a16z Podcast - a16z Podcast: Using Social Tools to Build Homes for Those Most in Need

Episode Date: November 28, 2015

Brett Hagler was on a trip to Haiti after the 2010 earthquake where he saw too many of those displaced by the natural disaster still living in tattered blue-tarp shelters. What struck Hagler was the need for more permanent housing that could not only offer much needed safety for families, but help foster the community that was split apart following the earthquake. The non-profit startup NewStory is Hagler’s answer to that need. NewStory co-founder Alexandria Lafci joins Hagler on this segment of the a16z Podcast to discuss the startup’s social-media powered approach to giving -- and why even as a non-profit startup they think and act like any other for-profit tech startup looking to make a mark.

Welcome to the A16Z podcast. I'm Michael Copeland. Brett Hagler was on a trip to Haiti after the 2010 earthquake, where he saw too many of those displaced by the natural disaster, still living in tattered blue tarp shelters. What struck Hagler was the need for more permanent housing that could not only offer much-needed safety for families, but help foster the community that was split apart following the earthquake. The nonprofit startup new story is Hagler's answer to that need. Hagler joins this segment of the A16Z podcast, along with News Story co-founder Alexandria Lafzee, to discuss the startup's social media powered approach to giving, and why even as a

nonprofit startup, they think and act like any other for-profit tech startup looking to make a mark. Alexandra, Brett, welcome. Glad to be here. Hi, Michael. Thanks for having us. New Story Charity. Why charity? It sounds so charitable. I thought, you know, we're in a world of nonprofits. Why is this a charity? Yeah. So we, what we do is we crowdfund houses for families living in danger around the world. And the name New Story is really what we go by. The charity piece is there to not confuse people because sometimes they'll think that, you know, we are a for-profit organization because of the way our platform set up. And so we had that in there just to make it simple. To make it very clear that this is, this is in fact a non-profit or charity. Okay. Well, you mentioned

that, you know, your job and your mission is to build houses for people who have been displaced by natural disaster, right? Let's get to the origin story. How did this come about? Because I know you both have had long experience, actually, outside of the Valley and the startup world, but working on this kind of stuff. Yeah, so the story starts. Iweds down in Haiti. And, and on a mission strip and actually went to a tent slum where these people were placed because of the earthquake back in 2010. So when the earthquake happened, there was a lot of, you know, immediate help, temporary relief. Tents were given out as band-aids, which were needed at the time, right?

But they were only supposed to last for about four months. Turns out they've been around now for five and a half years. And so I was down there in the tent slums and learned about the problems these people face. So just tell us a little bit, describe for us, you know, a five-year-old tent, you know, community that was meant to last six months. What does that start to look like and how do people have to manage? Yeah. So probably the worst problem is when you kind of think of Maslow's hierarchy, like safety's at the bottom, right? So if you think of a tent that has a mom with three young kids in it, they have no protection.

It's just a tarp tent. So what happens is, you know, dangers like child abduction and sex trafficking, you know, just horrible diseases from the sanitation inside these things. Another example, that's just crazy, but it's so hot inside of these. Like, imagine it being 98 degrees inside of a blue tarp tent with no ventilation. People are starting to go blind, Michael, it's crazy. So those are like, you know, when you think past us the initial couple months of being in a temporary place, those are the problems that come forth. And if you just think of like simple inconveniences in our daily life, right?

Like here in Menlo Park today, it's, you know, a little rainy, right? It's slightly inconvenient. But when it rains and you're living in a piece of tent that's tattered in multiple places, that's a catastrophic event. Think of someone with like a newborn baby, right? It rains, the floor becomes mud, you know, rodents start to come in. The entire family, large families are crowded on one bed. They're sopping wet. everything is drenched. Something as simple as rain can be a catastrophic event for a family down

there. There's a big push and energy and kind of will to help in this first responder kind of way. But then afterwards you're saying is when, you know, everybody kind of packs up their tents, as it were, and goes back to wherever they came from. And these people are left, you know, just struggling. So how does news story then, how did, like, how did you think about that problem? And then how did you come up with what new story's solution is? So, I mean, the name's new story kind of says itself. Like, you know, these people have been living this same old story for so long and we want to come in and literally create a new story in their lives. And, you know, the optimistic side here is that there is a solution to this problem, right? And so when I saw it,

you know, I saw the tangible tent and was like, okay, if you could just get them out of that and then into a safe home, all of these like life-threatening danger. would be solved. And so, and that's what we originally set up new story to do, was to simply take them out of that tent slum, bring them into a new community that immediately solves those dangers and then actually becomes a platform or house becomes the foundation for really the three pillars that people get excited about, which is access to education, sustained health, and income or entrepreneurial opportunities. And so that just really excited us that a home not only save people's lives, but it had all these far-reaching implications. And there was all these

ripple effects that could come from that. Okay, let's break that down then from getting the house actually built, funded and then built to then these implications of education and entrepreneurialism. And the third one is safety. Yeah. Income opportunities. I think a great example is probably from my personal life. So I was a teacher. I taught in Anacostia, which is in southeast D.C. So my students, about a third of them at some point in the year, they were homeless, if not for the entirety of the year. And if you think about their kind of their life when they're homeless, when they come to school, you know, if they come to school, first of all, their attendance is impacted, right?

If attendance is impacted, your performance and then your overall academic achievement is impacted. So that's really where kind of education ties in. And then, of course, you know, if you don't know where you're going to be sleeping at night, depending on the safety of that situation, your mental health is impacted. many times your physical health, and that's true of my students. That was true of their siblings. That was true of their parents. Their parents' ability to, you know, attain or retain a job was impacted. And so, you know, that's here in the U.S. And then, you know, those problems are just,

you know, magnified when you're in the developing world. Before news story sort of happened, you went through Y Combinator YC. Did news story, was that an idea in your head when you entered YC? and you entered YC as a nonprofit. So unlike other classes of Y Combinator startups. So first off, did you come in with that idea or did it sort of, you know, and you were driven to do it, and that's how you found YC or YC found you? So there's really two problems we're solving for. The first one is what we've been talking about, which is this, you know,

the problem on the ground, the life problem. And then the other one is how the idea for news story came. And that's just we thought, you know, traditional charity was very, Old school, we had a lot of problems such as a lack of transparency, a lack of efficiency, a lack of innovation. And that's how we got the idea for news story. You know, it's how a lot of startups start. It was, I was actually trying to give to a bigger organization online, and my experience

was just so poor, and I had no idea where my money was going to go. I didn't know who it was going to help. And at the end of the day, I just felt like a drop in the bucket. And so we wanted to create an experience that was the opposite of that. And that's how a new story came about. That's how we get early traction. And then we applied to Y Combinator and said, look, we believe the future of philanthropy is with two things.

It's transparency and then technology to scale the impact. Just so happened. White Combinator believed the same thing. In December of 2014 is when we launched as an organization. And then the Y Combinator batch started in June of 2015. Your YC experience, was it dramatically different than others? Or I mean, was everyone like, wait a second, your business model? model is to not make money. How does that work? It was surprisingly the same. Yeah. And so the thing here is

the way we think about this is our business model is actually to make as much money as possible, right? So the only difference is that the revenue we're bringing in is being distributed back out to families. Right. But the way the organization set up as far as how we set up our operations, how we set up our platform, how we set up for scale, our product, all those things, is the exact same way that a for-profit technology company is set up. And we believe that's the best way, that's the way non-profits should operate, and there should be no difference in mindset, right? Because you're trying to bring in the same amount of money, or you're trying to bring an incredible amount of money with efficiencies and build a product that people love. So that's how we think about it. So I go to the site now and

what happens? How do I then help contribute to building a home, in this case, and Haiti. And you've started in Haiti and the plan is to go elsewhere, I imagine. Yeah. So you come onto our site and you get to meet a family, like literally see the mom and her kids. You see their ages, their stories, their picture. And then you give directly to them. 100% of your donation goes to funding their home. One home costs $6,000 right now. Once the home is funded, then takes about two and a half months to build the home, which is all built by local construction workers. $6,000. Correct.

And describe for us what those homes, what $6,000 in Haiti can build? Yeah, it is a concrete block home. They're built to Miami-Dade County and Broward County Hurricane standards. So they're built to last and withstand natural disasters that might continue to come to Haiti. They are 400 square foot homes. And, yeah, built with concrete. reinforced with steel rebar. The family's also, what's really important is the families own the plot of land that the homes sit on.

A huge issue in development is when building happens and then, you know, maybe a few months later or a few years later, a government entity or a private owner wants to use that land for something else. And then those people are then again displaced. They get booted out. Exactly. And we are building solutions that last, not just the homes are, you know, constructed to last. but these families are able to stay there. And that's really impactful because, you know, that means that we're not just impacting those individual families, but we're really providing a foundation for generations to come.

And how, not to get too into the weeds in this, but how do they bring in electricity? I mean, I don't know what the state of running water is, especially infrastructure is a mess, I know. Yeah, there's a water cooperative. So that's, you know, those are really important question because those are things that we definitely think about. We want to build sustainable thriving communities and energy and water. Those things are critical. So there's a water co-op that is run by the. community. And the area is actually lit by solar energy that the Clinton Foundation has partnered

with and provides. So I identify my family. I contribute what I can. And 100% of my donation, so don't you guys have overhead? So if I give you $5, you put $5 into the house, how do you guys run your organization? So real quick, for answer that, I just want to finish the experience. So you would donate, you know, the exact family that you're giving to. And then when the home is built, we actually take a video of the family when they move into their new home and we send it back to every single donor. So that's kind of the full experience. And so right now, over primarily the next two years, we set it up, we said the simplest way to do this is just have two bank accounts, right? So one is for public donations that goes to the home construction. Our promises will never

touch that. The other one's for ops. And what we're doing right now is basically raising an angel round of operations through private donors just to cover the operations. I see. We value sustainability as well. So we are putting, you know, we are putting measures in place so that we're not always reliant on, you know, private investors and foundations for our operational costs. You know, our goal is that we would only need those outside funders when we're looking to expand or to, you know, do something brand new. But, you know, we are putting measures in place right now. And, you know, in order to sustain ourselves. One that we launched very recently is the option to allow our donors to opt in to contribute

to new story operations. That's been going extremely well. Over 60% of our donors actually opt in to help fund our operations. So that's one strategy. Splitting the bank account seems like an interesting solution to this problem of transparency, like you say. So now I know 100% goes to that I gave to building a home, goes to the home. Does it still solve for the operations, though? like, you know, do I know that you're not all writing around in limos like Red Cross executives

or whatever? Or, I mean, how do you, does that solve that question? And then a follow-up question around that is like then, you know, you came through Ycombinator. You're in the startup world. How do you measure success? Like, and then how does that get transmitted and broadcast back to donors? So, yeah, so with the operational bank account, one, we will make everything public, Right. So people will see what we're making public. And we're also operating at a basically a 6x. So $1 that's put into operations is going to yield $6 out into the field. That's our goal. And that's what we're striving to hit. And so people know, okay, what's going inside the input versus the output. And we'll make that as transparent as possible. Yeah. And as far as measuring success, the most obvious answer is the number of homes and infrastructure projects we're able to build, right? But, you know, that's just the first kind of layer. Like, yes, we are getting people out of these extremely dangerous tents into safe homes. And that, of course, is great. But, you know, like Brett mentioned earlier, you know, we do know, and our hypothesis that we're proving is that homes don't just provide safety. They have these farther reaching employees. locations, again, into health, into education, into income opportunities. So that's when we get more granular into kind of really showing why a home is the best investment when you're talking

about poverty alleviation, when you're talking about improving communities. I also want to throw out, I think that was great. I want to throw an example of the Red Cross because you mentioned that. So the Red Cross, this is an article that came out a couple months ago, they raised what was called a half billion dollars for Haiti after the earthquake. And they made a lot of promises to build homes and things like that. And after five years, they've built six homes in this area. They made promises to. And we won't go into details of, you know, exactly why that happened. But we know that by, you know, not having allocation for every dollar that comes in, there's trouble. And when they go to, you know, distribute that money,

it's just like this big bucket of money. And so what we do is not only, in our experience, not only is it great for the donor to know the exact family that are helping, but it really helps our operations because we go, okay, this money is tagged to this family. And we know that this home is supposed to be built in two and a half months,

and we're going to track that. And if it doesn't happen, then we know exactly why we can go fix it. Yeah, I mean, I should say, I know that the intention of the Red Cross and other organizations is always a good one Like you say that the on the ground specifics of how things go down is, I mean, hard to know. How many houses have you guys built in Haiti thus far?

Yeah. So we have funded now 131 homes during YC. We did this campaign. We said, let's pick a crazy goal during YC. And so we said, we're going to try to fund 100 homes and 100 days. And, you know, we launched this campaign and we got fortunate and we did 100 homes in 91 days. And so those are, some of them have already been completed and all the other ones are under construction right now. Yeah, we have 38 that are completed.

And that's because, again, you know, over the summer, we had a huge number of homes that were funded. And so we have about 25 that are currently in construction. And the rest are set to be built before the end of the year. And are these homes, like you say, is it a community of, you know, new story homes together? Is it a neighborhood? Or are they spread out in different areas? No, we are in the business of building communities. And homes are a part of that.

So the homes are all together in one community. Like I said, there's a water co-op there. There's solar power there. We believe that, you know, neighborhoods, sustainable communities is really what helps individuals. Does the neighborhood have a name? Do people call it anything in particular? It's Levec. Levec.

All right, Levec. Yeah. And so you think, like, the vision going forward in five years, there will be, you know, dozens of new story communities around the world in that you'll have, of course, the homes because there's the foundation, and you'll have a school, clean water and sanitation, a health clinic, anything else that that community needs for that particular climate. I want to ask a little bit about how, you know, the experience of being in my common air and being in the startup community has made this company

and what you do different. Now, you mentioned you get to see a video of your family moving in, which sounds to me very kind of social media like, there it is, and like I get this kind of gratification that you're used to getting on Facebook, right? So what kind of dials or levers or tools are you using that you kind of borrowed or, you know, modified from the world of technology that are working well?

So I'll give you one example of how, how we're really how we're scaling so um there was actually a a gentleman from a 16 z named chris lyons he's a good man and um wow that he said all right i'll agree with you there he set up a a uh what we call a birthday campaign and what that means is you come onto our platform and start your own fundraising campaign and so birthday is just one example but basically instead of asking people for gifts or like a dinner party that you have every year it's hey let's ask for donations instead. So you set up a campaign, right?

And then you send that out to your friends and family. Now, on average, that campaign brings in 13 new people that are now new story donors and expose a new story that we could have never reached, right? And then the viral piece is 20% of them will start their own campaign. So there's a virality piece to how we grow and scale as opposed to old school traditional charity models, which is more of a direct sales approach, some inside sales approach, gala, things like that. We're actually having active ambassadors go spread news story digitally. And then our responsibility is to create the best product possible that's going to make

people love it and want to engage. What do you have to keep a really close eye on? Like, you know, you have this contract with the people who donated money, whether it's for operations or for homes. And, and some of the things that we see, especially, you know, even in this sort of nonprofit microfinance world, things go astray. So what are you trying to make sure that you do to make sure that that doesn't happen? Yeah, I think the key there is the organizations on the ground that we choose to partner with. So our model is, you know, we're not, we're not the ones down there, you know, making relationships with contractors and governments. We rely on extremely

reputable nonprofit partners that are uniquely positioned in the countries that we're going to be working in to do that work. So, you know, making sure that they're an organization that has the necessary connections with, say, the government entity so that the families do own the land that the homes sit on that have been building quality infrastructure for years. So, you know, making sure that when the next earthquake or the next hurricane happens, that, you know, the homes that we're building are not going to fall apart. And organizations, that also have partnered with other organizations and have done it very well. So, you know, ensuring that we have very trustworthy partners that are going to work well with

us, have, you know, the solid communication that we need in order to, you know, get those videos back to our donors in order to, you know, make sure that these homes are being built in addition to having the necessary structures in place on the ground to actually get it done. Do you guys ever run into, so, for example, in the auto industry, Tesla comes in and like, look, we're going to show Detroit how to make cars, and Detroit's like, yeah, yeah, good luck. And turns out actually Tesla does a lot to show Detroit how to make cars. But there's this kind of like, okay, here comes the technologists with all their software and all their solutions to fix the problem. Do you get any of that? And if so, how do you respond? And whether that's on the ground from traditional nonprofit charity organizations, do they ever give you this? Like, well, who the hell are you and how should, why should you be fixing this problem? Yeah. I think from the, from the, you know, kind of the experience, the donor experience side and the tech side, it's, uh, it's very evident that this is a better way to do it.

It's more transparent. The donors appreciate this as opposed to other options, right? Like, that's, that's been acknowledged and proven. The thing where we get a little bit of a shade for is, you know, well, how do we, how do we know that we can trust your local partners and things like that? And I think the best way for us to explain that is by proving that we're building these homes in a very short amount of time and we're accounting for every single home that we're saying we're funded. And it's like, look, this is working. It is efficient and it is scalable. And it makes a lot more sense than to try to build your own in-house capacity to do these things.

Collaborate, right? Like use partnerships, use channels, just like SaaS companies. So you're like, use channels to get the end product complete. It sounds like, you know, this is an incredibly efficient, you know, well-oiled machine that you guys have built. But it can't be. I know that. I always be like that, I should say. So what's been hard?

Like, what's been, you know, between the theory and the practice? What have you guys had to kind of overcome? I'd say one of the things that we're definitely, you know, putting time and energy to now is really scaling our experience, right? So as we continue to fund homes at an increasing pace, it's going to get harder and more time-consuming to get these videos and edit them and send them. And that's a critical component to our donor experience, to proving that we are a reputable, accountable organization. And so, you know, one of the tenants that we kind of knew of before YC, but it's definitely preached throughout YC is this do things that don't scale, right? And I think that that's probably one of the reasons why larger nonprofits haven't done something like sending video. to every single donor of the exact family that they funded.

But, you know, we are committed to it. And we're doing these things at don't scale. We're baking it into our process very early. But it is definitely something that we have to work through. Using that example, how you're going to pull it off? I mean, one of the amazing things is like most people have smartphones that can shoot video, I guess. So, yeah, to Allie's point, this past weekend, I was in New York for the Clinton Global Initiative. And there was a lot of other way bigger nonprofits than us there.

telling them like what we're doing and I won't mention names of the organizations and you know they kind of looked at it as like whoa that sounds great but we could never do that you know and maybe they can't just because they're so big and their ops are already set up but from day one we're baking it into our operations and then we're going to be as formidable as possible to make it scalable I mean it sounds like that's the approach of most startups and actually that's the you know the advantage you have too because they probably can't do it Yeah, which in this context is sort of sad because what they could do is help more people. In the business context, it means that, you know, you guys will reach more and more people, ideally, which brings me to my final question, like, where do you go next?

Not to say that Haiti is by any means, you know, done, but where might you be focused next? That's something that we're working on right now. We're looking to announce our second country location by the end of the year. The thing, as I mentioned, that's the most critical to where we expand is our non-profit partner that we're going to be working with. So, you know, we do have a number of locations right now that we're considering, and really the final decision is going to come down to which partner on the ground shares our values, is able to kind of keep up with the, you know, technological demands that we do have of them, as well as, you know, being able to get the work done on the ground. It could be somewhere that was recently hit by a disaster like Nepal, or it could be an area like El Salvador where there's kind of been many internally displaced populations for a number of reasons, such as, you know, drug trafficking and things of that sort. There's just need on an ongoing basis, yeah. Yes.

Brett, Alexandria, thank you guys so much. We'll look forward to talking to you guys again and kind of see where everything goes. And news story charity, go check it out. It's been a pleasure. Thank you. Thank you, guys.