Y Combinator Startup Podcast - #75 - Sean Mitchell

Episode Date: May 4, 2018

Sean Mitchell is the cofounder and CEO of Rezi. REZI helps landlords find high quality, long-term tenants in 48 hours. They were part of the Winter 2017 batch.The YC podcast is hosted by Craig Cannon.

Hey, how's it going? This is Craig Cannon and you're listening to Y Combinators podcast. Today's episode is with Sean Mitchell. Sean is the co-founder and CEO of Resi. Rezzi helps landlords find high quality long-term tenants in 48 hours. And they were part of the winner 2017 batch. You can find them at rentresi.com. All right, here we go. Why don't we start with just a brief explanation of what Rezi does and then go back to what you apply to I-C-W. So Rezi is we're a rental marketplace with the mission to make renting better. We use our technology and we use finance in order to provide products that allows us to do that. Our first product is a product called Up Front, which is essentially a solution that gives landlords an option where they're guaranteed to lease out their vacant apartments and gives tenants. the ability to lease apartments from us in under

10 minutes. So when we applied to YC, which is call it winter of 2016, we were focused on the rental space. We knew that there had to be some sort of risk transfer from the landlord to either us or some other party.

But we didn't really candidly have a great handle on what the model should be. So at the time, we were kind of toying around the idea of, okay, well, what if we gave landlords protection from the downside? Like, if, you know, a tenant doesn't pay their rent. Yeah. And to put a finer point on that, the risk transfer has to happen because that's your value proposition. Otherwise, no one cares. Yeah, right. So let's think about it from the landlord's perspective, right? So a landlord principally has two risks with a vacant property. A, the, you know, the vacancy risk itself. So

the lost income and the carrying costs from owning that asset every single day. If they're not generating income, that's a loss. But then when they lease the property out to a tenant, you know, will the tenant pay the rent? Will the tenant damage the unit? Will the tenant be, you know, disruptive to other tenants who live in the building? These are all considerations that they have to have. And so we knew how to, we got fairly comfortable with how to solve that second problem. I think what changed during our time at YC was we decided to take the,

us next step forward and solve the first problem. So prior to, prior to YC, we were, you know, we looked a lot like effectively a software solution that gave you better due diligence or better screening for your tenants. And I think while we were in YC, what we realized was, okay, what if instead of saying to the landlord, hey, if you use our tool, you'll have a better success rate with screening tenants, what if we said to the landlord, okay, you never have to worry about a vacant unit ever again. Right.

Right. Right. Right. Yeah. Yeah. And, you know, would that be compelling enough of, of a solution that, you know, you can make a business out of it? And, you know, completely candidly, we got to YC January 4th.

I told the team I wanted to, you know, pivot the strategy probably on January 6th. And we went to office hours as our partners, kind of told them, hey, yeah, you know what you let us in? for the thing you let us in, we're not going to do that anymore. We try to figure out what we want to do. And I'd say by the end of the month, we had decided on this strategy and we actually closed our first transaction at end of the month. So it was a whirlwind January in 2017.

And we got to go into the financing in particular. Sure. But what was a particular revelation that you had to like shift? Yeah. It was how big of a problem can we solve? Yeah. So, you know, there's, I think everyone, and anyone in leasing and anyone in the rental space is familiar with the problems and pain points in the leasing process. You know, tenants have terrible user experience.

Frequently, there are agents, whether there be brokers or other parties, who don't have skin in the game. Yep. So, you know, the landlord who is effectively at risk of, you know, finding a, a business. bad tenant or not finding a tenant fast enough and losing money, they don't have a partner who is, you know, in that same risk. Right. Right. And so those two problems were pretty apparent.

And I think what we, the quote unquote aha moment. Yeah. Was what if you could could create a scenario where for the landlord that that risk didn't exist anymore. And if you could, if you could offer that product and, you know, that'd be, we knew it would be enormously complex to offer. Yeah. But if you, you know, you have to solve pricing, you have to solve funding, you have to solve, you know, technology.

But if you could do it, could you then meaningfully improve the tenant experience where, you know, tenants have the ability to lease properties in minutes versus, you know, waiting days and, you know, sending all of their sensitive personal information in, you know, typically very insecure ways. And did you have cash on hand in the beginning to pay these landlords or how did you get that side of the marketplace? Yeah. So the first transaction we did, we had the YC safe capital. We had a little bit of money that we'd raised from friends and family. But the first transaction we did, I pulled my other two co-founders aside and I said, yeah, I'm going to probably use 40% of the money we have on this one deal. And it's like, if this doesn't work, yeah, guys, I don't know. I really did. That's what I told him. And that was not an easy conversation. But, you know, we felt fairly convicted that it was the right solution. Yeah. You know, knock on wood, you know, that that went well and continues to go well. Right. And so for people who don't understand the product fully, how much cash are you giving this line?

It's a full year. Right. So depending on, you know, depending on a given transaction, it could be anywhere from, call it, $30,000 to $50,000. Okay. That's average. Sometimes great on a per unit basis. Okay. So on a portfolio of units, for instance, if we're engaging with a, um,

With a landlord who has like several units or something like that, then it can be, you know, several hundred thousand dollars. Gotcha. Or greater. And from a tenant's side, how do you meaningfully differentiate? Yeah. So I think user experiences are big focus. For sure. As it relates to tenants.

So I think you look at the leasing process. So, you know, particularly I leased in New York. You've been through this too. Yeah, yeah. Leasing an apartment, particularly in any competitive metro, is a very painful process. There's no standardization on the qualification criteria. You know, typically, you know, if your broker's not being really responsive, you can have, you know, missteps with being able to see the unit or visit the unit. And so we really focus on, okay, how do we make this process more efficient?

First and foremost, we, you know, decided to tackle showings. And we said, okay, can we make it possible for somebody to schedule a showing anytime they want? And we did that leveraging our, you know, concierge team. But after they can see, after they see the property, how do we improve the application process such that it's more secure and it's better? And really that's where, you know, the technology kind of came into play. And kudos to our CTO, Hirsch, who really thought through how do we implement this in a way where a person can just apply. and get a decision, you know, fairly instantaneously. And so, you know, we've been fairly fortunate to be able to achieve that.

And so volume wasn't a critical issue. It was mostly nailing the user experience. For example, you know, like all the apartments or a majority of the apartments that I looked for when I was living in New York and out here actually, just Craigslist stuff, right? Yeah. And so you didn't need to have an apartment in every area in Brooklyn. No, because, you know, we typically use third-party tools to market through. No, it was really user experience and making sure we got pricing right. Okay.

And where do you fall on the pricing spectrum? So, you know, we're alive in the Bay Area and in New York at the moment. A typical apartment, you know, our price ranges are, you know, probably anywhere from 2000 to maybe on the upper end, $6,000 in a given unit. It really depends on, you know, as a studio, one bedroom, two bedroom, et cetera. I think where there's a tremendous amount of value of what we do is that we are able to provide a fair amount of insight to our landlords, even landlords who don't end up transacting with us. We're able to provide them a fair amount of insight on where their units are likely to transact given a certain price. The thing is when you think about the resources that landlords have to kind of get price discovery, you know, the tools are not very nuanced and precise.

They don't provide the landlord insight into, you know, how does my likely, you know, executable rent change if I add stainless steel appliances or not? Has it changed if I have a patio or not or if I have a deck or not? And, you know, what we've tried to accomplish on the modeling side with our, you know, our internal system is can we put a price on those things? Can we say to the landlord, okay, if you have stainless steel appliances, your rental rate should increase by $57 on the quarter of 70 second and second for a one-bedroom apartment. That's amazing. Wow. And so that, you know, that research process and, you know, developing that sort of pricing, I think at minimum provides landlords with. a valuable insight into where the market may be,

even if they decide for whatever reason that our product isn't the right fit. Okay. And so following in that, we had a question from Twitter from Roberta's DeMarcus. What mental frameworks and thought processes were behind growing the supply side around landlords, doing things that don't scale in particular?

Yeah, I think landlords are probably one of the more nebulous communities to figure out how to sell to. And I, first and foremost, will not pretend that we have fully figured it out. I think we've learned a lot. You know, when we started, you know, Keenan and I, Keenan's another one of my co-founders. We essentially, in our, you know, in our little rental while we were going through I.C., we essentially set up a two-man cold-calling operation. Okay.

Where we essentially would go to Craigslist, Zillow, and any other site, you know, pick a hundred, units and we just call people. And I think, frankly, the willingness to be able to just talk to your customer, just like, the funny thing is that it's not complicated, it's not fancy, it's not using, you know, AdWords or, you know, PR or anything like that. And we're, you know, we graduated to that stuff later. But I think to start, it was like, you know, call a thousand landlords and have nine. hundred of them tell you, you know, I will say it more politely than they did, that they're not interested. Yeah, yeah. Of course. And you learn a lot.

What are you asking them? Yeah. So typically, we, you know, we confirm, at that point, we confirmed, you know, is the unit still vacant, first off? And second of all, if the unit was still vacant, then we said, okay, well, this is what we do. We, you know, will make you an offer to rent to your apartment. We're able to close in 48 hours. We would love to send somebody out to come and just take a look and we'll make you an offer. And frequently, I think, we almost 100% of the time have landlords who say to us, haven't heard of this before. Could you explain to me how it works?

Because I think they're fairly curious about the process, right? And I think what we're really able to speak to is the fact that not only are we going to provide them that certainty of execution and give them that cash in hand, but we are fairly sophisticated in how we approve tenants. Although we've meaningfully improved the tenant experience, in many cases, our due diligence process is meaningfully more robust. bust than the landlords. So they kind of get this, they kind of get this best of both worlds where, you know, they have the certainty,

they get the cash up front, but they also have, um, now this, you know, this entire, you know, technology company that's,

has skin in the game with them. Yeah. To due diligence these tenants, uh, extremely well. Uh, and so, um,

you know, for the ones that we were able that the, for the nine, not the 900 that told us, told us, yeah, the hundred that stayed. around.

You know, I think that that was, you know, fairly interesting. Okay. And so what exactly are you doing to screen tenants? Yeah. So when a person applies for a resi apartment, you know, we're looking at some of their rental history. We look at credit. We look at their income and employment status.

I think one of the things I'm probably most proud of is the fact that what we're not doing, which I think a lot of, a lot of tenants have commented us that they like this about our process. What we're not doing is evaluating things that don't relate to whether or not you're going to be a good tenant. And I think the fact that it's an automated and algorithmic process really reduces the potential for discrimination, reduces the potential for, you know, not approving tenants who are, you know, viable and potentially great tenants.

So, you know, I think we balance the right line. We want to make sure that, you know, you've in the past been a good tenant. You have the ability to pay your rent. You, you know, your background indicates those things. And if we can verify that, you know, well. And does the landlord have any part in the final choice? No. Okay.

So that's how you avoid the bias. Yeah, okay, got you. Yeah, I've gotten apartments in funny ways. And you're just like, I don't know, they said they thought it was cool that I worked the onion a long time ago. And I was like, maybe that's what they thought. Maybe not. We hear all types of stories.

I mean, we meet tenants who are like, you know, yeah, the guy just, you know, he just shook my hand and just, you know, like the way I presented myself. I mean, and like, listen, you know, more power to them, I think. Those landlords, they're great. You know, the stories we hate to hear about are. Yeah, the other sides of that. But I think from our perspective, you know, we know that we're taking not only a financial risk, but we're also taking, you know, the risk of the type of tenant this person is going to be.

Are they going to be disruptive? Are they going to, do they have a history of not, you know, being the best member of that community? And so we take that fairly seriously. So we really try to balance this line between giving a great experience, but also verifying that we're screening. I would say probably 90% of the cases we're probably screening better than our landlord clients would have

if they hadn't used this. Do you have a ballpark acceptance rate? That's not even the right word probably. Yeah, I know what you mean. It's a little, sort of, it's a little bit difficult to give you context because it really does vary by apartment.

Apartments, because different, I mean, we have apartments that you know, we'll show it two times and it'll rent. It'll only get two leads. And then we have apartments where it'll get 40 leads a day for a month and it will rent. And so it really does vary by location. I could give you an aggregated number, but it's actually not the most correct. So it's actually apartment specific.

It's not just like, hey, I'm going to sign up and then I apply it anywhere. Well, so any person who applies for any resi apartment, we don't charge. application fees. Okay. So if you apply for a Resi apartment and you're approved, if you decide that you want to take, you know, apartment A instead of the apartment B, you're freely able to do that. Okay. We don't charge application fees. We don't charge broker fees. So tenants have a very frictionless process as it relates to renting the units.

But yeah, different units, they just attract different types of volume. If it's a three-bedroom versus a studio, you know, the right part of New York or right part of San Francisco. Francisco, you know, you're going to drive a meaningful, meaningfully different amount of traffic. Okay. So let's talk about the financing side because I think this is quite different from the average YC startup, the average VC back company, you know, the standard path is to, you know, sell equity in your company shares, whatever that might be. You guys did that, but you also raised debt to finance the leasing of the apartments.

Explain. Yeah, sure. So, so we, you know, pretty early at the outset, decided. that we wanted to be able to have capital to provide the solution at scale for our landlord clients. And we knew we had to be kind of thoughtful about that. I think a lot of companies approach that in, they kind of think, all right, well, I raise X amount of dollars in safes.

I raise X amount of dollars in VC capital. I got to spend that equity capital to fund my origination. And, you know, from our perspective, we thought, well, wouldn't it be better if we intelligently kind of created a financing mousetrap because we're generating a return on these investments. Those returns are attractive to third-party investors. Can we create a structure that allows those investors to earn that return and allows us to use the money that our safe investors gave us, you know, just to operate the business?

And so I think we were, you know, fairly successful in doing that. But I also think, you know, it's sort of the... the sort of thing that you don't even know to ask that question unless you've kind of been on that side of it. You know, my background's in finance and in, you know, structured products. And so I did a lot of that in my past life. And so I think we had a little bit of a advantage. And how did you package that product? Because like the closest thing, as a consumer of this, I've never worked on that side. Sure, sure, sure. Is like a reet, you know, like something like, okay, this is kind of real estate. No, that's actually, yeah, it's a really good comparison, actually. So in effect, what we,

what we did was say, okay, you know, when we lease apartments, that creates a receivable. Is there a way to kind of put those receivables together and then raise money from that? That's essentially what we did. I mean, REITs are effectively that with properties attached. Right. So before you raise the debt, had you standardized what you expected to return across all of these units? It's like, did you, how did modeling that out even work? Yeah, I think we had a fair understanding of what the market would require.

So when I say that, I think whenever you're thinking about like the returns of your asset or your receivable, whatever you're doing. Yeah. At end of the day, it has to be at a return that's attractive to investors. So, you know, we knew, you know, investors in consumer receivables tend to like to earn something in the ballpark of mid-teens or greater into the 20s returns on their cash flows. And so we said, okay, we probably need to solve to be somewhere around there or at minimum, if we're going to be lower than that, then, you know, we just need a budget for it. But I don't think it's very difficult, I think, for particularly the startup founder to know exactly what the return is, right?

Because you have these, it's effectively two markets. There's an investor market that has its required return. And then there's a product market that has its potential return. And your hope is that those two are at minimum fairly similar. ideally the product one is a little bit more. But I think there's a discovery process there. And I think that we so far have been fortunate enough to, you know, provide that that solution on both sides.

But that's a pretty important consideration whenever you're launching any fintech company is, you know, if you're creating a return that's, you know, 2%, And, well, you know, investors can go and invest in U.S. Treasuries for 2%. So do they really want to invest in your thing? Right. Which is not a sure thing by any means. So what did the education process look like on both sides, right? So like both on the debt side of like, hey, we're doing this thing.

And then on the venture side of like, hey, just so you know, there's this debt thing happening. Yeah. Yeah. Well, I think on the debt side, I think, you know, we were fortunate. We had pretty thoughtful and educated investors there, you know, I think fairly sophisticated and also very capable in getting up the curve on new assets. And so I think that we can't really take all the credit for that. I think we were fortunate in that regard.

As related to our VC partners, I think whenever they invest in FinTech, whenever they invest in this space, I think they probably one of the biggest risks that they are worried about is can this company fund whatever, like the origination it's creating. And I think, you know, from their perspective, the worst case scenario is that, you know, I gave you $500,000 or a million dollars to, you know, pay for salaries and pay for server costs and you went and lent it out. Not that, not that that's a bad thing per se, but it's, it's true. Yeah.

It's now limited your ability to do anything else. So I think when we, you know, when we went to our RVCs, we said, you know, pretty clearly where our intent is not to use the majority of the capital that we raise from you for funding these receivables. Our intent is to create this financing solution that allows us to do it. Right. So it's not necessarily, it's actually maybe more attractive to them. I think so.

When we go out and raise again, I'll let you know. And so someone asked an interesting question. Akash Jane asked, how do you model risk given your business model? Yeah, that's, I could probably talk for like an hour on risk. But I would say, so our team, we bring a lot of different types of expertise to bear mind as in structured finance. My co-founders, you know, purely in commercial real estate, my other co-founders, purely in engineering.

And, you know, two of our senior team members, one's entire background is in receivable research and analysis. and the others is on, you know, product development and design. So I think, you know, the one thing that I will say that we've been fortunate with is that, you know, we each kind of know our strengths and know where we got. More specifically to this question when I think about the risk we have. So, again, it's principally two things, right? We're taking vacancy risk.

We're also taking the performance risk. the tenant side. Does the tenant perform? In other words, do they pay their rent? Well, do they pay their rent? But also, you know, are they a good tenant? Yeah. Because even if they're not paying, even if they are paying their rent, if they create a

scenario where the landlord doesn't want to work with them anymore, work with us anymore, like that creates business risk for us. And so I think, you know, our process and understanding that risk has been a kind of a combination of looking at other types. of consumer receivables and understanding how those are underwritten, as well as, you know, kind of testing things and saying, okay, well, you know, we think the timeline for this particular rental should be X. Let's go back and see if that's what actually happened, right?

So not even like testing it with a live transaction, but just like seeing, you know, kind of backtesting our own models. and saying, okay, you know, our models would suggest that, you know, lease up would happen in 60 days. Let's look back, did it happen in 60 days or sooner or something? Gotcha. So I think there's a fair amount of back testing for us on the pricing side and on the vacancy side, and there's a fair amount of not necessarily comparable, but other types of consumer receivables that we can learn from on the tenant due diligence side. And so that's kind of how we approach understanding our risk.

Hmm. Okay. And then on the on the pricing side in particular, are you basically suggesting to the landlord this is where it ought to be? Yeah. And that that's just how it goes. Yeah. Well, I mean, we say, you know, I mean, there's no landlord that we've ever engaged with that doesn't negotiate. They always want to. And we have a, you know, we have a fair understanding of the amount of room we have to negotiate. But, you know, we are fairly transparent with our landlords on, okay, you know, this is. is where we're going to pay, this is what we're going to pay you, and this is where we're probably going to relist it. And the reason we're going to relist it here is because this is what we think the right prices. Okay. And I think, again, that information is valuable. You know, you take rentals out of the equation for a minute, any asset. Yeah. If you're selling your car. Yeah. Right. And Kelly Blue Book doesn't exist. Some of the best way you can have, you know, an understanding of where your car is valued is if somebody else comes and makes you an offer.

Right? And so we try to be a very transparent partner to our landlords and say, look, this is what we're going to pay you and this is where we're going to relist it. You know exactly what we're going to make from this transaction. And we're telling you why we think this is the right timeline.

And we can have an open and honest conversation. Yeah. And then that doesn't put them off in general. No, I think actually, frankly, you know, that transparency is helpful. because this is their asset, right? For sure. And this is, you know, our landlords, you know, this is their investment.

You know, managing property is a very difficult, very arduous process. And so it's important that they see us as their partner. Yeah. You know, from our perspective, the biggest value add that we give to our landlords is that, again, we have skin in the game. Yeah. Right. Like if we think it's going to take three months to lease us up and it takes four months to lease us up, like we're going to lose money, not you. Yeah.

Right. Yeah. And so, you know, we want to be able to communicate to them, you know, transparently in order to solidify that trust. I think it's a fairly important thing with any business relationship. And so now do you have just like a network of people who are essentially reps for you to interact with these landlords? How are they assigned to like a rep the whole experience? So we have a sales team. Yeah.

They engage with landlords at all different levels. And I think what's been important for us is learning that the market has to teach us a bit. Real estate is so wide and so diverse. There are mom and pop landlords who own one and two units, and there's Blackstone. Yeah. A hundred thousand units. And there's a huge subset in between of people own, you know, 100 units up to like 10,000, 20,000 units. And all of them have different.

pain points. And so I think particularly when we were in YC, we were very adamant. Like, okay, it's this type of landlord. And I think what we've had to learn is like, okay, let's go find out. Let's go ask them and see who wants the solution and why and try to craft a solution that works for everyone. I think the other thing is that we've learned to be a little bit flexible. to really respond to landlord's concerns.

Right. Because the interesting thing about it is that if you are able to solve the problem on the landlord's side, that the benefits really accrue to tenants. If landlords have lower friction, if they have lower risk, if they are happier with their process,

if they spend less money, a lot of that benefit gets felt by tenants who are able to have a faster and more secure application process, but frankly, often are able to get much better deals in terms of their pricing. And as it relates to broker fees, as that relates to application fees, as that relates to the actual rent itself. Right. And now do you have an average length of a tenant right now?

I mean, I imagine, so you're winter 17, so right now you're just coming up on a year. Right. So we had a fair amount of renewals. over the last few months. And we've done several more deals in the last quarter. Yeah, I mean, typically we're leasing, you know, call it between one and two years. Okay.

It's pretty standard for New York or San Francisco. Same deal. You mentioned learning from the market. What were the other surprises post-YC? I'm sure there are a bunch. Yeah, there are a few. Yeah. I would say, I think the thing that was probably the most surprising,

the most surprising was finding out, you know, when you're a startup founder, you know, you research other startups and you kind of like try to understand, you know, how have they solve these problems in their markets. And I think, you know, some of the companies that, you know, you would imagine had very sophisticated mechanisms to like acquire customers, actually just had like regular sales teams that like cold called people. Yeah. And like I think that was one of the biggest aha moments where, you know, interestingly, I think sometimes you get caught up in the idea of like,

I have to innovate everywhere. And I think one of the things that we learned and, you know, I want to say thankfully we learned this now. Yeah, sooner rather than later, yeah. Yeah, is that, you know what, some processes work because they're the right process. And so you should just do that. You know, I think, you know, we learned fairly early that, you know, if you really want to work with a landlord and want to get them comfortable, you got to talk to them. That there's not a scenario where you're not going to engage with this person.

And, like, you know, this is, particularly if it's a mom and pop landlord, like, there's an emotional attachment to this asset. Don't expect them to just, like, come over and, like, you know, just list it on a platform that they don't know. You know, there's, at this early stage, at least, there's going to be an education process. I think, you know, for tenants, you know, similarly, our experience has been, we give them an automated experience in the leasing. Okay. But you know what? There are times where just, even after someone's lease an apartment, just interacting with a person, like, literally giving your customer a call and saying, hey, how did you like your experience? Hopefully everything went well.

That's sort of like small stuff that's like not just an automated response, which we do. Like we have automated responses. We have automated notifications. You know, we can't engage with, you know, with every single tenant that we have or every single. a landlord that we have on a very hands-on level, but we do make the effort to do it a little bit. Yeah. Because we learn and also, you know, we, I think, build a customer loyalty there that I think will play out to be pretty valuable. Well, it's such a unique angle, right?

Like, I'm trying to think of an example where something that used to be so high touch just becomes automated away. Yeah. You know, like imagine, imagine the first time you go. in a self-driving taxi. And you're like, you just step out and you're like, you're just gone? Yeah. Yeah, yeah, yeah. No, I think, I think, yeah, it's, I think, yeah, it's, I think what's really exciting about

right now is that we are kind of participating in a reimagining of a lot of these, you know, industries, you know, whether it's, you know, if you take Open Door and home purchasing, you know, you take Oscar and health insurance. There are a lot of businesses that the infrastructure itself that is allowing these transactions to occur actually looks very much like the traditional infrastructure of the past. What's changed is technology's ability to improve the user's experience. And I think that is something, at least for us, is a very exciting thing to be a part of because we know, right? 20 years from now, you know, two years from now, more and more tenants are going to, they don't want to feel like they're applying for a mortgage to lease an apartment. They, you know, the same experience that they have with, you know, buying something on Amazon is the same experience that they want to have of leasing an apartment.

And so we know that if we're providing that, we're on the right side of history. And similarly, for, you know, for landlords, you know, like anyone else, there's actually no other investment that I can think of. where the investor gives their asset to someone who has no downside. Whether it successful or fails, real estate is probably one of the singular places where you see that happen. And I don't think that's something that's likely to continue. Landlords are going to want that accountability with their real estate transactions and tenants are going to want that better user experience.

And so I know what we do is providing those things. Yeah. And so given that, you know, our bet is on those tenants remaining true. And if they do, then I think we have a really good chance of being successful. Yeah, that makes sense. In terms of broader trends, even, like you're talking about trends in global consumer, like behavior, basically, how they want to purchase stuff. On the apartment level, are you noticing, like, certain things are just really coming up and like this is what makes an attractive

apartment. Yeah. Well, I think, I think a lot of companies are, a lot of companies are of the same mind. Yeah. That the application process, the search process needs to be elevated. It needs to be more, more technology, less human beings. And so I think there are a lot of companies that are doing this in some way, shape, reform. I would also say the other quote unquote theme that is fairly powerful right now is this idea

of creating communities at different buildings. And I think there are a lot of different companies that do this, you know, common. I think there's a company called OMB that's doing that with kind of common spaces. But this idea of creating, like using technology, but also

just understanding how to engage at a social level to create communities and buildings and like the power of that effect.

I think is, it's very interesting. It's something that, you know, I anticipate will have the opportunity to play a part in as well.

But I'd say, you know, automated process and more, you know, kind of community living and community frameworks for for different buildings and neighborhoods are both trends that I expect in the real estate space to continue and to expand. And anything on new construction?

In terms of... In the context of what's coming on the market, what seems to be attractive now. Yeah. You know, I think landlords are constantly looking for differentiators. And so they're leaning towards more technology inside of, your house, right? Like, there are apartments in New York where you'll, you know, they'll give you a year worth of Netflix. They'll give you an Amazon Echo. You know, I think it's really about just gaining an edge in getting the apartment marketed and leased. But yeah, I expect that to continue.

Okay. And are you finding that these trends are kind of broad across the U.S.? Or is it supermarket specific? Where are you guys mostly right now? Yeah, so we're in the Bay Area and New York. You know, we will potentially be in other markets over the next, call it 12 to 18 months. I think those trends are common across every market, but they're moving at different speeds. So I think New York in particular is very interesting because of the saturation of new development. Yeah. Has forced a meaningful increase in the concessions that landlords have to offer in order to get their units leased. and in lieu of a concession like lowering the price or in lieu of a concession like giving away a month free,

I think a lot of landlords are thinking, okay, how do I better amenitize my unit? How do I give you services? How do I give you an Uber pass? How do I give you Netflix subscription to accommodate that, you know, that tenants desire? And I think that that's going to be, New York's going to be a place where that trend moves fairly quickly. Because there are buildings and landlords who are picking up on the fact that their, you know, tenants are noticing.

Like they're paying attention to what the leasing experience is and they're making decisions because of it. Right. And so I think, you know, just as much as getting those stingless Ill appliances matters, I think the experience in leasing out your apartment matters. And I think that they're starting to realize it. And I think that that's been triggered a lot by the new construction that's kind of come on the market. So I think New York is going to move fairly quickly. I think San Francisco is somewhat similar.

Markets like Dallas, D.C., Atlanta are all kind of in that boat. Miami also in that boat. But there are a fair amount of cities in the kind of the Midwest or central corridor of the U.S. That, you know, they're moving in that direction as well, but there's still so much potential return available in those rental markets that those landlords don't feel, they don't have the same urgency. Okay. And are these landlords all in, I mean, I guess it's probably location specific in terms of margins where you see certain landlords are like doing quite well. and then others are really feeling the squeeze.

Yeah, I think, yeah, I mean, it's definitely market specific. Yeah. And, you know, those, that's a long-term trend that, you know, metro areas tend to have lower, lower returns on it in terms of a rental basis than, than non-metro areas. So we've seen that, you know, continue. I don't anticipate that change. Yeah. Nothing changing.

All right, cool. So now that you're like a seasoned wise entrepreneur, what would you've told yourself, having now started a company, having now gone through YC, say like three or four years ago. Yeah. Well, I think I'm still a fairly young founder. So I think I'm still learning quite a bit, actually. Yeah. And I think what I would have told myself and what I kind of continually tell myself is really be focused on solving the problem.

I think once you, you know, particularly once you raise some money and, you know, once your team kind of expands a little bit, there are a lot of ways to get kind of lost in the shuffle of running a company versus committed and focused to, you know, the reason why you started the company in the first place. And I think it's it's it's kind of easy to fall into the trap of, you know, you're an entrepreneur, you're running a startup for startup sake or for that sake. Yeah. And I would say, you know, I continually tell myself this today and I certainly would have told myself then to be hyper-focused on how do we solve the problem and be, you know, you can't, you can't, you know, over-optimize your business and over-stratage. But I think you have to be willing to iterate and willing to learn from what the market tells you and not fall in love with, you know, I created this really cool fancy thing. And, you know, if nobody is interested in it, then you got to also be willing to, like,

throw it to the dustbin of history as well. And so I think just that commitment to being problem focused is definitely something I would, you know, certainly continue to tell myself and I would advise everyone to kind of think of it that way. Yeah, I think it's so common, especially on the technical side, being like, hey, look at this crazy software I made. It's super fast. It's like an all new programming language. I invented it all last night. And he showed a customer thing. Yeah. If nobody wants it, it wasn't matter.

Yeah, yeah. It doesn't matter. And have you now just hired it. people that you can delegate to so you can stay focused on that problem? What do you do? Yeah. I, so, you know, we have expanded our team. I talked a little bit about, I think I'm certainly among the most fortunate founders in that I have a, I have a team of very, very experience people who are also incredibly humble and willing to get their hands down. And I am very acquainted with, the fact that that is extremely rare.

Yeah. I really tried to supplement weaknesses. So we haven't really expanded the team as it relates to the debt financing or securitization financing side because that's really my expertise and I don't think we need to. We have expanded the team on the sales side and in particular on the real estate operation side because I think we needed to increase our bandwidth there in order to be able to engage larger customers. But we also needed to kind of import some expertise.

We had to like, you know, learn a bit about how is the standard, whether it be broker or technology company, how are they solving the problem? And how can we put our own spin on that? We've kind of been fortunate on our sales side to really hire some people with some strong real estate and customer acquisition expertise. What are your recruiting pro tips? How do you get these people? Yeah.

Recruiting is hard, man. I am aware. It is so hard. They don't tell you how hard it is. That's the thing. Like, recruiting, particularly people who are, like, great people, like, it's very difficult. But once you get out of your friend circle, oftentimes, you're like, I knew, like, three or four people we could hire and then you're done. Yeah.

Yeah. Same here. Yeah. That's exactly right. Yeah. My recruiting tip is if you need to hire for a role. role at the outset be very specific about what you need. And it's important to know what you need or is what you want, right?

I think that sometimes you can get caught up in the optimal, like, perfect. I'm going to hire for somebody who's going to become, you know, five years from now, potentially, like, you know, very senior in the company, and it's like, you know, as a startup, you're like, your life exists in moments. Like, you know, at any given point in time, you're, you know, maybe anywhere from six months to a year and a half away from not existing. Right. So I think it's very important to just remain focused on, like, achieving your goals. Hire to do that.

And then when you got to reassess, reassess. And what about, so you were working a finance job before you started this company. What kind of mental process did you have to go through to, like, get ready? Do you quit your job before you guys went all in? Like, how did it go? So I was really fortunate that the company I was working at prior to starting the company, they were very supportive and continue to be. You know, there's a great team.

And, you know, I think we remained fairly close. So when we applied to YC, I was still working there. Oh, okay. And, you know, I notified them when I applied and said, you know, listen, this can be a great opportunity, so I might leave. And they were, you know, I think they were really great about being supportive and being helpful there. Yeah. So the process for me went fairly, it was fairly straightforward.

Like we let them know what we were doing. We kind of mutually agreed upon a time when I was going to leave. And, you know, that's kind of how it ended. But, you know, one of my co-founders, he quit much earlier and, you know, he was just working on the company kind of day in, day out. And I think that that's the sort of thing that, you know, you got to have really significant amount of trust between your co-founding team when, you know, different people are in different life situations. And I think it helped that, you know, particularly for me and Keenan, we've known each other for, you know, in excess of a decade. We've been friends for a very long time. Yeah.

And I think with with with with with Hersch. We kind of found somebody that this is so cheesy I know, but we kind of found somebody who's simpatico who like you know was willing You know we've all kind of had this view of We're just going to work as hard as possible until we get there And so I don't think you know even when when when kingdom was working full time and and he hirsh and ever part time I don't think he ever felt that we weren't contributing our share because we would just work until midnight and put in, you know, 16 hour weekends, like, until we could. Until you shift it.

Yeah. So, yeah. It's important. I mean, it's a super common thing, right? You're like, oh, you're working on it full time and you're like, the other guy has one foot out the door. I'm just like, yeah, maybe it's special with YC. Yeah.

Like, if you get into YC, then I'll do it. Yeah. It's like, more often. Yeah. Yeah. Yeah. Right. If I get into Harvard or I'll go to college.

Yeah. Yeah. Exactly. Oh, awesome, man. So we had a great question from Twitter that I should ask more often. So from René de Anda, they asked, on personal life, how do you manage your well-being day-to-day? Yeah, that's a fantastic question and something that I am constantly thinking about. I don't think when we started, Rezi, I don't think I appreciated how much taking care of yourself impacts your ability to run.

and run the business. And it's so important. And so, you know, I'll answer a couple of ways. So, you know, I would say, you know, physically I've been more recently over the last few months, like, you know, trying to take better care of myself in terms of not only eating but exercising more. I'm trying to hit at least three times a week, if not more. Get to the gym.

Yeah. Yeah. And just like, you know, literally put yourself in a space where, like, you're not thinking about anything else. Like, I think the mental relief from being in the gym is just valuable. But, you know, I'm a big guy. I'm down, like, 15 pounds and starting. That's good.

That's amazing. Thank you, man. You know, I have a lot more to go. But it's not easy. But I'm happy. I'm happy with that as a process. I would say outside of the physical side, in terms of the mental challenges that you have, I mean, running a startup is you engage with, like,

terror and like your euphoria like all the time like all the time like I can't think of any other experience where like on a weekly basis you're like think the world's going to end and you think you're on top of the mountain and so I think having resources around you know we have um you know a coach who I who I talk to on a regular basis just to kind of level set and get like be able to think outside of just the tactical day-to-day. But, you know, and this is going to be a little saffy, but it's true. Frankly, the biggest, the biggest help to me on a day-to-day basis is, you know, my partner or my girlfriend. She is, I genuinely don't know how I would do any of this without her.

You know, frankly, having her as, you know, a person I can talk to and just download with, but also can help kind of take me away from, you know, the day to day. That's been super helpful for me. So I feel really, really fortunate. I have a lot of really supportive people who understand the amount of effort and time it takes to run this business. Yeah. You know, and have been there to be really supportive.

And so do you now block off time to spend time with them? Yeah. How do you do it? It's tough. Yeah. I'll give you a good example. We took a family vacation a few weeks ago. I didn't really vacate.

I mean, I wasn't physically there, but I'm still doing conference calls, still checking emails. Because, like, a start-ups your life. You don't, you try to, like, separate, but, like, it's your baby, right? I think what I've been doing a better job of is, you know, giving myself blocks of time, two hour windows, three hour windows where, okay, I'm generally not going to do anything. And I think that that's really what I've been practicing is like every day or so, like, after, you know, maybe after eight o'clock or after nine o'clock, like, okay, I'm not checking. I'm not checking.

And then, you know, I wake up at five every morning and then it's like, okay, I'm checking. I'm going to get them back to it. I agree, man. It's like it, I don't think, well, not everyone has a problem with someone wants to work a lot, but it's a person who's like constantly checking, like refreshing email fees. And she's like, dude, what do you can. Yeah, you got to have, you got to, you know, at end of the day, you have to be able to show that that person's important. Yeah.

And, you know, that's not that difficult for me because she's extremely important to me. So I just, I'm learning not to be so much of a workaholic. I think I'm getting better at it. Okay. All right. So you mentioned working with a coach. Yeah. And, you know, obviously having a tight relationship with your girlfriend.

Yeah. Super helpful for managing stress. Absolutely. Yeah. Are there any, like, books or, like, I think managing stress is, like, a big, big issue that people need to, like, take seriously in order to not just be busy. Like, they need to be performant, right? They need to, like, step back and think, like, strategically, what ought to I be doing right now?

Yeah, yeah, yeah. Um, what, how, how do you frame that? Like, what do you read? What do you think about? Yeah, I am, so I have always been kind of a, um, addicted to activity. Like, I need to, like, do something to, like, keep my mind. And what I've really began, you know, begin to learn over the last year or so is that's because I had a lot of these, these personal life experiences that I was really just trying

to avoid. I just not think about. And so I was just like, all right, you know, I'm just going to keep busy. So I don't think about it. And these anxieties, you know, they can be driven by, you know, personal life experiences or experiences of, you know, close friends, both in my case, that manifest themselves in, you know, you being a, you know, you working, but frequently that working isn't productive because you're just doing it to not like pay attention.

So I think first and foremost, a skill that I've only recently learned is like in the middle of, you know, having an anxious moment or in the middle of being really, really stressed out, like actually just stopping and asking myself, like, okay, why do I feel this way? And I mean literally doing it. Like I think, you know, that could be construed as, oh, we'll do it in the moment.

No, I mean literally like stopping whatever you're doing, walking away, going to a private room or station, and like literally saying, okay, why do I feel like how I feel? And I will tell you that, like, I've only been doing that since I started, you know, working on Rezi. And that has been so transformative for me. Because when you think about starting a company, it's a very stressful thing to do, right? Like, I mean, you're putting your career and your livelihood at risk. But that's actually not even the most stressful thing. The most stressful thing is that you're putting other people's livelihood at risk.

That if your, you know, concepts and ideas fail, like, it's not just going to impact you. It's going to impact them. And, you know, these are people who, you likely are very close with. And so that's a very stressful thing to deal with on a day-to-day basis. Not to mention anything else that's happening just in your personal life. Because your personal life doesn't go away when you start a startup. Like it all still exists. And I think the way, at least for me, that I've been able to really get a handle on the stress,

is knowing why I'm doing what I'm doing. I think there's a lot of, I certainly was one of those people that I think was kind of just working and just living the life without having. having like a purpose around it. And I think now one of the things that has alleviated a lot of my stress is that everything I do is purpose driven. Like I know why I'm running the company. I know why I'm in my relationship.

I know why I have the friend group and a support group that I have. And so there is no part of my life that isn't purpose driven and isn't connected to where I want to be. And that alleviates a lot of stress because even if, even if, you know, even if we're wrong, even if there's downside, I know that I've done the best that I could have because my interest and my actions are aligned. Right. And so, and that hasn't come, I really want to be able to say like, I read this. And that's where this came from.

And that's, you know, fortunately or unfortunate, it's not what happened. I had, I think, a, you know, a, you know, a. challenging year last year from, not challenging in a negative way, but just a lot of big things happen. I turned 30 last year. My mom turned 70 and got older. My girlfriend and I got much closer.

Oh, and I started a company. That too. And so it was a very active year. And I think what I've been fortunate enough to learn is that none of that stuff is too big for you. None of that stuff is too big for me to do as long as I'm doing it in a purpose-driven way. Like, why am I doing all of those things? And as soon as I'm, you know, very focused on the reasons why I'm doing it, everything else kind of, the stress kind of alleviates because I know what to do.

Well, it also helps you like cut out the bullshit. Exactly. Where you're just like this is not. Exactly. The things in my life that like, you know, aren't about these things, like aren't getting me closer to where I want to be with these things, they just go away. Yeah. Because you don't have time for them. And not even just time, but you don't have appetite for them anymore.

Right. And I think that is, that's a fantastic place to be. Oh, yeah. I'm probably, weirdly, I am daily in what probably should be the most stressed I've ever been. And yet I'm daily probably the happiest I've ever been. Right. You know, so. Well, it's not surprising, right?

Because there's progress. So there's a goal and there's a purpose behind the goal. Yeah. And you're making progress towards the goal. towards the goal. Yeah. And you're not just like zigzagging around. Totally, man.

But you know what? Look. You know, and, you know, other than I think the select few who like launch a product, it becomes the greatest thing known to man. And they, you know, right off into the sunset. I think there's, everyone kind of goes through these periods of iteration. And I think getting used to the fact that having those moments of, this is the greatest idea anyone's ever thought of.

We're, you know, conquering the world. And then this company is totally going to fail. Like, we're done. We should go. It's not going to work. We have a competitor. We should go pivot to being a beer company, which is definitely an inside joke at Resi. We, I think, just being able to handle those ups and downs and keep, you know, very

focused on the outcome. That is a skill that I've really only learned effectively by trial by fire, but it's been very, very helpful and very, very useful for me in terms of managing my stress. Even in like the most stressful moments, I'm able to kind of level set. Yeah. Okay. This is what's happening. I understand why I'm freaking out.

Let's focus. Let's solve it. And let's keep moving. And you put the purpose into words by just asking yourself. Like, are you journaling this down? Yeah. I do journal things down. I do that all the time where I will...

I've actually found that in those moments where I'm taking a step away, and again, like I said, like physically, I'm walking away. Like, I'll go take a walk or I'll, you know, leave the room for a minute, and I'll just open up notes on my iPhone. And I'll literally just start saying what I'm feeling. And what happens is that it just, like, comes out, comes out, comes out, comes out, comes out. and as you express how you feel you're like the logical centers of your brain

start to take over and it's like oh that's why I feel like that yeah oh that makes a lot of sense oh okay fine that's how I get myself from whenever I'm worked up I'm just like right at times you like this is silly why do you care about this thing I'm just like you know but like you can't that that that that logical assessment of the situation can't happen until you get it out right because you know what like

you feel how you feel. And until you can accept that you feel how you feel, you're not able to actually move on from it. And yeah, it's, yeah, running a startup is a very like all-encompassing experience because it's not just the running the business. It's the what it takes from you as a person to do it. And, you know, I'm really grateful for the opportunity to do it

because I think, yeah, I think it is driven a lot of personal growth just as much as it will drive, you know, a lot of professional growth. Yeah, man, that's great. A lot of wisdom. Let's just wrap it up there. Thank you so much. Cool. All right. Thanks for listening. So as always, you can find the transcript and the video at blog.combinator.com.

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