Buyers and Builders
00:00:00 · S0, Dan Lifshits
[00:00:00] S0: Today's episode is with Dan Lifshitz, co founder and chief product officer of Tweli. Tweli is building what you might call an AI enabled roll up in UK lettings, buying independent agencies, keeping the local brand and teams, and layering in software to automate the heavy operational workflows that frustrate tenants, landlords and agents. So far, they've done eight acquisitions, and Dan is joining us at an exciting moment. Welly just announced 93,000,000 in fresh funding to accelerate its acquisition driven expansion across UK. Dan, thanks so much for being here today, and congratulations on the race. So let's get into it. [00:00:46] S1: Thank you so much. My pleasure to be here.
00:00:46 · Dan Lifshits, S0
[00:00:46] S1: Thank you so much. My pleasure to be here. [00:00:48] S0: I found an interesting tweet, a post from you where you said under announcement of of your... I think it was a capital provider who said that you were saying there three strange kids show up summer two thousand twenty three and say they'll start buying agencies and digitizing them. And first acquisition will be 40 to £50,000,000, two fifty people. We already mapped it out long before AI roll ups were a thing. Thank you so much for your trust. There were 100 investors that passed, and you guys could have been hundred and first. So it takes just one to believe, and you were saying thank you to them. So I want to cover here too many people in life overall, in business as well. They give up too early. So let's talk about your fundraising journey, and please don't tell me it was hard. Tell me about more about what kept you going, what were your thoughts, how was the day to day, and tell me the real stories.
00:01:50 · Dan Lifshits
[00:01:50] S1: It was hard. But jokes aside, I think that it comes back to a bit of, I think, of our backgrounds and what we've built in of life before and everything. As you might know, we kind of the Valley was founded, kind of there are three founders of ours. Our journey has been kind of significant part of our career, forming part has happened in the right healing kind of businesses. I personally was a general manager at GET, kind of my co founders been GMs at Uber. And I think that's where we learned how to build kind of highly scalable, kind of also very operational, tech enabled operational business. And then after that, kind of Ilya and Dmitry, kind of for the other co founders, when kind of leaving Uber in around kind of twenty eighteen-nineteen were exploring what are the other markets resembling kind of lots of very similar things to that being in right hailing. So like effectively a huge operational business number one, like in technology to kind of significant extent and that kind of clearly can be improved with technologies. And highly fragmented two sided marketplace both from demand side and supply side. No surprise that this is where kind of the journey took turn to the residential lighting, so long term residential rentals because effectively kind of naturally ticks all of the above mentioned boxes and then the guys already once effectively kind of built a very, very similar business ideologically in Eastern Europe. What the factory kind of serves and continues serving to a significant extent foundation to what we're building here at Vale. Now it was pretty meaningful business that kind of for the guys sold in end of twenty one, kind of summer end of twenty one. And I think that that gave effectively it was like pretty big scale tech enabled kind of letting agents focus on long term as a venture unfolds. And I think for that journey it became kind of pretty clear there were two major learnings on that journey. I think that learning number one, as it always goes, one kind of positive one, not so. The good learning was that it's pretty probably obvious, I think, for anyone that's ever interfaced with a kind of letting agents or property manager that this is like a very, very people centric business.
00:03:46 · Dan Lifshits
But with more and more regulations coming through, with more kind of other restrictions happening, it ends up that people spend most of their time just on orchestrating basic kind of mundane admin processes rather than really spending time with the clients. And I think that technology exactly can help with that, where it can free up kind of a lot of time of people to really be much more customer service focused in the first place and then for the technology to take most of the remaining kind of mundane admin effects. So kind of you can build a much more product led business that first, much better user experience, higher efficiency, etc, etc. But there was a negative learning. And the negative learning was that with organic growth in this industry is very, very important because by organic growth, I mean, the key customer that you kind of acquiring this industry that pays you money is a landlord, like all know the property. And it's just structured that finding the landlords organically one by one is very, very slow and very limited because there are not that many landlords that are looking to switch in agents at every moment of time. That's exactly why when we've been in the kind of new evolution of this business, kind of considering effectively starting Valley, it was very clear for us that organic growth doesn't really kind of work fast, that you kind of cannot grow the landlord base at that quick pace. And that's exactly why we started exploring. Is there a way to overcome the limitation of organic growth? So effectively, kind of can we actually try to merge the best of the two worlds where we'll be building a tech first AI kind of native platform that re engineers the whole end to end letting agents experience from finding a tenant brokerage to property management to collecting rent, the full kind of cycle effectively. But the way to grow would be rather than going and selling this technology into existing agencies because agents is not looking for yet another B2B SaaS to change their operations and equally kind of not to kind of grow the landlord base organically. Is there a way to overcome limitation of organic growth?
00:05:37 · Dan Lifshits
And that's why I think that most of your, I think, followers on the X and YouTube and everything know it as bread and butter, because I think a lot of them coming from private equity world and roll ups that obviously kind of growing by acquisition is one of the ways exactly to overcome that. And this is the industry that is known to a significant extent that roll up is kind of works very well here. Because very good fundamentals of the business you're buying effectively almost annuity style, highly retentive customer base with a retention rate of like 95% plus and almost monthly subscription style monetization. So like super, super lucrative asset, super stable and a good one for kind of a lot. And that's exactly why I kind of thought why not to try to merge the playbooks of the kind of all the two worlds. Goals are the same improve the level of service and increase efficiency of the underlying operation and free up agent's time to kind of to service the clients more. But to achieve these goals, try to merge the best of the two worlds. Let's build and kind of AI first tech native kind of stack, tech stack, but kind of go to market, whether it be tactically go in acquiring kind of existing agents system, the way of buying agents, effectively buying the kind of the managed contracts of the customer base of these agents. And the mark on the journey, I think it was close at the end of twenty three when we kind of keep it off. And not me to tell you that I think that end of twenty three where you were a limited pool of investors, I think we're kind of open to kind of in a way something creative on the business model level because effectively it's almost sits at the conduit of the two worlds Because on one end you're building a VC style kind of tech transformation of the traditional business. On the other end, your growth is a kind of roll up where I think that VC kind of investors have a tendency to put, I think, businesses in a bit in a bucket. And I think roll up kind of direct associates with the kind of PE style investment because like where would you see a venture style upside in the kind of private equity kind of style of roll up. And obviously kind of I think that's talking about like 100 investors that give up. You can't talk to VCs, VCs saying everything is great, industry is huge, industry is crying for disruption.
00:07:39 · Dan Lifshits
You guys kind of pedigree is probably one of the best kind of founder market that you can think of. But roll up, go talk to PEs. You can talk to PEs. PEs are saying, sure, roll up bread and butter. No problem. We can even originate from scratch. The only moment you're saying that I'll be quite significantly technologically disrupting or engineering the business. They want us to say, guys, I mean, we probably can understand it intellectually, but that's not the type of investments that we're to have a history to underwrite. So we just don't know how to play this playbook. Would we really be the best value investor for you? Maybe you're going to refer back to kind of the VC guys because they know this playbook should be better. And that's exactly where you're going to fall between the kind of the chairs a little bit, because I think that this business model different investors have different views. Some say that kind of there is clear venture. Some say that it's maybe closer to kind of piece that roll up. I'm obviously much more the first view because like I can understand how well it can become kind of 1,000 kind of billion business pretty clearly. But I think the kind of the challenge was that this is a bit of a novel playbook with different profile of returns, both of the kind of upside returns and downside returns, that I think whenever you're trying to put yourself in one of the kind of brackets that exists, you will struggle because it's not very typical kind of putting a square in the kind of circle whole text exercise effect. That's why I think there was a bit of a novel playbook and a lot of guys that are going to be in a bit less maybe creative in the way of how like how to think about the kind of capital strategy in general was struggling to kind of put us in any bucket effect.