Gentlemen of the product team, happy Father’s Day!
This is a special little addendum for y’all. I am writing you this note in memo form, so that you can have and hold it as long as it is useful to you, rather than scrolling by on Slack. So please give it your attention and please plan to engage in discussion amongst yourselves, as only you can turn this into something meaningful to your work.
As you know, I have been prepping to raise again, so that we can resource you better. One of the things that gives me agita about investor conversations is that we know what the investors are going to be looking for, and for some of the questions, we have great responses and some, not so much. I think this is normal and it doesn’t seem to stop anyone from raising, as long has they have the early stage fundamentals, which we have in spades:
Amazing founder-market fit. Literally the people with 20-years of experience. We are the right team to be tackling this problem, and everyone acknowledges it.
Gigantic market. Multifamily, by value, is a larger market segment than office. It’s all aging and it all needs rehabs. A quarter of the households in the US live in multifamily, and there are plenty of places globally where the share is bigger. It’s definitely a venture-scale market.
Customer demand. People already pay a lot for services that we are digitizing and automating. They’re not really that satisfied with what they get out of it. Plus we already have paying customers, which is a pretty good indication that some people are willing to pay something.
Those are kind of the gating questions that speak to “is this a venture-scale opportunity?” It’s table-stakes as far as competing for VC dollars: if you are NO to these things, then there is no conversation to be had, and you can make a lovely “lifestyle” business bootstrapping for the next 30 years, which is also fine, if that works for what you’re doing.
In our case, we had the bootstrap option, and we decided not to do that. That wasn’t because Marc and I had dollar-signs in our eyes and wanted to chase a big exit. Marc and I believe that the venture path is the right way to deliver the solution we have in mind because:
Our product is fundamentally a market-transformation product. It’s kinda big, somewhat complicated, and has a lot more stakeholder roles to satisfy than the typical widget. It’s got a bunch of dependencies – we have to get owners on the platform, and then we have to convert them to use the bidding; we have to get contractors to show up to the other side of that transaction. All of that has to show up more or less at the same time before we’re even off to the races testing our actual product hypothesis. It’s like we’re an Italian restaurant that has to start with making the plates, chairs, and tables before we can even invite the customers to try the noodles.
We’re at the start of a revolution (5x growth in demand) and no one else is in the market, yet. But that won’t stay that way, because it’s clearly a venture-scale opportunity, as we said. Already, I know of one direct competitor in the EU with almost exactly our solution set, and that if I know of one, there’s probably five more. There are at least a half-dozen other startups that are starting at the contractor end that could, in theory, decide to go full market.
Multifamily is not actually a single national market; it’s a bunch of small local markets, with NY being the biggest of them (10% of all dus). This means that in order for us to scale outside NY, we have to be able to capture a non-trivial slice of the market every time – essentially, we have to be a big fish in every little pond. If we were selling, for example, the CO2Guzzler8000, we could sell one in NY and one in Detroit, and it would be fine. But delivering real-time NEW YORK market prices to Minneapolis doesn’t deliver any value to Minneapolis. We have to scale big every market entry (unless we want to be a NYC bodega - just one shop on the one corner capturing the foot traffic in that one block or two. But we’re just too expensive to be singular).
Until we have the ability to convert owners, whether from the subscriptions or from the lending programs, to use the bid features, you are not building enhancements to Momentum; you’re building the MVP. In other words, every plate you turn out needs to have the minimum performance of a plate (i.e. it can’t leak the pasta sauce all over the customer’s lap), but you’re not getting any awards there for making a particularly beautiful pattern on the plate (OK I’ve extended that metaphor further than it can go). Each part has to do the job it’s meant to do well enough that the customer is going to use the thing; but the purpose is to deliver the customer to a transaction where we can capture price and performance.
There will ALWAYS be things we can improve for the customer. Always. But until we can test our core hypothesis – that market transparency is going to drive increased construction spend – we just need them to be happy enough to head into the experiment with us.
And fundamentally, early-stage venture investors don’t care about the quality of the product; they want to see venture-appropriate commercial outcomes. If we’re not at the point where we can show non-linear growth, then we’d better be able to show important incremental de-risking of our business model. It’s a marathon made up of a series of 100-meter sprints.
So, please, calibrate what you are doing for MVP:
Minimally sufficient to keep the customer engaged. Any give time, we’re giving them the minimum set of tools to get that particular part of the job done, and not any more. This may mean that they are 20-30% annoyed at all times, but if they get to 40% annoyed, we have no customer. I don’t know where those cutoffs are, but probably Jason Block does (and when she gets up and running, so will Kate).
Speed to testing our key hypotheses is the PRIMARY thing to calibrate to. Does this feature or implementation tweak or design discussion or whatever help us get to test something about our core hypothesis, or something that is in the critical path to get us to that point? No? Well, then please do a minimally professional job (something y’all will have to agree on) of it and move to something on the critical path. So, (not news) I think part of it is we need to recalibrate to release early, release often; kill scope creep.
What we’re building has HUGE potential to completely change the way that multifamily does ALL renovations, because we are plugging a bunch of gaps that make the construction market crappy (risky -→ expensive) for owners, contractors, and lenders alike. Remember that ultimately, what’s at stake is whether buildings that are supposed to be protecting their residents are renovated so that they can actually do that under the changing climate. We’re talking about one of the most important pieces of physical infrastructure that determines quite literally how long someone will live. It’s a big, meaningful mission, and it’s worth hanging in there long enough so we can test our solution and see it do turn this market around!
Probably a lot. I’m not you. I can only give you my opinion on what we need to be doing to survive long enough to make this gigantic MVP that we’ve set out to build. It’s up to you guys to use your experience and creativity to make all this work according to the early stage startup model, which we (for better or for worse) are now committed to live or die: Always be de-risking the business.