The "Acquired" Cash Machine

Speaker A: Essentially these guys are, uh, printing money. They own 100% of the business. There's only two of them in the whole team, plus one editor. So three people. Their cost cannot be greater than 1 million a year based on my calculations. Hello and welcome to this episode of Cash Machines. And we have a, uh, big one for you today. It all started around three weeks ago. I get WhatsApp from my good friend Luke Shipley, Shout out to Zynk work a reference checking software that's doing real well. Anyway, I don't get a message from Luke that often, so I had uh, a look very excited and it was just a screenshot of a quote of from somewhere and I'll read it out to you. It says the acquired podcast is a beast of a business. The they publish eight episodes, or they will publish eight episodes all of next year and will have over 60 million in revenue through ad reads alone. This obviously gets my attention and I, uh, spend the last week or so researching my conclusions. And I'll give the headline of this episode away now. Is it actually it's not 60, I don't think. I think it's more like 20. And I'll dig into why I think that shortly. But the upside here for the founders anyway, Ben and David, is that they're pretty confident they're going to be doing $18 million in profit on that $20 million in revenue. And obviously it's bootstrapped. They own the whole thing anyway. So I just gave away the punchline of the episode, but yesterday we are focused on the acquired podcast. Feel free to Google acquired in Spotify, YouTube, Apple Podcasts. Essentially these guys are printing, uh, money. As I mentioned, they own 100% of the business. They. There's only two of them in the whole team, plus one editor. So three people. Their costs cannot be greater than 1 million a year based on my calculations. And I'm pretty confident they're going to be doing around $20 million in revenue. So I would not be surprised if Ben and David are pulling out, let's say $5 million per year from the business. And obviously their startup costs would be absolutely minimal. So obviously this deserves a, ah, full episode on Cash machines. Let's jump into this right now. So the show first started in 2015, 2016, and initially it was just Ben and David. They met through some kind of startup thing and they initially started just breaking down deals. So deals in Silicon Valley that I think went well and did okay. I've listened to the first episode. It's very disjointed. Nothing like the polished versions you see now. But then they slowly iterated their episode type over the year, quite subtly actually. They went from just doing tech deals and uh, they don't have guests or their main episode doesn't have guests. So it was just the two of them discussing tech deals and then it was just the two of them discussing tech companies. And then now what they've been fqing on for um, around four years is just the two of them discussing timeless durable companies. Episodes can range from two to four hours. And for some companies like Google, this year they did three episodes ranging with an average of around three hours per show. So big chunky episodes. And it's just the two of them, they have separate episode types that uh, are not on the main feed where they do interviews, um, and sometimes they do do interviews on the main feed as well. But the main episode type is these long big breakdowns of large durable companies. So that's essentially the business. They sell sponsorships. They do have a membership club, but that's currently on hold at the moment. I don't think the revenue on that significant. And so they spent these, let's say eight years building up the audience to something that is significant. So now they're able to charge between 1 and $1.5 million to sponsor uh, a ah, season of the show. And a season is six months and would include between two and four episodes. So they release between one episode every six weeks to every three months. And in terms of their down the numbers that they're hitting around a million listeners per uh, episode. And obviously those listeners are not your Average like a B2C pop culture podcast listener. The average listener here is interested in technology, interested in finance, interested in business, largely based in the US and so they actually state that they have the most valuable audience in the world. Obviously you can't validate that, but you can imagine this audience is significantly more valuable than the majority of other podcasts. So if we assume eight sponsors per season, and if you listen to an episode you'll spot about eight different sponsors. If you have eight sponsors multiplied by two seasons, multiplied by an average of let's say $1.2 million per sponsor, that brings me to my $20 million in revenue figure. I can't see from that quote that Shipley sent me, Luke Shipley sent me before that they're on the 60 million. I don't see really anywhere else where significant revenue could be coming from. They did have this membership, I think they call it the LP Club. It's currently on hold. It's low. Let's say they have a couple of thousand in there. Ah, it could be a max million dollars in revenue, so not significant compared to sponsors. So if that's the revenue, let's obviously break down costs. They have an editor. They won't share a name, but we can assume the editor is getting paid quite a lot. They have podcast hosting, which again is going to be thousands of dollars per month. They have their salaries which I assume are substantial. They do host events. But I am also of the belief that they are uh, essentially charging the sponsors for the events. Or maybe they're not, maybe that's included in the sponsorship. And so there some, some hard event costs. They've been running some big events recently, but aside from those I can't find any other forces of cost. And so we have to assume between 80 and 90% margins on the 20 million. And so we're looking at 16 to $18 million in a net profit, which is where I would assume that Ben and David is taking about out around 5 million per year to keep some cash in the business. And we'll talk more about what, what they're doing with that cash later, uh, on in the episode. So how is this trending over time? So as I mentioned, started in around 2015. They started monetizing in 2018. David goes full time in 2021. And here's when they nail the format of the uh, just the two of them researching and then telling the story of an evergreen durable business. Not necessarily tech. They've done Rolex, LVMH, Nike, Porsche, et cetera. And then in 2024 Ben goes full time. They've both only been full time on this since 2024 and we've got an excellent graph that they've actually published showing first 180 day downloads of every episode. And I will link below in the show notes to the article on our uh, site where we have this chart. But it's a beautiful exponential curve starting in 2016 where they had their first episode, like basically zero downloads. And then only do we start getting to the exponential part of the curve in 2021, 2022 where they have episodes on Bitcoin, for example, they have episodes on Berkshire Hathaway, they have episodes on Sony, Amazon, Nintendo and then LVMH. It was actually the most the 180 day downloads episode and that came mid 2023. And so classic like compounding audience growth. And this follows along with the iteration they've been doing on the format. And so I Think super important lesson for any media business is to you have a thesis initially of what you think is going to be good, what you think your audience is going to enjoy, but you have to evolve and tweak that over time to align with what the audience wants, but also with what you want to create. And I feel like Ben and David really enjoy researching and then discussing these large, durable companies. And so they've hit the sweet spot between what the audience wants, which is these large, chunky breakdowns and what Ben and David enjoy doing. So if we extrapolate assumed revenue, profit growth based on the assumptions I shared earlier regarding revenue and profit, I think when David goes full time, the total revenues is 2021 with about $1.5 million, a third with profits of around a million. So probably enough to support both of them. But they didn't both jump in. I think Ben jumps in 2024 when the revenue, I think is around $10 million. And I think it grew from 10 to $18 million. And we're extrapolating this based on download growth, uh, in 2025. So again, like 2020, they're making half a billion dollars. So essentially in the past five years went from half a million dollars in revenue, I think, to 18 million, so scaling very nicely, which mirrors the value they're creating because the downloads are going exponential. And if you assume every download is tiny bit of value being added to the listener, if they were to capture some of that value with the sponsorships, then the value they're creating for the listeners and the sponsors is increasing exponentially with the increase in download growth. So it makes total sense. And here's what can happen if you get a media business. Right, okay, so why have they been able to produce excess profits over the past eight years? So first of all, they have essentially mailed a product. They have nothing else in the market that is detailed and informative, yet also entertaining as their podcast episodes. And the way they've been able to do this is by they're starting off like a high bar in terms of the knowledge and intelligence of the two hosts. So even if the two hosts were researching and then creating episodes with like, let's say what the average podcast host may do, it's like a day of research each. The product is going to be pretty good because these guys have been working in tech, a business, et cetera, for many years. Ben, his background is technical, so he can code, so that's a good angle on these. And then David's background is finance, so you get the finance, uh, and the technical angle in those episodes. But what they actually do is spend on the order, months researching for episodes. And they also speak to up to 40 different sources. On top of that, what they also do, which they, here's an iteration, is that they both do their separate research. They agree who's going to research what, and then they come to recording without actually knowing what the other person has found. And so you actually get live in the episode this kind of these elements of surprise, the laughter, the admiration, the shock sometimes from each host if they're able to reveal something interesting. So they research from us, speak to many sources, and then they end up recording for eight to nine hours. Hours. They initially cut that down to three to four hours and then keep doing rounds of cuts to get to 2.5 to 3 hours. So it really is this handcrafted, almost like an iPhone. Obviously the iPhone, there's a lot more people spending a lot more time on it. But the craft that these guys have developed is pretty insane. Something that I think is valuable for any podcaster, it's that Ben said in a recent episode where they're reviewing how they build acquired, that they view every episode of the channel for Churn. And so they're terrified of Churn, because I would have said if they churn too many listeners, that's the end of their business. So they both love doing this. And so they spend months, they speak to many sources and then they do that massive editing process in order to, to really nail the product. So that's reason one, reason number two of how they speak with and work with sponsors. So for every episode they have single ad reads. So each ad read is specific to the sponsor and specific to that episode, which is different to what most podcasters do when they sell sponsors. It's not just ads in a podcast. It's almost like advocacy from Ben, David and the acquired brand. For example, Ben and David, ah, are available to go to their events, to interview their CEOs, etc. So more of a partnership. And so the sponsors don't just get the ads, they get the endorsement from the acquired brand and from Ben and David. And, uh, we believe this is, this enables them to charge a premium. Reason number three and final reason is the scale economies. Have they been able to essentially both go full time? What that's enabled them to do so they basically got enough revenue to go full time. Since they've been going full time, they've been able to build a better product. They're spending months speaking to many sources. And so essentially they have this big value multiplier on the effort that they put in because they know it's going to reach a million listeners. And so they keep going harder and harder on production. So for this three episode Google series they spoke to 40 sources, they spent a month doing research and they're also able to get access to sources that no other podcast would be able to do because they have the acquired a name, for example, reaching out to ex senior Google officials. It's easy if they've heard acquired and uh, fans of the podcast for them to get to speak to them, for example. And so just the size and the brand of the show is now enabling them to make better episodes. So it's harder and harder for anyone trying to do the same to catch up. Okay, so what do we think the cash flow is being used for? The most interesting example I found is that they have created a VC called Acquired Capital and they're taking presumably funds from the show. The first fund I understand of $30 million. I'd love to know how much Ben and David put in, but I would assume it's in the multiple millions from acquired. So acquired Money. But then they probably also found it pretty easy to raise money through listening to the show. And what they also do is invest in sponsors. And so they select sponsors that they would like to invest in but they also then get to know the sponsors throughout that process and then are able have to put money into the rounds of these sponsors. And so there's a self reinforcing loop going on here where they can create content that attracts high caliber sponsors which then generates big profits for acquired and they can then invest those profits back into the sponsors through acquired uh, capital and that produces even more cash. This beautiful cash generating loop there. The final and number one learning from me from this cash machine breakdown. So to win in the media game you just need better content. If you're going to do anything in the media game or not anything really the only thing you have to do is create better content. If you get better content, you get the attention. If you get the attention, you can make money primarily through sponsors or through other wave. But as we learn in this case it can take many and uh, many uh, years. If you go and check out the graph we have on the article we wrote about this, they actually only reach 1 million in revenue in 2021 we believe, which is six years after starting. So it can take many, many years. But once you get it working, they went from 1.5 million in 2021 to roughly 18 million today. And so once you have now the content type and you get it working, it can scale quite fast. It might take years to nail that first, uh, content type. So that is the acquired cash machine cash flow breakdown. Hope you enjoyed it. If you have any requests for, uh, breakdowns, feel free to drop me an email at tomomhuntio or ping me on LinkedIn. I'm always scouting for new cash machines to break down. The most recent one I've been working on, which should be coming out in a couple of weeks, is arguably the greatest cash machine of all time. I won't say the name, but it's an adult content platform and I'll leave it at that. Thank you so much for listening.