Dan Martell - Episode #3： Building, Launching & Financing The WeWork of Vacation Rentals

00:00:01.000 Here at WeWork, I'm going to go meet with Roman Bodnerchuk.

00:00:04.080 He's a real estate developer.

00:00:06.000 I actually met him a decade ago, and he reached out for some advice.

00:00:10.380 I actually don't have a lot of context.

00:00:12.040 We're just going to roll into the conversation, chat.

00:00:14.580 We're here at WeWork in Toronto, and just bring you along for the ride.

00:00:20.040 What are we doing today?

00:00:21.000 So I'm starting a new company called Tapestry.

00:00:23.580 Cool.

00:00:23.980 And it's basically we're buying RV parks, and we're making something really cool.

00:00:28.800 because there's really been no innovation in RV parks for 50 years yeah so imagine all these

00:00:33.440 people that we work they they love community they love social they just love this whole concept

00:00:39.440 but they've never seen like they've never looked at the stars and seen like actually seen stars

00:00:43.280 like you live in a city like toronto you don't see stars they don't they don't smell campfires

00:00:47.520 they don't know what's going to jump into a clean water lake so i want to give them that experience

00:00:52.320 that community experience but 90 minutes outside toronto is the first one yeah um so these are

00:00:57.120 small really cool looking cabins but very like architecturally you know hip and cool but it

00:01:03.280 also has a social area where there's like a restaurant so you don't have to cook you just

00:01:06.640 go for your meals we prepare the campfires for you so it's really a 2020 version of a hip and

00:01:13.280 cool resort yeah that we're going to sell these there's 50 of these we're going to have 50 so you

00:01:18.000 buy it for under 200 000 it's very affordable and the business model it's a land lease so we get

00:01:23.280 get money forever because at all RV parks, somebody owns a land and then you just pay

00:01:28.400 $200-$300 a month.

00:01:29.400 Yeah, it's a condo piece.

00:01:30.400 Yeah.

00:01:31.400 So it's exactly a condo piece.

00:01:32.400 So it's really a…

00:01:33.400 And you may know something about a condo piece.

00:01:35.400 A little bit of a condo piece.

00:01:36.400 Just a little bit, yeah.

00:01:37.400 So the idea, it's a great reoccurring business loss.

00:01:39.400 The problem with my business model right now is we sell out these projects, we only walk

00:01:42.840 away, there's no money.

00:01:43.840 But this is like passive income forever, and there are 17,000 of these parks.

00:01:49.680 I only want to do waterfront ones, so we're down to a couple thousand.

00:01:52.680 But there's a huge opportunity that no one's addressed

00:01:55.180 to make a cool, again, like we work,

00:01:58.120 you know, focus on the millennial.

00:01:59.480 Or like the cottage, like the WeWork.

00:02:01.440 Yeah, it's your weekend escape.

00:02:03.840 It's your escape to get out of the cottage.

00:02:05.480 I mean, there's a million people in the city

00:02:06.980 that live in a 600-square-foot box and only see concrete.

00:02:11.200 It's interesting because, like, in Florida,

00:02:12.680 my dad entertained staying at a place called The Village,

00:02:16.040 which is down in Florida.

00:02:17.320 It's 350,000 seniors.

00:02:19.880 You got it.

00:02:20.320 And one of the rules is the opposite of what we would have on a curfew,

00:02:24.500 is that if you're not at least 55 or older, you can't stay the night.

00:02:28.060 Yeah.

00:02:28.680 So you're essentially trying to create, like, a community for millennials.

00:02:33.220 You got it.

00:02:34.080 Got it.

00:02:34.820 What can I help with?

00:02:36.660 So the last time I raised money was 17 years ago.

00:02:40.180 I raised a million bucks in BC.

00:02:41.560 So I'm a little bit out of touch.

00:02:43.500 It's changed a little bit.

00:02:44.680 So am I doing a Kickstarter campaign?

00:02:46.320 campaign am i doing a general offering and going to high net worth guys i'm really thinking about

00:02:52.320 how to because i don't want to raise money for a resort i want to raise money for the whole entity

00:02:56.960 because we're going to we're going to be in the acquisition business we're going to be doing these

00:02:59.680 things so i know how to raise money on one deal for real estate but i'm looking like how do we

00:03:05.200 sell this like the way we work raise capital so we can really scale this yeah so that's the idea

00:03:10.400 So really it's a fundraising question.

00:03:12.940 Yeah, so the interesting part is

00:03:15.820 I'm pretty sure WeWork had a working model

00:03:19.300 before they raised their first significant round of funding.

00:03:23.080 That'd be right.

00:03:24.420 I'm almost positive.

00:03:25.260 I actually have spoken on stage with one of the founders,

00:03:28.420 the long hair creative guy.

00:03:29.880 I should probably get to know people's names

00:03:31.040 a little bit better.

00:03:33.000 And honestly, in the early days,

00:03:34.440 I thought, this is kind of crazy.

00:03:36.280 Like, how are they gonna,

00:03:37.600 And a lot of people did, justifying the valuations,

00:03:41.040 and they had a pretty impressive growth rate.

00:03:45.340 And then you come here and you're like, okay, I get it.

00:03:47.680 When 20% of the tenants are corporate companies

00:03:50.720 and not startups, you start to see the model

00:03:53.160 and you see the trends of kind of like,

00:03:57.660 own nothing access to everything, right?

00:04:00.040 And like people wanting fractional ownership to spots

00:04:03.380 and not having long-term commitments.

00:04:04.920 And I mean, I'm pretty sure you don't,

00:04:06.120 like you get a lease here,

00:04:06.920 but you don't have to commit.

00:04:07.760 It's month to month.

00:04:08.580 Like literally, that company right there

00:04:11.100 can just bounce.

00:04:11.940 Everyone's month to month, there's no contracts.

00:04:13.660 So that's, I think that's a trend that's here to stay.

00:04:17.280 I think that the ooprification of most assets

00:04:21.320 and resources are, is a real thing.

00:04:27.380 When it comes to fundraising,

00:04:28.520 cause like it's interesting is you have,

00:04:30.900 what you're doing could go and look,

00:04:32.680 I've been involved in real estate,

00:04:33.780 I've been involved in technology.

00:04:34.860 So you, there's the, it's always,

00:04:39.020 people talk about platforms, right?

00:04:40.560 So like if you think about it,

00:04:41.660 the thing you wanna build is like high level

00:04:43.660 and that's kind of a platform,

00:04:45.060 and then the individual projects are the things

00:04:46.940 that need to get funded.

00:04:49.140 So there's, you could do,

00:04:50.300 it's kind of like you could do all three, right?

00:04:53.940 If I was building this company,

00:04:55.580 I would definitely try to figure out

00:04:57.260 what's the unit economics for one location.

00:04:59.940 I'm assuming you've kind of run the numbers

00:05:01.460 90 minutes from here, you've got.

00:05:02.700 So tell me about kind of like what's the infrastructure.

00:05:06.680 Well, I guess, why do you care about doing this project?

00:05:08.780 Is that why?

00:05:09.400 Okay, so I was lucky enough at age 30 to buy a little condo about two hours outside the city of Muskoka.

00:05:19.100 And it was like my decompression place.

00:05:21.040 So Monday to Friday, I'm killing it, you know, like you know.

00:05:24.400 but the only reason I survived the last 17 years is I had a place to get out of

00:05:30.340 the city where I just relax and I could see the stars and breathe fresh air and

00:05:36.220 it was just that place of like solitude that got me grounded and then I come

00:05:40.880 back in the city and hit it for another week yeah and that that place that I

00:05:44.080 always have within the marathon right yeah and I think that when you live

00:05:48.100 again if you're one of the million people that live in this concrete jungle

00:05:51.820 of the city, and there's a lot of big cities, you don't get that escape.

00:05:55.520 So I'm trying to create that affordable, I know what it's done for me, what it's done

00:05:59.020 for my family, my kids.

00:06:00.320 And what's a Muskoka investment today?

00:06:02.960 Yeah, so, like, just the worst horrible lot you could find is, like, half a million dollars.

00:06:08.620 Yeah, just for the land.

00:06:09.440 Yeah, just for the land.

00:06:10.240 And then it's just a nightmare of maintaining, et cetera.

00:06:12.100 And under the new mortgage rules that take effect in Canada, January 1st, no one's going

00:06:16.500 to qualify.

00:06:17.240 Like, they've made it the most stringent, draconian laws we've ever seen in any country

00:06:21.560 in the world do so people want to refinance their own house they're going to go to their

00:06:25.720 bank oh you mean we're changing the laws and people that want to refinance they may not qualify

00:06:31.960 under the new law essentially their grandfather's in if they keep yeah as soon as they tweak

00:06:37.240 then they're going to even when you go to renew your mortgage you have these new stress tests

00:06:41.320 and all these crazy things that go the whatever value ratio yeah and it's all about your income

00:06:45.880 so so if you're an entrepreneur for example and you don't have like a huge t4 like 1.00

00:06:51.400 you're done like you're not going to you're not going to qualify for your own mortgage

00:06:54.840 so the mortgage you qualify for this year you won't get so so imagine second home so people

00:06:59.400 can't qualify for their own home there's no way they're going to get financing for a cottage so

00:07:03.800 i want to create a model where it's finance proof so we've got a way that with 20 down we can finance

00:07:09.960 anyone without a bank it's under 200 000 so it's affordable and it's a piece of paradise and it's

00:07:15.400 a community of like-minded people and it gives you all these amazing social benefits so i'm on

00:07:21.160 board with that the uh economics of the business model what do they look like so it's only about

00:07:27.880 two million dollars of infrastructure that we have to put into these resorts it's only a couple

00:07:31.880 million dollars up front does it exist already are you buying raw land and developing we're buying

00:07:37.880 rv parks that are already been around for 30 40 years already but when you go to those parks they

00:07:42.920 they look like a traditional RV park.

00:07:45.440 The first one has a great restaurant

00:07:47.100 that we're just gonna do a little bit of a makeover on,

00:07:48.960 make it kind of cool and hip.

00:07:50.560 So we're buying existing businesses

00:07:52.520 that already have cash flow, actually making money,

00:07:54.780 but we're changing the business model.

00:07:56.660 Again, it's kind of like Regis Business.

00:07:58.640 But an RV, yeah, so RV park typically have lots

00:08:02.600 that they rent and the RVs are brought in

00:08:04.280 by their customers.

00:08:05.180 That's right.

00:08:06.020 Or is this different where I essentially,

00:08:08.760 you guys are gonna provide the RVs?

00:08:10.260 So what we're gonna do, in year one,

00:08:12.820 we're bringing a bunch of Airstreams because Airstreams are kind of like the cool hip thing

00:08:15.660 people want to stay in. Tony Hsieh in Vegas has an Airstream park. Yeah, you got it. So part of it's

00:08:21.120 going to be part of for Airstreams and then we're going to have a cabin that you can purchase made

00:08:25.040 of containers, like really cool containers. So you have an option. You could be in the Airstream

00:08:29.800 neighborhood. You could be in the cool cabins and they're all going to be for rent. So even if you

00:08:35.720 buy a place from us, you're like, you know what? I don't think 10 weeks in the summer I'm going to

00:08:39.040 use it while you put in our rental program it'll pay for itself cool still

00:08:42.520 ownership for it's actually full ownership the actual the actual cabin

00:08:47.320 that you're going to buy is full ownership and it's you can take it

00:08:50.420 anywhere in the world so if you decide to go to Costa Rica or Mexico or Moncton

00:08:54.580 you can take it you could take it with you it's portable so it's a hundred

00:08:58.960 percent option ownership on that and that's worth financing but it's a land

00:09:02.980 lease so just like any RV park you're paying a monthly monthly fee so that's

00:09:06.640 That's the reoccurring business model for us.

00:09:09.480 So what we're excited about is we're creating

00:09:11.380 a new experience that doesn't exist.

00:09:12.720 If you look under glamping or I want to go

00:09:16.520 to a cool Airstream place, these ideas, these fantasies,

00:09:20.260 there is no surprise.

00:09:21.580 I know, I rented an RV this year,

00:09:24.100 because my brother's hardcore, and he asked us to join him.

00:09:32.660 It's tough, because everything's recorded these days.

00:09:35.760 It wasn't for me, and I'll tell you why,

00:09:37.360 is the camping experience I had was people

00:09:40.060 that really enjoyed starting to drink at 11 a.m.

00:09:42.860 and they didn't really do a whole lot.

00:09:44.180 And that's just not, I'm kind of like,

00:09:45.980 let's hike that mountain, let's, you know what I mean?

00:09:49.440 Like, let's do something challenging.

00:09:53.440 And I get it, some people do it to unwind.

00:09:56.760 It's kind of like, I like to play hard,

00:09:58.460 and I don't know, that's just me.

00:10:01.080 So, you know, we had to rent this machine,

00:10:03.460 we had to drive it there, we had to set up,

00:10:04.880 to deal with all the, you know, the toiletry stuff, which is just ridiculous. It just wasn't

00:10:11.840 for me. I'm more of a rent a chalet on a lake, Airbnb style, and that's my vacation. So I kind

00:10:17.740 of got to figure out, but I'm not, I like this idea. I'm obviously a very social person. I like

00:10:21.940 the community aspect. So, but talk to me through the top line potential and the investor ROI. Like

00:10:28.440 how does an investor make money in this deal? So the way we've looked at an investment offering

00:10:33.940 is guaranteeing like a 12% annualized return.

00:10:37.160 So we think by taking all the risk away

00:10:39.220 and giving them, basically it's in 12 months

00:10:41.880 they can realize they're 12%

00:10:43.760 and then give them an option,

00:10:46.840 basically a convertible option

00:10:47.960 to own shares in the company.

00:10:49.620 So that's kind of the model we've been thinking about.

00:10:51.800 How do you get them at a guaranteed 12?

00:10:53.720 Well, we're buying existing businesses

00:10:55.700 that have cash flow.

00:10:56.940 And then all we're forecasting is,

00:10:58.460 well, how many sales can we do in that time period?

00:11:01.000 But we're going to take the investor proceeds

00:11:03.620 and take that 12% and put that in a trust account.

00:11:06.340 So there 12% is already, you know, set aside.

00:11:09.180 It's already locked up.

00:11:10.340 So we're pretty confident because we're buying existing businesses.

00:11:13.660 Even if our business model failed,

00:11:16.300 we're still buying existing businesses that have been running for decades.

00:11:18.980 Are these cash flow positive?

00:11:20.340 Yeah, we're buying cash flow positive businesses.

00:11:21.960 And how, I guess, if you're going to buy those assets,

00:11:25.300 and obviously you're going to do it with some form of debt,

00:11:27.660 or are you just going to buy and sit through the whole investment?

00:11:30.640 So the first one, we've got a VTV.

00:11:33.060 So we've got, we're putting up like 25% vendor take back.

00:11:37.400 So a lot of these, a lot of these are called by retirees.

00:11:42.500 So they don't mind if you give them a couple hundred thousand dollars and you give them a high return, they're happy to do that.

00:11:48.460 They just need somebody willing to value the property.

00:11:50.320 And the thing about WeWork, they don't actually own any of the real estate.

00:11:52.940 So we could actually test our model, not even doing a long-term lease on our own program.

00:11:57.720 Hey, we'll lease it for 15 years from now.

00:11:59.600 So that would be a lot less capital intensive.

00:12:01.860 so that's another option for us so what's the challenge then i mean if you actually have a

00:12:06.340 model that guarantees 12 most investors in today's market would be happy with that i guess the the

00:12:11.860 challenge is i want to make sure i structure it right should i be doing a kickstarter campaign

00:12:18.420 or do i do a traditional real estate kind of limited partnership and you go talk to 25 accredited

00:12:23.220 investors i guess i'm looking at your insight in terms of what would you do to get to raise a

00:12:27.620 couple million so so what's happening in the consumer space especially in the consumer

00:12:30.740 in the consumer electronics space is

00:12:32.980 the Kickstarter is more of a marketing,

00:12:35.920 market validation process.

00:12:37.740 It's not necessarily a fundraising process.

00:12:39.740 A lot of these consumer electronic companies,

00:12:42.000 and I've invested in like 25 Kickstarters

00:12:44.740 where I've gotten stuff, sometimes I don't get stuff,

00:12:46.740 that's kind of the running joke,

00:12:48.040 all of a sudden something shows up in the mail 0.99

00:12:50.120 and you're like, holy fuck, a year later, 0.99

00:12:51.900 finally get it. 0.99

00:12:53.620 But the truth is, is many of these companies

00:12:57.320 might have had some other way of proving the model

00:12:59.540 and they raise capital, and then the Kickstarter

00:13:01.780 is really a way to go to market.

00:13:03.340 So the, you kind of want to think about it as like,

00:13:05.920 the go to market is the Kickstarter,

00:13:08.020 but it's not the funding economics.

00:13:09.680 Because typically you're gonna do it

00:13:10.920 either at a loss or a breakeven.

00:13:12.380 Most consumer electronic companies do it at a loss,

00:13:15.560 as a way to prove the market, just to go to market.

00:13:17.620 So that's why I think it could be all of the above.

00:13:21.860 If I was doing this, I mean, I'm a big fan

00:13:24.200 of not having a lot of investors,

00:13:25.760 just having a few investors, and I'd want the same,

00:13:27.600 and you know this, because you come from

00:13:28.860 in the real estate world is I want investors

00:13:30.700 that are gonna be able, like, if I can prove success

00:13:32.620 for them in this deal, that I'm gonna get this return,

00:13:34.640 like, we're gonna get the next deal

00:13:36.440 through the same level of investment.

00:13:37.500 So do I wanna do Kickstarters over and over again?

00:13:40.980 No, I would much rather say let's fund the core business

00:13:45.140 through the right, you know, real estate investment vehicle.

00:13:48.940 And that's why I said there could be

00:13:50.080 a technology aspect as well, right?

00:13:52.820 As you have this at scale, as you perfect your model,

00:13:56.220 there's arguments for scale, right?

00:13:59.460 WeWork had to work on the unit economics per location,

00:14:03.260 work on the trending data,

00:14:04.720 look at the workplace migration trends

00:14:10.720 to then finally argue the valuation that they're receiving.

00:14:13.580 It's not a real estate valuation, as you know.

00:14:16.180 So I think what you'd wanna do

00:14:18.420 is find the real estate investors

00:14:20.160 that are gonna back this kind of deal

00:14:21.320 because it's a unique product.

00:14:22.920 They're gonna look at it through the same lens

00:14:24.480 as they would any other real estate deal.

00:14:26.380 If you can guarantee the 12%, which is not bad with VT,

00:14:29.020 what do you guys call it, I just call it owner.

00:14:30.260 Yeah, vendor take back.

00:14:31.260 Yeah, so vendor take, so VTB.

00:14:33.660 So they're used to that, right?

00:14:35.820 Where businesses, mostly private equity I would say,

00:14:38.360 are used to VTBs, I don't know if real estate

00:14:40.160 is common, because usually it's a little bit more liquid

00:14:43.040 if they want to go to market.

00:14:45.100 Then go with those investors for the core business

00:14:48.680 and then use a Kickstarter crowdfunding campaign

00:14:51.080 to actually sell out the thing as a marketing initiative.

00:14:54.180 Okay, that makes sense.

00:14:55.020 Yeah, because like, yeah, well, I feel like this is,

00:14:57.880 we met over similar project that was gonna leverage

00:15:00.500 the internet to sell out the property.

00:15:01.880 I mean, it's the same concept, right?

00:15:03.220 Except today, you're leveraging the platform.

00:15:05.140 Now, the truth is, most people think that the Kickstarters,

00:15:10.320 Indiegogos, Crowdfund, or whatever,

00:15:12.640 are gonna bring the demand, it's about 10%.

00:15:15.880 So if you wanna do a quarter million dollar Kickstarter,

00:15:19.060 you're gonna have to bring, you know,

00:15:20.780 they're gonna bring about 25,000 of that.

00:15:23.740 A lot of people don't understand that.

00:15:24.980 So there's ways to do that.

00:15:26.980 For example, there's probably comparable Kickstarters

00:15:29.660 that you've seen, right?

00:15:30.820 You mentioned a few.

00:15:32.420 What are some of those?

00:15:33.600 Yeah, so there's a hotel that I saw

00:15:35.420 raised a couple hundred thousand dollars this way.

00:15:37.900 But I think you're right.

00:15:38.740 What they did is basically offer the rooms,

00:15:40.680 so people are basically buying this kind of.

00:15:42.220 A free buy.

00:15:43.020 Yeah, so you're right.

00:15:44.100 It's kind of, it's kind of.

00:15:45.400 It's going to market.

00:15:46.120 It's really creating a market,

00:15:48.080 but it's not really fundraising.

00:15:49.420 So they still had to do real estate finance.

00:15:51.740 Yeah, the hotel was built.

00:15:53.100 Yeah.

00:15:53.940 Okay, so that's good.

00:15:54.760 So that's just kind of step two.

00:15:55.600 But here's why I say that.

00:15:57.020 One of the ultimate strategies for getting

00:15:59.840 your Kickstarter distribution and awareness

00:16:02.040 is doing a reverse image search.

00:16:04.740 So essentially, if you can find the images and videos

00:16:07.380 that were used on that Kickstarter,

00:16:09.700 and then you go to Google,

00:16:11.060 you can actually do a reverse image search.

00:16:12.920 So most people don't know this.

00:16:13.840 Never heard of that.

00:16:14.680 Yeah, so if I took a picture of you,

00:16:16.060 I could actually go on Google, reverse image search,

00:16:18.900 upload the picture, and it would find

00:16:20.680 all the reference points of where that image

00:16:22.780 was used on the internet.

00:16:25.020 So here's why that's powerful from a crowdfunding campaign is,

00:16:28.440 and I'll give full credit to my buddy Clay Bear

00:16:30.460 who taught me this like five years ago.

00:16:32.420 He's the crowdfunding expert.

00:16:34.600 Is you can use where the,

00:16:37.460 that's how you find the press that's covered that project.

00:16:41.260 And you know birds of a feather flock together.

00:16:43.020 So like if they're gonna cover that project,

00:16:45.440 they're probably very inclined to cover your project

00:16:48.240 and that way it builds your hit list.

00:16:50.040 So before, this is why I say like

00:16:51.740 If you're gonna do a crowd fund,

00:16:53.100 I have a friend that's done like a high-end

00:16:55.280 Apple guitar case-esque product.

00:16:57.820 I've had friends that have done like the ultimate,

00:17:00.520 what was it, it was the cooler,

00:17:03.220 the ultimate cooler, the cool cooler, something like that.

00:17:05.620 One of the biggest Kickstarters ever.

00:17:09.320 And one of the things you can do is that one,

00:17:11.500 and then the other one is Facebook.

00:17:12.900 I mean, really, truthfully, it's the ultimate, right?

00:17:15.140 So you want to use the prep work to a successful Kickstarter

00:17:19.300 is reverse image search to find out the press media outlets.

00:17:22.220 Build those relationships up front.

00:17:23.900 So you build a list of, let's say, 75 press outlets.

00:17:27.260 They want the exclusive, you're giving it to them.

00:17:29.240 On December 15th, we're launching this new project.

00:17:32.760 Here's the video, check it out.

00:17:34.080 Oh, that's so cool.

00:17:35.320 Cool, we're scheduling media interviews.

00:17:38.420 December 1st, we're doing media interviews.

00:17:40.200 The 1st of the 14th, we're essentially

00:17:41.900 gonna be doing these interviews.

00:17:42.840 We can do them on Skype, we can do it on da-da-da,

00:17:44.300 whatever you want.

00:17:45.460 And we've honestly already got most of this funded,

00:17:48.180 just because we have a really large network,

00:17:49.680 here's my background, and we really wanna give you

00:17:52.160 an exclusive into whatever angle you find most appropriate.

00:17:54.720 Maybe it's the architecture, maybe it's the business model,

00:17:57.160 maybe it's the future millennial story, whatever it is.

00:18:00.980 That gets your press on board, and then what happens

00:18:03.300 is you boost those coverages on Facebook.

00:18:06.940 Right, so you're running ads boosting.

00:18:08.300 Running ads on the best performing ones

00:18:10.240 that are driving traffic, because you know those things

00:18:12.840 are gonna have a viral coefficient

00:18:14.120 based on their publishing and share.

00:18:16.220 So let's say you get covered by 25 outlets,

00:18:18.320 there might be only three of them that are actually like,

00:18:21.580 they publish and all of a sudden it's like 25 shares,

00:18:23.800 100 shares, 1,000 shares.

00:18:25.540 Those ones, those are the ones you throw ad spend on.

00:18:29.060 And you also throw some on yourselves and just see like,

00:18:31.580 then you look at your refer traffic to say,

00:18:33.640 are those articles sending more traffic cost per,

00:18:36.740 essentially I'm spending $10 to boost that ad,

00:18:39.760 is that getting a better amplification

00:18:41.400 to my target audience that's converting on Kickstarter

00:18:43.560 to people committing to the project?

00:18:45.620 Or do I send them directly to the Kickstarter?

00:18:47.920 Typically in today's world, promoting other content

00:18:51.940 that's really well positioned for their audience

00:18:54.280 to convert is better than sending to a direct landing page.

00:18:58.020 Right, that's interesting.

00:18:59.240 Yeah, and then I don't know if Kickstarter allows you,

00:19:01.840 but then you remarket them, then you tag them,

00:19:03.900 you give them a pixel, or at least they go

00:19:05.960 to your Kickstarter page or some kind of about page.

00:19:08.200 Somehow you wanna target them,

00:19:09.500 and then that's how you remarket.

00:19:11.300 And so that would be independent,

00:19:13.740 and that would actually be one of the strategic initiatives

00:19:17.660 that I would consider speaking about in the pitch deck.

00:19:20.920 Right?

00:19:21.760 This is our marketing plan.

00:19:22.680 This is our go-to-market.

00:19:23.640 We're gonna do this, we're gonna go X,

00:19:25.220 here's what we brought, here's the expertise

00:19:26.700 we brought on board to execute this,

00:19:28.940 and then investors are gonna go like,

00:19:31.080 wow, so really my exposure's low.

00:19:32.960 I'm buying an existing asset.

00:19:34.740 It's already got positive cash flow.

00:19:36.960 The NOI isn't crazy based on comparables.

00:19:41.960 it's essentially the option or the bet

00:19:46.460 to be involved in the future, right?

00:19:48.760 Because this is not a one-off.

00:19:49.940 This is actually a platform.

00:19:51.600 We want to prove out the unit economics

00:19:53.200 with this first project.

00:19:54.660 We're gonna learn, we're gonna reinvest

00:19:56.160 into the second project with all the learnings there.

00:19:58.200 The second one will get better and better.

00:19:59.340 I mean, I guarantee the first WeWork

00:20:01.840 had different economics in the 15, right?

00:20:04.220 And now they got it really dialed in.

00:20:05.720 They understand how to deploy.

00:20:06.860 I mean, how quick did this place sell out?

00:20:08.680 Yeah, it was sold out before it opened.

00:20:10.840 and I got a new one I went to see today,

00:20:13.220 and like literally in 90 days from when they sign,

00:20:17.360 like they're literally renovating these places

00:20:19.200 and getting them up within 90 days.

00:20:21.120 Perfect, so they've refined their model,

00:20:23.260 no different than a franchise prototype will.

00:20:25.220 I mean, I have a lot of friends that build up franchises,

00:20:27.440 and what they perfect is how to go from box

00:20:31.480 to fully built out unit to launching to profitable,

00:20:36.720 break even to eventually fully kind of like

00:20:39.460 commercialized square foot revenue, on to the next one.

00:20:43.320 And that's the economic engine that they're building.

00:20:45.760 And that to me for this kind of project,

00:20:49.240 especially because it's like,

00:20:51.640 I say this for like franchises or marketplaces

00:20:55.060 that have a local component

00:20:56.140 that are very geographically dependent,

00:20:57.940 that's what they're building.

00:20:58.840 They're building their per city deployment playbook.

00:21:01.080 So when Uber started in San Francisco,

00:21:03.640 for the first 16 months,

00:21:04.940 they were just building their playbook,

00:21:06.220 their institutional knowledge,

00:21:07.420 their best practices, their et cetera.

00:21:09.280 Then they launch in, I think they went to L.A. next.

00:21:12.300 I forget the cities, I was early friends with those guys.

00:21:15.780 And it's like playbook, playbook.

00:21:17.300 Sprague, I invested in Sprague Food Company,

00:21:19.260 unfortunately they failed, super fun ride,

00:21:21.460 30 some million spent in three years.

00:21:24.140 But that was like, let's build the playbook.

00:21:26.400 So I feel like that's the conversation you're having

00:21:28.820 with the investors, the go-to-market looks like that.

00:21:31.720 I mean, what are you looking to raise?

00:21:33.460 From an investor point?

00:21:35.280 $4 million is the challenge.

00:21:36.800 So it's not crazy.

00:21:37.800 No, it's not a crazy number.

00:21:39.560 And it's back to real assets.

00:21:41.680 That's what I'm saying.

00:21:42.560 Like that's actually like,

00:21:43.560 that's not for a reason for an idea.

00:21:45.060 You're gonna get a call for 25 million.

00:21:46.400 Yeah, no, no, it's 4 million, but it's back to, you know.

00:21:48.640 Cool, 4 million for one project.

00:21:51.180 These people are gonna buy into the project,

00:21:53.300 and are you saying those people have the option

00:21:54.840 to essentially be part of the ownership?

00:21:56.700 Okay, I wouldn't add that at first

00:21:58.280 because it could cloudy the conversation.

00:22:00.700 I think that what I've learned in business is

00:22:04.020 explaining what it is sometimes hurts you

00:22:06.900 if you make it too complicated.

00:22:09.100 Yeah, sometimes it's like, okay, I pay 200 grand

00:22:12.280 and I get X and you're gonna rent it for me,

00:22:14.340 so at the end of the day, if these numbers hold true,

00:22:16.480 the real total cost of ownership is Y.

00:22:18.840 I get that.

00:22:19.680 As soon as you add another dimension,

00:22:21.280 like those network marketers,

00:22:24.320 and if you get six friends and all of a sudden

00:22:26.260 that comes down by 6% and da-da-da,

00:22:28.220 it's like, it's the analysis paralysis.

00:22:30.460 I'd rather say no because I don't understand it.

00:22:33.060 I'd rather simple, like, even like, and you know this,

00:22:36.700 same size units, same size amenities,

00:22:39.780 same, like the more you can say it's this and not that,

00:22:43.640 then people can go yes or no,

00:22:45.180 and then all your marketing guides them towards

00:22:47.940 the decision of that.

00:22:49.700 Not if you have like three different flavors,

00:22:52.160 it just gets complicated when it's too many.

00:22:53.880 So I would say that's interesting.

00:22:57.180 The investors though, this is where you can kind of

00:22:59.280 play to their wants is

00:23:03.640 saying like when this is successful,

00:23:06.620 Our plan is to deploy this across.

00:23:08.180 How many other sites do you think this is gonna work for?

00:23:10.100 So.

00:23:10.940 You said a couple hundred?

00:23:11.780 Yeah, I wanna target the business.

00:23:13.000 So I would say.

00:23:13.820 If you do exist.

00:23:14.660 There's probably a dozen in the next couple years

00:23:16.820 that we really aggressively pursue.

00:23:19.700 Perfect, so when this works, not if,

00:23:22.180 when this model works on that location,

00:23:24.140 you have 12 already scoped out,

00:23:26.020 and it's probably, it'll close on nine.

00:23:28.300 And similar economics will work for there.

00:23:30.760 And the truth is, is once we do that initial go-to-market,

00:23:33.340 we're gonna understand the demographic of our customer.

00:23:35.540 We don't need to do that again.

00:23:37.580 Because we already know who they are.

00:23:39.200 We know what they spend.

00:23:40.440 I always call it, what do they read,

00:23:41.760 what do they buy, and where do they spend their time?

00:23:44.080 We'll know those things.

00:23:45.540 And if 80% of them are WeWork customers, then good news.

00:23:48.940 We have enough people on Facebook and WeWork

00:23:50.820 that we can market to actually sell it to the rest of them

00:23:52.620 based on our comps.

00:23:54.920 So that's the model.

00:23:57.960 I love it.

00:23:58.800 And do you have a particular company

00:24:01.020 that you'd recommend that could put together

00:24:03.640 a whole Kickstarter campaign?

00:24:04.880 Is this the way to build a business on this?

00:24:06.540 Where, yeah, we'll launch your Kickstarter.

00:24:07.940 Here's the challenge, and Clay,

00:24:09.080 I would say go check out his thing,

00:24:12.120 I think it's crowdhackers.com.

00:24:14.400 Clay Bear Crowdfunding, he's got a website on it.

00:24:19.760 I'm pretty sure he doesn't do consulting on it anymore,

00:24:22.320 and the reason why is, unfortunately,

00:24:24.080 most Kickstarters are probably lower than a non-for-profit.

00:24:29.280 Meaning that they don't even have enough money

00:24:31.480 to fund the business, let alone.

00:24:33.520 So typically, nobody's really tried to build

00:24:36.560 a consulting business around it.

00:24:38.360 Not to say that there's a ton of great information.

00:24:42.380 The truth is,

00:24:45.700 you know, I would find,

00:24:48.940 and this is the way I do everything,

00:24:50.220 I would make a list of the top most successful Kickstarters,

00:24:54.340 recent Kickstarters,

00:24:55.780 because things change over time.

00:24:58.240 So let's say in the last 12 months,

00:24:59.760 what were some of the top,

00:25:01.240 and predominantly within, generally speaking,

00:25:04.000 your customer focus, right?

00:25:06.620 So it may not be real estate,

00:25:08.200 but it might be consumer electronic focus on millennials.

00:25:11.060 What were the top 25?

00:25:12.560 Who were the people behind those companies?

00:25:14.060 Reach out to them for advice.

00:25:15.560 You'll start to triangulate some of the best practices.

00:25:18.260 They might recommend a PR person,

00:25:21.740 a podcast person, a website person.

00:25:24.900 At the end of the day,

00:25:25.900 you might have to put together your own team,

00:25:27.840 but they'll at least give you some of the best practices.

00:25:30.340 And what I've learned, especially if it's people recently,

00:25:33.060 when people are raising money, reaching out to entrepreneurs

00:25:35.580 that recently raised money or closed their round

00:25:37.740 is actually a lot easier than reaching out to somebody

00:25:39.680 that's done it a long time ago or has done it many times

00:25:42.120 because those people who just finished doing it,

00:25:43.820 almost, like they guarantee, I guarantee they got advice.

00:25:47.020 And they didn't pay for that.

00:25:48.540 So it's almost like their opportunity to pay it forward.

00:25:51.460 So if you go reach online for like who's raised capital

00:25:54.840 recently or who's done a successful Kickstarter in Toronto

00:25:57.720 and you reach out to them and say,

00:25:58.960 I'd love 15 minutes to talk about a Kickstarter program.

00:26:02.080 He's got 99% chance they're gonna say yes.

00:26:04.720 Yeah, they're dear towards that.

00:26:06.800 Would you completely forget about going to VCs?

00:26:09.520 Or do you think, basically, if that...

00:26:11.480 It's not a VC model yet.

00:26:13.480 So until you can have scale and you've built a couple...

00:26:17.640 Here's what VCs look for, 100 million in seven years.

00:26:21.320 And I'm not saying you can't argue that today.

00:26:24.760 At the end of the day, what's happened in the markets,

00:26:26.980 which changed 16 years ago,

00:26:29.020 how long ago did you raise that million bucks?

00:26:30.340 17 years ago to today,

00:26:32.020 is the risk profile has reduced significant.

00:26:36.380 I mean, a lot of people forget.

00:26:37.560 I think it was called Color.

00:26:39.560 I mean, they raised 36 million.

00:26:40.840 This guy was like ex-Apple.

00:26:43.140 They built this social network based on photography.

00:26:46.140 It was called color.com.

00:26:47.700 I'm pretty sure.

00:26:49.080 My buddy Peter Pham was involved in it.

00:26:52.320 Yeah, the guy essentially left Apple to do this.

00:26:55.280 All these VCs put in a ton of money.

00:26:56.740 You just seen it recently with Juicero, right?

00:26:58.720 Ton of VCs put in, ton of money.

00:27:00.520 Like what's happening is I think finally,

00:27:02.900 and it was already getting better this way

00:27:04.800 because I think Angelus and me,

00:27:06.640 it's just the cost of testing ideas is really low.

00:27:10.360 And I think what investors, I know for myself,

00:27:13.980 if somebody comes to me without a product

00:27:16.400 in the market with customers, I'm just like,

00:27:20.840 if you can't do that in today's world

00:27:23.320 where infrastructure cost is zero

00:27:25.500 and you have access to development talent all over the world

00:27:29.260 and anybody can learn how to code online

00:27:32.740 for 15 bucks a month, if you can't do that,

00:27:35.620 the chances of you actually succeeding

00:27:37.260 when in business becomes difficult is very rare.

00:27:40.640 The only exception is repeat entrepreneur

00:27:42.500 that just doesn't have to do that, right?

00:27:45.180 But the truth is I also have learned over time,

00:27:47.660 I call this the struggle line,

00:27:49.000 that a lot of repeat entrepreneurs

00:27:51.800 think the second or third time it should be easier

00:27:54.440 and they don't do the things that made them successful

00:27:56.580 in company one and two the third time,

00:27:59.220 and usually they hit the struggle line,

00:28:00.960 meaning that they think,

00:28:02.520 well, I'm just gonna hire people to build this out,

00:28:04.360 and I'm just gonna get this done,

00:28:05.720 and I'm not gonna be working 100 hour weeks,

00:28:08.100 and da-da-da-da, and it's gonna be a side hustle,

00:28:10.180 and all these characteristics that, in hindsight,

00:28:13.060 it usually gets really difficult,

00:28:14.200 and they either lose a lot of money,

00:28:15.660 or they decide to roll up their sleeves and make it work,

00:28:17.880 and when they make it work, and I ask them,

00:28:19.780 what was true about that, and they say,

00:28:21.340 well, I started doing the things I used to do,

00:28:23.940 Right, which was talking to customers,

00:28:25.380 which was manning product roadmap, which was...

00:28:27.840 Yeah, like, there's a reason why you were successful.

00:28:30.580 And so I would just say investors today

00:28:34.180 want to see more proof before they put their capital at risk.

00:28:38.140 And the only reason is, is in a world of AngelList,

00:28:40.780 you're competing against every other deal.

00:28:43.400 Like, it used to be information kind of obscurity,

00:28:47.220 meaning that you as an entrepreneur,

00:28:49.560 and vice versa, the VC definitely had more information

00:28:52.280 because they're doing dozens of deals.

00:28:53.740 But even on the entrepreneur level,

00:28:55.420 the entrepreneur could create buzz in a community

00:28:58.780 that wouldn't be validated.

00:29:00.840 I remember back in the day,

00:29:02.580 you were able to create hype in your city

00:29:06.520 that the local high net worth people

00:29:09.620 just couldn't understand,

00:29:10.980 it's kind of like Bitcoin today.

00:29:12.340 A lot of people put money in

00:29:13.260 because they don't understand it,

00:29:14.840 but they don't want to be the guy

00:29:15.760 that doesn't get involved in it.

00:29:16.740 And that used to be true in the past,

00:29:18.400 but now, because of the way the laws have changed

00:29:20.620 or angel investing and investment opportunities,

00:29:23.280 Anybody could go and say,

00:29:24.720 I wanna do every deal Dan does on Angel.

00:29:26.420 I don't do a syndicate,

00:29:27.380 but I have friends that have syndicates.

00:29:29.720 And essentially, you can co-invest.

00:29:31.660 You can see what they're doing.

00:29:32.720 No, no, you can literally say,

00:29:34.200 anytime Jason Calacanis does a deal,

00:29:36.600 I'm in on 10Ks.

00:29:37.660 Yeah, Angel, yeah.

00:29:38.800 I didn't know you could do that, it's incredible.

00:29:40.000 Next level, right?

00:29:40.860 So all of a sudden, it's like,

00:29:41.860 I wanna be an Angel investor,

00:29:43.060 I don't have deal flow,

00:29:44.360 but I know this guy,

00:29:45.140 because I follow him on Twitter,

00:29:46.400 or his blog, or his podcast,

00:29:47.800 and I'm just gonna do every deal he does,

00:29:49.340 and then that guy, all of a sudden,

00:29:50.480 instead of writing a 25K check,

00:29:51.840 he's able to write a 250K check

00:29:54.300 because he's got this syndicate of people that,

00:29:57.240 that's a today thing.

00:29:58.080 This is three years ago.

00:29:59.820 So Angelos has been doing that for that.

00:30:01.320 Three years I think there's been syndicates.

00:30:03.840 Yeah, so to me it's like when that's true,

00:30:07.320 that's what the investors want to see.

00:30:09.180 Yeah, that makes sense.

00:30:10.620 Yeah, sorry, we just have to wrap up soon.

00:30:12.720 Okay, yeah, no problem.

00:30:14.500 So just one question.

00:30:15.480 You do these founders dinners.

00:30:17.700 I just got back from lunch.

00:30:20.340 Love it, I love it.

00:30:21.620 Tell me how to do it.

00:30:22.460 You wanna hear something funny is,

00:30:23.460 I never pulled the trigger on this,

00:30:24.840 but I always wanted to do it.

00:30:25.900 When I was raising my round for clarity,

00:30:27.720 I was in a fortunate position

00:30:29.040 only because of the amount of excitement.

00:30:31.980 I honestly had previous investors I made money for,

00:30:34.300 which is always step one, make somebody money.

00:30:36.740 Step two, ask them for more money.

00:30:39.800 And I wanted to, and I had incredible investors

00:30:43.780 for Flowtown, like really, Travis Kalanick from Uber,

00:30:48.240 Steve Anderson from Baseline Venture,

00:30:49.860 in Twitter, Instagram, Heroku, like just an incredible,

00:30:54.440 like yeah, he was on the cover of Forbes, Golden Touch.

00:30:56.880 I mean, one of the first original super angels.

00:31:00.040 He led my round in Flowtown and subsequently

00:31:02.440 he led the round in Clarity.

00:31:05.060 And I thought, because I read about this once

00:31:08.540 where this entrepreneur invited all the potential investors

00:31:12.700 to a dinner at his house.

00:31:14.320 And he pretty much said to like a dozen people,

00:31:16.440 at the end of the night, I'm gonna pick one or two of you.

00:31:19.080 And this is my opportunity for you to get to know us

00:31:21.600 and for us to get to know you.

00:31:23.040 And we really want to see how you interact

00:31:24.680 with other people and ourselves.

00:31:26.420 And let's have dinner.

00:31:28.600 And at the end, they made the decision.

00:31:31.200 So that's interesting, right?

00:31:32.400 That's kind of like the same version of like,

00:31:35.040 you know, group selling at a real estate network.

00:31:38.200 Yeah, so that's, it was interesting.

00:31:39.520 I never did that because I didn't have to

00:31:41.160 and it would have just been a lot of overhead

00:31:42.760 and scheduling, but we did raise the round 80% complete

00:31:47.900 and then use AngelList to just amplify the awareness

00:31:51.560 so that I could then, that's how I got Mark Cuban,

00:31:53.720 that's how I got a few other investors for Clarity.

00:31:57.460 But you don't think I'm ready for AngelList for this?

00:32:00.100 No, I think, so my rule for AngelList

00:32:02.320 is get the round 60 to 70% done.

00:32:05.300 So I coach a lot of entrepreneurs in B2B SaaS

00:32:08.360 and one of them just ended up doing this.

00:32:10.920 They essentially got, I think they were raising 1.5,

00:32:13.360 they closed 750K, then use AngelList

00:32:15.980 to finish up the rest, essentially the other half.

00:32:19.040 The idea of using founder dinners

00:32:21.220 to start to build relationships

00:32:22.960 with those potential investors, I think is brilliant.

00:32:25.480 The key is, is you can't talk about

00:32:27.520 raising for this idea yet.

00:32:30.480 So if you invited me and other founders,

00:32:33.560 we'd be like, hey, Roman, what are you working on?

00:32:34.920 And you're like, well, I'm working on

00:32:35.760 this really interesting real estate deal, da-da-da-da.

00:32:38.320 And then I go, well, are you gonna raise money for that?

00:32:40.100 And you go, no.

00:32:42.460 I go, ah, that's too bad, that sounds super interesting.

00:32:44.460 and say, cool, I appreciate it.

00:32:45.700 And you just enjoy, everybody talks, blah, blah, blah.

00:32:48.140 The reason why is because people always want

00:32:50.460 to be part of the group that they shouldn't be in.

00:32:52.360 They always want the thing they can't get.

00:32:54.140 And look, if I'm sitting there as a real estate investor

00:32:57.040 and I know there's five other real estate investors

00:32:59.240 and I start hearing that like every two weeks

00:33:01.140 this guy's organizing real estate dinners,

00:33:03.920 then I know he's gonna close that investment

00:33:06.840 when it opens up.

00:33:08.020 So you do that for two months,

00:33:09.720 you maybe get introduced to 50 potential investors

00:33:13.460 And then one day you say, look, we're raising four million,

00:33:15.940 here are the terms, we weren't gonna raise,

00:33:18.000 but we just had so much inbound interest

00:33:19.520 and we thought, some of these people we've met,

00:33:21.780 we really appreciate their expertise along with it,

00:33:23.920 plus this is a bigger deal, the four is just the beginning,

00:33:26.400 it's really an option to get in on the hundred.

00:33:29.840 And let me know, I'm gonna be here if you guys,

00:33:32.300 I did that for clarity, so I actually emailed everybody

00:33:35.700 and said, when they were emailing me about the deal,

00:33:37.820 I said, here's my cell, call me, I'm sorry,

00:33:39.440 it's really busy, and I'm gonna make a decision

00:33:41.920 on how the composition of the round's gonna look.

00:33:43.960 Like today, here's my cell, call me.

00:33:46.860 And I had, I remember, I think it was Howard Lindzen,

00:33:49.420 really incredible investor, real estate investor,

00:33:53.060 or financial investor, he's like,

00:33:55.100 Dan, what are you doing?

00:33:55.900 What's up?

00:33:56.740 Like, I knew him.

00:33:57.580 He's like, I saw you on AngelList, I want in.

00:33:59.040 And I was like, well, there's only 25K left.

00:34:01.240 He's like, I want 50.

00:34:02.380 And I'm like, I don't have 50.

00:34:03.500 He's like, you know, get rid of somebody else.

00:34:05.660 Like, I want 50.

00:34:06.420 Like, I want to do 25%, I want 25 of my fun, blah.

00:34:08.760 And I was like, you want me to kick out Marquis?

00:34:10.640 like that's not gonna happen.

00:34:13.140 And, but that's, I think if you,

00:34:15.180 it's no different than anything else.

00:34:16.720 It's like build the pipeline, then pull the trigger,

00:34:20.620 and then pick, and move on.

00:34:23.120 Because the challenge with most fundraising,

00:34:24.720 if you do it any other way,

00:34:25.880 is that it can really just suck the life out of you.

00:34:27.760 It can be an ongoing thing that never actually gets done.

00:34:31.320 Roman, hopefully that was helpful.

00:34:33.320 Awesome, man.

00:34:34.600 Hi, it's Roman Bodnarczyk,

00:34:35.740 and I just had the most incredible 20 minute interview

00:34:40.260 Dan Martell and I had the privilege of meeting him about 15 years ago and I've watched him flourish

00:34:46.020 in his careers and his companies and I'm starting a new company today and I want to get his fundraising

00:34:51.940 experience and wow he completely blew my mind with the information he shared with me it was incredible

00:34:57.780 what Dan taught me in literally in 20 minutes would have taken me you know months or you know

00:35:04.180 ages to figure out how to raise money today in 2017 how to raise it really effectively so we

00:35:11.460 talked about angels list we talked about a kickstarter campaign some really incredible

00:35:16.420 strategies that i never would have come up with honestly on my own so i'm really really grateful

00:35:21.860 that i had the session with dan i think anyone that's listening that has a real business and a

00:35:27.460 real business challenge they need to get on a plane they need to get on a train get in a car

00:35:32.420 whatever it takes to get to Dan because in 20 minutes he could save you five or

00:35:37.580 ten years could save you a decade of your life so I highly encourage you if

00:35:41.480 you're able to to get Dan's advice

Dan Martell - November 23, 2017

Episode #3： Building, Launching & Financing The WeWork of Vacation Rentals

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