Riding Unicorns: Venture Capital | Entrepreneurship | Technology
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.
00:21:28 · Dan Lifshits
And that's why the only way to really build a product and build your target operating model that would allow you to achieve the goals of increasing the user experience and efficiency of the underlying businesses is only by kind of sitting in this office as yourself and on the fingertips, feeling and understanding what product are you deploying, how is changing the processes, how to change the process to adopt the product, how to change the product to fit in all the existing processes. Because differently from distributing your typical b2b SaaS, it's not that you're building a product, but then you're going and like selling to the other customers. But you have one goal and one goal is like serving your end customer. Now he's like landlord tenant contractor. And then you can attack it from both ends. You can approach it from the end of changing the operational processes, you can change it from the way of changing the product and technology. And you need to understand both sides on your fingertips really well to understand what are you actually building and changing. And this is not achieved by sitting in the fancy view work and drinking smoothie, sitting on the phone call with property managers and telling them which buttons to click. I mean, this is about rolling up the sleeves and going back to the board modes of the world and sitting side by side with these teams and co creating targeted rate model and technology to run these businesses.
00:22:43 · Hector Mason
[00:22:43] S2: And with what you learned sitting alongside in this kind of forward deployed, you mentioned FD earlier, sort of manner, did you... Have you learned that... I'm sure I'm sure these agents have slightly different ways of working. There are idiosyncrasies between them. And have you learned... Have you had to build your product in a sort of configurable modular way? Or have you sort of build it in an opinionated way where the agents that you acquire and start working with are forced to fit your product?