Tuesday, 29 November 2022 05:57

All founders should be solving a problem

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Why it worked for me and how it can work for you too

I run into a lot of aspiring founders who want to be founders just for the sake of being founders -- they want freedom, want to build wealth, or whatever the case might be. In my experience, however, it's a much better idea to become a founder only when there's a big problem that you're really passionate about and you have a burning desire in your stomach and heart to solve it.

The insight for my first company, Dotloop, started with a problem I was experiencing as a real estate agent. I was driving around town chasing buyers and sellers to get documents signed on the hood of my car. It was not only consuming a lot of time and energy for me and my clients, but it didn't seem secure to loosely email or fax important documents. I wanted to find a more efficient solution so we created Dotloop to digitize real estate documents that went on to become a market-leading company and now serves more than half of our real estate transactions in the United States.

Similarly, Pacaso is solving a problem that was personal to me. I grew up in a modest household living paycheck to paycheck. Second homes were definitely not a luxury that I had access to growing up. But ten years ago, when my wife and I were fortunate enough to become second homeowners in Lake Tahoe, it changed our lives for the better. We made new friends, found our favorite hiking and biking trails, local restaurants, family-run coffee shops, etc., and felt a deep sense of community connection. However, I saw a lot of problems with the old-model of owning a whole second home that called for a better way.

When I left Zillow in 2019, I spent most of that year seeking to better understand this problem. I remembered reading a quote from Einstein where he said, "If I had an hour to solve a problem I'd spend 55 minutes thinking about the problem and only 5 minutes thinking about solutions." I approached my year off through that lens. As I did research, the scale and complexity was greater than I first anticipated.

I initially saw the problem only from the perspective of an owner where the financial burden and time commitment associated with second home ownership was significant. Once I discovered the average second home sits empty for ten to eleven months every year, it was like a light bulb went off. There are 10 million second homes in the United States many of which are concentrated in the same destination communities suffering from low inventory and high prices for housing. What if we could enable a better way, that made second home ownership more sustainable for owners and communities?

Pacaso launched in late 2020 to offer a new category of real estate ownership, called co-ownership. Through this approach, we make second homes more accessible for owners by lowering ownership cost and reducing hassle through a fully managed owner experience. For communities, we consolidate second home demand by putting up to eight buyers into one luxury home. This means less competition for median priced homes most in demand by the local workforce, more spending at local businesses, and more tax revenue, according to economists who studied our model. We developed this model because we deeply understood the problem. Today, the traditional second home is seeing unprecedented demand due to the pandemic and remote work and many communities are in a full blown housing crisis. Pacaso and co-ownership can help, and that makes me excited to wake up and get to work every day and bring value to more owners and communities.

My tips for new founders on what to do and think about before you start your company are:

Find a problem that you are passionate about. Don't start a business just to start a business. It needs to be a problem burning inside you that you feel obligated to solve.

Take time to understand that problem. If you can afford it, try to take time off before starting your company to spend time understanding that problem with a clear state of mind and no distractions.

As you are thinking about the problem and business that you want to start, imagine a Venn diagram of 3 circles with one circle being what you love and are passionate about, the second with what you know (i.e. where are you advantaged compared to other founders) and third is what delivers a lot of value for consumers and makes the world a better place. If you could find the intersection of these things - what you love, where you are advantaged, and what delivers a lot of value for consumers, that's the magic formula to creating a great business that has a lot of impact.

This is a playbook that I recently had the opportunity to implement with our team at Pacaso and it's paying off. In just a couple of years, we are now 300 on our Crew serving 40 destinations with nearly $1B in real estate in our marketplace, and we are just getting started to provide a better and more sustainable way to own a second home from buyers and for communities. However, it's important to remember that these things do not happen overnight. It comes from passion, time and energy blended with more than a decade of building relationships, knowledge from prior companies, a full year off that I dedicated to understanding the problem, and much more. There's no better time to start than today.



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