Riding Unicorns: Venture Capital | Entrepreneurship | Technology
00:13:12 · Hector Mason, Dan Lifshits
[00:13:12] S2: that we would have loved to invest in it. It's the balance sheet stuff that was the issue for us. I... Not true, but... You guys are... [00:13:18] S1: I mean, not kind of keeping any any hard kind of truth on that. I think that as earlier stage investor, you obviously need to be sure that later on investors would kind of back it up as a story. Because obviously, if you're the last investor investing at venture style valuations, where the next round would come at fundamentals of the business, then effectively, it's not going to work for you. Right? So effectively, it's about kind of in a way believing to the story that story would continue growing. And I think that whenever you don't see the proof of the later stage investors already doing this sort of strategy, you have no other way rather than either just like in a way saying we're the smartest and we see that this wave is going to come. So let us jump on the ship right now and hope that it's gonna happen or just stay away. So I mean, it's just how the world works, and this is fine. I mean, don't keep anything bad to that. But you
00:14:05 · James Pringle
[00:14:05] S0: guys... There's also something in that way. You've almost turned what was potentially your biggest weakness from fundraising into probably your biggest strength by all of the VCs who weren't quite sure if the roll up model would be the right thing. And maybe some had LPAs that don't allow them to invest in that type of model and things like that. You've now gone well, actually this is, you know, you that whole narrative is exactly why you are doing well is because it is your biggest strength. It's like, no, this is the only way this is gonna succeed because anyone who's invested in any prop tech business that targets landlords, pretty much everyone's failed because they are the hardest customer profile to get to. They are private. They're behind shell companies. They're they're they're literally the hardest people to target. So you've turned you've turned your biggest weakness into your biggest strength. And I think that's a great lesson for any founder listening who's getting any sort of pushback is to try and think about why am I doing it like this? Why why is this the model that's right?
00:15:10 · Dan Lifshits
[00:15:10] S1: I think you're right. And I would share two learnings, observations here. I think that number one, the only thing that keep you afloat whenever you're hearing 200 rejections of VCs, like 50 rejections of PEs, is just your personal conviction into the thesis. Because I think that we had a bit of unfair advantage of having seen in practice how this business model works already once on the real business that made us 100% confident that this is working. It's just a question of execution, but this is gonna work. And that degree of conviction we had was to the way that, as you know, kind of the first acquisition we've made was based up north in Howell, where we relocated, where we're building out the business for more than a year. So effectively, yeah, was very conviction driven, but on our side. And I think whenever you know that it's gonna work, you just... Whatever. All the things that you hear, like, I don't believe it, or no, kind of you guys didn't convince me, it's a helpful feedback for you to keep the firepower to keep iterating, but that doesn't slow you and stop you from continue executing. And I think that you're just sure that there will be a moment of time where there will be enough data points to prove that this is really working. I think this is number one. But equally number two, I probably would be a bit more conservative on the fact that it's us that turned it into the strength, etcetera, etcetera. I think that as much as obviously whenever something is not working out for you as easy, you obviously start investing much more resource into that. And that naturally becomes much pickier where you focus for sure. But I think that we experienced a crazy kind of tailwinds of things just becoming in a way, more accepted from the investor standpoint, just the financial thesis overall, because I feel that there were a lot of changes on the VC side that were driving that change. And I think that coming down to a bit of a slowdown of an era of your typical b to b SaaS investments is one kind of factor that contributed to that appearance of AI that I think naturally pushes everyone to rethink some of the existing distribution models is number two.
00:17:12 · Dan Lifshits
So hence, I think a lot of investors become more open to not just building yet another AI native kind of B2B SaaS, because you understand that as much value as now can generate, potentially will not be adopted because of the lack of like effective acceptance to change within the businesses. And that's where you start rethinking in like volunteer FD style, why don't we go full stack and why don't we start owning the businesses in the first place? I think another factor that kind of contributed to that big time is that obviously, especially on the VC front and growth, that growth side, I think that everyone knows that there is crazy extent of capital consolidation within the few large kind of investors. I think that the statistics is that largest 20 funds raise more than 80% of all VC capital in the world. And obviously, whenever you have a big capital pool, yes, you're targeting not typical kind of fee style, in a way, management fees game, but you're still targeting in the same kind of three, four x return on your fund. Right? And that makes you potentially to go after a bit higher conviction, smaller amount, but bigger check investments, where roll ups is also falling as the category very well, because you can deploy a lot of capital within one company. So I think that fairly speaking, probably there are some things that would help to kind of create this wave for sure with proof in the putting of execution. But I wouldn't shy away from the fact that I think it's just overall the kind of evolution investment that we're just changing, where you have Internet 1.0 mobiles, after that you have mobile marketplaces, after that you have enterprise B2B SaaS. And I think we're just approaching the completely new wave of investing of AI kind of native services, roll ups in the services, etcetera, etcetera, that out of our control. So I think that as much as we navigated it, we've equally just been lucky for the kind of things to change into our favor. And I think it's important all the time to just remember the fundamentals, just not to kind of start being lost track to reality.
00:19:09 · Hector Mason
[00:19:09] S2: And and, Dan, tell us about moving to Hull. I mean, you... So you moved to Hull. I think it wasn't just you, but you were I foundries with families. Yeah. Yeah. And and you moved to Hull. And what was the purpose of that? And why was it a requirement? And was it valuable doing that?
00:19:26 · Dan Lifshits
[00:19:26] S1: Yeah, I remember when we've been discussing that topic with the team in Hull, and actually, it's a completely outstanding team of an agency, the first one with whom we partnered. And I think that whenever we were making some of the investor conversations from the open office and sharing that we moved to HAL, etcetera, etcetera, I remember that at first, the people were like, okay, what's the heroism here? I mean, it's amazing, Sisi, and we've been leaving her for all of her life. Why are you putting it as such a kind of thing? And whenever you're speaking to the New York or kind of London based investors that usually do not travel beyond M 25 quite often, you're like, moving to Holland. They were like, oh, wow, kind of this is such a conviction path. I mean, it was fine. I remember that. But coming back to the point that effectively the business is about... I think you can look at it from two distinct angles. I think you can call it a roll up with technology. And I think that this is wrong way to position what actually are we doing. And I think that another way to look at it is that we're building the tech first AI native letting agents of the new era, where it happened to be that our growth and effectively the way that we acquire customers, Tactically, it's just a go to market angle is acquiring existing businesses, because this is the only way to grow fast. And I think that that changes the perspective of how you look at things. Because eventually, when you say the word roll up, I think that there are too many hashtags sitting on it. It's like PE term, and you preserve not just the kind of customer base, but also the business, the processes, the team kind of etc, etc. Reality is majority of what we're buying, it's primarily the customers. Yes, it comes along with great kind of local teams and property managers and lots of other educated professionals that know how to run the property space. But we're also reengineering the target operating model of the value delivering of the service quite significantly as well, with changing roles and responsibilities of the people, changing how certain activities are being done, with unifying these operational activities, because obviously you can expect that lots of very kind of moms and pops traditional businesses implies that there is a variety of different operational ways how to do the same activity.