Friends, Romans, Fintech Aficionados - We are back with the first Fintech Founder interview of 2023. And we’re going to be talking about the one thing that Millennials far and wide all love, but will never have. No, I am not talking about unlimited access to avocado toast (always thought that was a stupid media narrative), I’m talking about homeownership.
Obviously I’m being tongue-in-cheek here, but let’s look at some of the data. The median home price in the US has soared 145% since 2002, in that same period median household income has only risen 67%. At age 30, the average Millenial is 13% and 18% less likely to own a home, than their Gen X and Baby Boomer peers were at the same age, respectively.
I share all of that to generally frame up for discussion: In modern American life, is homeownership an attainable goal for the average American? Has the American dream been fundamentally altered? Are technology companies capable of reframing our relationship with owning a home?
My take on all of the above is no, yes, and yes. And as a result, I wanted to spend some time with Ali Nichols, the CEO & Co-Founder of Getaway, a real estate startup looking to provide consumers with access to commercial-grade real estate investments in the vacation rental space. Part of their mission is to help people navigate the changing landscape of home ownership in this country by providing them access to financial assets that have the ability to both appreciate in value, and generate cash flow, while simultaneously building up a distributed network of properties where Getaway members can stay. It’s like staying at an Airbnb, but throw in the fact that any time anyone in the world stays at that Airbnb - you get paid. Ali and I had such a fun, wide-ranging, but most importantly honest conversation about homeownership, building a startup, and navigating the ups and downs of building a career in tech & VC. Ali is an absolute badass, and I’m really excited to share this conversation with all of you, so without any further ado - let’s dive right in.
My first question for you, Ali, is, let's talk about that founding moment for Getaway. What led you to want to start a company? And was there any sort of crucible moment?
Yeah, it's a great question. I've known my whole life that I wanted to start my own company and I had this idea, this notion of becoming my own boss at some point. That was instilled in me, at a young age as the true merit of success. I didn't know until I started in the tech industry that I would be a startup founder, but that's been ingrained in me since I was a little kid. So that's always been the goal. When it came to Getaway one of my passions, even since I was a kid, has been residential real estate, and in my previous role I was running the real estate team at another prop tech startup called Bungalow and had the opportunity to really scale out some really awesome programs, including launching a large fund and I realized, "Wow, I'm getting to use all this expertise in my professional life. How could I translate that into my own investing and start to build my own personal portfolio of properties?" And, actually, I was joking around with my now co-founder, Amr, one day: "Should we start a small fund together? We've built all this technology and tooling and product to be able to identify awesome rental properties. Let's go out and do this for ourselves personally."
And of course, like a traditional millennial I was like, "Oh, but we should focus on Airbnb properties, that way we can take advantage of them on the weekends and bring our friends, and it'll be so awesome." Then, we started scouting for opportunities and quickly realized that we were totally priced out of the market, even as somewhat successful millennials. And not only from a capital perspective but just from the actual time and energy it takes to go from zero to acquiring to operating a rental property, that was when the light bulb moment went off. It was like, if we're feeling this way, and I definitely know my friends feel this way, I think that there is a broader consumer group that's thinking like, "Hey, I really want to get into real estate. I'm really interested in this short-term rental like Airbnbs as an asset class. But I don't have the time or capital to do it on my own.” So is there a way for us to build a way to fractionally invest in that asset class and still get the benefits of staying within the home, just as if you would own them yourself.
Was there a specific experiment that you ran to confirm that there were more consumers interested in investing in short-term rental as an asset class?
We went into "Oh, okay, is this a good idea?” mode. And needed to validate if we were falling in love with our own idea, or if there is actually a market for it. So we started out by just having a million conversations like, "Hey, what are the pain points you're feeling? Is this something you'd be interested in?" within our friend groups, within friends of friends and so forth. And we got enough signal from those conversations to be like, okay, let's start working on this on the side and let's actually do some real demand testing. We actually started posting on social channels, built out a landing page with what we thought our key value props were and actually started advertising, doing paid social ads to the landing page to see if we could drive wait list sign ups, and then getting on the phone with those folks and understanding what they were excited about, why they wanted to be invested, and who they were as well. Is this a first-time real estate investor or are these people that have multiple properties and they're just looking to diversify? So, we were doing all of that pretty early on to get a signal, to see if this idea was something that had legs.
So let's set the stage for everyone. How does Getaway work? Do I just go on the website? I pick a specific property, or you give me a basket of properties, or can I drill in and say, I don't want to invest in Houston, but I do want to invest in LA?
Currently how it works is, anyone, so accredited or non-accredited investors alike, can come to Getaway's site and be able to invest in specific short-term rental properties. As an investor, you're actually choosing the property that you're excited about, whether that's because you love the characteristics of the home or you love the market or it's a property you see yourself wanting to travel to. And then once you invest, you own the economic interest in that specific rental property. So you earn cash flow and appreciation from the properties performance. And the payouts come every quarter from the rental revenue; then appreciation is realized when the property is sold in five to seven years. And we're really trying to maximize appreciation on the tail end.
So Getaway is a buying agent and you’ll purchase on behalf of someone? Or is Getaway the principal owner/operator of each property?
We have specific properties that we've actually invested in ourselves and are our active rentals that we're operating, that our customers invest in. So, they're already Getaway-owned homes that we're selling off to our investor group. Another benefit for investors on our platform is, first and foremost, it's a financial investment. They're making cashflow and appreciation. But then on the back end, every time they stay at a home in the portfolio, they get a discount, so it makes it more advantageous to stay in a Getaway home than any other Airbnb or vacation rental in the market.
Yeah. It’s such an interesting model because it’s somewhat of an overlap between co-ownership and the broader push into alternative assets. How do you guys manage that today where I can both own the home and stay in it? Do you all have some sort of internal booking system in place? And how do you keep everyone from booking out on the same holiday weekend?
Yeah. We think about this from a usage perspective. We essentially have a membership program that's analogous to your Delta Airlines program. The more you invest on the platform the more benefits that you receive and one of those key benefits is being able to book early. So basically, how far out you can book a property is based on your membership with us, and then from there it's first come first serve. What we've seen to date is it hasn't been an issue in terms of competing for the same weekend. And we believe that as we add more and more properties to the platform, as well as partner listings and things like that, we'll create a huge network of travel opportunities.
Do you view Getaway as, first and foremost, an investment platform or a hospitality platform? Or are you creating your own net new category?
Yes. So, for the investor, I would say, first and foremost, it's an investment product. Our goal and the lens I look at as we're underwriting, through our acquisitions process, is like, "Would I put my own personal money into this? Do I think this is a good investment?" And I have invested in the offerings. I want people to walk away, being like, "Yes, I'm super happy. I did that. I got exposure to this asset class. It returned what we thought it would. It's performing really well.”
The travel side is just an added benefit that folks can take advantage of, and a reason why you'd want to be invested in this asset class compared to commercial real estate, which you have no real connection to, especially if it's in a different state and you'll never see it in your life.
That's what I think about, if someone’s offering you know, Class A commercial office space in London, I couldn’t care less about the physical property. It’s just a financial asset.
Exactly! So with Getaway there is more of an emotional connection. I call it pride of ownership, because I could take my girlfriends to Scottsdale for the weekend and actually stay in something I'm invested in. So, there is that pride of ownership aspect to it.
All of that’s to say that on the back-end, to achieve best in class returns the operation has to be spot-on and has to be executed well. And that's one thing across the entire short-term rental space right now that we're seeing. I think Airbnb has had a little bit of bad press lately in terms of owners asking people to take out their garbage, and do all of these extra things that make you think, "Why am I doing this for you? I just paid a ton of money to stay in your home."
There's this divide happening where I think we'll see hosts and hospitality companies that are really investing in being guest-first with the experience, and really going above and beyond will far exceed the other 80% that are just like, "Here's the listing, show up." So that's one thing we are keeping in mind is the guest experience is very important, whether that's a Getaway investor staying in the home or a regular guest that's helping us drive those revenue numbers up.
You recently raised the Seed round from Cowboy and XYZ. Is that right?
Yes.
Amazing, so it’s still early days but what’s exciting is you’re marching toward building all of those key Series A milestones. But also what's really exciting about your business is that you've got so many component parts that you have to execute and execute extremely well. You know, you have to find assets, you have to buy the assets. You have to manage the assets. You have to deliver on the guest experience. Maybe kind of talk a little bit about that company building process today. What are you learning? And kind of take us inside the mindset of a founder who has to touch all of those different areas.
Yeah, I'm super fortunate because I had so much direct experience across all of these aspects in my previous roles. So in that sense, I’m bringing a lot of experience to the table and, frankly, bringing a lot of learnings on what not to do. But let’s start on the acquisition side of the business.
Every day the team is thinking through, what is a good investment for our consumers? We're building the tooling, automation, and products to always find the best deals on the market at the right time, and to be able to move faster than anybody else. We’re building a dynamic underwriting product that automates most of the work, but we’re constantly testing our assumptions. What does the regulatory environment look like? What’s the entry price? Where do we believe annual revenue will be? If we are targeting, say, Miami, Florida as a market, and we’ve surfaced what we believe are the top 10 deals in the market. Then we place a human in the loop to do the final underwriting step. Any company that says they don't have a human in the loop and that they're 100% automated might have a Zillow 2.0 situation happening, because the system doesn't know if the property is next to the train tracks, or that the neighbors have three dogs that bark all night. There's just elements where you have to keep that human involved. But the tooling lets us get to the best deals at the right time, so we can be first to move on those. So that's just like one aspect of the tech we're building on the acquisition side.
Let’s talk about customer acquisition. How are you thinking through that at Getaway? Because it’s such a critical part of building the business. Maybe share some specific examples that everyone can learn from as well.
Oh, gosh! There's so much here. First and foremost, do not get addicted to the paid advertising drug, like the channels like Facebook and Google are super helpful for getting traffic early on and volume through the funnel, but can be so expensive. I just caution all new startups and founders to diversify your channel mix as soon as possible, because from a budget perspective, relying only on paid media is going to be unsustainable.
For us this has been a journey of finding things that work in our space because it's an investment product. The earned media, like PR, has been every time that we've been mentioned in an article, or have had kind of social proofing from a respected person posting about us we've seen a huge spike in traffic to the site and conversion, so the more that we can get coverage in trustworthy channels is huge for us and a huge focus in this space.
The other thing that's been starting to really work well is first-party content. So something I'm personally working on a lot is trying to push out more content on LinkedIn and things like that where over the years I've developed organically a larger audience. Unfortunately, I'm not very good at Twitter. I'm more of a lurker than a contributor. So, there's some personal growth goals in there to start using my voice more on different channels and platforms. But the more content we push out the more we see engagement on the site, conversion through to investment especially, and this is surprising for me, but email lifecycle marketing is our best channel by far, and I think at first I was a little bit hesitant on it, thinking, "Are we pushing out too much content? Does this feel like, ‘What is this brand like? Get out of my inbox.’" But the more we ramp up there the better results we're seeing and we're holding our conversion rates– oropen rates– and it's consistent. So I think as long as you're pushing out meaningful content that people are interested in and adding value and it's not always just trying to sell your product your customers will enjoy that and consume that.
Do you think established players like Robinhood, Wealthfront– we could throw Public in there as well– do you view them as direct competitors for your share of wallet? Do you view them as potential partners and distribution channels? Maybe the more straightforward way to ask the question is, how do you see Getaway fitting within the broader consumer fintech investing ecosystem?
We don't view the Robinhoods and Wealthfronts of the world as direct competitors. What we found to date is that folks come to us and are interested in our platform when they want to be invested in real estate. And so our direct competitors are all of the other kinds of crowdfunding platforms in the real estate space, and I think that's who we're directly competing for. And even within that space I would say, we're competing more with folks that accept non-accredited investment, whereas Yieldstreet and others are only playing for high-net-worth individuals. For our customers, they're choosing what asset they want to be invested in before they get to you. So, that's why we're kind of like, “Okay, we're competing in the real estate investment world.”
Do you all do persona segmentation yesterday? When I was at Cadre, we did an extensive amount of research to segment customers by investing intent and investing education.
Yes. It's always constantly evolving as we get more data for customers on the platform. But we are definitely building out our personas and one that's been really interesting but I don't think we knew existed before we started, is a group of folks that just love crowdfunding, specifically real estate investing, and they will try every single platform and love to diversify and see who basically performs before they'll put more money in. From there they'll grow with you and invest in all your offerings and so forth.
But we’re also starting to see that our core ICP is really a first-time real estate investor that has high-potential income earnings over their lifetime but are just starting out in their diversification journey. So, Getaway may be the first time they're investing outside of their 401(k) or an ETF. We're really excited to work with those customers. There’s definitely more of an educational aspect to it, but they’re very excited about the asset class and also the travel benefits.
Okay so let’s ask a hard question. There’s a fundamental tension right now in the US of whether or not housing can both be affordable and a good investment. It feels like the pendulum has very much swung to housing is not necessarily going to be affordable for consumers, but it’s going to continue to exist as a capital asset. What are your thoughts on that? Just in general?
Yeah, it's a very tough question. I do think that, given the price of real estate, and even with a softening coming in 2023 we're not going to see, based on the dynamics of the market, a 2008-level crash. There will likely be a softening in prices, but that doesn't make up for the delta between how much people in America make. So, this idea of when you get your first big job, and you buy a house, and you have a family, that notion of the American dream is drifting away very quickly just because the cost of real estate continues to be elevated and still growing over time. And I just don't think wages will keep up, and so much of your wage has to go back to rising rental prices, rising food costs and all of those things, which makes it hard to save.
So with that, I think you'll continue to see more and more models into the market that are trying to give folks more access to the idea of owning real estate, but that won't be your primary home anymore. I don't know if everybody is ready for that, because I think it's so ingrained in us as a culture and society that home ownership is just a sign of success in your life. And it's been that way for so long. For the last 70 years it's been a real way for an average American to create wealth. It's like one of the biggest wealth creation pools that has existed. I buy a house, and 30 years later it's worth a lot more money. I'm able to borrow against that equity to do other things, and so forth. But I don't think that that will exist as a primary wealth creation tool anymore. So, folks will start to look for other opportunities to build wealth.
Do you think entrepreneurship, as an asset class, conceptually replaces real estate as the way that the average American builds wealth in this country?
Oh, that's a tough one. It's so hard, because entrepreneurship is so risky, like the beauty of real estate is that at the end of the day, as long as your assumptions are realistic and based in reality, it's not as risky and of an asset class. And the value of the asset is easily defined based on very public data.
With entrepreneurship, you're like betting on not only yourself, but the merit of the ideas, the feasibility of it actually working. And then the biggest thing is timing the market. It's like, “Do people want your product, your idea at this moment in time, and how much are they willing to pay for it?”
So I don't know, I think that entrepreneurship is still, in my mind, riskier than a bet on real estate.
Yeah. I am biased, obviously. I think at the very least, the emotional tenor and the mind share of entrepreneurship and specifically tech in general, is going to continue to grow.
I agree with that. By the way, I think that more and more people will actually become entrepreneurs as the market gets tighter in the next couple of years because it's like, well, the job at one of these big tech companies doesn't exist anymore. Now I have time to actually pursue my dream. So that will be an exciting time.
Well, my second last question is: You and I are kind of part of this newer, younger, more diverse generation of VCs and founders. And what I always love to do is also give acknowledgements, give people their flowers as they’re going through their process. So with that in mind, I would love for you to maybe share the accomplishment you're most proud of to date in terms of building Getaway.
Oh, gosh! There's so many little tidbits along the way. But I think one of the biggest accomplishments to date has just been, honestly, perseverance. I always joke with my co-founder like, "Oh, my gosh! What we thought was a crisis in week one now seems so insignificant and small. What were we worried about?" And I think, building up that, almost like stamina and tolerance to handle newer, bigger problems, fire drills, crises, and staying cooler and calmer and more collected, and not letting those things impact you all the time, that's one of the things that I think we've both been able to build really quickly. And I'm really proud of us for that, because I can see how that could literally eat away at you and wear you out really fast. So I know it's a combination of a lot. But I think building up that perseverance and thick skin has been huge since we launched the company.
Yeah, and my last question is: What advice do you have for first time founders in general? I always like to make sure that, with these platforms, and in these interviews, that the next person can take some direct learning from your experience and apply them to their own.
Yeah, I think it's really that relentlessness because, kind of going back to my earlier point, it's like you're gonna hit a roadblock. You're gonna hit a pothole. You're gonna figure out that something about what you're building won't work. So how do you keep pushing through? How do you get creative in solving problems? And just realizing that giving up isn't an option, and that just has to be part of your operating cadence. Giving up is just not an option; you’ll need to find a new path if the original is no longer there.
Ali, this was fantastic – thanks so much for letting us share your story and best of luck with building Getaway.
Thank you Dez! This was a ton of fun.
