We spoke with Ernie Graham, the CEO of Homebot.ai at his Denver office and he discussed how data is giving real estate consumers more control and making mortgage brokers and agents more efficient. Ernie also dives into the entrepreneurship side of things and talks to us about starting a real estate software business.
Homebot Podcast Transcript
Dan Daugherty: 00:01 Welcome to episode number five. I am Dan Daugherty your host. This is Rentbits Rental Talk and today I am in downtown Denver at the offices of homebot with the founder and CEO, Ernie Graham. Ernie, thank you for inviting me here. Oh Man. Well first off we’d known each other forever. Um, your first company was called peep.ly, right? And you sold that to realtor? Socialbios a little bit better. Yeah, that sounds better. So socialbios was sold to realtor. In what year was that? Two Thousand and 11.
Dan Daugherty: 00:38 And then you stayed there for three, four years. Grew that
Ernie Graham: 00:43 About two and a half years longer than I thought
Dan Daugherty: 00:46 you had an earn out and everything else. Right. And then you have this idea of homebot which is homebot now. Right? Homebot.ai? Tell us more about homebot.
Ernie Graham: 00:57 Well, it was interesting. So even before that and decided to take a year off after the market crash. And so I was a real estate agent. So between being a real estate agent, a broker, I’ve been ruminating on this idea for a long time, with my cofounder a home around creating content that consumers actually valued. And so the concept really started with us recognizing how amazing zillow was at playing on the vanity of the consumer to get everybody to feel rich, I want to feel, want to fill, of course. And um, and so the idea around Homebot was, well, instead of just making people feel rich, we create content that actually makes them much so homebot is this financial dashboard that helps people track the value of their home. Chapter loans, truck, their equity track, track, track, track, track. Then there’s all this intelligence that is personalized to them that tells them how to save money as well. It will be probably the largest asset their ever own.
Dan Daugherty: 02:17 So for example, I have my house, I put my address in your APP, right? Uh, you use artificial intelligence and data to then periodically tell me what my house is worth. Potentially the cost savings I can do by potentially refinancing. What else are the other.
Ernie Graham: 02:41 It goes on a mortgage. If you had mortgage insurance on your home or you’re paying mortgage insurance every month was got to tell you that when you can get rid of that mortgage insurance, if you qualify or if you might be eligible for a reverse mortgage to stop your mortgage payments, it’ll tell you that. It’ll tell you a lots of how much your home would rent for on AirBnb. All those things that help you see your home as an asset, um, and save money and build wealth. But one thing I will say that’s missing is that our business model, but it’s also our product model is that you can only get homebot through your real estate agent or a vendor because we’re complimenting the human, the practitioner here with this intelligence. So you wouldn’t put anything in. It would be, let’s say that close to your last deal. Last would put that information in there for you. And so he would just get an email notification and you click on it and it was just a magic to you all this information.
Dan Daugherty: 03:42 So you do that for just for sale now or for rentals too. Is there an opportunity there?
Ernie Graham: 03:46 So it’s interesting. So, um, lenders and agents have a lot of clients that are entrepreneurs and that, um, that own properties for the purpose of renting them so they will give home bought to those entrepreneurs. So let’s say that you own rental properties, you want to keep track of the equity and the rental potential of all of those as well. So in that context, yes it would work for you as an entrepreneur but our sort of our primary use case is that we want to empower Jo Jill homeowner to be like asset managers, hedge fund managers, like Super Smart with the way they use equity, leverage equity, consolidate debt, all these things that help them build wealth with their home.
Dan Daugherty: 04:32 So, uh, you guys work directly with the mortgage broker. So, so for example, I have a real estate agent and I get something that says you could refinance and save $40,000 over the life of your loan. Would you like to do that? Then does that go as a lead to the mortgage broker?
Ernie Graham: 04:52 Yeah actually, If you’re already that broker’s client, it’s not really a lead. What it is, it turns you into a handraiser. Instead of that, that a loan officer berating you with emails, content marketing, product marketing, day in day out which annoying basically beat you into submission to respond to that. To respond to that. Instead, they’re just giving you an application that you get to play with see, engage with every single month, year after year, and when you’re ready, when HomeBot says, this is a real, this has real potential for you. Then you click on a button, pick up the, you know, click on their phone number, whatever it is to contact them to help you effectuate that transaction.
Dan Daugherty: 05:35 Got It. Gosh, so you guys are growing rapidly.
Ernie Graham: 05:38 Oh, it’s like crazy. It’s going crazy. I think we, we augment the human. So we augmented the real estate agent and the lender, they want to do better, trust me, they want to do better. Um, it’s just hard for them to do better in an environment where there is shrinking margins and there’s more taking on more customers. Sometimes I can tell them Jerry Maguire story. It’s less money, less customers,they want to do better and I think that humble hoping to do better by their clients and prospects in terms of delivering super high quality intelligence to them. That empowers your client.
Dan Daugherty: 06:12 So did you bootstrap this? Did you raise money? Tell us the story of, of how this came to be because this is something that one, I don’t know of anything else that’s out there, two and maybe there is, but maybe you’re the first movers in this and two, was it hard to, if you did raise money, did you raise money? It, was it hard or did you bootstrap this knowing with 100 percent certainty that this is going to be successful?
Ernie Graham: 06:36 So it’s interesting. We’ve always, or I always bootstrapped, I didn’t know anything about raising money. Even when I sold that last company to realtor.com, that was all bootstrapped. I’m the kind of the companies I built before that all bootstrapped. But coming into home by one of the things that happened, we started to bootstrap right out of the chute. And matter of fact, when we left realtor.com, I’m Ira, my cofounder and I decided that we were going to spend about a year just testing with consumers. We had done well enough, we’ll put enough money in the bank that we were going to parlay. We were going to go all in, we’re going to put our money where our mouth was and we’re going to do is just research with consumers the experience, no business model. And we did that for about a year and that was freaky, it was scary because we’re just burning through our money. We’re not getting paid a salary, we’re just burning through our savings. But the reason we did that was because we didn’t want to be beholden to a business or customer or any model really that caused us to shape the consumer product to fit the monetization strategy. You know what I’m saying? Yeah. And others, we didn’t want to hold it to the man to build this product for consumers. We just wanted to make sure that we were just crushing it in terms of delivering what we thought would be valuable content. So when we did decide to move forward. It was around that time that somebody from 500 startups a big, you know, bay area accelerator, actually they’re international accelerator reached out to us and um, I don’t know, I had applied to other accelerators before and it’s just been shut down and told no a million times and I was like, nah, I don’t care about this accelerator thing anymore because it’s so depressing to go down the road and then say no. But, um, I took the call, I took the meeting with 500 startups and so we were actually accepted into their batched 18 accelerator in San Francisco at the end of 2016.
Dan Daugherty: 08:41 Out of how many applicants?
New Speaker: 08:57 Oh, it like thousands and I almost think that it was my irreverence to the process where I just didn’t give a shit, you know, was just like, I didn’t care. And I, you know, I think that investors as well as any that really care. And that’s the level of transparency. Not trying to shape the story, but to get back to your question, so we went through that program and that program is about two things, accelerating your business and B, fundraising because they put money in, but then they also bring a tremendous amount of venture capitalists like the WHO’s WHO of Silicon Valley and New York alley or silicon alley. And um, so we, we did end up raising money. So at the end of the story we raised four point $4,6000,000, but I will tell you what I thought was going to be this dreamy dream ride out in the bay area of raising all this money out there. Didn’t raise it out there. That’s not the way it happened. I had 100 meetings over five months and got told no a hundred times and was completely depressed by the process. I did get offers to change my entire business model and move out to the bay area, but I didn’t believe in that. I just kind of stuck to my guns. Um, so it wasn’t a, it wasn’t like a perfect. I don’t think anybody’s journey is perfect. There are some, you know, obviously there’s some harvard maga cumes out there that have had lots of exits like Google, like you have that, you know or have lived a charmed life, but it’s almost like looking at facebook or instagram, there’s charmed life is actually not the reality, you know, this is just the reality. So we ended up raising some from VC, but then all was from a big strategic corporate investor.
Dan Daugherty: 10:35 So the strategic investor is a client of yours or was a client of yours or was interested in potentially being a client?
Ernie Graham: 10:42 Actually the, I was just at a trade show. I met one of their, one of their executives and um, it just so happened that the home bought story was something he tried to get off the ground many years ago and he resonated with the story. And again, people to people. This was a friend of a friend that introduced us at a conference. I showing him what we were working on. And then it was actually a year later that we got to do that. We did a deal, dude, instead, you know, how that sort of stuff did. I mean, I always say this, when it comes to sales or anything like this, what you do today, i am sorry what you close today, was a function of what you were working on a year ago. It’s the long, you know, it’s a long play.
Dan Daugherty: 11:26 So many entrepreneurs come in, they read a TechCrunch article of company Xyz just raised $25,000,000 and it was the easiest thing ever. Um, but that’s not the reality of 99 percent of startups. Right? It takes time. It takes effort. It takes grit. It takes, you sometimes refinancing your house.
Ernie Graham: 11:54 It’s interesting. You got to be crazy on this kind of stuff because statistically the odds are against you. And I always think about it too. It’s like, you know, you go see a movie and you see some like new star that just overnight success, right? And then you go into IMDB and look at their filmography and holy crap. They did a crappy TV shows for 30 years. It’s the same thing, same thing. Yeah, you, it, you grind, grind, grind, grind, grind, and you put yourself in position and maybe you get lucky, but it’s usually a lot of hard work that put you in that position. Uh, you know, it’s funny, I, uh, when we recruit employees at homebot I think we have a super strong culture servant leadership where we want to lift each other up, but I always tell people always have a very sobering story for folks. I always say, Hey, listen, if you want to build wealth long term wealth, your odds are infinitely higher building wealth, simply going out there and getting a nine to five job, buy a home and building wealth with at home. And I know that’s consistent with our thesis as a company, but we happen to know a little bit about that. It’s not working for a startup because statistically the odds are against you or against the startup succeeding. So I always find that interesting to see, especially millennials respond, right? If I want to build a wealth, don’t work for startup statistically, yeah don’t work for a startup. Do a startup if you want to be a person bigger than yourself and you want to do something special but be prepared for failure.
Dan Daugherty: 13:24 Well, let’s talk about hiring in the whole hr stuff. So, um, when I started at Google, Sheryl Sandberg, who’s now at facebook, she, uh, she told us that, listen, because you have some people coming in saying, Hey, I want to a management role or a title of a director and so forth. And so many people that came into Google just had an associate role or something like that. And she said, when you get a ticket on a rocket ship, you don’t ask where the seat will be. Right? You just get on and you take off and you’re absolutely right. As it relates to startups, most of them will fail, right? Um, if you want to be wealthier, uh, go to a nine to five job, right? Don’t work 40 hours a day. Go get some stock options, maybe somewhere in silicon valley at a, at a company that’s maybe publicly traded, publicy traded, go to Amazon. Over time you’ll do well. From a, from a hiring perspective, 1) what do you look for and is there anything unique that you do at homebot to really distinguish the A players, you know, something else that we, that that Google told us. Omid Kordestani would say, it’s called the airport test and if you sat next to someone at the airport for two, three, four hours, would you love that person and want to talk to them more or would you not want to talk to them more and if the. If if the answer is yes, I would like to talk to them and learn more about them, then that would be a good hire. A players tend to hire a players at rentbits, We did something where someone that was interviewing for a rentbits position, we would take them to starbucks, but before we took them to starbucks, we would, we would ask the person or the person behind the counter to mess up their their drink and see how they would react and seven times out of 10 they would react like you would normally react. Oh, I’m sorry. This is, this is the wrong drink, can you please make a different one, but 30 percent of the time they would get angry and the demean the Barista, we knew right then and there, that person would not be perfect within our culture. Right? Is there anything that you guys do similarly to weed out those types of people?
Ernie Graham: 15:44 So it’s interesting that you put it that way too, because we call it the mercenary test, or a multiple tests. Mercenary, mercenary test is somebody. First of all, there’s nothing wrong with being a mercenary. You care about your own individual, your own sandbox, you care definitely more of what you can accomplish in a day that your team can accomplish in a day. And I think in this industry, there are a lot of mercenaries. Contractors are mercenaries, right? Um, there are some good aspects of that, but when you’re hiring an employee to be part of the culture of especially being a smaller startup, where if you’re 10 people on your 9 people, you’re hiring somebody that somebody is going to be 10 percent of your culture walking in the door. Very scary stuff. So one of the things that we do, and I won’t get into the types of questions, but we’re very sensitive to, we call the mercenary red flags. Do you care more about your own accomplishment injury team? There’s little subtleties and nuance by the way they answer questions and it goes back to our, I would say one of our cultural themes of servant leadership. How do you serve the other people on your team to make them better? And so if we felt like someone’s mercenary, they can’t work for us. Um, and so, you know, again, it comes back to being a part of the team, lifting the team up. But I’ll also say something about just being part of a startup, which I think is super cool. I’m not trying to scare everybody off a startup. You know, most people don’t really know what their potential is. Most of us don’t. And the way hiring and the world is set up is you get, you know, it’s almost like the Peter Principle, right? You get, you rise to the level of competency or you get into a groove and Rut and it’s really hard to get out because your experience now so that predetermines the jobs that you’re going to get it. So the cool thing about startup and the thing that we really like to emphasize is that where you come in is not what you’re going end up and that you get to explore whether it’s you come in as an office manager, maybe actually you find that that hr is what you desire to be and you go get into. I’m actually our office manager just did this. She just got passed all her tests and now she’s getting experienced with her. Her ambition is to be a full time HR person. You can’t really do that instead of a traditional company. Right. Whereas in a startup you can come in and say, Hey, maybe I’m full stack, but then you ended up being frontend because that’s just where you desire to go. I love sort of the new thinking around sort of strength based coaching, strength based management where you know, it’s the story I want to start around, you know, in America anyway, that kids like if you have a kid and going to school and they get a C in English and they get an a in math as a third grader and you are going to give them a tutor, you’d probably get them a tutor in English. The C, right to get that up to an A, but strength based says no, C is good enough. It meets the compulsory requirement to be proficient. What you really should be doing is supporting people in the skill set that they’re great at doing and really exploiting that greatness and helping them exploit their own greatness in that. And that’s where I bring it back to the startup. I think it’s such a great opportunity to find your potential and to go after those things that they caused you to want to, you know, you know, work 100 hours a day. And I’m not saying it’s like that, but you know what I’m saying just to go crazy because you love it so much. Instead of doing the things that we don’t like to which, ultimately we end up procrastinating on and we’re just not good. You shouldn’t do those things. I personally don’t like this, don’t like that. So anyway, I know that it’s kind of happier, but you know, mercenary when you can’t hire mercenaries and expect to build a great culture and you really want folks that can explore and learn their own potential and end up in the right spot.
Dan Daugherty: 19:52 You know, it reminds me of being a scout for professional baseball lets say, and you are scouting a shortstop, and that shortstop goes to single A and then AA and then really the arm is so great they become a pitcher but they never knew that they would be a great pitcher. Do you use any tools to look at the strength of individuals that maybe they did not know they had? For example, maybe you hire someone as an office manager, but you see a lot of great sales characteristics with that person. Do you then say, hey, would you like to do a little more sales type stuff, or do you have the person say, I’m actually more passionate about x and I want to learn as much as I possibly can about that?
Ernie Graham: 20:41 Well, we’re not that structured on that right now. We’re learning exactly what you just said. It’s a combination of both. It’s a combination of a. having an environment where someone is comfortable saying, I don’t really like doing this piece, but I really liked doing this piece and then in combination with that where the management team where we are observing what people are better at and instead of saying, oh, you really suck at this and say, Oh, you’re actually better at that, and if we have the opportunity to let them just focus on the things that they’re great at and love doing and of course we want to position that way. This is something that I get so excited about. Again, we’re just 25 employees right now. I get so excited about sort of keeping that spirit, keeping that idea alive as we expand to 50 and a hundred 200 employees that, um, that people are not afraid to seek, you know, the job or the tweak of their job that makes them happier because they enjoy doing that more. I think it’s harder to do it when you’re smaller because you’re a very matrix organization. People do a lot of things so it’s harder for them to focus more on one thing if you, if they sort of have to do five things, but that’s, that’s actually a really cool part of it too because if they’re doing five things, and I always said this for the first year and half I was like, everyday I do 10 things as a ceo and I suck at $9. Right? Because it’s completely, you just have to do those things. But also, you know, I think that employees coming into the organization, you can do up five different things across five different sort of disciplines. You, you actually get to learn that one or two that you’re particularly good at.
Dan Daugherty: 22:23 That’s true. That’s very true. Um, and, and that’s inevitable with startups. You have to wear multiple hats, right? Yeah. Especially as a CEO.
Ernie Graham: 22:43 If you don’t like doing things you don’t want to do, don’t do a startup. But it’s also, like I said, an opportunity, you know, there’s a discipline opportunity opportunity to learn about new skill sets.
Dan Daugherty: 22:43 We have time for one more question. And uh, and I asked this a lot to entrepreneurs for the other entrepreneurs that are looking to start a business, maybe they’ve never started a business they’re looking to, to leave their nine to five job. They have an idea. What is one thing that you would recommend to them as a piece of advice? One thing I know there’s a lot
Ernie Graham: 23:11 I would have to say to test your idea on the side, don’t quit the nine to five job, um, uh, explore, test, research, build that product, moonlight without affecting your performance of your primary job. But what this means is that you’re going to have to work 80 hours a week. That’s just, I mean this whole moonlighting thing, it’s not about stealing 20 hours from your job, working those 20 hours in the side, it means you’re going to have to work your job 40 hours and then work that other if you really want to go and you need to start working 40 hours a week on the side, 80 hours a week, people talk about 80 hours, but you’re in 80 hours you realized it is so mentally fatigued and it’s just very hard to do it this way, but I’d say you have to do it that way if you want to be able to fund and also it’s a. it’s just a practical approach because I hate to say it. Most ideas aren’t going to work in actually this is your way to work 40 hours a week on one idea it fails, you go to the next idea, the next idea, and it’s probably not going to be the first one. Right, so I would say moonlight on the side without digging you current employer.
Dan Daugherty: 24:33 That’s great advice. Validate your idea. It sounds like you validated your idea and maybe tweaked the idea from what you originally thought it would be, but you validated it before you really went into it. Raised money and so forth, so validation. That’s so key. It’s so true because there’s so many ideas that are out there that will fail.
Ernie Graham: 24:57 I know you didn’t ask this. I know this is the last question but I will say this is that I think that there’s a culture of startup life is very facebook. It’s very. It looks so cool, right? The parties and the tennis shoes with logos and that’s all you can drink Kombucha, right? When you get into the thick of it, startup life, that stuff isn’t nothing, and I say this a lot to our team. I know you really want to make something work. You focus on being a place that works great, not a great place to work. I’m not just trying to be pollyannish about this. This is where I feel like so many people get it wrong. If you’re only focusing on a lifestyle or the perks of the business, all this cool stuff, you’ll probably fail. The energy is really going to be placed on being a place that works great. That means your idea’s validated. You’re putting the pieces in place to make that thing work. You’re not focusing on the spoils. You’re focusing on actually constructing a machine, an engine and that’s not always fun. Um, and then if you get that right, there will be plenty of companies and ping pong tables and pool parties or whatever it is in your future. But I think sometimes, I get a little worried that there’s a lot of people that come, especially the number of people that come into the startup world because of the lifestyle. And if nothing else, if you know this better than anybody else, and if you don’t have a work ethic, you don’t have to be that smart. But if you aren’t willing to outwork everybody else, don’t do it. This is a lot of hard work.
Dan Daugherty: 26:34 You are amazing. Ernie. Thank you so much for your time.