or the liquidity or the net worth basically of their balance sheet, and they can access funds that way.

 

Sam Parr: That’s what I do.

 

Justin Donald: Yeah. So, the more you move up and play that game, the more you see how you can create equity out of thin air with no money down.

 

Sam Parr: Yeah. And that’s the truth. And I don’t like talking about that a ton because like the truth is, though, you can kind of only do that if you’re already rich. I mean, I’m sure there are some ways that you can kind of hustle and make it the reality. But once I kind of like went through this and like my banker told me all these things that I could do and I’m like, “Wait, what? Like, I could borrow tens of millions of dollars at a 1% interest rate and I just click a button?” And they’re like, “Yeah.” I’m like, “Oh, well, that’s why like the rich get richer and why people like…” I’m like the system’s kind of unfair but it’s for me in my favor so I’m going to take advantage of it, but I’m like, I had no idea this stuff existed.

 

Justin Donald: Yeah. It’s pretty crazy. And you can see kind of that gap between the haves and the have nots low income, ultra-high net worth and you can see some of these tools. And so, that’s why they say if you were to distribute all the money equally in a matter of time, a number of years, it’s going to go back to just where it was. The same rich people are going to be rich, the same poor people are going to be poor, and it’s just understanding a lot of it’s a mindset. And then a lot of it’s just the way that you look at money. If you’re going to hold money so scarce that you can’t make any decisions, it’s going to be really hard to get ahead. But if you’re going to look at money as a tool and just say, “Hey, this is a resource I’m using to grow my wealth,” it’s going to be a lot easier to make decisions. And also, whether you win or lose, you make money, you lose money, you’re not as attached to the outcome. You’re more attached to lessons learned that are going to help you on the next deal.

 

Sam Parr: And the cool thing about the internet, about building internet businesses is you learn. When I learned this, it was like I had bad eyesight for years and I finally put glasses on. But like once I learned that I’m like, “Oh man, I can just like write something and people will pay me to read it.” Or I can just sell information or pixels so like I can create literally like, it’s like I’m Picasso. Just give me a can of paint and a canvas and I’m going to create something that creates wealth out of thin air. And once I realized that that’s possible, I was like, “Oh my God, the world, it is different than what I thought it was.”

 

Justin Donald: That’s right. And it’s really hanging out with people that are going to help you see that, giving you exposure to how to really get ahead. So, this has been awesome. I really, really appreciate your time, Sam. Where can our audience learn more about you and all the cool stuff you’re doing?

 

Sam Parr: I use Twitter and I use Instagram. So, thesamparr on Twitter is where I do a lot of business stuff, and then thesamparr on Instagram I’m really into fitness. So, I do a ton of fitness stuff and you’ll see lots of shirtless pics. So, if you’re not into that, don’t go to my Instagram.

 

Justin Donald: I love it. Well, I just have really enjoyed our time here. I love the way that you look at the world and business, and I just want to congratulate you on the success you’ve had, but also challenge you. And you know, really kind of help be a cheerleader for what is to come, for the opportunities that I see in your future, which is cool and I’m excited about different ways that we can work together to help one another out. I’d like to just kind of close things the way that I always do with our audience, and that’s this, what’s the one step that you can take towards financial success and financial freedom today, a life that is not by default but by design, a life of intentionality, a life on your terms, and a life that is created based on time and space of creating that vision? So, I appreciate you joining. I appreciate each and every one of you and I look forward to catching you next week.

 

Sam Parr: Can I answer that? Can I answer that?

 

Justin Donald: Yeah. Please do. Heck, yeah.

 

Sam Parr: I would say make a list of 50 people who you admire who are way out of your league and cold email all of them and keep following up until they tell you to F off.

 

Justin Donald: That’s awesome.

 

Sam Parr: That’s what I would do.

 

Justin Donald: I love it. I absolutely love it. Well, here’s one action step that you can take literally today. So, thank you for that, Sam, and thank you for your time. I’m excited for the future, my friend.

 

Sam Parr: Thank you very much.

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