Dillon Zhang Forrest: Building Robinhood for commercial real estate
Ideas vs execution, Robinhood's business model and interning at Venmo when they were 4 employees
Dillon is a friend and YC alumni who’s working on a really exciting idea: Robinhood for Commercial Real Estate.
Here’s a great pic of Dillon looking like he’s about to audition for a movie in Hollywood:
A few things we’ll talk about:
Dillon’s contrarian view on why ideas are more important than execution
Why Robinhood’s business model creates a misalignment with their customers
How Dillon got into startups through an internship at Venmo when they were 4 employees
And 3 very actionable tactics (aka golden nuggets) for early stage founders
Use Double to get a virtual assistant and offload low value add tasks
Pick an idea that’s easy to explain
Use the Product Market Fit Score to know whether you have product market fit or not
Questions are from me, quotes are answers from Dillon, emphasis mine and the text below the quotes are additional comments from me.
What is Steady?
Steady lets you invest in commercial real estate for $100. Our goal is to be like Robinhood for real estate. We help people make money!
I think it’s a brilliant idea. Commercial Real Estate is a great asset class but you have to have a big initial investment to start investing in it.
Could you give an indication of your stage?
Seed stage. We have a closed private beta with 180+ paying customers but aren't taking new customers at this moment. We just figured out our repeatable business model and will be ready to add more users very soon!
Can you describe how your customers get value out of your product?
Lots of everyday people want to invest in commercial real estate, but they can’t, because commercial real estate is set up only for institutions to succeed, not everyday people. My customers get value from Steady because we're the first to let them invest in this asset class at this level.
Every business model that’s like “this cool thing is only accessible to a segment of the population, we’re going to make it accessible to everyone” is usually a good one.
How do you define product market fit and do you have it?
We have some level of product market fit, but we don't check all the boxes yet. The good signs are that our retention is good, our customers encourage their friends to join our product, many people who have never heard of me before they signed up for Steady are giving us tens of thousands of dollars, and our waitlist keeps growing without us promoting it. One PMF box that we still haven't checked is growth: our product isn't ready to grow exponentially yet. Another unchecked box is the "very disappointed" test: our product is way too lacking to pass this test.
The “very disappointed test” Dillon talks about here is the framework designed by Superhuman CEO Rahul Vohra. I’ve talked about it with Sunsama CEO Ashutosh in a previous edition of Deep in the trenches
We also have an Actiondesk template that lets you easily calculate that score.
What type of growth do you think is necessary for PMF?
Hmm good question. I think 20% m/m growth is a good benchmark. You could argue that retention is a better signal of product/market fit if you assume your target market is stagnant. But startups can't survive if they're content with just retaining within a small target market. So it's practical to raise the bar on the "market" component of PMF to include not just capturing your target market but growing the market.
What are your results for the "very disappointed test", do you actually run it and the rate is not good? I'm actually surprised given your product. Do you think it's because it's a bit of a "set it and forget it" product?
Actually, I haven't run it in a very long time. So this might be different. I do feel that average user sentiment is average right now. I think people like the dream that we sell more than the literal product right now. Our "set it and forget it" nature definitely doesn't help. Since users set it and forget it, we need to improve the post-investment experience so users can be excited that they invested with Steady.
This is a fascinating topic. I’m wondering to what extent the lack of engagement in a “set it and forget it” product triggers potential misalignment with the customers.
For example, Robinhood has lots of things in their product that makes it easy for you to trade often and pushes you to trade often. However, the best investment strategy for most of us (ie 99.999% of us) is just to regularly invest in index funds instead of buying and selling individual stocks.
I’d be super curious to have the following analysis from Robinhood
% of users who outperform the S&P 500
I’d bet a lot of money that it’s probably on a few percent.
Consider that only 20% of actively managed funds outperform the S&P 500, and we’re talking about professional investors here, imagine what it would be with amateurs investors.
After we initially spoke, Dillon actually ran the test and here are his results:
We have a small sample size issue, since only 30 people replied. But among those 30 respondents, if they couldn't use Steady anymore, 23% would be ok, 33% would be disappointed, and 43% would be very disappointed. The superhuman PMF post says that the magic number is at least 40% users saying "very disappointed." But in my bones, I can tell that we don't have that much PMF because customers aren't ripping the product from our hands. It still feels more like we're pushing the boulder up the hill rather than racing downhill to catch up with the boulder rolling away
Let’s go, take the win Dillon! You got Product Market Fit!!
How did you get your first 10 users / customers?
The first 50 paying customers came from social media posts. I launched Steady's waitlist on linkedin, which surprisingly drove signups from some eventual customers who never heard of me before Steady. Also, for one month, I wrote twitter threads about people building wealth with investing. Of the 20 threads that I wrote, 3 of them went viral and drove the majority of my waitlist signups at the time. I invited everyone on the waitlist to book a 15 minute zoom call with me on a calendly link, and my calendar ended up booked back to back all day for 5 full days. Some of these first 50 customers declined my invite for a zoom call, but I think 40 of them came from this week of zoom calls.
Here are three viral threads from Dillon that helped Steady get users
One good lesson here is that if you’re trying to go viral with social media posts (or anything else really), you need to have enough shots on goals.
Out of the 20 threads on people building wealth, only 2 went virals and drove most of the signups.
And first 100?
Honestly I got lucky and my initial users started inviting their friends to join. They'd text or email me "hey Dillon, can you add my friends to Steady? They wanna invest too." At this point, the vast majority of our paying customers are from word of mouth, rather than my initial social media campaign. Making it easier for users to add their friends is one of our big product priorities, since this currently still happens all manually.
This is actually a great sign of Product Market Fit. It shows Steady is something people want.
How did you make your way to the world of startups?
When I was in middle school, I attended a math summer camp. One of my teachers was a college student named Andrew Kortina. 7 years later, I was in college, and Facebook was becoming mainstream. Kortina and I reconnected over Facebook, and I found out he started this startup called "Venmo" to pay your friends with your phone. Tech and startups were hardly relevant among my friends in college at the time, but he made this 4 person startup Venmo sound really cool. I asked for an unpaid internship, and he let me work 2 days a week for them for a semester. I ended up learning to code there and became determined that I wanted to build startups. I'm the only person I know who got lucky and had a great unpaid internship experience.
Is there one specific tactic that was very helpful to you, whether it's in finding users, building your product or fundraising that you'd like to share?
Pick an idea that is extremely easy to understand and extremely exciting. Any idea that's not easy to understand or exciting will make every single part of your job 1,000x more difficult: go to market, recruiting, fundraising, even product development. Some founders say "ideas don't matter, execution is everything" -- I think that's false and that the idea matters more than anything else. If you can't have both a great idea and great execution, I'd still be bullish on a great idea with mediocre execution, but I'd be completely bearish on a mediocre idea with great execution. Our friend Daniel Jones is the one who made me fully realize this. Dan said that he likes ideas where the audience's reaction is "wow what an amazing idea, how is that even possible??"
I think the advice of choosing an idea that’s extremely easy to understand is a great advice. It’s not something that you really think about when thinking of business ideas. However, as a cofounder / CEO, your main job is to communicate what your company does and make it exciting.
To potential customers
To potential hires
To potential investors
Having an idea that’s easy to explain is underrated, it makes your life much easier!
What's one thing you wish you had known when you started your company?
I was really fascinated with bootstrapping for the first 10 years of my startup career. That was bad because I was always under-resourced, and I was always grinding by myself to ship prototypes to validate products. For stretches of my 20s, I'd wake up at 5am to work a few hours on my startups, go to my day job, then work on my startups again until midnight, then work all weekend on my startups. I was a wild man, completely obsessed.
But it was a complete waste of time. No one gave a shit about anything I did, even if I "validated" the idea with surveys and stuff before building. I believed in lean startup methodologies a bit too strongly, so I underestimated the role of vision in finding opportunities. I expected perseverance and iteration to get me to PMF. I wish I focused on opportunities that resonated with VCs from day 1, so that at least I wouldn't pursue any ideas that the VC market didn't validate, and I'd always have a team to share the load with me. Fundraising forces a baseline level of credibility for your ideas -- if VCs don't want to invest their money, a renewable resource, in your idea, it's unlikely to be worth your time, a non renewable resource.
In a recent edition of this newsletter, Sam Devyver was giving his point of view that raising money can screw your startups:
Like most things in life, the truth is always in the grey area.
What's a tool that makes you save time every week or every day?
I just hired a virtual executive assistant. It's been a mind-blowing time saver. But if I can't pick a service for my answer, I'd say 1password. I started taking security really seriously after starting Steady, which motivated me to use a password manager. But now I'm not sure how I ever lived without a password manager.
Do you use a service for this or you just directly hired someone?
On the recommendation of Bo Jiang from Lithic, I hired a fractional virtual assistant from Double!
Honestly a bit jealous here, because I’m pretty sure I also recommended Double to Dillon but he chose to remember Bo.
As cofounder of a startup, as soon as you start to get admin / low value add work, you should definitely find someone you can delegate it to. The problem is at the end of the day, any topic that’s not owned by someone else will end up on your lap, and you can end up spending most of your time on things that are not really moving the needle for your company but that still need to get done (ie payroll, taxes, R&D credit applications, etc). You definitely don’t want to be in this situation.
What's a favorite book and why?
My favorite recent business book is "The Alliance" by Reid Hoffman. It's a really short and practical book about how employers and employees can re-think their relationship to develop employee careers more and improve employee retention for employers. My favorite recent non-business book is "3-body problem" by Liu Cixin. It's a fascinating sci-fi novel. When I got to the last page and realized the book was over, I was so upset that I shouted "that can't be it!" aloud.
I loved the three body problem. If you like sci-fi, this is a must read.
Any insights / golden nuggets from “The alliance” you'd want to share?
Yeah! The book's goal is to increase employee retention for employers and improve the career trajectories for employees. The core of the book is structuring an employee's work into a "tour of duty," which specifies a) value that the employee should generate for the employer, such as shipping a new product or building new distribution channels, and b) value that the employer should generate for the employee, such as leadership experience or new expertise. The alliance is an agreement between employer and employee to mutually invest in and commit to one another during the tour of duty, and then revisit the working relationship as tours of duty approach a close. At that point, you mutually decide if you wanna do another tour of duty, or if the employer should help the employee find their next opportunity.
What's a favorite podcast episode you'd recommend me to listen to?
My favorite podcast episode of all time is "Tech startup ideas for the farmer economy" from Shaan Puri and Sam Parr's My First Million podcast. This pick is selfish because Shaan, one of Steady's investors, gives Steady a very cool shoutout! But besides that, Keith Rabois was on a podcast and said a bunch of stuff about how he believes PMF is created with vision, rather than discovered with iteration. That podcast found me at the time when I was learning that myself the hard way. I actually can't find the specific podcast, but it might have been his appearance on This Week In Startups.
Is there a product that you yourself would need?
The big things that are top of mind right now are decreasing healthcare costs, since I just signed up for health insurance for Steady and shit man it's expensive, and other ways for everyday people to make more money.
Easy fix: just move to Europe (says the guy living in New York)
On a lighter note, what's a movie / tv show / documentary you watched recently you'd recommend people to watch?
Abbott Elementary, which I think is like The Office except way better, and Attack on Titan, which anyone who loved Squid Game should love too.
Lastly, where can people find you if they want to follow the rest of your adventures?
I'm @dillonzfo on Twitter!
That’s a wrap. Did you enjoy this? Let me know by just replying Yes or No to this email, I read them all :)
Want more? Check out the most popular Deep in the trenches edition so far with Ashutosh from Sunsama. They actually just announced that they’re profitable!