Startup pitch competition: Jason invests $25K | E1748

0:00That's what I call like the slow Kohl's marketing. you ever use like charcoal briquettes Liam you're making like a barbecue you know if you have one of those and I put it on a table between the four of us right here in the middle of this like zoom call we'd all be put our hand over to be like oh it's warm and then if I put five of them there we put our hand out just like a foot we'd be like oh it's warm and then if you put 15 of them we'd all lean back in our chairs and be like whoa that's hot and it's just one five fifteen you know you start getting these hot coals going, they kind of build on each other.

0:35Then when you put another, when you put the 16th call on, it immediately goes on fire. This Week in Startups is brought to you by LinkedIn Marketing. To redeem a free$100 LinkedIn ad credit and launch your first campaign, go to linkedin.com slash thisweekinstartups. Squarespace, turn your idea into a new website. Go to squarespace.com slash twist for a free trial. And when you're ready to launch, use offer code TWIST to save 10 % off your first purchase of a website or domain. And Lemon.io. Need to speed up your product development without draining your budget? Hire vetted engineers from Europe at Lemon.io.

1:15Go to Lemon.io slash TWIST to get 15 % off for the first four weeks. Hey everybody, welcome back to This Week in Startups. I'm your host, Jason Calacanis and we've been doing the show for over 1700 episodes and when the show started I started putting small bets$25 ,000 into a bunch of different companies you've heard of some of them folks like uber robinhood com.com and that's when I was a scout for a venture capital firm called sequoia capital and I started my first couple of venture firms funds rather and those funds were 10 million dollars very small and i did it as a side hustle if you will that's quickly grown into the launch investment corporation we have three funds we've deployed we're raising our fourth fund you're interested in hearing about our strategy you can go to launch.co slash memo m-e-m-o you can read the memo which i wrote it's just my vision for what we'll do with the capital in launch fund four.

2:19And one of the key initiatives is something called Founder University. The URL for Founder University is founder.university. And this is a 12 week course I created, which helps founders who are thinking about starting a company get their MVP out the door, learn the fundamentals of startups, got a unique business model, we charge people$500. And if they come to all 12 weeks and give us an update on Monday nights, just a short update on their progress we give them the 500 back this has resulted in uh over 90 graduation rate but then one of the things we realized during this program was my goodness people are building interesting companies and not everybody's got a rich uncle or aunt or a bunch of cash in the bank so we started giving 25k investments to a bunch of the folks in the program with me is kelly who runs the program I'm with Presh on my team.

3:12Kelly, give us a little overview of how the fifth cohort is doing and what people find valuable in the program. Absolutely. Thank you so much for having me, Jason. So Foundry University Cohort 5 is currently in the works right now. We are on week five. We had a great session last night going on just building in public and how to actually grow your users kind of in a free way early on and get some traction there. And yeah, the program's been really great. So far, we've been hearing from founders that have had a startup before that they really love just the speed and the cadence of having Foundry University.

3:49It's two days a week. There's also offline curriculum. And then from there, also that there is the accountability and a peer group, right, to hold each other to actually getting work done and moving fast. Yeah, people like a good community. So we thought we'd make some interesting content out of this by having the companies in the program pitch me here. and then I'll just decide if I'm going to invest in them or not. So we have two companies today. Why don't we get started with the first company? You can introduce them, maybe, Kelly. Awesome. So first up, we have Luis with NeighborBright. Okay, Luis, it's time for you to shine.

4:25Okay, I'm Luis, the co-founder of NeighborBright, group deals for neighbors on home improvement projects. Meet Sarah in Francisco. Sarah is a homeowner, Francisco landscaper. And Sarah is spending too much effort trying to get landscapers. She doesn't know if she's overpaying and she's having issues communicating. Well, Francisco is spending a lot of time visiting customers, quoting, and not getting hired. And he's unable to make efficiencies because all projects are very different. So NeighborBot is a solution. We're a marketplace for groups of homeowners and contractors. We help Sarah find the group.

5:00We offer design services. We run the bidding process to get the best price from top contractors, and we facilitate payments. The way it works is Sarah joins the group. The site is like a group one page. It's a limited time, limited number of users. She enters a few details, and she will off to go. While Francisco, on the other hand, is able to see all the projects in a map. He doesn't need to go and visit Sarah's house because we have a design. We did it with Sarah. All the measurements are there. All the materials are there. He's able to quote right away and not lose time. We earn money taking a 7 % fee on the projects and markup on design services.

5:42We'll be starting with landscaping and then expand US-wide with other exterior projects, such as roofing, solar, heat pumps, etc. We are the only marketplace or the only company in the market that is offering, you know, finding contractors, design services, group deals, and facilitating payments. This is the way we're going to acquire users, or at least partially, is an app that is going to be fun and it's going to be free, where users can visualize with generative AI their new gardens. The team has over 20 years of experience building marketplaces, and we have advisors from the home services industry.

6:20We are raising a$1 million pre-seed round, and that's it. We're NeighborBright, group deals for neighbors on home improvement projects. okay so have you put this product in market and what has the initial reaction been give me as many details as you can about the number of users and the reaction yes so we uh we started this project uh as you know asking neighbors on next door and i was like hey neighbors what do you think about you know grouping together and solving this problem that i have because i just move a new house and I'm having trouble finding contractors and it's really annoying. So I want to solve this problem.

6:59And I got so many positive responses. And I was like, okay, I'm a product person. This is a very ripe opportunity marketplace with unhappy one side of the marketing is unhappy. So I started like making a group together, calling contractors, we're also very unhappy with the two things solutions. So that's that's the way we started. We posted on next door saying like, neighbors want to join this group. We did one in three months, we got like when you're so like 15 or so homeowners interested. And we've already signed 10 ,500 GMB. So they already paid for the projects. What project do they do? It's a landscaping.

7:37So the one time landscaping or like their monthly landscaping? One time. So the idea is converting their gardens into drought tolerant landscaping, which is a lot of people are doing right now. So the concept here is you find a great contractor, you say, hey, here's a neighborhood, this person's going to be working in the neighborhood. And would you like to participate in us as a group doing projects related to our roof, our landscaping, our pools, whatever it is. And then is the idea that that contractor can then have a density of customers in a small region because commuting and sometimes they live far away, they can get four or five customers in one area.

8:15And that's more efficient because they tend to come for a couple of hours work on a project, there's some blocker, they come back the next day. Is that is that sort of the idea? Is that you're saving them time? Yes. So yeah, it's a maximum five minutes drive one project from the other. That's that's how we build the groups. But every time there's no subscription here. So every time you do a project like this, you're starting from zero again. yes for for the specific projects although the way we're thinking about repeated customers is these customers that we talked to they they love so much the idea that they were like oh can you also do my roof and can you also do my you know fence and and stuff like that so we are planning to you know take the existing customers and expand to the other projects that they want to do for their homes got it but there are some regularly occurring projects you could include in here so landscaping is something people like to do every month every two weeks every week depending on the the property and the person's desire and like having a handyman or i don't know what the gender neutral version of handyman is handy person uh having a handy person uh come and you know just go in the neighborhood and solve a bunch of problems for people and then having price transparency that seems to be the big win yeah the price transparency of this so does everybody see each other's pricing?

9:33Or? Okay, so we buy as a group, you can see, hey, I had an 800 square foot backyard. Another person had a 1600 square foot yard, one person got a$500, but one person got an$800 quote. Hey, that seems reasonable. Oh, no, that that kind of transparency, we're like the transparency is like our fee and their costs. And we say how much we were able to reduce the prices. And that's because we want to, we tried that and we wanted to reduce friction. So even choosing the landscaper is something that we do. So we tell we tell them like, hey, this is the winter landscaper is great. Are you in or not? So that we move that way we move fast.

10:09So you aggregate all the quotes together and you price them out with a landscaper or you with your knowledge price them out and then give the landscapers a group of 10 projects. We price them out with the landscapers. Got it. Okay, several quotes. Got it. And then whichever one you think has the best reputation, the best pricing, some sort of balance to say, hey, we're all going to get this so it's sort of like a groupon for services in your neighborhood is an easy way for people to think about it some people aren't old enough to remember groupons but everybody could get a free dessert with their entree if 100 people decided to pay in advance for their meal or if 100 people bought a yoga pass for a month but you would get that model was a little bit flawed because you weren't getting great customers they were people who drive by this would be better customers.

10:53All right, very good. And Kelly, on our team, perhaps you could talk about the two or three things that we look for in a company when we fund them at this early stage. Everybody always asks me, hey, how do you pick a company at this early stage? What are the things you look for in a company? Maybe you could say a few words about what we saw in this company that we liked. Yeah, absolutely. This company specifically has a really incredible team of builders. They've got a few folks on their team who can actually bring this to life and they won't have to outsource the development, the marketing. So that's something that always stands out to us.

11:27And the fact that they have early traction and have found kind of scrappy ways to get people using the product and make those early learnings happen quick. Okay. So they have multiple founders. Those founders are builders. And they have early traction and are a bit fearless in getting out there and putting product in market. These are all good signs in the early stage. You mentioned, hey, they're not outsourcing all this development they're builders themselves we like to back builders so well done okay now uh and uh they have a decent business model here uh it's it's a unique business model it's not exactly a marketplace it's an aggregator of you know uh services so it i guess it's a marketplace arguably but it's a different model than a marketplace typically because you're doing this bundling of i guess it's a subset of marketplaces it's bundling of pricing group group pricing.

12:15So it's kind of e-commerce-y slash marketplace. When you're selling to B2B buyers, you only want to get your pitch in front of the decision makers, don't you? Of course you do. Because upper level execs are the ones who make the purchasing decisions. They're the ones that can take out their corporate cards, sign the purchase order. But there's a problem. We all know the problem. It's hard to get them. They're busy. They're in meetings. They're skiing in Aspen. They're in Italy in the summer. It's hard to get those decision makers to make a decision, but not on LinkedIn, which now has 930 million members.

12:46And those members are ready to do business, including the 180 million senior level and 10 million C-level executives. They're just waiting there and they have all that purchasing power. LinkedIn ads let you reach those 180 million senior level executives and those 10 million C-level executives. Okay. LinkedIn equals business, business equals LinkedIn. It's that simple. Everybody's in the business mindset when they're on LinkedIn. Hey, listen, on other social networks, people might hang out and talk about politics, they might do dance moves, maybe they're shopping, maybe they're showing their vacation, that's fine for other social networks.

13:18But for business, I just want you to use LinkedIn. And I've got$100 credit waiting for you for your first ad campaign, go to linkedin.com slash this week and startups to claim your credit linkedin.com slash this week and startups terms and conditions do apply because they're giving you a hundy. Let's go on to our next company. Kelly, please introduce us to our next company. All right. Next up, we have Liam with Coffee Closers. Brilliant. Hi, I'm Liam, co-founder of Coffee Closers. Meet Luis. He's an aspiring young real estate investor who's on his lookout for his first deal. He currently spends his time scouring through Zillow, clicking on random properties, and then running the numbers in Excel.

13:54To do this for an entire city literally takes him months. Now, what we do is we invert this process. We take every property in his target city, we run the numbers on all of them, and then we rank them all from top to bottom by monthly profit and cash on cash return. So now Luis literally just has to peel off the top to find a great deal. Business model is twofold. You can either get a report on an individual property for$2.50, or you can get a monthly subscription for $20 per city. Traction, launched on the 1st of March, we have 12 paying customers and we've made $205 in total sales. Go to market, we've been using my co-founders Real Estate and Tech YouTube channel and also the BiggerPockets real estate forum.

14:34Road to 100 million. There are currently 80 million people in the United States alone who can afford a down payment on a reasonably priced investment property. We need 1.7 million of those to spend$60 a year to get to$100 million per year. Roadmap and vision. We currently only help investors find a great property to invest in, but we could also help them find a great city to invest in from an appreciation perspective and also to manage that property. No service currently aggregates these three things, and we think that one that did could amount to a$10 billion valuation someday. Competitors, two main ones.

15:08One is Mashvisor, but they're not very beginner-friendly. The other one is PropStream, but they're more for analyzing off-market properties, and we do more on-market properties. Team, I'm Liam. I'm a full-stack developer with some past startup experience. My co-founder, Ariel, is a senior data scientist at a tech company. She's a four-time real estate investor, and she sold over$18 ,000 worth of real estate courses to people in our target audience. And that's it. I'm Liam, co-founder of Coffee Closers. All right. Great job, Liam. So I'll ask you a very specific question. How did you come up with your pricing model?

15:40$250 per report, or you have a monthly fee, or a yearly fee? What's the yearly or monthly? What's the monthly? $20 per month per city. $20 per month per city. Okay. So how did you come up with this pricing? If you want the honest answer, we just plucked it out of thin air and we gave it a go. And it seems to be doing okay. Excellent. How much does the average customer invest in real estate? Obviously, it's going to be a range. But for this type of user, they have to be an accredited investor, correct? If they're investing in real estate like this or maybe not? Not as a private individual, no. Okay.

16:20So they could be buying the property themselves and not be accredited. But to buy a home, the down payments has to be tens of thousands or hundreds of thousands of dollars. Yeah. Yes. But here's the interesting thing. Most properties that actually positively cash flow are quite affordable, somewhere between maybe 80K to 250, depends on the market, et cetera, but that kind of range. So a 10 to 20 % down payment, if it was 100 ,000, would be 10 to 20K. Or they can do three and a half percent if they house hack, meaning that they live in it themselves and they rent out the other rooms so it can be as low as 3 500 got it all right so but you're charging 20 bucks a month uh which is 240 a year you said you had to get to 1.7 million customers this is just advice it feels like you're charging way too little which is a negative signal that this doesn't have value so in terms of pricing do we have a pricing module kelly and founder university is that something more for launch accelerator our next program when people have products in market i'm curious we have high level but i think we should build it out Yeah.

17:20So pricing is super important. It's something when we have these discussions with founders, we always try to highlight, are we giving enough background or information? You want to start, it's my personal belief, at the high end. You don't want to start at the low end. You just want to start at the high end. Why would you want to start at the high end? Well, then you have a high margin business. The business is profitable. Now, if the business is profitable out of the gate, it's going to look much more attractive to users. So we get rid of the$2.50 per property, I'd let people sign up with a credit card and get 10 reports for free.

17:51Then you would find out after they get 10 reports, they put their credit card in after 10 reports, you know, or after two weeks of trial, if they put their credit card in, so you know, it's a legit person, they're not just using fake emails to get 10 reports and then starting over, they put their credit card in after two weeks, it charges their first month or for the year, And I would make it$499 a year. And I would make it, you know,$89 a month. Because if they're going to be spending money on this, and you give them the ability to find a better property, I mean, that's going to result in tens of thousands of dollars in value, maybe hundreds of thousands of dollars of value in the coming years.

18:31So it's grossly underpriced. And I think you could be got to be careful. if i told you i could give you omokase sushi dinner for six dollars what would you think is it would you want that yeah was it sushi grown on a farm yeah but i mean what would you think if there was a six dollar omokase sushi dinner yeah a little concerned right like how on earth is this six dollars are you giving me tuna fish out of a can i mean what's going on here um now if i told you it was a 60 say hmm not cheap but not too expensive you know so there's 300 homo casa casa you know sushi dinner so yeah 60 sounds reasonable i could probably get a good 12 pieces five dollars a piece so you're probably massively undervaluing the value you're providing obviously once again kelly we have here uh builder founders fantastic uh you've got some early traction i understand you've had 165 dollars in people uh putting their credit cards in and giving you some money yeah uh yeah as of yesterday 205 205 great so we love founders who are obsessed with these early numbers or all those early numbers are signal you know uh when you when you open a coffee shop and you're going to charge six dollars or whatever phil's coffee charges for a pour over man that is a crucible moment for that startup will people pay to watch a hipster at phil's coffee pour hot water over their freshly ground beans or not or are they going to think it's stupid and you know what a lot of people think it's stupid to pay six bucks for a cup of coffee but they're not going for everybody they're going for the people who think it's bespoke and awesome and they want to have the best cup of coffee possible they're willing to pay the extra four bucks for a cup of coffee so i think you are that elite cup of coffee and you should price it as such early traction builder founders this is what we love to see um and it's a space where on the surface people might say kelly oh my god ai chat gpt all this stuff so i'll just ask liam how do you think about using ai yourself and then you know the general ai tools out there whether it's bard etc and their applicability to this space are those going to be competitors to yours or is this too deep of a data science problem and you'll always be able to build interesting features around the product that outpace those.

20:50So it's an interesting question. The framework that we've had thus far is just what is the problem the customer has and how do we best solve it? And for the problem of finding cash flowing deals, we thought that we could solve it at least to a reasonable degree without relying on AI. That said, my co-founder is actually a machine learning coder, shall we say? She's a data scientist. So she does have those skills to hand. And we've had conversations about how we might potentially leverage AI, but we've been quite hesitant to just sort of shoehorn it when we don't necessarily have a very specific use, which we can see for it.

21:23Got it. Listen, we have been doubling and tripling down on Founder University here at launch. In fact, it's kind of the future of our firm. And it's amazing for us to work with hundreds of early stage founders, even before they incorporate, right? They have ideas, and they're trying to figure out what tools to use to make their ideas into a reality. And we're seeing so many of these founder university startups using Squarespace. Everybody knows Squarespace has beautiful design templates. They're all mobile optimized. And of course, they have powerful e-commerce integrations. But did you know that Squarespace also added member areas?

21:57This is where you can sell members-only premium content, okay, educational stuff, etc. And if you're a consultant of some type, you have now appointment scheduling built into Squarespace. so listen if you build it on Squarespace everything's going to work they keep adding amazing features and you're going to load super fast on your desktop and mobile it's going to look great super easy to edit super easy to evolve and if you're looking to start your business you can't go wrong with Squarespace we all know that so I want you to head to squarespace.com slash twist for a free trial and when you're ready to launch use the offer code twist to save 10 % off your first purchase of a website or domain we love you Squarespace our longest running partner here on this week in startups.

22:37Thank you so much for supporting our founders and for supporting this week in startups. Let me just ask both of our founders here, Luis and Liam. When you how did you find out about founder university? And what value have you gotten out of the program for people who are listening deciding if they want to be part of the sixth cohort? So yes, I'm a member of your syndicate. So I have been quite familiar and done a couple investments as an angel. So yeah, I knew the whole programs, the accelerator and so on. In regards to value, I'll just give an example of a story that I went through. So I got this very famous VC reach out to me on LinkedIn.

23:19And I was kind of like, how do I do? I have never pitched to a VC before. What do I do? So I posted on the group and Kelly jumped in a few minutes later. And she coached me through so many videos. And then she had me pitch, send the pitch to her and gave me feedback. And the meeting was quite successful. So yeah, that's a great example of how you guys had value. Excellent. So there's a community there. For people who don't know, we're using a piece of software right now called Circle. I think it's circle.so. And it's a nice kind of combination of a message board, wiki, and Slack-like community, I guess.

24:00and it's worked so far. I don't know if we'll build our own software eventually or use a different package, but so far Circle has worked okay for us. And we keep all of the Kelly alumni in the same instance. So we now have over a thousand founders in there, I believe, hanging out and helping each other. So the cohort helping each other is part of the magic. And then the alumni hanging out there, it's kind of like a book face at YC where, you know, all the alumni get to hang out together. Maybe they sell into each other. They can meet co-founders, that kind of stuff. That stuff's all happening, I think, in there, Kelly.

24:33Yeah, absolutely. Lots of questions and folks asking, have you ever used these tools? Can we get a discount? All of the things. It's great. All of the things. Liam, maybe talk a little bit about your experience in the program, people who are thinking about it. What's your advice to two or three people who got laid off from meta or, you know, we're working at Google or they're thinking about leaving or they're, you know, graduating from Berkeley and they want to start a project. What's your advice to them? They should certainly apply. And for me personally, the main thing which stood out to me, of course, there's the mentorship, which is very valuable.

25:06But the number one thing is that I'd never been a part of a startup community before. And so being part of a community with another 200 people was extremely motivating. And one could even say ever so slightly intimidating at times. And I had a note on my laptop which said, everyone else is working right now. And I always looked at that. And so whenever you have a slight moment where you feel slightly distracted, I'd look at that and I'd get back to work. you know it is uh the nature of startups that people maybe don't want to admit kelly but it is a lot of work and you're going to have to sacrifice and there's going to be sacrifices in your personal life family career whatever it's just going to take time and effort if you're and you're in a competition that's just the nature of it all right now i've got to make a decision kelly keep bringing me such great companies i have to say you haven't brought me any duds yet um so it makes it very hard looking at these are doing the work jason it's what we love yeah i well also i think you're skimming the cream uh maybe you're not bringing me the ones who are struggling uh to pitch here which i guess is reasonable uh but here's what i can tell you about both of this um i don't know exactly where uh neighbor bright is going to wind up but i do know they found a problem that is as paul graham would say i see a hair on fire problem an annoying problem a acute an acute problem a problem that anybody who's a homeowner has which is vendors it is exhausting and there is safety in numbers and if you could offload the vetting and the quoting those two things of vendors that's like having an estate manager and that is incredibly valuable it probably takes the average person 10 hours to you know research interview and manage and get quotes from vendors And on the other side, the vendors have probably takes them hours or 50 bucks a lead on Thumbtack, which we're investors of or Google or Yelp or whoever's doing home services.

27:02I got to pay that 50 bucks. So there's got to be a better way is what comes to mind. And here is what could be a better way. And then something I noticed about it, which was something I hear from the vendors who come to my house, which is they're driving in from far away sometimes. and maybe they live in a neighborhood an hour away from the people they're servicing 30 minutes away and when they get there if they can have five homes in the same area and they can remove that you know 30 to 60 minute drive between and it becomes a five minute drive that's super efficient and that's valuable to them they can share and then if they can do five jobs at once they can have five four other workers come with them for those projects they can do that those projects over 30 days in a dense area, man, that's just super efficient to bundle all that.

27:49So when you see that kind of efficiency on both sides, you got to think the take rate, 7 % is too low. It should probably be more like 20%. There's probably a pretty significant take rate that could come from this that is, again, founders always underestimate the value they're providing. So if you just chart just on hourly, if you were to hire somebody to do this project, it would take them five hours, you pay them 30 bucks an hour, you pay 150 for somebody to manage, you know, just finding somebody to do your electrical work or roofing work, probably more. So I really love the idea. I don't know if what they're doing right now is the exact format they'll get to, but we'll see, you know, it seems like a really good start.

28:28And then for our second company, Coffee Closers, you got that nice Glenn Gary, Glenn Ross reference there. I like that. I don't like misspelling it. I think you're doing that for the domain name. so i would just call it closers uh maybe and so or coffee closers is okay two words i always like one word i would just call it closers and then put a cup of coffee next to it call it and then call it a day you can come up with another domain name but yeah providing data for people to make better decisions with a with seriously uh considered purchases like an investment that's worth a lot of money and i think it's worth one percent two percent of the cost of the transaction so if it's a hundred k home i think the value of providing is probably two thousand dollars which means if you charge but six hundred dollars a year they're getting three times what the actual value is again if they hired a consultant if they hired a broker they hired somebody to do this that person would probably be charging you know three four or five percent the cost of the property for their services so you're greatly undervaluing the value the the the value you're providing and that means there's a pricing power here and if you can get half the people to say no that's too expensive that's good you're probably getting rid of the looky-loos and not great customers so if i only had to pick one i wouldn't do it it's my money anyway it's rlp's money i have to make the decision i'll invest in both so you got me again can't bring me all these good companies and then expect me not to give them you know but these small amounts of money and so you know we we like to put in this small amount just as a for people listening we consider this the start of the relationship then we like to see the monthly updates as the monthly updates come in we'll see two hundred dollars turn into two thousand turn into you know six thousand say hey maybe you come to the accelerator here's another hundred thousand or maybe it goes to forty thousand or thirty thousand say hey here's a 250k check from our fund or a 500k check from our fund at a six million dollar valuation or four million dollar valuation hey you got some traction and uh we want to send it to our syndicate to 11 000 people and uh lewis is part of the syndicate so he sees us send those deals out and we uh we'll have on average six or seven hundred thousand dollars come in from the syndicate investors at the syndicate.com so our fund tends to put in these 200 250k 500k slugs gives us another two to you know, 6 % of a company, depending on their valuation.

30:55And that's our goal, Kelly, get to 10 % in the winners. We like to do that over four investments. So this is about the first of what I hope is four investments in each of your company and getting us to 10 % ownership in the breakout winners. So well done, everybody. All right, you got a great idea for your tech startup. And hey, listen, you're going to change the world. I know you're going to do it. But there's a problem. You don't have engineers, right? You need engineers, you need those developers, but it's hard to find them. And it's certainly hard to find them quickly. So if you're trying to reduce your burn rate, and you're in a tight spot, and you need to get engineering talent right now, well, what you want to do is imagine there was a partner who could provide you with more than 1000 on demand developers.