Tuesday, September 6, 2022

From Idea To $50M in 18 Months

In the first decade of his career, Chris has 3 exits under his belt with Renjuice (acquired for $40M), 42Floors (acquired), and Interviewed (acquired for $50M) - This is Chris Bakke!

Chris Bakke

CEO at Laskie

Hey Fam!

In today’s workshop, we sit down with Chris Bakke, a repeat founder who took his last company from an idea to a $50M acquisition in just 18 months.

Now, he’s doing it again with his new talent marketplace company Laskie

Make sure to follow him on Twitter at @ChrisJBakke

Let’s get after it!

On Today's Experts Session, we explore:

  • Who is Chris Bakke? In the first decade of his career, Chris has 3 exits under his belt with Renjuice (acquired for $40M), 42Floors (acquired), and Interviewed (acquired for $50M) - This is Chris Bakke!
  • A New Business Idea: There’s a gap in the market for the Barstool Sports of technology and business. Here’s how you could build it!
  • Case Study - Laskie, From Idea To $4M/yr: Chris takes us from idea through validation and ultimately scaling this $4M per year business.
  • How To Scale A Business Fast Using “The Mom Test”: Chris built a startup to $2.5M ARR and sold it for $50M in 18 months. How? By using The Mom Test.
  • Why Focusing Might Be The Key To Build Wealth: Chris explains why he’s hyper-focused on home run opportunities and lets experts build his wealth for him.

 

Guest: Chris Bakke, CEO at Laskie 

Social: Twitter at @chrisjbakke

Video Length: 47 Minutes

Who is Chis Bakke?

2010 to 2013 - The First Exit:

Chris picked a winner early. In 2010, he joined RentJuice, as the Director of Business Development. The company allowed real estate agents and brokers to manage and market their inventory, communicate with their clients, and do all their paperwork in one simple interface. 

Zillow acquired the company for $40M, and Chris took home a small windfall. He joined Zillow as part of the deal and worked there from 2011 to 2013.

2013 to 2017 - Selling for $50M…Twice: After leaving Zillow, Chris joined 42Floors as its COO. He helped build the first true search platform for commercial real estate. The company is a prime example of how valuable creating big data sets can be for valuation. Knotel acquired 42Floors to gain access to information on over 10 billion square feet of office space. 

Soon after leaving 42Floors, Chris built a piece of software he desperately wanted during the company's hypergrowth period - an interview assessment tool. 

He called the company Interviewed.com, which allowed employers to pre-screen applicants with simulations for phone screening, customer support, administrative assistant simulations, and an excel test. This process significantly decreased friction in the application process and eliminated a large portion of manual application review. 

Indeed acquired the company for $50M in 2017. Chris spent the next 3 years at Indeed. These years turned him into an expert in HR tech and prepared him for his next big thing when he left the company in 2021.

2021 to today - Growing Laskie To $1B: Chris knew he wanted to build a venture-scale business and started by trying to bootstrap Laskie, a talent marketplace company, with his own money. 

He quickly discovered that he and his co-founders were better operators when building with venture capital. Chris made the calculation that getting the connections and visibility of a top venture capital firm while maintaining 85% ownership of Laskie would help the company get traction faster.

Case Study: Growing Laskie To $4M Per Year In Under 2 Years

Here’s the story of how Laskie was born. Let’s dig in!

First, what is Laskie?

With Laskie, you can apply once, and the platform will match you with jobs that meet your requirements and want to interview you. The company vets both employer and candidate to reduce friction in the hiring process. It provides exceptional value to enterprise-level clients who would otherwise be spending 10X more time on this hiring process. 

What Was The Unique Insight That Led To Chris Building Laskie?

Laskie has evolved through a series of iterations. Initially, Chris saw an unmet need for placing high-end human capital. Entry-level offerings like Fiver or UpWork are fine for low-level, repetitive work but are not an adequate platform for elite-level talent. Traditionally enterprise-level companies have had to go to traditional consulting firms for stand-alone projects that typically cost a fortune. Originally Laskie ended up hiring the high-end talent themselves and charging on a fractional or consulting basis. This iteration failed when companies ended up wanting to hire their placements directly…

This led to the start-up evolving into its current iteration. A place where top talent can apply once, and the Laskie team works to get interviews with top companies that match their criteria.

What Does Laskie Look Like Today?

Laskie does not hire anyone directly these days but assists talent in building a profile on one platform. Instead of having to fill out scores of applications, candidates complete one 30-minute application that can result in 20 to 30 inbound leads a week. Elite talent can always get a job but rarely do they have a good handle on what the most exciting opportunities are available in their market. Chris and his team are able to take a macro view of the appropriate vertical to make micro decisions to make the best match for both parties.

How Does Laskie Become A $1B+ Company?

The goal is to have a perfect product/market fit by expertly curating demand for candidates and employers of every size. Given the size of the HR tech market, if Chris can accomplish that, they will be well on their way to unicorn status.

Chris has built and sold multiple startups. His last company, Interviewed, reached $2.5M in revenue and sold for $50M, just 18 months after starting it! Here’s the “idea to launch” playbook.

Here’s The playbook:

Step 1: Determine Your Ideal Criteria

There are an unlimited number of start-up ideas, but successful founders like Chris know that there are throughlines with all successful enterprises. The first one is personal.

1) Is the idea one that you can work on for 10 years? You are going to get punched in the face. If it's just a money-making idea versus a personal crusade, it is less likely that you are going to keep pushing when business pushes back. 

2) Does You Have A Unique Competitive Advantage? This is a critical component. If your advantage is not unique, then you are battling it out with similar competitors and risk a large firm just throwing a bunch of money at your idea themselves, likely pushing you out of the market. The last thing you want in business is a fair fight. Make sure that what you are doing cannot be copied easily and leverage the heck out of what makes you different from everybody else. 

3) Do you have an idea beyond the headline? I call this the dissertation principle. Imagine that you are being tested for a PhD. If you can defend your idea against pointed questions from smart people, then it is a real opportunity. If you can only impress random attendees at a cocktail party, then go deeper.

Step 2: Build A List Of Business Ideas

Good writers are constantly recording ideas for content at all hours of the day and night. One idea leads to another. Over time the sheer number of prompts ensures there are tangible things to create. The same principle works for founders. Don’t rely on your memory. Have a place to put down all of your ideas. It can be as simple as keeping a Google Sheet. Doing so will spur opportunities you would not have discovered but for committing to the recording process. Start with what you already know. Chris was familiar with HR tech, so many of his ideas centered around that vertical.

Step 3: Filter This List Using Your Ideal Criteria 

Chris and his cofounder ranked every idea on a Google sheet by these criteria and then went deep on the top six. This isn’t something they selected over a few adult beverages at a bar on the back of a napkin. It was a deep dive over a number of months. Do everything you can to eliminate doubt. Research and preparation is a free way to avoid costly mistakes later. You don’t want to put yourself at a dead end and debate sunk costs. Do the work upfront. This will save you a lot of heartache on the back end.

Step 4: Validate These Ideas Using “The Mom Test”

Chris loves Rob Fitzpatrick’s book The Mom Test: How to talk to customers and learn if your business is a good idea. The premise is this: If you were to ask your mom (or any nice person for that matter) if they liked your business idea, you would always get good feedback. Most entrepreneurs are enthusiastic about all business ideas. Non-entrepreneurs have zero reference point and generally think all concepts are cool. What this means is that it is very easy to find yourself in an echo chamber of encouragement. This can lead to thinking you have a good idea when you really don’t. The way around this is to go to the market that will purchase your idea and just talk to them.

Chris talked to over 130 people in 30-minute interviews. These people ranged from an Army Ranger to the Head of HR at Sony. Here’s the most important part Don’t tell them your idea. Simply do a 30-minute interview and see what's what their biggest problems are. If you talk to a broad enough group of people, you will find commonalities among them. Look for the overlap with your ideas. If everyone runs through your idea or is at least idea adjacent, you may have a winner. If no one even comes close, you have a problem. The last thing you want to do is create a business that requires you to educate everyone on your offering because they are completely unaware of the problem (let alone your solution). 

Step 5: Make A Choice - AKA How To Stop The Idea Maze

It is a cliche that your greatest gift can also be your biggest weakness. Just because something becomes a trope over time does not make it any less true. Entrepreneurs are idea machines. It can be very easy to overwhelm yourself with choices in the early phases when trying to decide what to commit to. You know this in your bones. Just look at how many domain names you have purchased in the last year. There is no dating in a start-up. It is a commitment with a capital C. This can be truly scary. If you followed the “Mom Test” advice above, there is a very easy way to know when to pull the trigger. It’s when your interview candidates show commitment to the business idea you’ve come up with - this could be by spending time with you to help frame the business idea or pre-purchasing your solution to their problem.

Key Principles To Remember: 

  • Channel Existing Demand, Do Not Create It: What is incredibly important here is that you are solving existing problems. People should already be spending money to solve the problem you’re tackling. If you can create a solution that enables them to solve this problem better, faster, or cheaper, then you’re in business!
  • Do Not Spend Money Unless You Have To: The most expensive part of company building is when you start to invest in software engineering, hardware development, and growth. You can create a small group of avid fans without having a perfect product built out and spending thousands of dollars on marketing.
  • Always Get Commitments: Every time you have a conversation with a potential customer, you need to ask for commitment. There are 3 forms of commitment—time, money, and reputation. When you start getting a form of commitment from 70% of the people you speak with about your idea, you know you’re on the right track. 

Business Opportunity:

Barstool Sports For The Business & Tech Community

Context: Barstool Sports is a media company that produces content on the sports world and pop culture. It initially made its money through ad revenue on multiple channels (app, website, podcast, YouTube). As the audience grew, it expanded to a subscription model, a sports betting platform, eCommerce sales, and pay-per-view events. If you ever doubted that there is money in content creation, Founder Dave Portnoy exited Barstool for $120 million, while the company itself is valued at $450 million.

Idea:  Barstool Sports, but for the business and technology community. There is a great demand for start-up and tech content about successful entrepreneurs. Books about Steve Jobs, Walt Disney, and similar icons sell millions of copies. Most information about current founders is transmitted via word of mouth by industry war stories with write-ups here and there. A centralized hub where everyone goes for this type of content, delivered in a funny, pithy way, does not currently exist. 

A category king is waiting to be crowned. Examples of content would be Founder stories, tech news, and start-up war stories. Etc. 

The closest example I have seen yet is WorkWeek Inc, a company that provides a series of industry-specific newsletters. They partner with “creators” to write the newsletters and provide centralized services such as advertising sales and marketing to grow them quickly. WorkWeek does not currently have an omnichannel social media presence, but the model shows signs of success. 

How To Build it: There are 3 primary pillars of this business.

  1. High-quality content - The most challenging part of this process is finding content market fit. You’ll need to identify creators that are creating fantastic content but don’t know how to grow or monetize effectively. One potential path is helping well-known creators on one platform (e.g., YouTube, Twitter, Twitch) and helping them monetize their content in another way (e.g., Newsletters, Podcasts, etc.). 
  2. Growth - Creating great content is hard enough. Doing that as well as scaling efficiently, is a whole new challenge. Many creators don’t want to take on this risk…if they’re wrong, they could waste tens of thousands in marketing dollars. If you’re proficient at a specific growth channel, capitalize on it. If you aren’t proficient, learn!  
  3. Monetization - Concentrate on maxing ad revenue and partnerships on as many channels as possible. Once you have built a large audience, leverage it into a subscription base. Leverage again into natural 3rd party collaborations. 

How Chris Builds Wealth:

Opportunity vehicles:

  • 42 Floors (Acquired ~$40-$50M) Chris joined as an early employee and COO. This was his first big exit, showing him the value of asymmetric upside.
  • Interviewed (Acquired ~$50M) Chris was the founder of Interviewed. This big exit allowed Chris to implement the plan developed from the 42Floors deal to cover his expenses with cash flow and dividends from his investments. 
  • Laskie (Current Start-Up) The company generates about $4M/year. The goal is to drive to a $1B valuation.

Investment Portfolio

  • Real Estate (20%) - Chris started by investing in single-family homes North of Dallas while working at Zillow. He discovered investing in real estate venture funds, making 8%, is better than being directly responsible for the properties and clearing 15%. Chris lets the experts do their thing while focusing solely on his work.
  • Public Markets  (40%) - Chris does not pick individual stocks but again relies upon full-time professionals to manage his capital.
  • Venture Capital / Angel Investing (20%) - Almost everything within his angel portfolio is as an LP with blue chip firms like YCombinator.com. They are the best in class for finding start-up opportunities and are doing the legwork for him. Do you see a pattern here?
  • Cash (20%) - This is from a recent sale of real estate. Don’t be afraid to have a pile of cash on the sidelines. Waiting for the right opportunity.  If the difference between winning and losing is a micron, sometimes being liquid can make the difference.
  • Crypto (rounding error%) - This is mostly, so Chris doesn’t get the side-eye when people ask him if he has any crypto. His day job is the riskiest thing he does. There is not a need for speculation in emerging markets.

To Get Rich - Focus On The Big Win And Automate Everything Else

When Chris builds companies, he’s optimizing for scale. He takes on big problems in large markets with highly scalable solutions. These types of opportunities often have very high risks. Because of this, he needs to hyperfocus on executing his business idea and reducing the startup risk. If he’s successful, the equity in his winning start-up idea will far outweigh any lost gains driven by slight optimizations in other asset classes. 

For example, his first business had ~$550k in revenue and was acquired for ~$45M. His second business had $2.5M and sold for $50M…

These businesses can generate large acquisition prices due to their potential scale…his real estate or public market investments just don’t have the same potential. 

So Chris generally spends all of his time focused on that potential outcome. As for the rest of his investments, he applies the “done for you” model. He finds the best experts in the field and gives them his money.