0:00He was going to write me a check for $25 million and I was [music] under 25 years old. For me, it wasn't about what I could spend. It was about building something customers really value. Being able to create a product that [music] could be 10 times more expensive and the customer still thinks they're stupid if they say no. That is how you design great products. But a valuable [music] product is only part of it. People need a reason to trust what you know, and that can start before you launch. And so
0:28you will be able to build an audience even before you have a product just with your knowledge. So when you hear these pitches, think about the problem, the price, and the people you're trying to reach. Before we jump into this video, this is from our first week at founder school. Students had 5 days before pitching Joe on their business ideas.
0:47Seems [music] like you could charge a lot more.
0:49So my offer is you're going into the hardest market in the world. You're on you're on 11 out of 10.
0:54If you enjoy these videos, please leave us a like. Let us know in the comments and hit the subscribe button so we see you [music] in the next video. But first, here's what the man who planned to write that check told me. When I was your age, if somebody gave me $25 million, I would have gone to some island, I would have just been out of here and that's I would have been done.
1:14And I was like, okay, but I'm not. I'm building like the world's greatest company. And cuz they were worried that they're like, I'm giving too much money to a young kid. And I'm like, no, we are building the world's greatest thing. And so back to having one of the things when you start building your company what you think about is the money you're making is [music] what lets your company get better not that you have the money right that your initial [music] interest may be ooh I want to make a bunch of money
1:42that sounds awesome but the company what [music] that will translate into is no the money is what lets me build do what I love which is [music] build a better more awesome company right and it's the you'll find that most entrepreneurs spend vastly less than they could that they don't do it so that they can go spend [music] the money they do it so they can go build more.
2:05I was just wondering okay when you dropped out of college what business did you start?
2:10So I started Trilogy and [music] it was an AI company. So my my background of stuff was just in when I was in high school uh I wrote a paper on AI and this [music] is way back a hundred zillion years ago in the '8s. Um and it was old school AI. It's not the stuff you guys think today. And then I went to Stanford uh because they were the center of AI, Silicon Valley AI, and uh the father of expert systems and AI back then. I went to his class, learned everything about it, and then I'm like, I can build one
2:38of these. So for me, I I knew I'd written about AI and the technology and I had this technology idea, but the big thing and I think you guys are doing the first 70 pages of Formosy's book, right?
2:49which I think if you guys have [music] gone through it right you are now better than 90% of the entrepreneurs because so few people master that and that is like when we talk about critical skills that you can teach people right [music] that concept of narrow your focus right be able to create a product that could be 10 times more expensive and the customer still thinks they're stupid if they say no that is how [music] you design great products the way I was thinking about it is what product can I build that companies [music] will give me tons of
3:18money for right Where is there huge value that if I build this extra system, right, this AI product, that companies like IBM will give me $25 million?
3:27That's what caused me to realize when I that I should drop out is cuz there was all these people who tried to do AI in the8s and none of them focused on well, what provides a ton of value to the customer. They focused on what's cool to work on, right? And there's always this temptation of oh, I want to work on the cool thing. I had come from it. And I was like, "Yeah, whatever on the cool thing. That doesn't seem to be working out." Cuz every all these other companies weren't doing well. And I was like, "I'm going to focus on something that companies think is really
3:55valuable." And so that was why we were the first company to sell a billion dollars is I was literally the first one, even though I was a kid, to be like, "Hey, let's make sure this is worth a ton of money." And there was an article that had been published that this concept, the big hardware companies like Hula Packard and IBM and AT&T, it was worth a million dollars a day. And I was like, "Okay, that seems like a lot of money, and if I can solve that problem, they're going to give me some of that money." [music] And that was the uh that was the key. And so I hadn't and
4:23I had to narrow because AI expert systems are a big field. I had to narrow it down just the total herozi thing.
4:30Make sure it's 10 times more expensive than everybody else, right? And then [music] still have companies like IBM say feel like they're an idiot for if they'd say no to me. If you are going to build a product, right, and build a company around something, you do have to wake up and love it and say, I want to be the world's best at this. I want to be the world's best. And that concept of I am going to become an expert. There won't be anybody who knows more than me about it, right? That embodies everything that you'll do. So when I said I want to become a principal of a
5:00school and I'm like, well, I I went and read all the learning science papers that said how can kids learn 10 times faster, right? And now I can sit and why why do I get invited on podcast? Because I'm now an expert in actually education and [music] less than four years, right?
5:15So when you think about your four years of founder school, right? You guys in your field, whatever your product is, whatever the company you're starting is, you will be the world's expert in this, right? If you're going to be successful, you have to be the expert because if you aren't, there's going to be someone else who is. And when they are, they're going to build a company that actually beats you because they have better insights in [music] how to do that. And so the first part is just this. And that's the part of are you chasing this for money or are you chasing [music] this because you love it. And that's part of what you
5:44guys want to find. You want to find something you love cuz you're like, "Oh, this is awesome. I like to work on this." The way you test if you're an expert, how do you know if you know stuff? [music] You post it. the world like Twitter and other places. The online world has all the other people and you can [music] first follow them and learn from them, but then second you build up an audience by posting your expertise. Everybody wants to learn, right? They want to learn. That's why people listen to podcasts. That's why there's all the online communities. And
6:13so you will be able to build an audience even before you have a product just with your knowledge, right? just as you're learning, people are going to want, people interested are going to follow.
6:23And so, as you think about building it up, it's a super cheap way. It allows you, building an audience allows you to build way ahead of time and and build your distribution channel before your product's done, right? [music] Cuz you're able to sit out there and build up that whole audience around what your interest is. And then once you have that, then you're like, "Oh, here's now a product." And if you have to wait to your product, you've wasted all that time. and then now you're like, "Oh, now I have to do it." Most of the time, beginning entrepreneurs want to wait
6:52until the product's 100% done. And that's [music] just there's it's that's a mistake. You should build earlier. When you're not shipping, right, and you're not claiming you're shipping, people are super forgiving of mistakes and changes, [music] right? There's a thing called build in public where you talk about things. They just want to be part of it.
7:10Well, so my company is Rip Drone. And so, you know what Ripcurrens are, right?
7:15What I'm selling is a base station with a drone and wristbands. [music] And so let's say you're out swimming at the beach, right? And you're gonna be wearing our rip drone wristband and you get caught in a rip current. Most people panic. You get very scared. But all you have to do is you press the wristband button and in a matter of seconds [music] the base station will open. The drone will spring out, deploy, and it will fly over to you, hover above your head. It will drop a device that inflates upon hitting the water so you can grab onto [music] it. And then it sends a SMS to 911 and flashes emergency beacon lights letting everyone know that
7:43there's a problem. That is an awesome idea. How much does this drone and dropping it is that like really expensive?
7:49So the for the business tier where um my current pricing model [music] is about $35,000 for the business tier for it doesn't cost 35 grand to [music] make, but I'm trying to charge premium pricing to include the wristbands and it's also $300 a month subscription for the AI and um sell service for SMS. But I also have a government tier where so that one is on the much higher end closer to $50,000 with an $800 a month subscription. And that one has um solar panels so you never have to take it off the beach. It
8:18has a it has multiple cameras so it's getting every part [music] of the beach.
8:21And there's no wristbands required. So if somebody if the [music] camera sees like the water formations start to form a rip current and they see somebody moving in an unnatural direction, the drone will automatically deploy, fly over to them, and drop the inflatable device. Oh [music] wow. And how much is that?
8:36The government tier is $50,000.
8:38Seems under the other ones didn't seem underpriced. That one's the first thing you said that seems like you could charge a lot more.
8:44So my offer is that I help small retina opthalmology practices with under five doctors uh get paid for every injection that they administer for $7,500 for setup and then $5,000 a month after [music] that. If any injection goes unpaid, they get that month free.
9:01No. And the thing I would do, my best advice would be I would look at all the things that [music] office is doing, right, and the the doctor's doing and make sure that [music] this is the number one thing.
9:14Like that there's not something else that's worth $30,000.
9:18Or $50,000. [music] Because there's always places when you look at a business of, oh, here's a whole business. Oh, this one would be profitable if you fixed it. The problem is, especially in small businesses, they don't [music] have time to go fix it. So, they're going to focus on their biggest issue. And if you're number two or number three, they're not going to get to you because they have to worry. They worry about their biggest issue.
9:41[music] You want to make sure when you're looking at their problems that you're like, "Okay, this is it." You're going to be an expert in their finances, right? And how they get paid and their revenue. And so, as you do that, [music] I would just keep looking and making sure that's the the biggest one. Like one of the problems that a lot of software and SAS companies do is they're like, "Oh, there would be a return on investment if they just would buy my software." And [music] those companies don't do well because the companies themselves are like, "Dude, that's like 30th on my list." Sure, if I did it, but I'm I'm working on the most important
10:11ones. And so, just make sure that's true.
10:13I basically make these activity boxes for kids who are just out of the hospital with like a cast or if they had like [music] some sort of surgery and they need at home care and they're just like sitting at their house. They're bored, [music] they're tired, they're in pain, they have nothing to do but like watch TV all the time. So, I make these activity boxes and I basically they're full of like a bunch of different activities that I'll guarantee you they all spend 3 to 5 days of screenfree like activity [music] time um or else you get your money back.
10:38This all started because when I was 3 days old, I had heart surgery [music] and I remember like I just remember my parents telling me all these stories about how like I was in like a big recovery stage. It took almost 3 [music] months. And so basically, ever since second grade, I made Jared boxes to bring to the hospital. I made 20 every year for the cardiac floor at Boston Children's Hospital to like give back.
10:57And I just remember I've had a lot of surgeries, not just for that, but other things. And then I just remember sitting at home and I watched my three siblings sit at home, have nothing to do. So I decided to make these. Um they're called kits for kids [music] and they're $500 a box.
11:10Okay. What's the cost of the box? The cost of the box I'm thinking around um $300 to make and then I keep $200 and then shipping's also included in the $300 over I worry that your gross margin is not enough but I also want them to be affordable cuz and that's the issue and so you have to decide that right that's always the balance of how much stuff am I putting in the box and but a lot of it is the the circle that you'll find on consumer goods is the more expensive the product the more expensive your cost of customer
11:40Yeah. The more expensive your customer acquisition cost is, the more gross margin you need. Yes. Right. And it becomes a circle where you're trying to figure out the right point of that, which is if it's too expensive, then your cost of customer acquisition is too high. If your price is too low, you can't afford to go get the customers.
11:58And so it's it's balancing what what will the market pay? And then innovation comes from, okay, I can source the right priced products to put in my box. Yeah.
12:16Right. More than the cost of what [music] I have to pay to put it in the box.
12:22Have you ever gotten really into a book or video game world that you wish you had a part in it?
12:27Absolutely. So, I'm building Imagination Studios, which I basically take games that people already like know and love to play in. And I have something where they get to create something and be a part of changing or making the game. Instead of just upgrading your car, you build it.
12:46You build it from scratch. You know, one of one of the things when you pick your companies and stuff and you think about your ideas is you're trying to figure out what is the degree of difficulty, right? Like how hard is this or how easy is this? And you know, you can pick ones that are easier or pick ones that are harder. And there are certain industries that are really hard. Video games is one of those like you are literally like and just think about when you're building is if you can find one an idea that's you [music] know Warren Buffett has a great
13:14quote which is like I like to do the 6in high jump. He's like the 6T one is like really hard, right? And he's always looking for ideas that he can just step over rather than have to make a huge leap. [music] And so the only my my best advice on anybody who does video games is you're going into the hardest market in [music] the world. You're on you're on 11 out of 10, right? And so just recognize that and as you jump into it, if you have great ideas and and things like that, things can take off, but it it's hard. This obviously for edtech
13:43companies, especially when they're making a lot of pushes specifically to GitHub, sometimes the data can get leaked on accident. And if the FTC or COPA does come into contact with that data, the fines can be very very large. And luckily, there are tools out there that are able to scan GitHub and find things like credentials, um, other secrets that shouldn't be exposed.
14:04However, there are none that can scan specifically for personally identifiable information and especially not for students data. Though, there's a huge hole in the market where there's all of these edtech companies [music] are using AI and pushing. Sometimes the AI is unreliable. It pushes things that shouldn't be pushed and then it's on the internet and then those companies need a reliable way to take that information down [music] before anyone gets wind of it. So I'm offering for $20 per month per person who is making code. Uh there
14:32we're able to scan the internet and make sure that no data that shouldn't be on the internet.
14:36One I totally understand the market and I think it's a great market. Um [music] plenty plenty of demand. I believe you could charge way more really. I think you are underpricing it. that back to if you're an edtech vendor, right? This is your biggest nightmare.
14:50Yeah. And so your ability to have scanning, right? And I I I would actually scanning [music] plus remediation. Yeah. Which is, hey, I'm not just going to point out, right? It's sort of white hat stuff where you're like, I'm going to point out and I'm going to fix it for you. I would I would look to [music] raise your price a lot more, add some more functionality cuz that's always he's like, how do you solve their problem? pointing it out to the vendor, they're like, "Uh, well, I don't trust whoever put it in." Yeah.
15:16So, the person who's going to pay the money is like, "Just solve the problem for me." [music] Because if you found it, you sound like you're more competent than my team who put it in. And as because you're young, you also get just sort of a a bonus point. And this lasts until you go to college, right? So, this four years is extra. is adults. Super successful adults overinvest [music] in ambitious teenagers. You will get people to help you that once you go to college, they will never talk to you again because when you're a teenager, they're
15:46like, "Oh, that's awesome." Right?
15:47[music] And they want to be able to help you. Then once you're like, "Oh, I'm 25." And I call them up, they're like, "Whatever. It's no longer interesting."
15:53And so you guys should lean into that cuz you can get them when you reach out to them and they find out that, "Oh my gosh, you're a teenager." Then all of a sudden they're like, "You're a high schooler." They're going to give you way more help than they would to somebody [music] who's 10 years older. And being online helps you do that.