How I Built This with Guy Raz - Houzz: Adi Tatarko

Episode Date: May 30, 2022

When Adi Tartako and her husband started the home design and renovation website Houzz in 2009, they had no expectation that it would grow into a global business. In fact, Adi was a hesitant entrepreneur, preferring to foster Houzz as a lifestyle business and pushing back when experts told her it could grow into something much bigger. But as Houzz morphed into a go-to site for users to get ideas for home improvement and connect with industry professionals, Adi decided to go all-in. She walked away from a promising career in finance to become the CEO of Houzz, helping lead it to a platform that now has 65 million users worldwide. See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

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Airbnb.ca.ca. slash host. We went on a social event from our little sons preschool. And then I met this nice grandparent of one of the kids and said, I love homes. I love renovation. I did multiples in my life. You know, send me the link. And I sent him the link. And then he calls me afterward and he said, are you crazy? How many users you said you have? And why aren't you raising money for this? He said, well, you know, it's our thing. Nobody tells us what to do. And he said, you know what? I think that you're making a mistake. I'll just say this. If you're not going to raise money, somebody else will realize what you're doing. They will raise money. They will copy you. And you will say goodbye to this initiative. Welcome to How I Built

this, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built. I'm Guy Raz, and on the show today, how a frustrating home renovation led Adi Tatarko and her husband to build house, an online community for homeowners and remodellers that's grown to 65 million users worldwide. I love stories about accidental entrepreneurs and part because I'm one of them. This show you're listening to started as a side project. I just really wanted to learn how ordinary people build extraordinary things, and I thought there might be a small group of people

who'd also want to hear those stories. But to my surprise, it took off in a big way. I was and still am genuinely amazed and delighted that millions of people listen to this show each week. It is mind-blowing to me. But anyway, the point of the point. of all this is to explain that I never intended to stop doing the other things I was doing at the time. How I built this was a fun side project.

But it soon became clear that this show was, in fact, the main project, and it completely changed everything I do. Now, in a much, much bigger way, like to the tunes of billions of dollars, this is a version of the Howes story. How's, if you're not familiar with it, is a website, an app, and an online community for architects, interior designers, and people like you and me who are looking to renovate their homes. It's used by more than 65 million people, and it's the biggest home renovation community of its kind. Basically, it's a place to get ideas, to buy the materials you want, and to hire professionals to help you get the work done if you don't want to do it yourself. But this entire venture, last valued at over $4 billion, started as a hobby, a side project, a project to renovate Adi Tatarco's home in Palo Alto, California. At the time, she and her husband, alone, thought there should be a simple and inexpensive way

to design your own renovation project, something that could be done online. Back then, Adi was working as a financial planner. alone was a software engineer at eBay, and Houses' first customers were other families at their kids' school. It was a website where they could post photos of their home renovations and also a place where local architects and designers could promote their work. But very quickly and organically, a D&Ollone started to get inquiries from designers and cities outside California, and words started to spread through the community of people involved with the home renovations. innovation industry. And some of their friends practically shook Adi and alone by the shoulders trying to convince them that Howes could become even bigger, maybe even huge. But Adi held back.

She already had a career and she had two young kids at home. But eventually, she was convinced that Howes had too much potential to treat it like a lifestyle business. So she walked away from a promising job in finance to become the CEO of House and to help lead it to become the massive site it is today. Aditya Tarko was born and raised in Israel, where her parents worked together in the real estate business. Family was close and she lived in a tight-knit community. I was actually guys studying with the same 38 kids in the same class from first to eighth grade. And I'm very, very proud to tell you. that to date, I'm in touch with the vast majority of the kids from that class.

Amazing. We meet every several years with some of kids. I still call them kids. I still have close relationships to date. So it was a very warm, friendly, close environment with lots of fun memories. How were you as a student in school? Were you a good student? It wasn't okay.

I wouldn't say excellent students. I made it through. You know, guy, my mom was so liberal and so, you know, trusting. And she said to me in high school, look, I know that many kids just in high school don't tell the truth to their parents. So let's have some ground rules here. I don't want you to ever need to lie to me if you don't want to go to school or you rather have a fun day once a month or whatever it is with your friends at the beach. let it be, just don't lie to me. And if you tell me the truth and you promise to never do things behind my back,

I will always have your back and always support you. And she did. She said, that's your life. I'm telling you why you should study and I know you're capable of doing whatever you want. However, do it your way. Just never lie to me. I know that in Israel, so for the vast majority of teenagers, the path is pretty clear. You're going to do service, military service for men.

I think it's three years and for women, too. So what did you wind up doing for your military service? I ended up selecting going to the Air Force. I think that a big part of who I became later on is due to my amazing experience in the few years I serviced in the Air Force. and what I did there. I'm assuming that given there's been a time lapse between the time you served and today, it's probably not classified what you did anymore.

Can you talk a little bit about your experience? I was involved in very interesting plans and missions, and one that is very well known to the public today was the rescue of Jewish people from Ethiopia at the time that politically, it was very, very challenging to do that. Yeah, this is the sort of the late 80s when Israel was airlifting Ethiopian Jews out of Ethiopia and I think also Eritrea, these sort of midnight missions.

Correct. So I think I had a very, very meaningful service. And I think I learned a lot at a very young age, how to emphasize what's important, how to juggle gazillion things and still, you know, catch all the balls. And again, be sure that what's the most important is being careful. first. So as I understand it, once you finish your service, you went to do a bachelor's degree at Hebrew University in Jerusalem. And I read that while you were there, I guess you and some friends went on a trip to Thailand, like a backpacking trip. And it was actually on that trip where you would meet the

man who would become your husband and eventually your business partner alone. So how exactly did the two you meet? Yeah, in Bangkok, we had to travel with very, very limited budget. And, you know, in order to get to the island, we had to take a 15-hour bus. And I was traveling with two girlfriends. The three of us sat in front, you know, in the front of the bus. And the bus driver came to me at the beginning of the journey. And he said, I'm sorry, you cannot sit here. more people need to come in next station, you have to move to the back. And then he literally took my hand, walked me to the back of the bus, pointed to an empty seat next to a lawn, and said, you sit here. So we ended up sitting next to each other for 15

hours, and we talked the entire time. Or if you ask a loan, he will say, I talked 14 and a half hours, and he said a few things, no, I don't think so. But, We did talk a lot. And it was just very, very magical. You connected right away. Yes. What did you guys talk about? Books, life outside of Earth, if possible or not.

What do we know? What we don't? Philosophy. All kinds of things that you can't even imagine. It's just try to squeeze first five, six dates with someone into one ride of 15 hours, right? and you're trapped. You can't go anywhere. Yeah. And when we arrived to the area of the islands, I was supposed to go with my girlfriends and, you know,

just stay all the time with them. And I ended up spending all the time with him. And I always say our life started in a honeymoon. And I thought, well, from here, it's only going to go down, right? You know, how can you keep things, you know, at that level of the islands in Thailand, the rest of your life? And when we ended up being together, I said, I'm going to hold you up to these standards. That's what I like.

All right. So both of you, presumably, you go back home to Israel and you stay together and you're basically a couple. Yes. And from what I understand, alone was still doing his military service and getting a degree in computer science. And I guess at some point he starts sort of like a small business developing software. And I guess you're planning to go into like international trade or finance or something like that. Is that right? Correct.

But Alon said, I have a better idea. I'm about to finish my service in the Army. And I got a few clients that want me to build these systems for them, program for them. And why don't you come and partner with me and you'll deal with everything. related to the business side. He already had IBM and other big tech companies asking him to develop systems. And so I learned a lot about it when we, again, we lived together. We were already together for a while now.

Right. And I guess, I mean, not too long after, right, one of, from what I understand, one of your clients came to you and proposed a merger with them. And they had a similar kind of company and they wanted the two of you to run it out of the United States. Is that right? Yes. And now we are married, no kids. And an offer comes our way to legally merge our business into a startup that just raised a few million dollars, move to New York with the thinking, by the way, that we'll do it for a few years.

And go back. That's what we thought. Go back to Israel, right. So this is, I think you moved there, what, in 99 or 2000, something like that? 2000. All right. So you move there. And but from what I understand, this arrangement doesn't really last very long.

I think like less than a year. And the two of you, you and alone, decided to leave this company to move on or something like that, which presumably meant that you had to find it like another job pretty fast. right? Yeah, so you're absolutely right for two reasons. One, we had some savings, but there were not enough to stop working, small savings, and we absolutely needed the money. And two, the clock was sticking with the working visa because we're pretty nerdy on that front, where people that will never spend one minute in a place without the appropriate approval. Yeah. But we knew that when this deal will end, both my salary and the working visa will end, and we can no longer stay in the US.

And so we knew we have a few months, and then we had to make a decision. What is it we're going to do the day after this will end? Are we going to go back to Israel? Are we going to try to look for something else in New York? Or are we going to move like Alon wanted to the Silicon Valley? Right. Now, the year guy is 2001 now and the end of the dot com, you know, the bubble burst pretty much. And everybody is getting out of the Silicon Valley.

Lots of jobs are being cut. Lots of startups are shutting their doors. And everybody is telling us that we're crazy. Alone, however, had a very different idea in his mind. He wanted to move to the Silicon Valley. And I'm assuming part of you probably wanted to go home to be with your family. But he was a software engineer. I mean, this is what he had studied.

And so in 2001, even though the bubble had burst, Silicon Valley was still the mecca. It was still the place to go to if you wanted to get into tech. He was very drawn here. And he thought it's going to be amazing. But I was actually so not into it, this area, the Silicon Valley. And I said over my dead body, I meant it. This is the suburb, you know, I need a city. I need Tel Aviv.

I need New York. I can't live in a place like this. We're young. We don't have kids. What am I going to do there? And he looked at me and he said, I think you should really, really just give it a chance for me. He's so presumably he starts looking for jobs out there and he got a job at eBay, right? That was the job that they offer he got, which enabled you to move.

You make it sounds easy. I can tell you that that period of our life is something that I always tell to other entrepreneurs and to my kids and remind ourselves where we were when we got to the Silicon Valley. Because we didn't know a soul in the Silicon Valley. And we came. We didn't have money. I was still on that visa. Yeah. We had zero knowledge what's going to happen.

And the clock was sticking on the visa and our savings. So you didn't go out there with a job in hand. He just said, let's go out there and figure it out. Well, after 16 interviews and four rounds where they called him to eBay, he finally got the offer. So it must have been like a month and a half at least where we are renewing our hotel, you know, every single week until he got the offer. But we had moments there that I always remind myself how we set one day that this small, hotel and I told him, what are we doing in this place? You know, I want my friends. I want my family. I want the city. What are we doing? It's not going to happen. We're wasting time and money and energy.

And then he said, do you know the story about these two frogs? And I said, what? And he said, the two frogs that fell to the bucket full of milk. And I said, no, I don't. And he said, Adi, two frogs fell to a bucket. full of milk. There were jumping, jumping, jumping. One of them got very tired. So what she did, she stopped jumping, drowned, died. The other one kept jumping and jumping and jumping until the milk turned to butter. She climbed on it and got out of the bucket. If you'll continue jumping with me, we'll find what we want, but you have to continue jumping and you have to believe that it will happen. It will turn to butter. You will see. And Alon is so, not that person. So it was striking to me that he, usually it's the opposite.

And it was so inspiring and said, okay, I'll jump with you. I came all the way here. I'll jump with you. Okay, I should mention that a lot is happening around this time, right? I'm sort of fast-forwarding just a little bit here. But the two of you decide to start a family. And then you also go back to school to study financial planning. And then you pursue a job in finance, right?

Yes. I studied. I started the internship halfway through school and my boss, Phil, had a branch of Commonwealth financials. It's a very big financial planning firm, but he had his own branch for 40 years in the Silicon Valley. And what was interesting about his branch was he served lots of the tech executives in the valley. So the exposure through financial planning was really striking to me, learning and coming to it from this direction. Right. And Phil at some point, realized that I'm not his, I think, typical worker.

In which way? What do you mean? I think I was very honest with him about less sugarcoding of different things that I wanted to say, about the approach, about where I thought that he's too conservative, then I would dare to say it, what other people didn't say. And I had nothing to lose at this point. I wanted to learn and grow.

And when I saw something that made like, what? How can you do it like this? You know, this is so old school. I would say it. And did that annoy him or did he like that? Did he like that? He liked that. The fact that I came and challenged everything was something new and compelling to him.

And he wanted me to talk like this all day long. So he was ready for his retirement. which I didn't know at this point. He was getting close to 70 at this point. And he at some point came to me and said, I want to offer you a full-time job and the deal. And I said, what's the deal? He said, I want you in a few years to take over the practice from me.

Wow. It's a pretty great offer. I mean, for somebody who knew nobody in the area who did just like a year or two before learned how to do financial planning, the fact that he's really kind of taking you under his wing and saying, I think I want you to run this place. That's pretty great.

It was very flattering. And I talked with Alon a lot about it, which for a moment sounds very compelling to him as well. He said, well, if you do that, I'll be able to leave eBay and start my own thing. Right, because he'd already done it once. It was obvious. If there was something obvious in our life, it was that Alon is an entrepreneur, born to be in tech. He at some point will start his own company. I had no doubts.

It was me that experienced tech for years, both in Tel Aviv and later on, you know, for another year in New York, that said, it's too intense for me. It's not something that I can imagine alongside with having a family. And it wasn't an option for me not having a family. Was alone coming home and talking? Were you talking through ideas? I mean, this is, so we're talking about the period of like 2002 to 2006, 7, was he, Was he constantly coming up with ideas or were you not really talking about specific ideas? I think the first few years were all dedicated to our new careers.

Yeah. Alon was really, he built the API from scratch, you know, for eBay. For eBay. Wow. And so he was very, very busy doing what he did there at the beginning. They didn't have it. Then he built it. And then all of a sudden it became meaningful part of their business.

And at this point, we are already, you know, having a second child, we were so busy. All right. So Alone has his career at eBay. Clearly with an eye to starting something down the road, you have a great career and are starting to earn, you know, decent money. You're mainly on a salary. But you could see a future where you could actually make a lot of money running this business when, when Phil your boss and mentor retires. Yes. meantime you're living in Palo Alto and I think you you around the time of the birth of your second son you bought a house in Palo Alto right?

Yes. And this house is going to play a role in what's going to happen because I guess this was a kind of old-fashioned house. It hadn't really been remodeled when you bought it. It was sort of dated like 80s or right decor and things like that. 50s. 50s decor, okay. Untouched from the 50s too. Right.

So it was not just building the 50s, nobody up there. it from the people. And when you bought it, presumably like most people who buy houses or a lot of people, you're like, oh, we can fix it up. We can do some things here and there. Yes, of course. But we knew that we had to save money first in order to do that. And I remember along telling me, oh, gosh, you know, we're going to put all our savings

into this down payment. Price is so high here. If it will go down, we're broke. And I think that you guys were so busy. You have two kids. you've got busy jobs like, yeah, okay, you can live with an ugly ceiling or a, you know, a linoleum, whatever, like, you can live with that. It's fine. And I'm assuming you did live with it. We had no choice. We had no money.

When we finished paying for the house, we had very little left. We knew we're going to live with it for a while and we'll need to save again in order to start, you know, slowly updating different parts of the house. That was the deal. We knew it. Yes, it was livable, but livable in a way that our tiny master bath was so tiny and so small. And alone is six foot three, he had to stand on his knees when he brushed his teeth in the morning and evening, right? You know, it was that little. Did you ever start to actually look for somebody to help you or a contractor or anything like that? Oh, yeah.

So first we saved the money. So it was possible to do something, not everything, but something. something. And we started looking for professionals, architects and builders and people to help us. And this is where we started facing some challenges. First, finding good professionals that would be relevant for us was extremely hard. Our network was very, very limited to the people that we knew. And we ended up hiring someone that worked with us for almost a year on plans. And in that process, process was so tedious and problematic because we were asked to run to the bookstore on University Avenue and buy books and showing the books what we like and what we don't like. And then just

to hear from the architect or the people, you know, yeah, that's very nice that you like this, but that's going to cost 10x from what you have. So it's not an option. So frustrating. Took a long, long time to get plans in our hands for the first part of the remodel. And when we looked at it, we realized two things. One, we just don't like this plan at all. None of us like the plan. And two, we can't afford it. We're so far between what we have in the bank right now and what this is going to cost us. And we had to throw it away after lots of money that we spent to get these plans and start all over again. And we wasted more than that. than a year on that. So that's on the bad side, on the good side. House was born because of that.

When we come back in just a moment, how Adi and Alone channel their frustration into a side hustle until an expert tells them they're crazy for not turning it into something bigger. Stay with us, I'm Guy Raz, and you're listening to How I Built This. Hey, welcome back to How I Built This. I'm Guy Raz. So it's around 2008, and Adi and a loan are having one of those classic entrepreneurial moments where they realize that the problem they have is also a problem that lots of other people have, finding good ideas for a home renovation and getting them to fit your budget. So during that year, we try to look for solutions for it. Yeah. First, there was the problem of getting to good professionals that would really understand. our style, be able to accommodate our budget, and do what we want, right? And so we looked a lot.

And the more we look, the more we've realized it's problematic. It's many of the professionals in the industry did not even have websites. They had a listing in a yellow book or some directory or legion sites, but you couldn't tell what it's all about, what are their expertise, what they're good at, what's their style. We couldn't get what we wanted online. And the more we tried, the more frustrated we became, how come we can do it efficiently? Yeah. So that was it. That's how it started.

And Alon kept saying, it doesn't make sense. It doesn't make sense that it works like this. There must be a better way of doing it. It must be a better way of doing it. I'm trying to figure out at what point do you remember you or Alon saying, you know, maybe we should just like build a website to make this easier. The idea that there must be a better way for us doing it, for people doing it, was already, you know, forming itself in 2008 when we struggled with our own process. But not in a way of thinking, oh, and now we're going to build a huge company out of it.

Or a business, or even a business. It was just like, let's just do this thing and see if we can make some. There was a need. There was a need. And the need was very clear. The more we talked to people in the community, we have a neighbor that is an architect. We have friends from our kids' school that experienced the same thing when they try to remodel.

We met some professionals during our process, and we started asking questions. And the more we talk to people, the more we realize there are lots of frictions in this. And this frustration about the process was something that professionals in the industry shared as well because they were pointing fingers to us and they said, hey, guys, you know, you understand that you're asking us to do something impossible. You are pointing your fingers to a picture that costs so much more than what you can afford. So educate yourself before you're asking and don't blame us that you can do it. Right, because if you look at a picture in a magazine, and by the way, this has not changed because I follow a bunch of design things on Instagram, just to keep my head out of the craziness of the world.

And I'll see, like, you know, oh, we just did a simple renovation project, you know, in the middle of Sweden. And it looks great. But then you realize that it was probably like two, three, four million dollars. But you wouldn't know that from just looking at the picture, right? And certainly not sort of looking at a magazine. Correct. And so when we started building house, it was very clear to us that, one, it needs to be very, very visual. And two, it needs to bridge these gaps between what the professionals know in the industry

and what the homeowners don't know but should know. And all these data need to come attached to the photos, which is the uniqueness of how. Today we have over 370 million metadata tag attacks to these millions of photos. So when you're looking at a photo, you don't just look at something you say, I like it. You know what is that style, which materials, product, layout, were used? What was the budget? Who created it? Who are the professionals that worked on it? You can ask them questions. And that helped from the get-go to bridge some of these gaps. All right. So just some nuts and bolts questions. So for example, in 2008, when you start

talking about maybe we can kind of tinker with this, you could pick up architectural digest, which you can still do today, right? And you can open a page and see a beautiful renovated room. But you can't obviously tap on the magazine and know, what the paint is or the color is or the brand is. What you guys were trying to do is to essentially put that view of that room on a web page but that every part of it had a tag where you would know that that's a towel hold. What's the amount of towel holders called? Or there's a, you know, that fixture.

I don't even know the name of that fixture. It's more than that. It's even a layer before that. even the fact that many times you see a picture and the person that is being interviewed is the homeowner, you know, a celab that build a beautiful home and they're interviewing about the home. You don't know who was the builder, who was the designer. Is it too expensive that I should be, even if they mentioned the name, that it makes sense for me to call them or they're going to laugh in my face because my project is way too small

for them. Right. And for us to make sure that these professionals can stand behind their work and say, that's my job, Let me explain to you what I did, how I did it. And that wasn't possible. So when in 2008, you and Alon are talking about how to solve this, how does it, what was the next step? Did he start to build a website, like sort of on the side and at night? Yes.

So it started with a website and he started programming. But when you program a website, you need somebody to use the website besides us in order to know if it's useful. But just let me, I want to slow it down a little bit because this is important, some of the details. When he started to build the website, right, you had to get photos up. And the idea was presumably to get photos of completed renovation projects. So where did you go? Who did you ask for photos from? So by that time, after working a year with multiple professionals and also meeting different homeowners that've been through remodeling projects in our area, we had the first, you know, people to go to and say, hey, we are trying to build this platform that we can all use where we'll connect the dots.

Would you participate? and people said, oh, yeah, sure, why not? And just for context here, you are still going to your job. You're still working as a financial planner. A loan is still going to his job at eBay. Correct. The name Hows, did it have a name already at that point? So we needed a website, right, to put everything in.

It started with a website, not with the app. And money was limited, right? And so we went and looked for domains and obviously more common house names like house were not available. Not available. House was the closest we could get to house, which was a combination. Back then, the word buzz was heavily used with lots of consumer websites. It was a buzz to do this, a bus to do that. So we said, hmm, house with two ziz at the end, it's kind of.

kind of people can think it's a combination of house and buzz. It sounds good. It's, you know, just five letters. And it was available. And it was available for $35. Because it's a made up word. Yes. So $35.

We didn't know. So we said, okay, you know, we can afford $35. And we got it. It was not yet open to the outside world. We were just, you know, using it. with 20 parents from our kids' school that were the first users that provided feedback about it, with the first set of professionals, mainly on the design side, architects and interior designers from Palo Alto and the Bay Area that we knew. And when we did it, we worked in the morning, came home, spent time with the kids, put them to bed,

and then our second shift started at night when the kids were sleeping. But I'm assuming once you got to that headspace where you're like, I'm going to work during the day and then I'm going to work at night on this thing. I mean, you knew that your husband had this dream of starting a business. But it sounds like, I mean, this is the first thing in like seven years that got you excited too to help him start it. So clearly, you must have started to think in your head, maybe there's something here. Maybe there is a business here. Not for me.

No. No, okay. Not for me. I was so on my way. you know, to take over the business from Phil. And I kept doing everything I had to do in terms of licenses and tests and studying and taking over and meeting with clients in order to fulfill my agreement to him, you know, that at some point he can retire. Yeah. And I'll take over.

And actually in my head, I, when we started seeing, you know, the ramp up of this, I thought, well, maybe that's going to be Alon's thing, you know. Maybe right. So he potentially may be able to continue with this and with our plan that I will be the main supporter. And nobody thought about, you know, money, big business, you know, that was too big for us to think about these things at this point. Right. But when you, because I know he sort of launched this in 2009, the two of you launched it in 2009. And you started out really, there were photos from local architect. you knew and designers.

And then you asked parents at your kids' school to get on the site and start using it, which is, you know, how most of us start, we ask people we know. But then what do you do? Like, where does it go from there? It started growing by word of mouth. The minute that we opened it to the outside world

and people could refer each other, their referrals started happening. It took life of its own, really. And when you could refer other people once they were in, they could upload pictures out your, they could just upload it and fill in the data themselves. Correct.

And we started getting, we had a little, no there, supported house.com, which Alon and I would check every night. What kind of emails and requests and bugs and ideas and, you know, somebody from New York that would say, we see what you do in San Francisco? Would you consider opening it in New York as well? Professionals told their homeowners they worked with to use it to tell them what they like. homeowners told their professionals to use it to show what they like. And it started spreading this way. And then we started being more proactive, inviting different groups from different locations.

And I guess what would motivate an architectural firm or an interior designer to put their stuff up on your site was it was free advertising for them. Correct. Brand building, purely brand building in a way that didn't exist before. So here's my question. I mean, you know, you've got a website and, you know, both of you have steady incomes and stuff. But as people were using it, did it cost a whole lot of money? I mean, I guess it was like not that expensive to actually keep this up. Well, at the beginning, we didn't have that much traffic, right?

It was us as users and our surrounding community. And I will say before it started expanding to the hundreds of thousands, we had a moment, guy, at around 20,000 users. that we thought that this is it. Right. And that was what, two or three months in? Probably several months in. It's pretty great. 20,000 users, and you were not advertising. True.

We didn't have money to advertise. But it then got stuck on 20,000. And we were looking at Google Analytics and looking at our data, and it didn't go anywhere. And we did more, you know, of what we did until now. And we kept, you know, developing and adding content and enhancing the product. Yet it got stuck at 20,000. And I remember that conversation that we had that maybe this is it. Yeah.

But I will not forget that during that year, I got myself a meeting at the Architect Association in San Francisco, the chapter in San Francisco. And I went to pitch the idea to them. Pitch the idea of what were you pitching for them to contribute to the site? Yeah. Join, create a profile of all your portfolio. and become part of the community. And I went to meet with the board. There were 17 people around the table. And there were different voices around the table.

Some people were very business-oriented. So they said, well, we'll encourage all our members to upload portfolio if you'll sign up an agreement that if you ever try to monetize it, we'll be excluded from any monetization attempts. We will build our portfolios, but you will never charge us for it. They didn't want you to make any money off of it. Correct. And obviously that would make zero sense.

I mean, of course. When I said, well, it's not a business. I'm not monetizing it right now. But I cannot guarantee something that I don't know how this is all going to involve. Or what I can say is you have a lot of benefits in it. See all those that already joined, you know, what's happening to them. And they said, well, we'll think about it and get back to you. I said, okay.

And I left a meeting. Yeah. And I swear God, 24 hours later, I started seeing some board members that were sitting in that meeting uploading like crazy all their portfolio to house. Wow. And I told them, something is working here. Because if I just talk to them and that's their reaction, but then I go back and that's what they do personally for their business. You knew. You knew you had something.

So that was a good signal that they did it. And did that begin then a surge of new users? I wouldn't say that they moved the needle, but it was a signal that the idea is sinking. So we kept jumping and we started expanding it in different directions. Okay, here's a question for you. How are you doing that and also keeping a full-time job? A lot of it was done nice. and weekends, literally nights and weekends, we started getting some folks from our community

and friends that wanted to be involved beyond just being users, right? And offer their help on different fronts. One offer to help build more present on social media sites, which were very, very new at that time, like, you know, Facebook, Twitter, and so on. another one was a designer and offered Alon to start working on the design side and potentially give a facelift because Alon did a great job, but he's not a designer, right? And so nobody worked full-time job, but we started getting very passionate, interested friends and people around us that wanted to help us.

And so it was very little, but it helped a ton. So 2009, by late 2009, because you're working at the financial planning firm and then coming home and answering like emails from support and trying. I mean, this is like I can't even imagine the number of emails that you were facing on a day-to-day basis now. Yes. And so at this point, were either of you or you were alone even starting to think about quitting your jobs to work on this full time? I didn't think that we're both going to do it. I at some point started thinking, maybe at some point alone will be able to do it full-time if it will continue evolving like this.

And then we went on a social event from our little son's preschool. And I was chatting with different people. And then I met this nice grandparent of one of the kids and, you know, cheat-chatting. And he was a former Israeli too, so it was very easy to start a conversation. about something, about living in the area and moving and differences and so on. I don't know how I got to mention this side little project too, which keeps me also very busy at night. And then I tell him all about it.

And the more I say things about it, the more questions he asked. So obviously, someone is in front of me that understands home remodeling very well. Apparently, he owned multiple homes. And so we decided to talk afterwards. he asked me to send a link to the website. And I said, sure. He said, I love homes. I love renovation. I did multiples in my life. You know, send me the link. And I sent me the link.

And then he calls me afterward. His name is Amos. And he said, are you crazy? How many users you said you have? And I tell him, you know. And how many did you have at that point? We did have a few hundred thousand, you know, monthly users at this point. And thousands of professionals with portfolios very, very active. working with these homeowners. And he said,

and how much money did you invest in it? I said, well, right now we're paying $2,000 for the servers, but, you know, we sponsor it from our time. Yeah. Our time, which is a lot. But our time, I said, okay, and why aren't you raising money for this? He said, well, you know, it's kind of really fun that it's our thing. Nobody tells us what to do.

We don't want any investor to come and ruin this fund. and we really don't need it. It's expanding like this. And he said, you know what? I think that you're making a mistake. I'll just say this. If you got to this point with no money from investors, without tons of engineers helping a lost due program

or to you to build this community or all these things happen, if you're not going to raise money, somebody else will realize what you're doing. They will raise money. They will copy you, and you will say goodbye to this initiative. So my recommendation to you, think carefully if you don't want to raise money. And if you do, I'm happy to help you to do so. And did he have money to give you?

This guy, his name is Amos? Yes. He actually did and I didn't want to. So after talking with Alon for a while about this, at this point I realized that Amos, Amos Will Nye, he is an entrepreneur that built multiple companies He's the last one. He took public and then sold for $4 billion to MMC network. So not exactly the guy from the street just giving me advice, somebody that understands something.

And I called him back and I said, you know, we may consider it. But two things. One, we don't want to find VCs or investors that will tell us what to do. We are really on a path here and we want to invest in the product and user experience. and expand this community significantly before we even think about the business here and how to make money. Because you had no business model. You had no business model at that point. It was just getting people into it.

We didn't make any money. And we said there are lots of things you can go for and different ways to monetize this. At this point, Google already reached out to us and said, you have... Wait, how did they find out about you? So one of the users was working at Google and, you know, the ads part. And he, you know, saw how much activity we have there because he was an avid user. And then they reached out from Google and they said, why aren't you putting some Google ads there and monetizing it? Yeah.

And we didn't want to. So you didn't want to put ads? No. We didn't want to clutter the experience. We didn't want to tilt our focus to disarranted. early stage from product, development, and user experience and our mission to how do we make a few dollars out of it right now. So what I told Amos was we need to bring investors that do it at our pace, our way, not put

pressure on us now to monetize it right away. It doesn't matter what else we care about. And so Amos said, I'm happy to help you with that and I can invest too. And I said, no, and that's my second thing, Amos. not just I need to meet the right investors that will agree to do it our way. I want you to stay on our side as a mentor. I don't want you to be on the other side as investor. Wait, you told him he couldn't invest in it?

That was my immediate ask, yes, that he will not invest so that he can advise us, you know. I could do both, but I get you. I hear you. I mean, I'm poor almost, although he already sold a company for $4 billion, so he's fine. I didn't think he needs our little project for the money. But he was, you know, By our side, we met once we decided that we're going to explore it our way, no decks and presentations on Sandhield Road. That was a big no-no.

You didn't want to go to Sequoia Capital and benchmark. You didn't want to sit in front of a bunch of VCs with a deck and answer questions. Not just that. I didn't want to put imaginary numbers on a deck where all what I wanted to put on the deck is how much fun it is to grow a community that is adopting it and sharing it with other. by word of mouth and our product roadmap and how big that can be given what we're seeing now, I didn't want to put, you know, imaginary numbers and business models that we can all tell how people do it. No, I didn't want that at all.

Right, because it's all fake numbers. It's all during the pitch session. It's all invented numbers. I didn't want that. I wanted somebody that will see it, fall in love with it, say, I love it just the way it is. I like it. I'm behind you. take the money, keep doing it.

So, I mean, that's great. I mean, it's a great position to be in, right? Because it actually reduces the pressure in a sense that you're not like desperately looking for money. But at the same time, you know, that if you were going to make this into something full time, like a real company, you would need some investment capital, right? And eventually you did. Like, you did an initial.

And I think what? like $2 million you raised to start this thing? So how did all of that come about? Yeah. So just for you to know, about the $2 million, back then, we were spending so little and accomplishing so much. When Amos asked me how much money I think that we want to raise, I said, well, see how much we do with $2,000 a month. Can you imagine, you know, what $1 million will do to the business? Yeah. Not being naive, just. really thinking frugal how much we can squeeze ourselves, you know, and get out of ourselves, you know, for this. And so he said, well, if you think that you want to raise a million,

then at least raise two. I have some buffer there. I really want you to have cushion to hire top engineers and great people. I recommend that you'll consider two instead of one. Okay, two, but not more, not more. And so we ended up meeting through the small network that we had back then, very, very few people. Right. Very casual environments, either at our house or a coffee place, very, very casual. And I think Alon was the one who met outside of the house with Orrin first. And I should mention this is Orrin Zev, who I guess, who becomes an important investor in house.

And he's an angel, I don't know him, but I know about him to read about you. He wasn't an angel investor in Silicon Valley. Well, most angels at that time were investing small amounts. Again, we're talking about the early 2000, 50, 100, maybe 200K in each startup. We called it a spray and pray, you know, approach for angels. He had a very different approach. He invested in very, very few companies every year, just his own money, but much larger amounts. And so that was Oren and not the typical angel, but we met him. And after that,

a few days later, I was on the phone with him and the loan was on the, you know, connecting. And we were talking business with Oren. And Oren said that he wants to invest and he can give us the money by the end of the week. And this was, you know, just a few days after we met, to put, you know, such a quick offer on the table. Two million dollars. Two million dollars. That was kind of, I remember. And I remember the scenery like it was yesterday because the kids were quite young and they

were throwing oranges at each other. And I was trying to tell him, be quiet. Stop throwing this all over, you know, the house. Yeah. And that was such a mess there. But hilarious. And orange said, yes, I'm interested. I'm behind you.

And I'm telling myself, does he even know what's going on in the house right now when he's giving us a proposal to go? Give us $2 million. And had you, by the way, and had you and Alon put a value on the company? Did you say, yeah, you know, we think it's worth $10 million or not really not yet? We were so not naive because we came from this universe, but we were never in all the rounds that this and the ones that came after were so not fixated on what's the valuation should be. It was almost not ignoring it, but it was really down in terms of our. our list of priorities down the list.

And the reason was I was so certain that we have to bring the right investor that would really let us do it our way, that it doesn't matter what's the valuation or how much we need to give that person. If it's the wrong person, it will kill everything. And if it's the right person, it can change everything. And so I built a lot of trust with Oregon during that process. it was almost hard to believe what he did for us because he was so honest with us, walking us through a term sheet and showing us line by line what he's proposing.

And he could have go the other way around, which many investors do, to innocent first-time founders that are founding a company in the U.S. like this. But he didn't. And he said, I'm founder-friendly. I may take more, but I give you a lot of freedom. And I will sit in the backseat. And that's your right. He said all the right things, gave us all the right terms and the valuation didn't matter at all. So July 2010, you raised that $2 million. They get Zev, Orrin Zev and a small group of investors take 35% stake in the company.

At that point, were you ready to quit your job? So just before we closed that round with Orrin, Alon and I had that conversation. He said, I need you to run this thing with me. Is that what he said? He said, Adi, I know you have this deal with Phil. I know that you invested a lot of time, energy, effort studying in this. But I think you love doing house more. And I think that you should seriously consider quit your job, too, as I'm going to do, come and do it with me.

and I also think that you should be the CEO. So that was a launch bill to me. And it's not an easy thing to consume. No. But he said it. And did you immediately think okay? No. No.

I think for many people, including myself, I'm not any different. It's very hard to stop the way you were thinking until now and completely change direction without digesting it all the way, the implication of what you're doing, especially if you are very, very invested. And it's not that I was in a bad place, right? I felt like obligation to feel to the business. I invested a lot in it. And I had very different thinking during that path about how I see my life.

Many times you have expectations from people around you, from family, from yourself. What did I do? Did I just waste my time all this year is doing all this? For what? and now I'm going to start all over again. But the honest truth was, when I asked myself, what would I be more excited to do when I wake up in the morning? It was definitely that.

When you told Phil, your boss at Commonwealth Financial, that you were leaving, that you were going to do this thing full time, I mean, presumably he knew you were working on this because, right? Because, I mean, you'd already told him about it. So what was his response? Was he, like, disappointed in you? Did he kind of let you go in peace? His first reaction was, I knew it.

The spark in your eyes when you talk about this, I can't replicate it for you in the business here. I just can't. I knew you're going to do it. I'm sad for myself, but I'm happy for you. When we come back in just a moment, how Adi and a loan continue to grow house without paying to market it and how the pandemic totally changes the trajectory of the business.

Stay with us. I'm Guy Raz, and you're listening to How I Built This. Hey, welcome back to How I Built This. I'm Guy Raz. So it's 2010, and Adi Tatarko has just quit her job in finance to be the full-time CEO of Howes. An investor, Orin Zev, has just put in the first big chunk of money. And of course, at some point down the road, Howes Will Myrower? monetize through commissions on its marketplace and a subscription service for home builders and designers. But at this point, Alone and Adi are not really thinking a whole lot about the business model. We felt it's so early and there is so much to do in terms of building the product and user experience

that it would be wrong to tilt our attention to monetization at this stage. And we actually told that to Oren before he invested. And Oren said, I'm with you. The one thing that Oren did change our opinion about, when he invested, we told him that we probably don't want to talk to VCs for a long, long, long time. Probably not until the point that we will be ready for monetization. And six months in, Oren changed our mind. And he said, look, if you want to bring top talent, top engineers, compete with companies with a lot of money, it would be very helpful for you if you have a top tier VC backing you off. That's my opinion.

If you don't want to do it, that's fine. If you do, I'm happy to make some intros. And you ended up getting money from Sequoia Capital, which is one of the top venture firms in the world. Yeah, I feel very fortunate because we didn't even, we again, no deck, no numbers, no imaginary things, meeting at the office showing the website showing the numbers and tea at a local, you know, place in downtown Palo Alto. And in that meeting, they looked at each other and they said, we're going to give you an offer. Wow. Adi, when you, after that round, I think it was almost $12 million, you had money. This is December of 2011.

you had real money to hire really, presumably really great engineers and designers. And I think by 2012 you had about 26 people working for you. But how are you growing the site? Was it still growing organically? Because it is a tribe, right? I mean, designers, architects, they're – I'm assuming that people heard about it through them. But you also needed ordinary people who are not designers and architects, people like us. people like us to go to the site to start using it for their home renovation. So was it,

was it word of mouth growth or did that money also allow you to start to do paid marketing? No, it was for years until we even started with the paid marketing. We were very fortunate on that front. The expansion kept, you know, happening organically by word of mouth. We didn't have to pay for it. and we could only focus on bringing the talent, invested a lot of our money and time and energy, finding this talent. In fact, Talon and I, for years, spent 50% of the time interviewing people. That's what we did in the first few years. And we did it across the board when we decided to build the sales team.

Then I interviewed all candidate until we got to 150 solid salespeople on the ground. And when we decided to expand internationally, every engineer, every product manager, every designer, we interviewed them all. And it took a while until we said, okay, we have a solid foundation here. I'm wondering, Adi, I mean, yes, you have Sequoia behind you, which is a giant, right? And that sends a signal to pretty much everyone else that this is a force to be reckoned with when they back a company. But still, you know, I wonder, I mean, you know, I wonder. why Facebook didn't just try to do something similar. I mean, were there other companies or any of the giants out there trying to compete with you early on? Not specifically

Facebook that you mentioned, but there were definitely attempts by different players with much more money and recognition and well-known in the industry. Lucky us, it was. It was, it was not all the way and too little too late and these initiatives were shut down. Did you get nervous? I mean, did any of them ever make you nervous that we got to hurry up and get ahead of these guys? They're coming after us. I think that the mindset was always, we are very unique because we have that robust, enormous global community that has both the homeowners and professionals, right? Today we have. have 65 million homeowners in the community and 2.7 million professionals. And we are very deep.

We're the only ones who can, first of all, introduce them to each other. And this is like a flywheel. One is bringing the other. And that is a huge differentiation when you are the technology platform and you're providing tools to both sides and both sides come to you. They're always going to be others. And the fact that there is interest in this industry and somebody want to copy something from us, It's actually flattering. Adi, who helped you and alone see this as a really big thing? Because even up until the middle of 2010, it sounds like the two of you were not sure what this could be. But like you raised money in 2010, $2 million.

By 2014, the company has done a funding raise at a $2.3 billion valuation, like $3.5. years in. I mean, that is crazy if you think did you, I think admittedly, you didn't see that in 2010. You didn't see that it could be that big. I think that, first of all,

in the first few years, we realized that this is a huge industry. Okay. And home is such an important thing for people. And you know, the second expand after they pay for the house is to actually

customize it and build it and renovate it for themselves. And we realize along the way there is so much more we are barely scratching the surface here in terms of the product we can develop for our community and for both sides of the equation here. But I don't think we ever sat there because we never created this graphs saying, and this is what it's going to be. It's always very down to earth. That's what we deal with right now.

Yes, there are lots of different opportunities down the road. There can be expansions in so many different directions. But right now, what we're dealing with is so big and so changing the industry that this is what we want to do. Adi, I'm curious about working with your husband. And I say this. I should say in all being candid here, I work with my wife. She runs our production company. How do you kind of divide and conquer?

I mean, do you both have your sort of areas of interest? and focus and or do you also, and this is not, I mean, it wouldn't be surprising, but do you also have areas where you just really disagree and just and have like arguments over? So it's everything. I think day to day, obviously, we're both involved in everything. You don't always agree. And sometimes Alon will convince me that something is better, you know, this way versus the other. And sometimes I will convince him.

And sometimes we let, you know, other folks in the company convince both of us that there is another way of doing it and that's better. And it's okay also to make mistakes and then realize that maybe there is a better way of doing it and change things. What is it about alone that makes it work, where the two of you actually not only have created this business, but seem to really like to work together? I will start with the end of it. I would never do it with someone else for sure. This is crazy enough. And I need to have somebody that I truly and fully trust 100%. When founders are strangers, that can work as well. But many times what I see is we had different point of view or we were in different stages in life. One wanted to just sell and move on. The other ones felt like

can do it forever. We are hearing sometimes founders that are coming from the same background. So there is a lot of ego of who is going to dictate what. We just don't have these things. And while it comes with other challenges like balance of home and kids and the company. And as Orrin once told me, and I really remember that conversation when I not complain, but I vended. I said, it's such a crazy time, Orrin, I don't know what I'm doing. You know, it's so crazy with the kids. The kids were young.

And he said, you're very fortunate, Adi, because all the good things that can happen in life are happening to you. And you choose to embrace them. So just choose to enjoy them. You can be at the peak of your career when you are 20 and probably not when you are 70 or 80. And you also can't raise your family and your young kids at these two extreme ages. For most people, it happens at around the same time at your age. And you decided, which is a choice, that you want to have both.

And you are juggling between, so embrace the fact that you are fortunate to do it, enjoy it. And he was so right, so right about it. You've been quoted talking about, you know, the sort of, quote, work-life balance thing in previous articles. But I wonder, and you've talked a little bit about, you know, some of those experiences that you had around just like, you know, the kind of this pressure that you felt. But did Alon also feel that pressure as a father? I think that there is a difference in society, between mothers and fathers. And Alon is an amazing father.

But I will say mothers and fathers, either by nature or society expectations or both, are wired in a different way. And I think at least I can talk about herself. It's almost like a child is born with that potential baggage of guilt. I'm not doing enough.

I'm not there enough. I need to do more. I need to do more. And I think mothers have more in this bag than dads in general. I'm generalizing. And again, not to take a thing from him because he's amazing. And meanwhile, I mean,

Howes was just on this growth tear. I mean, from the time that you launched until, you know, just every year was growing and new products were being created and it spread internationally. And then the pandemic hits. And like a lot of companies, you guys struggled at first. I think you even had to do some layoffs. But then pretty quickly, things started to turn around, right?

People were starting to use their homes working from home and they were starting to renovate their homes because of that. You actually had like crazy record growth in, I think, in late 2020, 2020, 2021. Is that right? Yeah. So what happened is we indeed face all these challenges at the first few months of the pandemic. But then several months later, when things started, you know, opening up, some trends that we saw prior to the pandemic started accelerating big time, right? So there were three trends, big ones. that we saw in the industry prior to COVID,

especially in the US, but some of them were very relevant in other markets too. And what were they? The first one was the baby boomers. That's the generation that is heavily remodeling and preparing their homes, you know, for the next phase. For retirement. Correct.

And this definitely accelerated big time during and, you know, the pandemic. The second one was home equity. that was at record high. People taking it home equity loans. Yes. And the third was, especially in the U.S., lots of aging homes that are 40 years old or more, that needs massive repairs, build up and renovation, like our house when we got it. And so these trends were there prior to the pandemic.

And the reality was not just that these three trends accelerated. I think many homeowners wanted and still want to reimagine their home and the functionality of this home. Now that COVID created a different reality, we used to work from the office. I didn't have a home office at home guy. I didn't because I didn't need one. But all of a sudden, not just that I needed one, Alon needed his space. And my kids studied from home the whole year. And many homeowners wanted to leverage every single inch of their home, and they wanted it now because they needed it now.

And professionals need to keep up with this space. So, yeah, it really changed the dynamic. And I think it's here to stay because our mindset about our house completely changed. Yeah. Adi, you've been at this now for 12 years. And it's pretty clear there's been talk about an IPO. It will probably happen at some point, maybe even this year. You are young.

I mean, you're not yet 50. You can do another company. You could run a foundation. There's lots of things you can do. You could do pretty much wherever you want. Do you, do you, are you excited about the idea of running a public company and doing quarterly calls with investors and reporters? Is that something that appeals to you? I think that the next phase or level of a company,

should not be a goal or a mission by itself. Different milestones of raising funds privately, publicly, adding partners, investors are just supporting avenues along the way to make sure that your path is conquer there and you are getting to the place you need to get. So then when I put myself in all this or say, am I excited about it? I'm not excited.

I don't think it's relevant. know, I once was interviewed by a reporter, and just before me in New York, they interviewed someone about parenthood and a research that was done among many, many parents, what are the ages of your kids that makes you more excited about and which ages you're kind of not excited about or prefer to forget? And I take the whole package and whatever is needed in order to provide what I need to my kids at every age, including the less compelling ages. And I take and look at all the beauty that comes with each stage. And this is how I see my role as a founder of this company. At any stage, there were many different challenges. And at any stage, in every stage,

there were so many great things to be inspired by, to look forward to, to be happy about. You know, we grew from being the first two homeowners to 65 million homeowners that are using house today. So it's unbelievable. So it's unbelievable for me to even say it, but I'm still a user. And I feel very grateful and fortunate, but I'm not the story. The story is, you know, how do you take this fortune and what do you do with it? I just feel very, very lucky on that front. Yeah, I mean, let's talk about luck because, you know, there's always an, I believe there's always an element of.

luck, but I'm wondering how much of that you think is a factor. You know, you, you, you met a lawn on a bus. You were, it was a seat next to him and, and that's, that, that was just a seat you took. You know, you met this guy, almost on a kid, one of your kids' field trips or school trips, and that led you to a group of investors. How much of the journey of housing, what you guys built do you think has to do with, with those lucky breaks and how much do you think has to do with just your, the work that you guys put into it and your intelligence and hard work. I think that 90% of it is, and again, some people describe it as luck. Other will say coincidence, being in the right place. The way I see it, I think we all have different opportunities surrounding us every single

day, tons. We just need to open our eyes and look and be fair with ourselves, because many times we think that we walk in a certain path. And I'm saying it because I, well, I can complain to you until tomorrow about I didn't want to live in the suburb. I feel that we were very fortunate that we moved here because lots of amazing things happened in the Silicon Valley for us that I'm very grateful for. And I could tell you that, you know, oh my goodness, I choose to stop financial planning after investing so much in it. But I feel so far. fortunate that I did because see what happened. That's Adi Tatarko, co-founder and CEO of House.

By the way, did you ever finish renovating that house? Did you just like give up on it and move to a new house? We're still in the same house, guy. Exact same house. Still in the same house. Still in the same house. Renovated now? Renovated now.

Got it done? Yes. You know, a house is not walls. A house is a place to create memories with the people you love the most. And this is how I see this house. It brought so many great moments to our lives and to our kids' lives. And that's what it's all about. It's nothing else.

Hey, thanks so much for listening to the show this week. By the way, if you want to hear every episode one week early, check out Amazon Music. And if you want to listen one week early and ad free, subscribe to Wondery Plus in Apple Podcasts or on the Wondery app. And please do follow us on your podcast app so you always have the latest episode downloaded. And another way to support our show is by filling out a survey at Wondery.com slash survey. If you want to contact our team, our email address is H-I-B-T at ID.Wondry.com.

If you want to follow us on Twitter or Instagram, our account is at How I Built this, and mine is at Guy Raz on Twitter and on Instagram at guy.org. This episode was produced by Josh Lash with music composed by Ramtin Arableu. It was edited by Neva Grant with research help from Margaret Serino. Our production staff also includes J.C. Howard, Liz Metzger, Alex Chung, Carrie Thompson, Catherine Seifer, Elaine Coates, John Isabella, Chris Messini, and Carla Estevez. I'm Guy Raz and you've been listening to how I built this.