Abort Mission — The Life of and Lessons Learnt from Hutsy
Before I dive into our lessons learn from having been in the RETech industry for 3 years (from circa 2017–2020), I want to give a quick background of our journey.
Prelude 1: Life before Hutsy
Rashid and I had met in college through a mutual friend when I was transitioning into tech. Turns out we connected unnecessarily well the first time we met; we had ended up chatting for 3 hours on how we wanted to change the world in our own, large ways.
He had, already at the age of 19, been running his own design and development studio (Sophire Studio) in NYC. Naturally, I had to join him and help him run his business :) We had an amazing stint for a year where we mostly made a ton of mistakes, but also had a ton of fun learning about how to sell, how to build, how to communicate, and most importantly how much we loved working with each other.
We knew the imminent setting of Sophire Studio as we began to itch for a baby of our own. Him having a network of real estate agents and brokerages in his home town of San Antonio, Tx, from when he had worked as a web developer back in high school, it only made sense for us to reach out there and begin working towards problems they faced on the regular, that could be fixed by a software solution.
We had little notion of what a ‘startup’ was, but we quickly had a Wordpress platform running (FlareAgent), with paid users that were growing rapidly from 15 to eventually 200 agents over the span of a year and a half. What we had set out to do was very simple — automate real estate transactions for the real estate agent and brokerage.
The rest is history.
Two college chums, who had no idea what they were really doing, chanced upon Y Combinator for the first time, got very lucky to be the first batch that had access to their Early Decision program and ended up being one of the first 7 YC cos to be accepted that way for the S19 batch.
We spent the last few months wrapping up college, and eagerly moved to San Jose for what would be a wild ride for the next 12 weeks.
Prelude 2: The birth of Hutsy
As soon as we embarked on our YC life, we were quickly made aware of the expectation of us to meet by demo day if we wanted to stand a chance of raising a successful seed round.
We went back to the drawing boards and realized that the chances of us growing 10–20% week on week were slim, given how niche our target demographics were (we were targeting elite agents who had their own team of co-agents and transaction coordinators), and how slow our sales cycle had shown to be.
With much guidance from our YC partners (shoutout to Holly, Aaron Epstein, Dalton and Gustaf), we landed on an initial version of Hutsy. We knew, deep in our hearts, that we always wanted to serve the consumer at the end of the day, we just didn’t know how as college students. The biggest thing YC helped us with is probably in understanding the extent of what we could do if we broadened our minds and stopped being our own road-blocks.
So there we began, trying to change the annual trillion-dollar-home buying (and eventually, selling) market in the US.
Prelude 3: The spark that never became a flame
We set a goal for ourselves for the remainder of our YC batch — we had one month left till Demo Day — to pilot with 3 homes.
A month later, we presented proudly on stage having closed 4.
Thus began our fundraising process.
Through a series of miscalculations, mistakes on my part, and perhaps just circumstances (not going to say that WeWork’s scandal caused our fundraising to fail, but there seemed to be a pattern across all the other real estate cos in our batch were affected), we ended up raising a meager sum that left us with 8 months of runway. From September 2019 till June 2020, we needed to somehow flip Hutsy from being a baby that was unproven, to successfully blowing consumer and investor minds to stay alive and continue the Hutsy saga.
We planned that we would have a soft launch in December, and a hard launch in March, and that would give us a couple months of buffer to a close more homes before we ran out of $, allowing us to make the decision of raising if we needed to and putting us in a good position to do so.
Through a hard grind to close partnerships across 8 different cities (NYC, Miami, Portland, SF, LA, San Antonio, Austin and Seattle) with real estate agents, lawyers, mortgage brokers, inspection companies, real estate data/feed providers etc, and a simultaneous push to pump out a software platform for home buyers as we relentlessly tried to acquire them, I am really proud of us for how much we were able to accomplish in the 6 months that followed.
We made our final and best attempt to bring Hutsy to the nation at the start of March with our hard launch, our hopes up high.
Lessons learnt (the top 20 I can think of right now)
Alas, through a series of unfortunate events, namely COVID and the market crash, the home buyers in our pipeline ended up getting major cold feet, and any potential new ones backed away really quickly.
Understanding the gravity of the situation (that within a few weeks, we would not be able to pay rent again), we made the decision to shut down Hutsy and move on to other endeavors.
So, for anyone who is pursuing a RETech startup, or is just interested in this industry, here are lessons that we learnt and felt were true. YMMV ;)
- Selling to agents is not impossible, but sales cycles are long, and finding the right sub-demographics of agents is very important. Agents are spammed with a ton of software everyday, so standing out is very important.
- There is a lot of noise in the lower market (a ton of random CRM tools, a ton of new startups), but very little competition in the higher market (Compass, Zillow, OpenDoor) given how MASSIVE this market is.
- The majority of sales still occur through an agent. Real estate agents are here to stay for the forseeable future. The majority of the market isn’t ready to adopt a non-agent process (and this tends to be closely tied to the price of the home as well — the more expensive the home, the more dependent buyers are on a human to guide them through the process).
- Succeeding in selling to home buyers is a simple matter of figuring out a solid customer acquisition strategy. I always give the example of having a 100 folks in a room, where if I knew exactly which one or two of them were active home buyers, I would instant win. Of course, this isn’t possible. Therefore, being able to constantly draw patterns between where they existed, what they did before and after buying a home (fun fact, many recently engaged/married couples in the US begin looking for a home), and how to reach them will be key. Once you figure out how to spend a dollar to reach the right person, you’ll earn $10 in return. Otherwise, you’ll be spending $100.
- Facebook ads are NOT your friend. Unlike most other industries where you are allowed hyper-targeting, real estate/housing laws and regulations prevent serving ads to a specific demographic (we weren’t even allowed to drill down to a certain age group — the lowest we could go was 18 to 65).
- Google ads are probably not your friend either. Unless you have a stupidly big budget, good luck trying to out-compete Compass, Keller Williams, Zillow, etc.
- Find alternative and cheap ad channel. Especially if you are going after the consumer, find a new startup that is giving you massive discounts to try their ad channel. The ones that work best are those that are local. The more localized you can get, the better. Note that since you can’t rely on the typical Google/FB ads, you will need to hunt for new ad channels.
- SEO is a good game to play. It is “free”. Content is definitely king in real estate, especially since the process is so confusing. An educated customer is a happy customer, and a happy customer is a happy startup founder.
- Building out a search tool for homes is VERY annoying, but also rather simple. All you have to do, in theory, is sign with a data provider, and integrate it to your platform. What gets it messy is the requirements for each location (keep in mind, there are over 600 MLS across the nation, each with their own requirements).
- You might find quickly that you need a broker on your team/you need to get a brokerage license. There are a couple ways to work around this, but perhaps one helpful way I can leave you with is that by reaching out to most brokers who’ve been in the industry for a while (you could probably find these folks to be aged 35–40), you will find that they are very eager to explore new ways to expand their business through tech.
- Know what you can and cannot be doing. For example, unless you have a agent’s or broker’s license, you CANNOT transact a home on someone’s behalf and take a cut from it. Do not even think about it. Refer to the previous point if you find yourself in a situation like this.
- Figure out who your allies and enemies are. The real estate industry is so intricately woven — there are MANY players. Many of them don’t actually want any change, because that means that they will go out of business. Figure out who wants to take your side, and who will be adversely affected by what you’re working on. Use this to your advantage.
- Follow the money. Money is flowing in 70 thousand directions for a single transaction. Map it out. Study it. Find where you can take from, where you can’t. This is in parallel to the previous point.
- Trust is a huge factor. Figure out how you can build trust with your customers (especially if you are serving the consumer market rather than the B2B market). Since every transaction is so hefty, no one wants any single transaction to fall apart. If you are able to convince someone that you have been able to minimize points of failure, you will see success.
- The real estate market is seasonal. Summer times are HOT. Winters are cold. And I mean that both literally and figuratively.
- Real estate market is also cyclical, and dependent on the larger economy. People change behavior based on how the market performs. Note that this doesn’t necessarily mean that the total transaction value falls, it just means that different types of people buy and sell differently based on the market. We don’t have that much data to present a solid thesis on this point, but being on the inflection of a huge market crash, we noticed significant behavioral changes across different home buyer demographics. Practically, this means that you would have to change the patterns you had previously drawn in order to re-reach your target demographics (because this would have changed).
- “Insights” are overrated to the home buyer. There. I said it. They don’t care about your secret sauce, or what you’re doing behind the scenes. They just want to be sure that they find a place that they love, that their family and friends love, and that they see as a positive investment. If you can guarantee that and prove your trustworthiness, you’re golden.
- Access to capital is very welcomed. We found that things take time in this industry. Sales cycles with agents and brokerages are long. Home buyers take long to decide. Partnerships take long to close. Software takes long to integrate. Having significant buffer to survive through it all just increases your chances of being able to try multiple angles before having to close shop.
- Stay human-lite/be lean. Profit margins are INSANE, but only once you figure it out. Till then, you’ll be pinched and squeezed in so many ways. Ads are expensive, software is expensive, everyone wants a cut from you, and talent is of course expensive. The more you can automate (either internally or externally), the more you’ll see yourself getting closer to those insane margins.
- Manage your projects, capture every detail, don’t miss a single word. This matters for winning trust, and so that you don’t end up in legal shit. Since it is a highly regulated market, you don’t want to spend your time in court, instead of out on the streets winning hearts.
To wrap it all up, I want to say that through this story of ours, I hope you take away, not that building a Hutsy equivalent is impossible, rather that you would have to do it differently from how we did it because it clearly did not work for us. I hope that our lessons will be yours without the burden of failure, and that you will be able to bring forth to the world something amazing in this space that so desperately needs humongous change.
All the best to you and your team :)
PS: Rashid has moved on to working on a cool new database idea. If you have experienced any distaste towards garbage databases are, reach out to him at email@example.com. I am currently working at H1 as a PM, and we’re constantly looking for talented fullstack engineers to join our team. Reach out to me at firstname.lastname@example.org if you’re interested.