In a break from the serious topics for most of 2020, today’s newsletter offers a more lighthearted perspective.
10 True Fans
In 2008, Kevin Kelly (the founding executive editor of Wired magazine) coined the phrase “1000 True Fans.” The idea was simple: anyone could make a “six-figure” living if they could find 1000 people (“true fans”) willing to pay $100/year. Aimed at artists and “makers,” the idea gained traction in various creative industries. Today, the idea extends to the tech world, with support structures like Substack and Gumshoe.
In 2019, Li Jin (then a partner at Andreessen Horowitz) took the idea further by introducing the concept of “100 true fans.” She argued that “Today, creators can effectively make more money off fewer fans,” and a smart creator can find a way to make $1000 per fan — so they only need 100 true fans to hit that magic $100,000/year number.
Today I bring you my own personal thought leadership on the idea of fans. Just as Gillette innovated to add “one more blade,” I am taking Kevin and Li’s ideas even further. A creator in 2020 only needs TEN True Fans. Why settle for 1000 fans paying you $100/year or 100 fans paying you $1000/year, when you can focus on just finding the fans that love you the most and getting them to pay $10,000/year?
That way, you only need to satisfy ten people, and you can earn a six-figure salary.
Now, I understand you might think $10,000 is a lot of money. And it’s true. It is. Ten thousand dollars would pay for 64 years of standard Netflix service or more than a century of watching The Mandalorian over and over. But most people forget how big the internet is. There are seven billion people in the world and if you look at trends from five years ago and project them forward, then approximately 147% of those people will be connected to the internet. You only need TEN of those people to love you so much they would be happy to pay $10,000/year. That’s less than 0.00003% of Americans. And you don’t need to limit yourself to that group: my research on Statista tells me that many people in the world do not even live in this country!
You might be thinking, “what can I offer as a creator that someone would pay $10,000 a year for?” That’s a very insightful question. In the tech world we call that idea “finding product-market fit.” You need to “fail fast” and test different product ideas until you find something that resonates. Once you find something, though, you can easily scale it. You could run ads for your product on Facebook. To do this, you need to build a funnel.
$4/click on your Facebook ads
1% convert into email subscribers ($400/subscriber)
1% of subscribers become true fans and pay you $10,000/year ($40,000/fan)
That means you are only paying Facebook $40,000 to acquire each fan. That may seem like more than $10,000, but the important point to understand here is that you are not in the business of selling UNITS. You are a subscription business. Just like Blue Apron, you can spend more acquiring a customer than the customer pays you, because it is unlikely they will ever cancel an overpriced “meal kit” in fancy packaging, so your $10,000 in revenue will go on forever! Also, you are not just a personal brand, you are a SaaS business, so you need to give every acquired customer a “multiple.” Many SaaS businesses are valued at 13x revenue, so every customer you acquire is actually worth $130,000. And since $130,000 is much more than $40,000, you have nothing to worry about.
So which products should you try and test to see what works?
To truly understand the 10 True Fans concept, remember that the product is secondary to the audience. You won’t actually be selling a “product” per se, you will be selling a service, and in the new economy, service just means you are selling STATUS.
Millions of people put hours and hours into the creation of TikTok videos — and they do it all for free! Why do they do it? Status!
To create 10 True Fans, you need to understand the value of helping your fans increase their status. The first way is easy: only open your “membership” as a BETA. Beta is a code word in Silicon Valley for “something exists but you can’t get it.” Beta launches use the “fear of missing out” to drive product adoption. Since you only care about attracting ten fans, you never need to leave the Beta. This means that you also never need to perfect the product. If there is an issue, explain that you are “in beta” and that things will get better when you move to Alpha, Gamma, or Delta. If they ask when that will happen, explain that you do not use waterfall development — that you are “Agile,” so you only plan one 2-week “sprint” ahead. This allows you to be more responsive to their needs.
How else can you raise the status of your 10 True Fans?
You can give them ACCESS. People love access. Access can sound intimidating, but it just means you give your 10 True Fans the ability to interact with you directly. This does not need to be in person. Many people prefer having long meetings on Zoom because it allows them to spend more time at home with their screaming children. Those people are the best target market for your 10 True Fans.
There is some concern about offering access because it does not SCALE. But, let’s be honest, you are only talking about ten people. You can just limit them to an hour or so a week of your time. The key to the 10 True Fan model is that you are “doing things that do not scale.” If you tried to do that with 1000 fans, you could not give them that much access. And since this new generation craves more PERSONALIZATION and AUTHENTICITY — they will prefer the 10 True Fan model to Kevin’s less-well-thought-through “1000 True Fans” idea.
Once you have 10 fans paying you $10,000/year for an hour of your time, you can begin to reduce their benefits as you acquire more fans. If you are able to get 20 fans you will be making twice as much money as you were when you had 10 fans. The beauty of this model is that as you get bigger you will make more money for the same amount of work. This is called being “stratecheric” (a hard-to-pronounce word that combines “strategy” and “technology” and often results in spin-off podcasts).
Where do you find your initial users?
You should always start close to home. Most people already know hundreds of people. If you’ve been on LinkedIn for any length of time, you’ve likely had thousands of people express their interest in connecting with you. These people already admire you (why else would a sales rep you’ve never met want to reach out?). Connection is the first step towards “liking,” a term invented by Mark Zuckerberg to describe sharing political memes through a newsfeed. Once someone LIKES you, it’s only a small step to convert them into a True Fan.
You may already HAVE some of your 10 True Fans. Are your parents still alive? Even if your parents feel they cannot afford $10,000/year to support your ability to “create,” they likely have significant equity in their house. You can walk them through the process of a reverse mortgage that will allow them to pull out the needed cash flow to become your beta members. If you have two parents you are already 20% of the way to your needed 10 True Fans. You may also be able to offer a chance for your siblings, aunts, uncles or grandparents to become early members (position this as a CHANCE or OPPORTUNITY. Never ask for a favor). In my experience these people may not understand the value you are providing them, and that’s okay. Do not let their lack of imagination hurt your ambition or your familial relationships. As important as your vision is, you should always maintain quality connections with your family (and depending on the value of their primary residence, perhaps your parents will pay for memberships for other family members?).
Once you have exhausted family connections, your next step is former classmates. Best case: you attended an exclusive Ivy League school, but even if you didn’t, hopefully at least one of your friends from school was so successful that they’re struggling to find good investment opportunities. Many people do not understand that we have entered an era where TALENT is scarce and MONEY is plentiful. Did you know a wealthy Japanese-Korean investor once gave a company $300 million dollars to walk dogs? Why? Because there is a lot of money in the world, but only a few entrepreneurs talented enough to build a company that walks dogs. That is how rare talent is. Can you walk dogs? Then you too could be an investment opportunity!
But first you need to make sure the ultra-wealthy are aware of the ability to invest in you. If someone from your school has become super-rich they likely cannot find a way to invest their money in low-risk, high-return opportunities. By making them aware of your 10 True Fans program, you can help them find a good use for their idle funds. They may even have invested in SNAP and not been given any voting rights! You can not only offer the opportunity to be part of your BETA, but ALSO give them lifetime voting rights. Ultra-rich investors love voting rights, so don’t forget that angle when you approach them.
You can also look to your former co-workers, but most specifically your boss. You were likely paid $60,000/year or more at your last job. You were not hired as charity. Someone hired you because they assumed you would create MORE than $60,000 in value. Assuming you did have a job like that, your boss knows that you create $60,000 (or more!) in value EVERY YEAR. Why wouldn’t he pay $10,000 to get Beta-access to that value creation.
The key to all this is that you need to be a MONOPOLY. Understand that there is no one else like you! (Unless you are a twin, in which case I suggest a joint venture aiming for 20 fans so you are not competing with each other over your identical DNA). As Peter Thiel (founder of PayPal, first investor in Facebook, and model for HBO sitcom villains) says, “competition is for losers.” Once you realize that you are a monopoly and that monopolies are good, you know that you can easily go from zero to one, but then keep going until you hit $10,000/year. Not even Peter thought of going to 10,000. But then again, Peter never developed the idea of 10 True Fans either, did he?
In summary, while ten years ago it may have made sense to find 1000 True Fans paying you $100/year each, and last year it may have made sense to find 100 True Fans paying you $1000/year each, the world has changed. In this new world, it makes sense to reduce dependence on QUANTITY and focus on QUALITY. That means LESS fans and a HIGHER revenue per fan. Imagine a pyramid. The other theories are on the bottom of the pyramid, and this theory is on the top of the pyramid.
Which part of the pyramid do you want to be on?
Whatever your idea, there is no reason it will not work — unless your idea is ONE True Fan at $100,000/year. Then you are just being ridiculous.
Keep it Simple,
Edward Nevraumont
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Edward Nevraumont is a Senior Advisor with Warburg Pincus. The former CMO of General Assembly and A Place for Mom, Edward previously worked at Expedia and McKinsey & Company. For more information, including details about his latest book, check out Marketing BS.