Nikki Pechet and her co-founder started Homebound after a wildfire ripped through Northern California and thousands of people were put on years-long waiting lists to build their homes to make building a home simpler. On this episode, she talks with Darrell and Jordan about creating an online flow that makes buying a home almost too easy, how her experience at Thumbtack helped her think through the labor logistics, and why she isn’t nervous about the impending economic downturn.
Nikki Pechet and her co-founder started Homebound after a wildfire ripped through Northern California and thousands of people were put on years-long waiting lists to build their homes to make building a home simpler. On this episode, she talks with Darrell and Jordan about creating an online flow that makes buying a home almost too easy, how her experience at Thumbtack helped her think through the labor logistics, and why she isn’t nervous about the impending economic downturn.
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Darrell Etherington 0:01
Hello, and welcome to found I'm your host, Darrell Etherington. And I'm here with the disaster zone to my dream home,
Jordan Crook 0:08
you know, Jordans, right.
Darrell Etherington 0:10
I'm like the perfect version, the homeowner versus homeowners association approves me. Put on the place of you, I suppose, though we're saying,
Jordan Crook 0:19
Yeah, sure. You can be the president of the homeowners association with that attitude. Yeah, no, they're always bad. I mean, that one, that's a good person,
Unknown Speaker 0:27
no one wants to be that person. Sorry, to all the presidents out there. alienating listeners. That's
Darrell Etherington 0:33
what we do here and
Jordan Crook 0:35
look at your life, though, really, like look at yourself in the mirror and figure it out.
Darrell Etherington 0:42
What we actually do, I found is talk to a founder every week about the stories behind the startups. And this week, we're talking to Nikki Pickett from home bound, which is a platform that makes it easy to essentially design and build your own dream home from the ground up, including selecting a spot and pricing it all the options is quite complicated. But if you go to the site, you'll find out it's actually not that complicated, which is the real impressive feat,
Jordan Crook 1:12
the site definitely makes it look less complicated than it actually is. Which gives me like a stressed feeling, I think, because it is a big deal. And you need architects and contractors and information on the lot and the location just like you will with buying a home and then you have all of these different vendors and suppliers and workers that do different things like tile and drywall and painting. And I mean it just it's like a army of different people with different goals. Yeah, that come together to build one home. It does feel somewhere in the middle of like these big developers that do the cookie cutter subdivisions, but like plopping those anywhere, and having kind of like Prefabs, maybe not prefabs but like pre designed places that you can kind of like pick and choose different little bits to but it's a really interesting company and it has insane investors. And she is obviously incredibly convincing. You guys will see soon. Yeah, but if someone else were talking to me about this startup, I'd be like you are out of your mind. Yeah, but I like totally bought it from her. I
Darrell Etherington 2:17
think Nikki gets a lot of credit for the success of the company so far and the investor she's managed to amass and you'll hear why. So let's go ahead and get started with Niki. Now. Let's do it. Hey, Niki, how's it going?
Nikki Pichet 2:34
It's great. How are you guys?
Darrell Etherington 2:36
Doing good doing good. Jordan just came back from vacation. I'm wearing a shirt that would indicate that I'm on vacation, but I'm not.
Jordan Crook 2:44
I look tan. You do? A little bit to do. Yeah. Yeah. And you don't even know how pale I normally am. I actually really tan like this isn't a little tan. This is like it's so
Nikki Pichet 2:55
it's pretty good. I mean, I would have guessed you had like a really good spray tan. Oh, no, it's a legit tan. And I think
Jordan Crook 3:03
to do spray tan, but it just I can't get on board with it. But I know it's healthier. Yeah, for for you listeners. It's the way to go. I just can't do like the like the Chris
Darrell Etherington 3:16
isn't a medical advice podcast. It has podcasts where we talk to founders about their companies and their founders stories and journeys. So Niki, do you want to start us off the way we usually started this off, which is giving people a little bit of an explanation of your company is homebound. In case people don't know, but they probably do because they listened to the introduction of this episode in which we talked about that. Yeah, do you want to give us kind of just like the elevator pitch of what it is homebound does
Nikki Pichet 3:43
definitely. So homebound is a technology enabled home builder is building the first digital infrastructure behind every single step that goes into building a home. And ultimately, what it feels like for our customers is just a next generation home builder, home building, as it should be. And our long term mission is enable anyone anywhere to build a home using
Darrell Etherington 4:06
technology. Nice. Yeah, I had a look at the website. And I was going through it. And it's a very nicely designed website. And I was I felt like it was kind of similar inexperience to like when you're configuring a Tesla using their like, configurator sort of, is that kind of the vibe you were going for? Or what was the thinking behind the creation of the tool?
Nikki Pichet 4:26
Yeah. So first of all, awesome that you got that vibe? Yes, I think Tesla's done a phenomenal job of making it so easy to buy a car that you almost can accidentally buy a car from them, which is pretty cool. But really, when you think about buying a home or building a home, it's so inaccessible to most people, and some of it is about the financials. And that's like a longer term problem to solve. That is certainly on our long term roadmap, but a bunch of it is also just information asymmetry. It's like, well, I don't know, where could I build a house? What kind of a house could I build? How much would it cost if I built a larger house or a smaller house? If I changed interior finishes, how would that change the cost to build? Ultimately, like the simplest expression of what we're doing is that checkout flow. And we think about it is ecommerce home buying. So it is a checkout flow where you can design and buy a custom home entirely online. And that's an incredible simple experience for homeowners. And over time, that will include components like financing, and homeowners insurance, and all sorts of things that you want to buy after you move into the home. But what's really complex and important and really the hardest part of everything we're building is the entire back and they need in order to surface that super easy like, choose a lot. Tell me what house you want on it make personalization. So that house so it feels like it's yours, check out and buy it online. That's really simple. Everything underneath that is where all of the complexity, and all of the competitive advantage really sets.
Darrell Etherington 5:54
Yeah, because
Jordan Crook 5:55
I'm so lost on how you built it. Like, this is so complicated, and it stresses me out. What like, can you talk a little bit about like the pre homebound process, right? Like, I have some money? I think I want to build a house. I
Darrell Etherington 6:11
don't because I don't know, I bought a house that was already built. Like what real Tillys? Start not that?
Nikki Pichet 6:19
Well, let's it may, it may be easiest to back way up. And let's talk founding story. And I'll tell you a little bit about what we started building.
Unknown Speaker 6:27
Why did you even
Nikki Pichet 6:28
why we're supposed to ask why did you even do that? Okay, so in 2017 wildfires in California burned down over 6000 houses up in Sonoma counties in parts of Napa County. And at that point, it was the largest and most destructive wildfire in the history of California, unfortunately, that has now been ceded to multiple other wildfires. But at the time, that felt like a shocking once in a lifetime event. And for homeowners in the impacted communities. Like this is an area that had 300 homes a year built there before. And now you needed 6000 homes to be built all of a sudden, and to be rebuilt by homeowners who didn't ever want to build a house in the first place and had no idea how to get started. And so when you talk to people, they were lost, they were hopeless feeling like how am I ever going to navigate architects and permitting and engineering and you finally get to talk to a general contractor. And the general contractor tells you no problem, I love to build your house, I'm gonna put you on my waitlist, and I'll call you in three or four years. That is what was happening to homeowners in this community. And so my co founder lost his home in the fire and was going through exactly the same process. And at the time I was at thumbtack, I spent four years helping build thumbtack to be one of the largest and fastest growing services marketplaces. And I knew that the marketplace model was really helpful for certain things, was not going to do anything to solve this. And so my co founder, Jeff called me and said, We need to create a next generation homebuilder around this, like we got to help rebuild our community, we got to be able to do better. And so we got together. And we said, well, first of all, on the labor side, we know that there's tons of labor, that is an hour drive, two hours drive away, that would love to help. And so we started calling people first we call people out of state, and then we called people who were just a few hours drive from Sonoma County. And every single person we talked to, we'd send them plans would say, would you be interested in coming to build this house? And every person we talked to said, Yes, I'll start immediately, like, When can I come? And so that was the first like, I think something might work here. The second piece was when you talk to homeowners, and what Jack was feeling was this, like, other sense of opacity of the industry, like, I don't even know what the first step is. And after I do the first step of like, I guess, file an insurance claim, like, what should I expect back? And then how do I start building my house? And how's it going to go? And how long is it going to take? And how much is it gonna cost? And what do I have to do? And what does somebody else have to do? And we looked at it and said, but everywhere else you would ever do anything, there's a tech tool that just tells you like, here's the however many steps and in our case, we now have about 600 steps and building a home. But there's no tech being used anywhere. And so it was like, Well, of course this isn't good. There's nothing to make it better. And so we originally started the company saying let's build a next generation homebuilder that uses a combination of off the shelf technology to start and proprietary technology that we build over time to create better customer experiences, plus a marketplace model around labor to bring in all the labor that we need to hurry up and get started immediately and build more efficiently over time. And so that was the initial thrust of it was like efficiency and experience were the two things we thought we could dramatically improve. And the solution to improving it ended up being well, you just have to put technology or software behind every step of the process in an interconnected web so that you can make the everything about it significantly better. And so that's where we started and we started building homes for homeowners on lots that they owned. And as we got into that We were building in disaster areas and people had lots and we would build first custom homes, and then what we called Ready plans, which were pre engineered homes that they could make minor modifications to. And then we said, Well, hey, we're solving this really well and disaster impacted areas. But what about Austin, Texas, where you have historically low inventory levels, and historically high migration, and people desperately need homes, you see the same disaster dynamics. So you'd have 35 families in the heat of COVID, standing outside waiting for an open house to open and 15 minutes into the open house, the house will be sold, and you'd have all these families just devastated. It was like, You know what, this is the same dynamic. So in order to solve the problem, in places where nobody owns land, we had to figure out how to go get lots I could tell you more about that. But that's kind of how it evolved from custom homes for people who owned land to ready plans that made it dramatically easier to just say, I want to awesome modern farmhouse with a white exterior, and white oak interiors, this is what's gonna look like to you know, I think they'll get lots and we can put the whole thing together, and we can create a checkout flow that lets anybody anywhere, say, I want to live here, I want this house on it, I'm gonna personalize it to make it mine. And soon I'm gonna be able to finance the whole thing, and by my house online.
Jordan Crook 11:14
So it's almost like, it's because this whole time I'm the kind of learner that needs like, an example, or an analogy or something to compare to, it's really hard for me to do anything theoretical, I'd be a terrible like physicist or something. But I kept trying to find what it was like a kin to or like, what it's the evolution of or whatever. And it almost feels like you guys are taking over for those big developers, right? Like the Toll Brothers and stuff like that, where I mean, so my I guess, fiance, my fiance, and I were looking at Toll Brothers. And it's a pain in the ass, they kept telling us the basement was a required option, how was an option either added into the cost of the home, or call it an option that we could pay for, but it can't. That's the dumbest thing I've ever heard. But it is a grueling, grueling process. And you don't have a lot of flexibility. You don't have a lot of choice. Yeah,
Nikki Pichet 12:14
and I mean, the other thing that's interesting. So before I got into the industry, I didn't know the spectrum of the industry as much. But Toll Brothers, there's sort of two sides of the industry. It's like a real barbell, you have 300,000 licensed home builders in the US who build an average of two to five homes per year. So these tiny little general contractors who build custom homes, and they'll build them anywhere you want. And then on the other end of the spectrum, you have Toll Brothers, and polti, and Banagher. And Dr. Horton, and all these guys who build where they control everything, they go get large tracts of land, they break it up into 1000s of blocks, they build nearly identical houses where there's a required basement option on every single one of them. That's the model. And so the thing that's really wild is what you just described as painful and opaque and bad. That's the efficient part of the industry. The other part of the industry, which is anytime you're building in what we call infill location. So in a central city area in an area impacted by disaster in an area where you have housing stock that is basically past its useful life and needs to be torn down and rebuilt. No production builder is coming in there. And so you have huge swaths of the country that are the most desirable places to live, where you have the most population migration. And the builders that are serving that are your tiny home builders who have no access to capital, no access to human capital, absolutely no technology anywhere that is set up to serve them. And so what we said is, we think that we can create a model using technology behind every step that enables us to bring the best of breed efficiency from your big production, home builders, having predefined homes that are really efficient, or every single piece of the house has been optimized for user enjoyment and ROI and efficiency to build, and understanding how to acquire lots that are gonna work really well for homeowners and be super desirable, but also affordable, and a process where you're managing to every penny that goes into every house. But you can do it in a dispersed way where you can build on any lot anywhere. And the thing you need to have to make that possible is you need to have a project management system where instead of standing on a street and saying, Yeah, I've know exactly what's happening in these 30 houses, because they're all next to each other. And I'm standing here looking at them. You can look at a dashboard and say, Yeah, I have lots scattered all throughout central Austin. And I'm standing here looking at this dashboard. And I know what's happening on every single one of my locks. So that's what we're focused on building technology around and there are going to be people who choose us instead of Toll Brothers because of the flexibility and the ability to configure your home online and know exactly what you're doing and exactly why you're choosing what you're choosing. There gonna be other people who would say there were no circumstances ever where I want to live in some big production community where the houses all look the same. I want to live in central Austin it. And I'm gonna choose one of homebound flats in central Austin, and I'm gonna pick a house that I love. And I'm going to personalize it and make it mine. And I'm gonna buy that. And so we're very focused on creating the spectrum of houses that serve all of our customers so that you can live wherever you want. And you can say, I'm gonna live in central Austin, and hey, I actually need more space. I want to move out to the suburbs and have auctions there as well.
Jordan Crook 15:20
So who are you going after? Exactly? And are you making the process also not only like, more efficient and kind of like more customizable, but more affordable as well, because there's a whole thing right about like, there's no more starter.
Darrell Etherington 15:35
When I was on the site, I kind of got the vibe that I'm trading, and maybe this is a erroneous impression, but then I'm trading some costs for convenience, because it felt a bit like things where it's like, oh, yeah, like, do this, and then you don't have to worry about it. And I'm like, whenever I see that, and you have that feeling, I'm like, That means additional cost, which for me as one specific consumer, I'm like, great. I'm willing to do that. But is that the case overall, already? Yeah, I guess just generally, kind of pricing isn't Yeah,
Nikki Pichet 16:03
so the long term mission of what we want to do is anyone anywhere. And so that's a huge spectrum of price points that we want to enable. But that doesn't mean we'll build all of those houses like we are investing tremendously in building a technology platform that first allows us to be the most efficient and greatest experience home builder that exists today. Over time, we'll be able to open that platform up and allow other people to operate on it. Today. Our core customers are typically people who are either a newly married couple who are buying a home that is at or slightly above median price points and center city locations. Second group is families who are trading up maybe from that first starter home and are looking for something that will fit their family or they can raise their kids. And then we also have a fair amount of empty nesters who are either moving into sort of their dream suburban home that is optimized for what they're looking for many of them moving back to Center City locations, and looking for a great home that they can enjoy retirement. And so those are sort of the three segments that we're going after. Today, our homes range in price from roughly median in a market to two to 3x, median price points, that sort of the core range today, which in a city like Austin, it looks like roughly $600,000, up to about $1.8 million is kind of our core sweet spot. We ended up with some things on either end of that. But that's sort of a core that we're focused on today. And when you ask about are you, you know, effectively is more expensive. Generally what we're trying to provide is dramatically better value for about the same price. So in a $600,000, homebound home, you're gonna get more space, more style, higher end finishes, and just like a better overall setup, lower operating costs for the home because of things like spray foam insulation that make it cheaper to heat and air conditioned your home. This is probably you're gonna pay
Darrell Etherington 17:59
great value and awesome at the moment. Totally, totally.
Nikki Pichet 18:03
So we invest in things that we think are really high ROI to the homeowner, then we can pass along things like we get tremendous efficiencies on buying all the inputs that go into a home because we have direct relationships with every manufacturer of finished components that go into our homes. And so we get great pricing on Windows and flooring and countertops and cabinets. So that's extra margin that we can invest in things like spray foam insulation that you can't see, but that you are going to feel having for the next decade living in that house.
Darrell Etherington 18:31
Yeah, great. Yeah. So it's interesting, as you're describing this, I think at the outset, you were like talking about how you thought about a marketplace model. But realize like, this doesn't work for this. But as I was listening like I'm like, it's there's elements of a marketplace, right? Because you work with independent contractors, right, but totally, but you're more involved. So it's like, it's a hybrid, you said platform.
Nikki Pichet 18:52
I think of it and like this is, uh, you know, every founder wrestles with what do I call my business, you know, this or that, or whatever. So, for us our business, I think of it as a platform because it is there's a software component that goes literally from data on lots that turns into us actually acquiring those lots, which turns into assigning a home to those lots and getting that home built, and then selling it to a homeowner or you can sell it to a homeowner really at any point along the way. And that homeowner lives in that home forever. And behind all of it. You have a database about that house that starts with when you're thinking about buying a lot. There's data created about the characteristics of what and the house that should go on it. And that carries all the way through to the homeowner living in the home 10 years later. And so it is it's a software platform. And then there are plugins to that platform, the procurement experience and how do you find the materials you know, any of our suppliers that have API's will be automatically plugged in so that we know lead times and pricing and availability of items. On the labor side we have what is effectively a tightly managed marketplace where we go out and we can add top of funnel if we know we're going to need more flavor or plumbers or electricians or tile guys. And then you go through a really rigorous screening process to be in the group of people who can have a job assigned to them. And then once you're successful with us, we're going to continue adding to your business and helping you grow your business over time. So it's a very involved tightly managed marketplace on the labor side. But over time, if you imagine this entire platform, like it's incredible for our business, and our business wouldn't work without it, it's also pretty incredible for anybody else's business to if you're home builder. And so I think the other Marketplace application that we imagine over time is letting other people operate on the platform, if you're a home builder, you would like to have access to lots to build on, you would like to have access to a library of plans that are perfectly optimized to be the most efficient to build, you'd like to have access to a supply chain that you can just say, I want to build plan 55 A, and it automatically populates every single thing that you need to buy to go into that house, and you can push by and deliver to my site. So all those components, I think function, also as marketplace. So there's a bunch of applications for marketplace functionality. But my belief is on something as important as your home, you want to have somebody who is deeply embedded, and helping control every component of it. Because so much goes wrong and so much it's going to be complicated and difficult in the process, maybe an ally who can help you get through all of it. Yeah, for sure.
Jordan Crook 21:21
That was another question I had, though. Like how high touch is it? My My mom didn't build her house. But she basically gutted it. It was like a two year renovation. And she's pretty she would never use homebound to be honest. Because she is so yep, she wants to be in the thick of it with her own pieces of paper and pen and all that stuff. But it is a stressful thing, right? And like thinking, Oh, the wrong thing gets delivered or you know, I'm having trouble with this contractor or whatever you want someone high touch you want to be able to like get on the phone with someone or look someone in the face and be like, This is my house. Like we got to work this out, not like yeah, email to info@homebound.com.
Nikki Pichet 22:01
So first of all, the way homebound operates is a total choose your own adventure for homeowners based on what they want. If you want to just get a killer house in central Austin that you can move into next month, we've got a whole bunch of those ready for you. And you can just pick a house and you may be able to make final touches like choosing the dining room chandelier and the powder room wallpaper and the backsplash in the kitchen. But otherwise, you move into a house that we designed and we built and you just get to move in and enjoy it. For people who want to be able to make personalizations, you can back really far up and you can say okay, well, I don't want to necessarily make a ton of personalizations. Or I don't want to commit that far in advance. So maybe I'm gonna buy a house that is just started. And I'll get to choose things like flooring, and appliances and lighting and things like that. Or if you say no, I really want to be able to choose as much as possible about this house, you can go all the way back and choose a lot that's in our inventory that hasn't yet gotten assigned a home to go on it. And then you can say, all right, I really want to live on this slot. And I'd like to choose this home with the Craftsman exterior instead of the farmhouse or the contemporary exterior. And I want to really upgrade the kitchen, because that's the thing that I'm going to spend all my time in. And I don't care as much about the bathrooms. And so you can make a lot of those personalizations. But really, it's designed so that you can operate however you want to within it, there are people along for the entire ride. So if you buy your home early, you're gonna have when you log into our homeowner portal, you're gonna have a whole team assigned to you. So you'll know who's on site, building your house, you'll have a salesperson who's helping coordinate all the details. And you'll have a project manager who you can ask any questions that you want about what's happening. Now, we also have a portal where you can see everything that's happening on site. So you can see job logs every day of what's happening, photos of what's going on on site. And you can see any changes to the schedule. So you have a view of here's what the schedule is. And if there's, you know, weeks of rain, where we end up having to go slower than we'll let you know, hey, here's what's happening with the weather. And here's the impact to your schedule. Or if we're able to get your house finished earlier, we'll let you know that you're going to have a chance to move in early Does that ever happened? It does happen. It has been harder the last couple of years than ever before. But we just finished a home up in Santa Rosa that was pre sold to a homeowner and finished it right on time, which is heroic efforts of the team but it's it's extremely important right now because people got mortgages locked in, so you got to deliver on time so that their rates don't expire. And so that was the case with this homeowner, it was like it doesn't matter what it's gonna take this house is going to be delivered to this awesome family. And it was so
Darrell Etherington 24:40
nice. So I want to go back to your family story a bit just because you talked about how you know initially it was kind of response to this need and your co founders need I mean not just for whoever all people affected in the wildfires, but like, Did you realize right away that you were gonna then continue with it or like When was the moment where it became like, oh, well actually this could be a business We should build that business. Yeah, continue it after
Nikki Pichet 25:03
well, so I am a like a home obsessed human. So I grew up in a super handy family and we didn't have a ton of money to have people come renovate our house. So we did lots of sort of DIY projects. And my mom thought everybody should know how to use power tools by the time they were in elementary school. And so we use power tools, and we built things. And we always had this sense that home was a really important place and that we're going to invest in our home. So fast forward to graduating from college. I was going to work at Pepsi during the day my job.
Darrell Etherington 25:34
Jordan was familiar with Pepsi as well.
Jordan Crook 25:36
My dad is Head of Global Sales at Pepsi Cola. Awesome. I wonder if you ever disclaimer, so you have to say it so that when I like Pepsi is better than coke. No one pays us from Pepsi. My dad buys me gifts for my birthday. That's an excellent.
Nikki Pichet 25:53
Well, I loved working at Pepsi, it was awesome. I spent my first two years out of college working there. And it was this incredible experience of selling a bottle of sugar water for someone and having them be like, yeah, like, this means something like me and Beyonce or like me, and Britney, like it was so cool. And then I graduated from college, I graduated a year early from college. So I literally moved to New York City with no friends, which we don't recommend to anyone. But I met Steven Ross, who's chairman of the related companies, which is the largest residential developer in Manhattan. And he asked me to come work for him. And I was like, Well, like I can't, because I already have a full time job. But the thing is, I don't have any friends. So if you don't mind, if I work weird hours, I can work nights and weekends. And so I worked two full time jobs out of college, one selling sugar water to people who were so thrilled about the brand. And were so passionate about it. And the other working in residential real estate in Manhattan with apartments that cost 10s of 1000s of dollars a month, and nobody cared. There was like no brand recognition. Nobody was like, Oh, my God, I have this. It was just like, yeah, I spent a lot of money. And I might move if somebody offers me like a better box at a better rate or whatever. And I was just like flabbergasted. I'm like 20 years old, living in Manhattan by myself. And I'm like, This doesn't make any sense. And so that was the first time where I was like, I think residential real estate could do better. And so didn't necessarily know that I would end up in this space. But always like, continue to love home love, do it yourself projects, I went to business school, spent almost a decade have been doing digital transformations for old industries and seeing over and over and over again, that you have these really old successful, like operationally efficient companies, but have ancient tech stacks that they're never gonna be able to fix. And then somebody else swoops in and says, like, Oh, that's cute. I like your old tech stack, I'm gonna build something that is really efficient, and simple and new. And I'm going to crush you. And so watch that over and over and over again. And I think that was very embedded in my mind of like, it's really hard to take old companies and make them new. And every industry needs new companies that are entirely founded on digital infrastructure at every step of the process of what you're doing. And so I left Bain and I went to thumbtack pretty early and got to be part of that team and building it from a small company into a large company and really understanding what makes businesses like that work. And in that process, I got to really understand how tradespeople work 60% of the business was home categories with trades, people who were incredible plumbers, and painters, electricians, who just weren't that good at getting customers and sometimes this incredible tool to get customers. But I got to learn so much about the way that labor works and the way that people think about scaling their businesses, and the different types of people who operate in that industry. And so when Jack called me it was like, oh, yeah, we can fix this. There's nobody in Sonoma to build the houses. That makes sense. But there's a huge population of people in Sacramento and Modesto and Bakersfield, and like, we have licensed reciprocity with a bunch of other states. So you could go to Louisiana and bring people in or Oregon, or there's like tons of labor. And so I immediately knew like there's a labor solution here. And you could create a much deeper interaction with customers. And then I think as you got into it, the original vision was like, alright, help our neighbors in the backyard. And then you pretty quickly get into and you're like, well, here's an industry that is, you know, construction in the US is a one and a half trillion dollar industry today. There is no technology, there is no good technology anywhere in the industry. You start playing through it, you're like, you know what, I think this might actually be like the biggest business that we could possibly build. Let's put our heads down. Let's focus on single family homes, which is a close to $500 billion annually business. And let's just make an incredible experience for homeowners to be able to build homes in the midst of the greatest housing shortage that we'll see in our lifetimes. This feels like it could be a massive business. And so it was early on where we felt like this isn't small. This isn't one market. This isn't just disaster recovery. This is fundamentally changing the way that homes are built and enabling access to homebuilding not only to millions of consumers who would love to build a home but just can't deal with the complexity, but also to trades people who it's a horrible industry to participate in from a trade perspective and trying to get collections of trying to deal with all the complexities that happens around you. And so we felt like the opportunity was massive. And that's why we're running after it. What was fundraising?
Jordan Crook 30:12
Like? I mean, you look at your, I mean, whatever I can see on the internet of your investors, and like, in these growth rounds, obviously, you have some amazing investors that are like very well known early on, like the first time, I imagine that the reaction was similar to me. And Darrell was like, Wait, you're gonna do what? How did that process go? That first fundraising round of trying to get people on board? You need capital for this? Obviously. Yeah.
Nikki Pichet 30:36
So my view on fundraising or my experience with it was, it's actually pretty easy in the early days, like, if you talk to any venture capitalist, like the basic sort of VC playbook is large Tam, decent founder team idea, that doesn't totally suck, if that's what you're looking for. And so we had massive Tam, we had several people in the founding team, who we just, we knew we're gonna be able to build a big business here. And I think, if you have conviction that you know, you're going to be able to do it makes it a lot easier to just tell your investors like, the range of outcomes here is gonna be like multibillion dollar business to a like 100 billion dollar plus business, but like, we can make this into a decent business. We had some good traction, like in the early days, there were tons of homeowners in Santa Rosa did their houses rebuilt. And we were able to convince a number of early customers to just trust us. And we had some incredible builders on our team who'd come from big production homebuilders, and also from custom home building, we were able to actually offer a pretty good team and plan to our early homeowners to get started, but it meant we had a lot of pre sales. So we were able to say, this is a massive market, we've got the right team to go after it. And we have early traction that proves we're gonna be able to do it. We were wildly fortunate to get early investors who were incredible investors, but also felt like founders like Josh Kushner led our Series A from thrive and Josh's an amazing founder in his own right. And he's also an incredible human being. In those days, he felt like a third co founder, he felt like somebody who was in it with me, who wasn't asking, I had this meeting with him right after we closed around, I spent two full hours of breakfast, telling him all the things that were going wrong that I did not affect. And it didn't occur to me that like that was sort of a dumb thing to do when he shouldn't do that with your investors. And I left the breakfast, and I texted him afterwards. And I was like, hey, really sorry, I didn't say anything positive. Like actually, there's a lot of things going really well, too. Like there's a few of them. I need to
Unknown Speaker 32:31
use more money, I
Jordan Crook 32:32
definitely want to keep investing. But he
Nikki Pichet 32:35
texted back and he said, You sold me once now I'm on your team. And you never have to sell me again. I'm here to solve problems with you. And Josh has gone on to invest in every single round that we've raised. And then not only an incredible investor, but what feels like a team member and a friend always. And that same conversation. So I raised our Series A when I was 38 weeks pregnant with my third child, and I'd had my baby, send her term sheet that I got home from hospital, I had the baby 30 days later, we launched our second market when she was two weeks old. It was a wild time. And so that breakfast with Josh and he was like, Oh, and by the way, I noticed you took no time off, go take the next two weeks off, I just gave you $10 million. So I can say that you have to do that. I don't want to talk to you. And I was like, okay, so took a couple weeks off and it was great. But you know, we're so lucky to have people like that and so Thrive invested COSLA invested. There's an agreement for runner invested, Ashton Kutcher invested. We had just like a great set. Google Ventures with a great set of investors in our series A and what's been really helpful about that, as they've all participated in every round since and you have this really nice portfolio of people who have really different spikes. Josh feels like a founder and Vinod Khosla is like big bold, like, do the craziest, most ambitious thing you can possibly do. And then David, why then is postponed. But I love like bananas that way. And then David Wyden is like, super willing to get into the weeds of how your contribution margins work, and exactly how that's gonna play out over time. And it's such a helpful pairing to be at a million feet looking down on the biggest opportunity, but also like, okay, great. And then exactly the path to profitability is what? And what do you have to believe to get there? And are you on track to do it, people like Kiersten Greene, who create incredible customer experiences and believe in creating magic for her customers, we were really lucky to get a bunch of people on board who've stuck with us, actually, later rounds, I think are harder, because in the early days, it's so simple questions of like, Tam team, some traction, right? In the later days. It's like, no, no, no. Yeah, show me your contribution margins. And it's if you're raising venture dollars, it's really easy. If you have a software business and you're like, Yeah, contribution margins are 90% It's a lot harder when you have a business that your contribution margins are gonna be lower your market is massive, you have dramatically less competition, and then you also end up with other financing via So last year, we raised hundreds of millions of dollars of debt, in addition to our Series C, and for some investors, they get that and they're like, that's incredible. You just financed growth at a dramatically lower percent return than I'm looking for. For other investors. It's scary. It's like I don't I don't know what that looks like, and how are you gonna manage it. And seriousIy was a kind of a different set of trying to find the people who really understood the business and wanted to invest and then starting to get into crossover investors who looked at us like a public company. And that was actually really helpful to get that view of oh, okay, here's how we're like a homebuilder. And here's how we're like a tech company. And here's how that comes together to think about longer term valuation, every round sort of had its complexity, I'd say, series A was the easiest. And I think for most people, series, a should be easiest, because you just have to tell a really good story. And then fifth, well let our series B. And they've been a fantastic partner as well. And coastal NRC, but the C was the one where we just had the most divergent conversations. And you talk to VCs who are like, I love the space and really like your team, but I don't understand the business like I don't we do software. And so you've got to be able to take that and be like, Okay, that's not because they don't like me. It's not because my business is bad. It's just like you don't do the thing that I do. Okay, that was a big for me was understanding that everybody isn't going to want to invest in the thing that you do, and getting really good. And I think we're probably okay at but over time, I started to get really good at understanding who are the people who really want to invest in what we're doing, how we're doing it over time? And how do we make sure that we're telling a story that is polarizing, where people are either gonna say, Oh, my God, I love what you're doing, and I'm gonna support you no matter what. And other people are gonna say that for me that doesn't fit with my portfolio, and know that that's how it's gonna go. And that's actually
Darrell Etherington 36:42
can be frustrating, because you're like, you want to be the mold breaker all the time, right? And you're like, but I can just get through, like, look at everything we've done. Look at me and look at the end, then like, you'll just get over the hump, but it's like, no, some people just never will.
Nikki Pichet 36:53
Right? Yeah, I sent a bunch of time on that, like, the evolution is sort of like, you pitch people. And you're like, No, no, I know, you only invest in software, I totally heard that you said that. But let me tell you why. And you spend a bunch of time and you know, you spend time with people who are good friends, like I was close to the Sequoia team when I was at Thumbtack. And so I got to talk to Alfred about it. And it was like, well, we're never going to invest in you. And here's why. And it's like, I totally get it. But like, just let me finish. Like you can, you can pinch us but like, You got to kind of get over that. And also have to figure out how to just not take it personally, I could run a software business, if I want to run a software business, this is the business I'm building, and it's the right thing to build. And some people are gonna love it, and some people are not going to invest. And that's totally fine. Well, it's
Jordan Crook 37:33
the same thing for customers too, because you can always like, go and get the rest of them. Right. But if you're like worried about if you were trying to build this for like everyone who wants a home, like anywhere you would be it would, you'd be screwed no matter what, because it's never going to work for everyone. Maybe not soon. So you have to focus on that one slice and then like, expand from there. Yeah, same with investors.
Nikki Pichet 37:58
That's a trick in building any businesses like, You got to zoom out because you want everyone like, I want everyone on our team to think we're building the biggest business that has ever existed in the whole building, because you need to be thinking in that bold way. And you need to be willing to make mistakes and to fail, so that you can quickly iterate and get better. And I think it's so important in the DNA as an early stage company to build both the mindset of here's where we're headed, and the resilience of, we're gonna fail so often on the way to get there, and we're gonna get better every time we're going to fail fast, we're going to continue to get better. And so it's important to have that vision and to know that like, for us, I think success is we enable anyone anywhere to build a home. But we don't do that today, there's, that's a 20 year vision, today, we're gonna build for this slice of the market, that we can do a really good job from a customer experience standpoint, and where we can have margins that are solid, so that we can get on to the next step of building for a wider slice. And you just keep adding, and you got to be able to show people, how do you get that whole arc? But if you can prove it, then you could just focus on today, what do I have to do today to make the business successful?
Darrell Etherington 39:03
So we're almost out of time. And I don't want to end on a downer. So I promise we'll go back and like to find one at the end or whatever. But like, the economic outlook is like not wonderful for let's say the next few years, probably. And the housing market is very likely to be I mean, it's already being affected and is likely to be much more affected. So how does that impact you? And you're like, you seem just from having talked to you for 40. But it doesn't seem like you're pessimistic person in general, but like how does it affect you? You're thinking about the prospects of other next fundraise events, stuff like that.
Nikki Pichet 39:34
Yeah. So there's the really practical side of it, which I think any founder right now needs to be thinking about in all scenarios of what could happen. How do I know that my business does not blow up. And so super important, like we're talking to our board about path to profitability, so I fully believe we'll be able to raise another round of private funding and go public at some point in the not too distant future. But the only way to come Triller destiny is to know with precision what our path to profitability looks like, and be super clear that we can be on that path. I think for any founder out there right now, you should know what your path to profitability is. And it's gonna force you to think about some dark things were like, Ooh, I really have to get to profitability, you're not gonna get to do some of the things that you've been dreaming about doing. And it's very important that you swallow that pill and see, this is what it looks like. Now, you can still have cases like we have a rigid path to profitability, even in downside cases around what we think we can do one, both growth and margin acceleration. That isn't fun. I don't want to have to do that plan. But I know what it is, then we have our base case plan, which is like, Okay, we still think we can do really well, even in this market. And one thing that is fun, frankly, about being a startup, when the world is falling apart is for me to triple the size of my business every year for the next several years, particularly in a market where you have a massive housing shortage, no matter what happens with the housing market, we have a massive housing shortage, particularly in the markets that we've chosen to operate in. I can dramatically grow the size of my business without stealing one point of market share from anybody else for several years. And so what's really fun for a startup is like, you're going to be impacted, you need to know how you're gonna be impacted from a macro standpoint, but still, you have the ability to grow massively and to completely transform during a time when much bigger companies were being impacted by the economy much more dramatically than you are, are having to contract.
Darrell Etherington 41:29
Yeah. And they have the inertia that they can't shift fast enough. And you're able to be nimble, right? Yep,
Nikki Pichet 41:34
that's exactly right. And if you go back to like, what was the original thing that we were trying to build with this company? It's a nimble and responsive homebuilder because we needed to be able to go into a region where there was no labor and where you had 6000 People in needed homes, and quickly figured out how to build a homebuilding operation and get building quickly and efficiently. We have that DNA. And so the ability to say, okay, markets are shifting, what are the places that we believe from a risk perspective are most insulated? And how do we want to disproportionately focus our business in those places from a price point perspective, from a market perspective, from a timing perspective, and our business is all backed by data in a way that most other homebuilders aren't. And so things like knowing what you think the likely price volatility on a particular lot in Austin versus Houston versus Dallas looks like, means that we have the ability to go in and be much more precise. And to build a portfolio that is lower risk than any other homebuilders portfolio, right now, there's a lot that as a CEO of a startup, you've really got to be navigating and understanding like, things could go sideways. And if they went sideways, what are you going to do? But once you have that plan in place, then I think it is all opportunity. And it's all about figuring out, where are other people who don't have data scared? And how can I build up enough data that gives me conviction, so I don't have to be scared so that I can operate boldly
Darrell Etherington 42:57
blind spots?
Nikki Pichet 42:58
That's exactly right.
Darrell Etherington 42:59
Oh, that's great. I mean, you've convinced me and I'm Jordan will attest. I'm an expert in pessimism. Like, my conversations from the past weekend, were like, do you think infrastructure is done? Like, he wasn't like, what's the opportunities? It was like? Do you think it was air travel infrastructure specifically, but like, is that just never coming back? I think it'll degrade until nothing to zero. And you're like, by the way, we have so much opportunity, it's gonna be great.
Jordan Crook 43:29
It's totally, it is whiplash working in startups during an economic downturn, because, yeah, we're gonna do and I'm like, Oh,
Nikki Pichet 43:38
I think the thing you're always looking for, though, is like, you want somebody who has the backup plan? Who knows? Like, how am I going to get to profitability if it goes sideways? And what can I do to massively scale back so that I survived, like, step one for every business should be survive. But once you have that plan in place, and as long as you are really clear about it, then you get to start thinking about opportunities. And you can think about what are the right risks that you want to take? And what are the things that are not the right risks for your business? You know, we're talking to our investors on both the equity side and the debt side. And one thing that is so clear is you've got dry powder everywhere, there's so much money out there. And there's been a big venture pullback over the last quarter because people are letting prices reset. But that does not change how much investable capital there is sitting at every venture capitalist across the world. And so they can hang out for a couple quarters and not invest. But at some point, those dollars are going to work. I think the real thing we should all be thinking about is how do I make sure that my business is better than the other businesses that they could potentially put dollars into and we think the same thing on the debt side where it's like, well, Goldman's not gonna stop deploying debt might be a little bit more expensive, might have a little bit more red tape around it, but as long as we are one of the best opportunities to invest in we'll be okay. So what does that mean? How do we make sure that We are hitting the metrics that we believe will prove that.
Darrell Etherington 45:03
Yeah, that's a great point. Yeah. Cuz it's not like everyone's tightening their belts because there's a scarcity of resources. The massive wealth still exists, people ended up pools are still there. But you're right. It's about like, things were totally out of control when it came to valuations. And they needed a correction. Yeah, that's exactly right. Well, so yeah, like, this is a great note to add on, actually, because it's a very optimistic takeaway, I think, for anyone listening for all the founders listening. Yeah, I really like should, I think galvanize them for action. I wouldn't know because I'm a risk averse person who thinks that the airports are all going to collapse and we're gonna live in fear. But, but yes, I think your perspective is much nicer, better. And I think people will have a lot to take away from that. So thanks very much, Niki. It's been a great conversation with you.
Nikki Pichet 45:50
Excellent. Really enjoyed the time with you guys. Thanks for having me. Thank you.
Darrell Etherington 46:00
All right, Jordan, that was a conversation, Niki, what did you think besides being very excited that she was a Pepsi alum?
Jordan Crook 46:08
I mean, I don't really care that much. I mean, I just like don't like when people are super obsessed, and like stubborn about coke. Because I actually don't think Coke is that good. But even if I did think it was that good. I still have to be on Team Pepsi, just for financial reasons. But you know, whatever. Anyway, she's great. I think that she's incredibly impressive. And I mean, I said in the intro to I just don't think this idea would work without her because she really explains it well, and she's got this like confidence and optimism without sounding like she doesn't have her feet on the ground. Yeah, I think it's like a really hard balance to strike. And it also feels like one of those things where we could have talked for another hour, just trying to understand better, what exactly happens with the business. Like I wanted to go more granular. I was like, So who's your grout dude? And like, what grout options do I have? Like, if I wanted to do grout? We didn't do that, obviously. But you could go on and on and on. Because it is so complex.
Darrell Etherington 47:09
Yeah. It's a very complicated business. That was what was most interesting to me about our chat was how she said that the early days were easy for her when it came to fundraising. Because if you came to me with this idea, it sounds so hard. And I mean, that in the sense of like, there are so many hard goods involved and human beings and
Jordan Crook 47:31
like, like shipping, and there's like manual labor and being paid out. And like there's just every little tiny piece. I mean, it's like building a home. Right? If you were to go build it with you. I mean, we that was our first question like, What if there wasn't this and I needed to build a home? What would I do first, and I have no freaking idea like that. It would just be terrible. I would just smash down this one that I'm in now and then smash it down. And then you pull out like Ryan Gosling. And you just
Darrell Etherington 47:58
stand that reference book.
Jordan Crook 48:00
He builds her house and the notebook?
Darrell Etherington 48:03
Oh, I haven't seen I haven't seen that. But
Jordan Crook 48:05
I haven't seen the Nope. Oh, my God, well, we have bigger problems to solve. But I did have something that was so much more important than the notebook to talk about. It's obvious Oh, wait early days. So yeah, you were saying she said that it was easier in the early days. And I didn't want to say this during the podcast with her because it's like not whatever. It's not great to say it's not maybe in great taste, but like a wildfire. Like she's probably pretty grateful for that. Because that early traction, yeah. Like investors at the early stage are looking for Tam and team. But like, they need some proof of concept. And this is the kind of business where it is so complicated that it would be very hard to get proof of concept without funding. But when people actually already own the lot, and there's like a desperate need, and you're like, hey, just we built a website. And like we can connect you to the right people. It's basically like connections and partnerships, and a good website that like streamlines at all, but not the lots and the homes and the materials, like not all of the extra upfront cost. And that was probably so critical. Because then you say, oh, yeah, like, look, it actually works. And that wouldn't happen without a disaster sound like myself?
Darrell Etherington 49:18
No, you're right. But I think if there's anything that's true about Nikki, it's that she is a person who in the best possible sense, makes her own opportunity of situations that arise and I know what you're saying like that it would be important to kind of present it that way. But I also don't think it's that offensive. Really, it's actually like, Oh, look at this point accuse
Jordan Crook 49:38
her of not being there was a wildfire. You know what I mean?
Darrell Etherington 49:43
She's not excited by it. But it's similar to a lot of the companies we've talked about who kind of got a lot of traction or born out of the pandemic, right? It's like COVID Yeah, like you can't, it's an act of God, right, like the technical term and if you go to like, if you're like an insurer, or an underwriter or something or force majeure, right But it's like, what can you do with that? And there are people who, for whom it's like, well, this is what I can do it that right. And it's a very good thing, when you're able to do something that then becomes a much superior model of what came before. And it sounds like homebound is that in an industry that was essentially very legacy bound, like an industry that had a lot of inertia around it.
Jordan Crook 50:22
When I do think that stuff that starts I mean homebound, didn't actually start during a recession, anything that started during a boom, but I do feel confident in the kind of her plan around this economic downturn. And like you said, like, you can't be mad, some of the most successful businesses of the last 20 years happen were born in like, 2008 2009. So like, you can't be like, Oh, how dare you take advantage of all these businesses closing, you know, like, that's how disruption happens is in those like, do or die moments, in a lot of ways? Yeah. Yeah. Yeah.
Darrell Etherington 50:54
And yeah, you're right about her, like when we were talking about be like, current and, you know, media future outlook for the economy and her being, like, very convincing in terms of the measures and the planning that she's done. And all that was like, Oh, yes, uh, huh. Yeah, I believe you, which, if nothing else, even if that turns out to be totally, that's a great skill.
Jordan Crook 51:17
Exactly. I don't. Yeah. And obviously, like homebound has plenty of investment and seems to be doing really well, right. Like it wouldn't continue to get debt from Goldman Sachs and all these other things if the numbers didn't all add up. So it's obviously doing really well. But I think even if it wasn't, we would think it was. Yeah, because I do think she's incredibly skilled at like, I don't want to say like, pulling the wool over your eyes. But there's just something about when she says something, she doesn't even have to give you details. And you're like, I totally believe you. I 100% believe in you. Yeah,
Darrell Etherington 51:46
that's right. And I do think that for her specifically, it comes from a place of being herself feeling very informed and confident about that.
Jordan Crook 51:53
Yeah, totally. Right. Like just conviction and confidence and why she's doing it gets her there. So
Darrell Etherington 51:59
yeah, all right. So that's our episode, always rate and review us on iTunes or know Apple podcasts like and subscribe,
Jordan Crook 52:07
you know, share them share the word tell people about found you. Just tell them word of mouth. That's
Darrell Etherington 52:12
a great way to grow businesses. I've
Jordan Crook 52:14
heard why not? Hey, I was listening to some podcast. And it's called found you can find it on the podcast app of your choice as big the screen
Darrell Etherington 52:23
and you can say, well, really what I really like about it is the charisma of both hosts and also their Intelligence Scale. Yeah, and general sense physical attractiveness. You can't see that. But you could also mention that
Jordan Crook 52:35
their lack of focus, yeah, weight or whatever, whatever it is you like, or don't like, hate. Listen to us. I don't care. Yes. Let's
Darrell Etherington 52:41
just listen and give us good reviews. That's all we ask. It's not too much to ask. Thanks very much. Thank you.
Round is hosted by myself, TechCrunch news editor Darrell Etherington and TechCrunch Managing Editor Jordan crook shot Kulkarni is our executive producer. We are produced by Maggie Stamets and edited by Cal Keller TechCrunch. His audio products are managed by Henry pick of it. You can find us on Apple podcasts, Spotify, or wherever you get your podcasts and on twitter@twitter.com slash man. You can also email us at found@techcrunch.com and you can call us and leave a voicemail at 510-936-1618. Also, we'd love if you could spare a few minutes to fill out our listener survey at bit.li/found listener survey. Thanks for listening and we'll be back next week.
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