Adeel Mallick, the co-founder and CEO of Humming Homes, had the perfect background to start a company and lead a fundraise. Experience at startup studios, an MBA, and stints at top venture capital firms had him setup to knock the first fundraise for his startup out of the water. When things didn't go as planned, Adeel had to reflect, regroup, and recommit to the process to get his company the seed funding it needed to scale.
[00:00:00] Adeel: I'm actually very open to have somebody telling me that this is not the right thing. I'll just tell them that they're wrong. That's like my Netflix, like as soon as someone tells me this doesn't work, my natural knee-jerk reaction is you're wrong.
[00:00:18] Jason: This is funded a show where founders who raised millions in venture capital share the gritty. Of what it actually took to get that money in the bank. I'm Jason Yeh, not too long ago. I was trying to get my ideas funded. And back in the day I was a VC listening to founders, pitch me for money. A lot of fundraising can be very nuanced, like the way you email an investor to get that feeling of FOMO just right.
But it's also quite. You've either got a business and story that brings in money or you don't your network while important will only take you so far. Those connections can get you meetings, but there's no ceiling to deal without a compelling narrative about the opportunity. That's why I think of the fundraising process as the great equals.
No matter how fancy the resume, everyone faces the same pressures and the winning formula is always the same story, story, and story. Today's guests had everything you think you'd need to raise millions impressive startup experience, a stint at a respected VC firm and an MBA from MIT. Only his first attempt at fundraising failed a deal.
Malik, the co-founder and CEO of humming homes tried to raise a seed round for about a month before saying this isn't working and today's show is what happened in between that realization and getting the term sheet for his $5.6 million seed round led by Greg. We're going to hear what a deal realized he was missing the first time around as he tried and failed to convince investors, to buy into his company that helps homeowners manage the maintenance and upkeep of their houses online and how he eventually got the same investors that initially passed to be as most enthusiastic.
But first we started with how he got a lay of the land through a series of roles at some of the most prominent players in the world of startups.
[00:02:28] Adeel: So back in 2018, I actually joined a ventures to do a call to atomic. Which many of you may have now heard of was a brainchild of hymns and her. Bungalow the co-living company, homebound, and that's actually where I got introduced to this idea of that, where, you know, you could partner with great operators and investors and actually go out and build in a category that typically you wouldn't bootstrap or starting your own, uh, which is like particularly exciting because I've been so passionate about the built world.
Um, and so had a great experience, uh, working there as a founder residents, ultimately wasn't in love with San Francisco, but like loved the model. And so when I was actually moving back to new. Post business school. Um, I was introduced to Kevin Ryan and ally Corp. I was introduced on the basis of, you know, I want to build and I want to find the right partners.
And I want to be in New York, Jason, you know this, but like New York city tech is nothing like Silicon valley, but it is the second largest tech hub in, in, in the country. And so I knew. This is where my network was. This is where I probably flourished the most. And, um, Kevin, and what they built at ally Corp has just been quite iconic in terms of ventures through your world.
Right? And so helping co-found businesses like business, insider, Gilt, Groupe Mongo, DBS, Zola nomad health. There's a strong track record of historical success. So when I was elected. Purely just looking to dig deeper into the world of real estate tech and consumer services. Kevin and Alec Corp had invested actually in two companies, one of which called blue ground, which is a us Sonder competitor and the other Rachel Jones, which is a Roofstock competitor.
[00:04:02] Jason: I'm glad you started there because I haven't had the chance to dig into and have a deeper conversation with anyone that's been through a venture studio model. I know it from the outside and in fact know a lot of people that run venture studios, but for the benefit of, of me and everyone else, walk me through that, that model a little bit, because I don't know if everyone knows about that option and venture studios that
[00:04:24] Adeel: are out there.
Yeah, totally. The ventures tutor broadly is like, when you think of a startup studio, you think about a place where ideas are just being generated, right? When you think about a venture capital firm, you look at ideas that are being funded broadly, right? You have capital to deploy, you know, early stage company investing is very difficult for a variety of reasons, right?
I mean, you're making so many bets on founders that you. I don't know, too, too well in Marcus that you're not super familiar with, but like, think that you should be. And, and you're basically taking this like, you know, large bed and given the fact that the velocity of company building over the last five years has like quintupled venture capitalists and leading investors are now thinking through like, how else do I optimize our pool of funds?
Right. Especially at the early stages. And that's where this ventures to do model came in is that you can bring the best of both worlds together in. And founding under one house under one hub and like cultivate both like founders and people who want to build with like capital partners who actually can like, provide some level of, kind of freedom for these investor, for these operators and entrepreneurs to go out and like tackle some of the most like category defining businesses.
So like, For example, uh, atomic, their big win has been HIMS and hers. Nobody was doing DTC men's hair loss supplements prior, right? And now they've been the category winners and people who've tried to follow suit. Haven't really been able to do so with Kevin and ally Corp. Sola is, uh, you know, from, I last checked like a seven or $800 million category winner with.
Brought her weddings, right? If you just even look at this space broadly, and a big part of it is like initially, like the thesis around venture studios is let's build, let's build after categories that are very difficult to enter. Let's put in capital upfront so that these companies can build defensible moats.
And it's not like two days later, somebody else is going to come in and like go out and build a, you know, build a competing.
[00:06:20] Jason: I see. So it's kind of accelerating those first days, whereas someone maybe starting on their own needs to validate a market, figure out how to bootstrap MVPs. It's like if we like the market and we like the space and we're like the operator let's capitalize it early, let's let's put infrastructure and resources around it so that it can get a bit of a jumpstart.
Is that kind of a simple.
[00:06:41] Adeel: Absolutely right. I mean like the best job, I mean, you were a venture capitalist, you know, it was like some of the best parts about being an investor is, is like the smart people you meet. Right. And like everyone's career in VC and early stage company building is so long that like, eventually Jason you'd say, oh great.
I know a deal, like a deal. Would you want to come build this with me? Right. This is your second or third company, or I know you were. Kind of like the head of this group at this previous port Covar is like, let's go out and build something together, right? Yeah. I think as a founder, there's two typical reasons why people will do this, a venture studio, one, it does from a capital perspective, it does.
De-risk the idea of entrepreneurship. So it doesn't, de-risk how hard you have to work or how difficult it's going to be. But, but it does. De-risk the idea that like, Hey, I can have. Paid for on day one. Hey, I don't have to like live hand to mouth and that's actually just a fundamental, very big difference.
Right. So there is kind of like a, I guess like a, an opportunity cost to that. Right. Um, so that's one, two, you know, in my opinion, like when you find sole founders, right. Without, you know, they're like there's two phases in life. We'll right out of college, like. 24 25, et cetera, where you have nothing to lose or when you're in your forties, when you've already done, like, you know, you know, one or two of these things, uh, you have a lot more confidence.
And for me it was just like, Hey, like I want my first shot on goal to be. Like I wanted to be at, to hatrick and I want to align myself with like a set of team members or group that can allow me to just accelerate Pasa. Yeah.
[00:08:12] Jason: I deal, I actually think this is a fantastic setup. It's kind of exactly what I wanted to get to.
Um, which I think it's pretty obvious just from asking you initial questions. You're pretty sophisticated. Yeah. The, the few things that you've said so far were that you worked at a venture studio and then joined a venture studio to build your company humming homes. And as we just described, it is one of those situations where you are plugged in to a set of infrastructures and resources that really get you accelerated and moving in the right direction without any of that sort of initial startup education that is necessary.
That initial startup just like grinding out what you didn't see. Is that you also spent time at Bessemer. You also spent time at sound ventures. If you look at a deals, resume on LinkedIn, it's sparkling a MBA from MIT, kind of all the things that you would expect. Someone to get to a stage, to work at one of the best, or start a company out of one of the best venture studios in the country, which might lead some to believe that coming out of the time at, at Allie Corp and really deciding to go raise outside capital would make it a breeze.
Right. And a lot of times we hear about the struggles, hear about the things that people don't hear when they see the headlines, the funding announcements. And so. I want to rewind and talk about what it means to be. I don't know if the word is graduating, but like kind of getting ready to, to leave the nest, the Allie Corp nest and say like, okay, we're, we're going to go take outside capital.
Can you rewind back and say like, do you remember what the conversations with Kevin over at alley Corp or where it's like, Hey, let's go raise money for this. And what were the trigger points, um, that led you to believe that you wanted to go.
[00:10:00] Adeel: I mean, I think like broadly speaking, we incorporated and started building product or MVP product and some members of the early team.
And like, I'd say like Q1 of 20, 20 after I was like, okay, this is a massive market home services. Quote, unquote sucks. There hasn't been a category winner. This is a tech enabled service. I have like service-based experiences. Like I know I feel way more comfortable in this category than I would in like B2B enterprise SAS in, in, you know, in a, in an adjacent space as I was just like amped up.
And so we started building and our goal was like, in our particular vertical home services, you have to find service market fit before you find product market fit, which is like very different. It's a very interesting nuance, right? Because like service market fit of basically. Is there a need for the broader, is there demand?
Is there need for what you're trying to build and identify product market fit? Like when you've actually figured out how demand meets like scalable company building. And so my goal is like, let's just like get a set of customers. Let's bring on homes. Let's like have like some very high, like high level tech with like chat and like projects that people can submit in on.
And let's see if we can do that. Right. And so we signed up like 14 or 15 homes in our first market. They were free. They weren't paying. And our goal is just to like, learn, like, is this a business that's venture backable, right? Like there's great businesses, but the hardest part about, you know, consumer services or oftentimes particularly real estate tech is.
Is this business, a venture back a little bit business, right? There are some businesses that are great PE businesses, some businesses that are great bootstrap, but is this business like something that you can actually take exit velocity on? And so we set up customer. If we started getting NPS, we started doing projects.
We started kind of building the infrastructure and we had a pretty successful pilot, right. I mean, it was in our first market. We had like a 80% conversion into folks who wanted to pay full time. You know, the team was growing and rebuilding a ton and it seemed like that was the right time to go out and fundraise.
Right. You have momentum and you know, you have momentum and you have the team and you think oftentimes at the early stages, like. What else do I need? Right. Um, so the, the early conversation was like, Hey, conversion is higher. Pilot went well, like we're building, we have a clear sense of like what we need to do over the next three to nine months.
Uh, we were really thoughtful around like three things, like one distribution, be unit economics, and then see like how. You know, more efficient over time. And, you know, we thought we had crystallized our go to market approach and, and those were the triggers. Like, you know, like those were the same kind of like questions and, and, you know, areas that we were digging into pre fundraise with both Kevin and I is like as a business.
It felt like it and we pushed forward. Yeah.
[00:12:48] Jason: And everything you said is, is a V a very sophisticated view on, on how to do this. Right. Um, making sure you're testing the market, not building too much before you're ready to go. And in terms of what you were seeing and what you were able to validate at least internally, and, you know, I see this a lot.
Maybe you see this in yourself, but you know, founders might be too close to the business to like really see what's happening. But there did seem to be enough of that to say, I think this is, this is the right time to go race. Totally understand that when founders go out and say they want to raise not many have the experience that you had, um, in terms of your exposure to.
The other side of the table, right? Venture capital. I wonder if you could, uh, you know, you don't have to go into too much detail, but tell me what it meant to you to set up a fundraiser like that, as you were going out, deciding that you were going to try to raise money, what was that effort? Like? What, what did, what did your training, or what did your time at the different venture capital firms teach you in terms of what was necessary and what you put.
[00:13:53] Adeel: Yeah. I mean, broadly speaking, everything that I say that I'm going to lay out is with the pretext of most 95% of early stage businesses, aren't hockey stick growth right out of the gate. Right? So if you have hockey stick growth, feel free to ignore everything, right? Uh, if you, if you did, you know, $20 million of revenue in your first year, you could literally ignore every single part of any, any thoughtful process.
And you'll get. Several term sheets. You know, I think what my experience has showed me was a handful of items that I, that are basically bucket into three categories. Number one, regardless of who you are. You know what your background is or what team you built at the end of the day, you're going to get several nos.
Right. And so how do you set up against noses that it's basically shots on goal. So set yourself up and give yourself as much ample time to. You know, build the relationships with investors so that when you actually pitched to them that first 45 minute meeting, they know who you are, you know, who your co-founders are.
If you have any, they at a very high level, know what the business is like, and they pretty much like you, you know, like those wouldn't be gating factors to getting you a term sheet. So I'd say like from the time that I started building, obviously I was getting a ton of like inbound just to, you know, a large part of is like either my network or.
Working on something new or the fact that I was affiliated with Kevin and ally Corp. So I started building those relationships, you know, whether it's like intro calls, coffee chats, this is pre pandemic. And, uh, kept those relationships alive. Obviously I would say the second piece is make sure that you have a list of realistic investors.
So have tier ones have tier twos, have tier threes and. What's really important is like all of those investors should be investors that typically will invest in your business model. So if I go to a venture fund that does not touch anything, that's not B2B enterprise SAS. Like I'm setting myself up for, I know.
And I'd rather spend time digging into other Crunchbase profiles, other pitch per profiles of investors or companies. Get in front of those investors, right? Make the introduction. It's a better use of your time. And then number three, just come prepared, right. Be really thoughtful around like the due diligence questions.
Like what I had done advance in advance of my team is like created like seed round guidelines, basically. 50 questions that we're going to get asked, like let's have answers to all of them. Here's, you know, a, a list of, you know, the types of investors in their profiles, like the types of questions that the likely ask and, and their personas based upon my initial reaction.
Right. But basically do your homework, right. Have a really tight data room, have a really tight followup process. Almost don't wait, like more than three to six hours post conversation to send, you know, access to the data room. Um, if the conversation ends there have Chris followups, but just like, just be a general about it.
Right? I mean like the, the, the inside scoop is like, investors are quite critical. Because they're seeing hundreds of deals per week. Yeah. So the only ones that catch their attention are the ones that basically can do the best job of staying in front of them.
[00:17:17] Jason: The deal had one of the most comprehensive approaches to fundraising. Ever encountered when we come back, the one thing he was still missing.
I spend most of my days, one-on-one with entrepreneurs, helping them understand strategies that make a difference in fundraising. Some things vary from founder to founder because not everyone's story is the same, one thing I'm super consistent about no matter who the founder is, making sure they send their decks and materials using a document sharing.
And for that, I always recommend DocSend DocSend lets you know, what's happening with your deck after you send it along with real-time analytics and notifications, did the VCs actually open it? What slides did they spend the most time on? And if you think it got shared with the wrong people or maybe you made a mistake and sent it too quickly, DocSend lets you control access and Nick updates.
Even after sending sign up for a free two week trial at docsend.com/funded that's D O C S E N d.com/funded. Okay. Back to the show.
process it's where most first-time founders I work with get tripped up when trying to fundraise, but that wasn't the case for a deal. His experience in VC helped him create a Bulletproof process, including a lead list of over a hundred investors, warm intros to those targets and a schedule built around calendar density.
But what about his. The thing that BCS would have to believe it was another story.
[00:19:17] Adeel: The like the tough part about all company building is that no matter what you have done, it's all irrelevant. Right? So like when it works, it's a culmination of your life's work when it doesn't work, it just didn't work. Right. I mean, like, that's just like what it is. That's like the, like the pre-tax solid is one kind of pitfall that I think a lot of founders have broadly, and this is a pitfall and not a weakness is that I'm telling you, Jay.
What I'm seeing in the market. Jason is not in the market. Jason doesn't actually know what's happening. Jason is the investor. A deal is the founder and crystallizing a story that gets an investor amped up is, is really difficult, right? I mean like that's where like FA like most ideas are venture venture-backed.
Melissa. I was like, huh, I can get a pretty good venture capital fund around those. Like, there's a handful of things that I think the market was telling. I mean, you know, in, in, you know, late 2020, it was like one the market broadly wasn't ready to the idea. Um, or at least the go-to market strategy was like interesting.
And there was like limited data, right. Based upon like our vision. And then three personally speaking, I think I'm a pretty practical founder. And I think sometimes when you're building. Businesses that require some level of quote unquote psycho news. Like I could see like how somebody like, uh, a good deal smart, but is he like too smart?
Yeah, you're right. Is he, is he, if he's like smart he's are working, but like, does he have that in fact, cause like this is such a massive undertaking, right? It feels like some basic and not, not, not to clown some like, but some like really, you know, understood business model that like has worked, you know, 10 different times over.
Maybe different. Right. But this is like talking about home services, which is, in my opinion, one of the largest categories that have not been brought online is one of the most difficult categories with like tons of skeletons of companies who've failed. And I would say like, that's what the market was telling us.
It was like, there was like three areas that just kind of like, didn't seem fully flushed
[00:21:31] Jason: out. Let me, yeah, let me just make sure we make this crystal clear. You, you went out and you were running a process for. But two, three months.
[00:21:40] Adeel: Yeah, I would say like that, like the first process was a full month before we basically shut it down and said, Hey, like, this is probably not, yeah, something's not working.
Tell me a little
[00:21:52] Jason: bit about at the end of that month, there must've been like pretty low lows. Like what did, what were you thinking? What were you feeling? You know, and, and how did you even decide what to do next? Because look, there are a lot of options for a guy with your background. Do you need to keep doing this?
Do you, you know, do you want to keep passing on the incredibly lucrative jobs that, that I'm sure people are pursuing you for? And so when things at the end of the month, aren't going in the right way would love for you to remember, you know, w what was it like, what was going through your. Yeah.
[00:22:21] Adeel: I mean, I think like broadly speaking, it's really interesting because like hindsight is 2020, right?
So you're like doing things in one and you're like, okay, whatever, dude, we just gotta go out and do this. I think the things that I clearly saw was like, I like one thing that became really clear to me, it was like, I just didn't have a. Data to talk about the business in a way that was like truly convincing.
So that's one is like, I just didn't have enough traction in or data to, I wasn't in love with like how we were progressing towards like actually figuring it out. Right. Like we invested a ton upfront in like product and tech and like at the end of the day, like there was a different metric that mattered versus like product NPS for our business.
So it was number two and number three. Really kind of reflecting. I was like, what do I do next is like, I've basically dedicated 29 going into 30 then. And beyond that, into this business, and my take was like, really, really like good entrepreneurs do not give up. And like, I'm the son of a, of an entrepreneur.
Like my dad came to this country in 1986. He came from Karachi, Pakistan, and he arrived in Norman. At the university of Oklahoma, he was doing his masters in civil engineering at the university of Oklahoma. And while he was doing that, he was like a dishwasher at like a Chinese restaurant. And like, someone's like many first generation immigrant families.
We experienced that. Like, you know, you know, he had moved to New Jersey, we built our family, et cetera, et cetera. And he started his own business. Uh, it was, you know, he was, he was a civil engineer by training and. I got to see him start this company at 45. And it was, it was started in our basement. And, uh, you know, when you're like 11 or 12, you're like, it's kind of weird, right?
I mean, like your, your dad who was like supposed to be going to work all the time is like at home and like, Building, you just don't know. And like, you know, as kids, like, you'll hop out, you like print something and you'll make a copy. You feel good. You don't actually know what's going on. And like today, so that business started in 2001.
Today that business is now doing $25 million in annual recurring revenue. It's, you know, in five different locations across the Northeast and the Midwest, you know, it has over 150 employees and my dad built that from scratch and he never gave up. Right. And like, It's, you know, a lot of people can give up, like, it's so easier.
You're like, ah, you know, like, Hey somebody, else's right. Maybe they're telling me that, like, you know, this is just not the right thing. And I'm actually very open to have somebody tell me that this is not the right thing. I'll just tell them that they're wrong. That's like my Netflix, like as soon as someone tells me this doesn't work, my natural knee-jerk reaction is.
Right. And I think like, that's what was like the driving factor is like, I will not lose this because I, because of the fact that like, there's so much opportunity here, like this is not a small market. This has not been figured out. This has not been something that like, people really can wrap their heads around.
It's not like any investor would say. Here are the three reasons why they just couldn't wrap their heads around it. And so that signaled to me is like, I don't have enough data. The story's not clear and I need to go work on my founders. Yeah.
[00:25:37] Jason: The story is not clear. It's. I mean, it's so interesting that.
It almost always comes down to the story is not clear. Right. And honestly, the story is not clear is you, you picked up on a lot of it, right? You didn't have the data, but the story is not clear as like how insane is a deal. Like will he do what it takes? And I think it's a good segue to say, let's talk about.
How you pick things back up and who you ended up talking to, like how, how did, how did it go to say let's do a restart of the round because like, this is a story that not a lot of people here. Right? In fact, like if we didn't do this pod. You just raised around, right? Like no one would know, but instead this is a, this is a process that people need to understand, happens and can be done.
So tell me about closing down the first effort, and then what you told yourself you wanted to get done before, maybe going out again.
[00:26:35] Adeel: When I was thinking through like, all right, you know, we gotta, we gotta turn this thing down. Let's go back. Let's go focus on building. I think there were three things that I told myself I had to do.
One is I need to have better data on like what our customers were doing and are saying it didn't help us, that we built a home services company during the pandemic. You know, like some of the most iconic businesses that were doing well in this space, like basically went to zero at during that time period.
And so. For me, I was like, I need better data as to like, what is like the customer demographic looking like, what's her meeting age? What are their habits? What are those? Like the type of user profile that is using humming homes and our service and what are their, w w how are we solving their needs? And I just didn't have that at like, you know, 14 to 20 customers.
So just having more data, like, I like signing up more homes to like, Theory on how I would, uh, get a different customer acquisition channel, which would move away from B2C to B2B, to C. But I actually hadn't focused on like signing a B2B to C partnership. So I wanted to do that. And then three, like I said, like we had, we had invested a ton in like product and tech and I basically flipped the business on its head.
We cut down a lot of people who were. Not necessarily, in my opinion, driving towards our goal, it could, we had invested a ton of headcount, uh, on the tech side and we actually needed to focus on like, you know, sales, marketing, and operations. Right. We really need to be able to like sign up homes and service those homes.
Cause we had like the basics of tech figured out and I didn't want to go back out till I felt very comfortable in all three. So our burn went down because of the head count reduction. Our strategy was. Basically like the mantra at the company was if we're not signing up homes and we're not servicing these homes, nothing else matters.
So don't, don't work on it. And, and for about like close to four and a half, five months, we were just heads down. You know, like by end of year through may, like mid may, like right before summer started, we were just building and we're just like focused on like, what are we seeing? What does it mean? How do we get this over the line?
Because like really good founders, in my opinion are folks who are constantly the most critical of their own. If you don't think I'm doing the right things, then chances are, I may not be. That was like the, the thing for me is like, I can actually invest a ton of time and infrastructure in getting things right.
And really making sure that like, you know, like sometimes you'll read like, you know, your idea was too early. Like, I actually think that like, our deal was like perfect timing, you know? And it's like, all the other things were a little bit too early. I want to ask
[00:29:14] Jason: you. Do you remember kind of like the lowest point of the.
Uh, of that
[00:29:17] Adeel: fundraise. Yeah. So my sister just got married in may. She's a couple of years younger than me and my mom's sick and she can't go with my sister for shopping and stuff. And like my brother and his wife went to go do all the shopping and all that. Cause I'm, I'm Pakistani. You know, I was, although I was born and raised in America, pretty close to my culture and you know, I just wasn't, I didn't feel like it was okay for me.
You know, and so it was actually a really, it was like really pleasant, but it was also like a dark time. Right? Like I went to my parents' house while everybody was away. I hung out with my parents and I basically watched old TV show reruns for like four or five days and just like unplugged. And like, I, you know, as any founder can attest to, like, when you unplug, it's actually sometimes very hard to get back on the hamster wheel.
Right. Body is so go, go, go, go, go. Um, and it was just like interesting, you know, it was like, it was like, I needed to take that breather, but it was definitely just like, there was, I think, like there was one day where I did a move from my bed for like a solid 36 hours, you know, including sleep, you know? And I think, like I said, I don't want to say it's a dark moment.
You know, I don't think it was like super dark. I think it was just like, you know, a part of me wished that like, you know, wouldn't it be great if you close around and you got to go do this thing and you celebrated from a yeah. Well, I guess what, like things. At least in my life, they've never worked on time.
And so I think there was a point of frustration that like, geez, like quite as nothing ever worked on time. Uh, but it was more so like personal debt about the business as
[00:30:49] Jason: any founder can attest it's for better or for worse. And I actually try to help founders not do this so much, but it's. It's all encompassing, right?
Like family wedding. And it's sorry, you know, there, there are things that you're dealing with. I don't want to leave that at this lowest point. I actually want to juxtapose that to asking you, do you remember when you, you got the call or you got the message that your lead was actually going to jump in and say they wanted to lead around if you could reminisce with me and.
Tell me what that was like.
[00:31:23] Adeel: Yeah. I mean, so I guess fast forward a couple months, more than a couple of months later, you know, I, I basically, again, like during that four or five month period, I was still building relationships with new investors who I hadn't chatted with, uh, reconnecting with a handful that were super interested that just, you know, we felt like we were almost there.
Couldn't get their, you know, provided strong updates to the investors, say, You know, th the three things I became really clear, it was like the business had pivoted. So we went from like both secondary homes to now, including primary homes, which is huge. Our Sam increased like by like 10 X. So that's one, two, we moved away from like a market by market approach to like a regional lodge approach, which made our, you know, the economics of standing up a market that.
Better. And our costs like produced by threefold. We signed a massive partnership with like the third largest residential brokerage in the country. And so there was just a lot to update, you know, like, like when, when you know, and we've talked about this before, like, you know, the worst update is like, Hey, just like circling back what's out.
Right, right. It's actually like, Hey, by the way, like this, this, this happened. Sorry, my head's down. Like we should connect in the next coming months. Right. It's like, like, like. Like, that's how I was framing it because like truly, I, I don't think it was a great use of my time, but I did know that like we basically had to source at least another 20 to 25 investors that like basically, you know, w w w w would take her first look at the business and things like that.
I'd say, like, you know, it's really interesting and it's pretty, I'm pretty young. I'm not going to need. But, um, our first term sheet is not who we went with. Uh, unfortunately, great firm. We just, we felt like we found a better fit. Um, you know, uh, in the end three out of the four term sheets were from firms and, uh, VCs that actually passed on us the first time.
One of whom didn't even show up to my first name. And had his EA canceled while I was in the zoom. And so it's just funny, like, you know, my, my tip from founders is like, don't take it personal. The world goes around and like, you know, like, no one's going to play a sad violin for when you say no to someone else, it will happen at some point in your career, whether it's a term sheet, whether it's a job offer.
Um, and like one thing that like, I think I've always had is like, When I got the first, yes, it was like a sigh of relief, but like the first, yes, all it signaled to me was like, I've just reached one summit. So it's not like I was like, I think what I told my, my, my siblings and my wife, like they were more excited and Mike, you know, myself and my co-founder.
I was like, okay, now we got to worry about the next round. Like now we got this thing, like, let's just focus on what we do to the next round. Like that's how you think as a founder rep, because all you realize is like shit. Now someone actually believes in me and if I don't prove them right. And they're going to be like, I just wasted all this money.
So that, those that's the thought, that's a feeling that I had knowing that like, okay, like this is pretty wildly successful fundraise, but, um, it doesn't really mean it.
[00:34:32] Jason: That's awesome. It's a very common feeling. At least you got that one flash of like awesome before reality set in, which is like, there's a long road
[00:34:42] Adeel: ahead, right?
[00:34:51] Jason: That was my conversation with a deal, man. The co-founder of humming homes, a company on a mission to make home ownership easier and more enjoyable as a risk averse person. My producer, Olivia wanted to know how common is a failed raise and as an honest but optimistic person, I wanted to give it to her straight after the break, a debrief with Olivia about how often founders put the brakes on arrays and how the best of them come back stronger.
Early on at my last company, we had the chance to sell into a large public company, but ran into a wall. They wouldn't work with us unless we were SOC two certified. We really tried for weeks to get something done. We were Googling how to get SOC two certified and interviewing expensive consultants. But in the end we abandoned the deal because it was too.
So, when I learned about Vanta accompany, that was just backed by Sequoia used by hundreds of SAS startups to get SOC two certified. I was so annoyed. I, man, I really wish they had been around back then. Vanta makes it super easy to get a variety of certifications like ISO 27 0 1, SOC two, the certification we needed to get and HIPAA, they integrate with your cloud provider and other tools you already use to automate the super complex and time-consuming process of preparing for an.
Anyway, if you'd like to drop a month's long process down to weeks, like I would have back then and actually signed those major contracts, you should check out. Vantaa also, I'm really happy to share that listeners have funded get hooked up. You all can get $1,000 off your service by going to vantaa.com/funded.
That's V a N T a.com/funded. Okay. Back to the show.
[00:36:45] Olivia: Okay. So my first question is that I know a deal quote, unquote, failed his first attempt to raise. And I was thinking about that. And I was just wondering if you could explain what makes that extraordinary as it relates to his story, because my understanding is that. A lot of people fail, you know, and fundraising is really hard.
So is what makes his story rare? Is that he, is it that he like quit partway through like he stopped partway through? Or is it what makes it rare that he stopped and then was so successful? Like what, where does the novelty come in for you?
[00:37:30] Jason: Um, there are a few elements or portions of that that I think are.
Novel one is that, that story is rarely told. Cause if you think about it, stories of fundraising, um, are usually told with success. And so all you hear is like it happened and here's the headline number and wow, isn't this impressive. Um, so rare for people to know. What actually goes on behind the scenes.
The second part of it is when you're fundraising, you're generally fundraising at the end of your runway, as in, at the very end of the amount of cash that you have to even run the business. And the reason you do that is because the further along your company is. Ostensibly the greater your numbers are.
And the more value that your company is worth. So your, your valuation for your company, it won't be as high as it could be. As deep as possible into your company's life. So as long as waiting as long as possible broad strokes, that's, that's, what's true. And so if you time it such that you go out to fundraise, if you fail and you haven't done it the right way, or you haven't properly planned for that, that potential you failed.
And then we're at the end of your fundraise. And so then, yeah. Um, other people, other reasons like other subtle reasons is that some people might plan for a longer than, than is, um, desirable fundraise. A lot of people say six months before you run out of cash is when you should start because of how long it could potentially take the fundraise.
And that's usually the advice I give as well. But what you usually see happen, especially with. Inexperienced founders is that they will start their fundraise. Maybe they'll have created a great process the way a deal did going into this first attempt. And then it'll like go out and he'll be getting a little bit of interest, a little bit of interest, and then not so much interest and then die.
And instead of, you know, closing it off, they will limp along for the rest of the time until they're fully dead. And that is one of the most common mistakes that people make as they're going out. A deal was really great and had the presence of mind to run his fundraiser the right way. And when it wasn't going well, and it was, it seemed like it was dying off instead of doing what feels natural, like what your fight or flight instinct would be, which would be like, oh my God, everyone's saying no, I got to go find more investors right now to add to the process.
He said, you know what, I'm going to close off the process. Now, shut it down, spend a month. Rethinking what we've heard from investors really reassess the way the business is operating. Try to make a difference in the next couple of months in the company and the narrative, and then go back out again in full force.
Um, so that, that combination of things made kind of his story, a unique one to here and the way he was able to restart it, such a, such a good lesson and
[00:40:47] Olivia: his conclusion when he, after he put a pause on. The round was that, whoa, I need to work on my story. And if I remember correctly, he was trying to raise a seed round.
And I was just wondering if that, like, actually, I guess I'm trying to like flex my knowledge here a little bit, because a seed round is based on story a lot. Right. And so I was just wondering if people. Fail or struggle at this seed round. It probably is because of, yeah. I mean,
[00:41:22] Jason: I think the, the clarification that I would put there is whether you're, pre-seed on the back of a napkin or series B with a lots of lots of numbers, it's still all about the story.
It's just, what, what things back up the story or what people need to look at and believe in our two. Really understand the story. And so you're right. He had to look at the story he was telling and then re formatted and sort of reconstituted a story that allowed him to go back out and tell net new investors a story.
And then honestly tell. Investors that passed on him the first time. Hey, by the way we talked last time, this is what the story was. We actually heard your feedback and here's how it's evolved so far. And we've ever been able to see X, Y, and Z happened. And I think it's really important to share this perspective or this, this actual example of what can happen in that deal.
And I talked offline and, and I was telling him how impressed I was about. Is grit around the fundraising. And, um, what I said was, you know, there's something about a founder that was. Fail and fundraising hear feedback, actually incorporate the parts that work and come back, come back out to pitch again, with all of his pride intact, you know, like not with his tail between his legs, but, but just being like, you know, what we learned stuff and kept going.
And my, my reaction to him was like, I bet you some of the business metrics improved. I bet you some of the story improved, but I also bet you. The perception of him as a founder really evolved, like, is this, and we talked a little bit about this with a deal. It was like, is this guy too smart? You know, he's got his MBA.
He worked at this firm, he had this cushy, he had this like startup job in, does he have what it takes that sort of craziness that some founders need to have in order to like push through all the hard times?
[00:43:31] Olivia: I think the term he actually used with psycho. Yeah,
[00:43:36] Jason: no, no. I think that, that is the, uh, scientific word that the founder needs is the psycho nest to actually run, you know, run through these walls.
But it's true. It's like, wow. This person is not going to give up. He is adaptable. He learns quickly, and he executes all that together as a is a little bit of psychosis, you know, cause it's not, it's, it's painful what he did, but he came back and was able to convince an investor that passed on him the first time to lead his seed round.
Um, so very, very impressive.
[00:44:08] Olivia: Interesting. Is that something common that people who work in VC and then go on to. Want to fund an idea. Um, is that something that they often are kind of like grilled upon or have to prove? Cause I'm just thinking about it now and it's kind of like, I just see how that's possible, you know, just when I'm trying to think, but like within journalism where.
Everyone thinks they can have a podcast. And it's like, like, you know, if you're a reporter and it's like, okay, well I could have a podcast. And it's like, well, could you, like, I feel like sometimes within this space, there's a lot of judgment too.
[00:44:51] Jason: I'm in, and it's, I could kind of read it on your face. It's probably, but it's probably appropriate that, that sort of skepticism that, that you just, because you write an article and people follow you, that you could also have.
Uh, a great storytelling, voice, you know, a great, um, bedside manner in an interview, all these things, because there probably are, uh, there probably is a graveyard full of journalists that tried to do podcasts that ended up not doing well. And honestly, I it's it, I think it is the same for. X venture capitalists, because I mean, VCs, and I can say this because I, I feel like I fell into the same trap.
I was a VC. And you, you know, you think about the VCs a little bit, like, you know, PowerPoint, jockeys and people that, that can like pontificate and, and express opinions around things that they don't really know. But what does it mean. To do. They actually know what it means to find product market fit, you know, do you know what it actually means?
The hire top talent in a really competitive market? Do you know what it takes to, you know, stay up seven nights in a row, just so you can make payroll, like all of these things. That you don't see from the ivory tower to the venture capital firm. Those are all things that, you know, you'll never know if someone's great at, until they're in it.
And like, there's nothing about being a venture capitalist that, that helps you either way. In fact, in some cases it might give you. Inflated sense of ability as you go out and start, you've certainly had the advantage of, of fundraising. You can do that better, but like product, the search for product market fit.
Uh, you don't have an advantage there. So I do believe, at least for me, You know, I would, I'd be highly skeptical of X VCs that wanted to start a company and I'd want to grill them on, on things like grit, you know, like, like running the process, like
[00:46:53] Olivia: not so crazy. Cause we have spoken to a bunch of former VC.
[00:46:58] Jason: That's totally true.
[00:46:59] Olivia: Yeah. Maybe that's just
[00:47:00] Jason: your network. Well, you know, we've talked to it's survivor bias, right? We've talked to a bunch of VCs that raised money because the podcast is about people that raise money and maybe it would be interesting to go talk to a bunch of people that failed, uh, especially at, um, fundraising and their businesses.
Um, it's to a certain extent, you know, we can talk to me at some point because I was able to raise, but you didn't bring my company to like a multi-billion dollar exit. So, um, it happens. Okay.
[00:47:34] Olivia: I have one more thing to say. And it's something to tell you that, like, I don't even know if you'll care, but I feel like this starts fits into like startup.
World. Um, I'm like a crypto head now. I don't know if that's like a term
[00:47:49] Jason: crypto
[00:47:50] Olivia: day trader. Like it's not cool and I'm making like no money,
[00:47:54] Jason: but I checked my coins. Okay.
[00:47:58] Olivia: Sheba queen keeps tanking. I need to get out. Don't I, Jason, I have $14 and sinking by
[00:48:07] Jason: the minute. I'm proud of you. It's it's it's a good wave to be in at least at alert now, but put money in your you're willing to lose.
So they didn't learn and maybe you'll be surprised and make some money. I hope so, man. None of, none of what we talk about, especially when it comes to crypto should be considered actual financial advice. And we need to leave that in. If we're, if we're going to leave a segment around crypto.
[00:48:35] Olivia: But I would like some investment advice offline.
[00:48:48] Jason: Thanks so much for listening. There are tons of. Each founder recover on funded has around startups and raising in life and we don't have time to cover it all. So if you'd like to get a free insights pack based on a deal, Malik from humming homes, go to funded pod.com/humming homes. If you're looking for more insights, strategies, and support around fundraising, subscribe to our weekly newsletter.
Funded pod.com/newsletter. And find me on social I'm at J Ja that's J a Y Y E H on almost every platform. I respond to newsletter replies in D apps to hit me up. This episode was produced by Olivia Rheingold. Hi,
[00:49:28] Olivia: I'm back in Chicago and it's freaking cold.
[00:49:32] Jason: Thanks. Also to Jonno Lee from adamant ventures.
Hello friends, and thanks to a deal Malik from humming homes for putting a hashtag. There for me to work towards the idea of logging into a website to have my home cleaned, fixed up and serviced with just a few clicks seems pretty nice. And as always one last, thanks to our sponsor. DocSend the most trusted document sharing platform.