Originating $500m in Real Estate Loans

J. Scott:
Welcome to the BiggerPockets Business Podcast show number 79.

Matt Rodak:
Because at the end of the day, what you should be committed to is not the strategy or to the idea, but to the problem that you’re solving for society and you’ve got to be willing to execute whatever that means while you’re in that war period of the business.

J. Scott:
Welcome to a real world MBA from the school of hard knocks, where entrepreneurs reveal what it really takes to make it, whether you’re already in business or you’re on your way there, this show is for you. This is BiggerPockets Business. How’s it going everybody? J. Scott here and Mrs. Carol Scott, is there. How are you doing today, Mrs. Carol Scott?

Carol Scott:
So super awesome. Guess what we got in the mail today?

J. Scott:
What did we get in the mail today? I haven’t even checked the mail today.

Carol Scott:
We got that book.

J. Scott:
Ooh.

Carol Scott:
Yeah, that book. We got a book in the mail today. So guess what everybody, we are interviewing a while out. I can’t tell you.

J. Scott:
We can’t tell.

Carol Scott:
I know, it’s on the tip of my tongue, but I can’t tell you who it is. A very prominent business author we all know and love. We just received an advanced copy of his new book, and I’m so excited to dig into it and cannot even wait to talk to him soon. You’re going to love that show and so will we. So anyway, that’s what we got today. Good day, good day, all around.

J. Scott:
That’s awesome but we can’t say who it is yet, but I can say who our guest today is. That’s no longer a secret. So our guest today is Matt Rodak. He is the founder of a company called Fund That Flip. And Fund That Flip is, it’s a real estate crowdfunding company, which means it’s a company that provides funding for real estate investors who are looking to borrow money while at the same time, offering opportunities for investors looking to passively lend money on real estate. Basically, they’re a marketplace that matches up real estate borrowers and real estate lenders. And Matt has been a friend and a colleague of mine since he asked me to join the Fund That Flip board of advisors back in 2015 when he started the company. So I am affiliated with the company full disclosure, but I am super honored to have been able to watch his journey and the company’s journey. And from the inside, see the phenomenal growth of his company over the past five years.
Now over the past five years, Fund That Flip has originated over $500 million in loans. And during the first half of the episode, Matt talks all about how he conceived of the company, how he built it, and how he grew it. But it’s the second half of this episode that’s the real magic. So Matt walks us through his detailed roadmap for business success, the five stages of growth that all entrepreneurs should follow, if they’re starting and scaling a business, and if they want to start and scale their business successfully. The discussion is absolute gold, and I’ll be honest, it’s going to forever change the way I think about how successful businesses evolve. So make sure you listen for the second half of this discussion where Matt walks through his five stages of growth and make sure you start employing it in your business today.
Now if you want more information about Matt, about Fund That Flip, or about anything else we talk about on the show, please check out our show notes at biggerpockets.com/bizshow79. Again, that’s biggerpockets.com/bizshow79. Now without any further ado, let’s welcome Matt Rodak to the show.

Carol Scott:
Matt, we are so excited you are here today. We have so been looking forward to chatting with you more about Fund That Flip. So welcome to our show.

Matt Rodak:
Thank you so much for having me I’m excited to be here.

J. Scott:
Yeah. So let’s start with, for those that aren’t familiar with Matt Rodak and Fund That Flip, tell us a little bit about your business and then maybe take us back and tell us a little bit about you and how you got started.

Matt Rodak:
Yeah, so we are a short term lender that specializes in bridge loans, hard money loans, private money loans, depending on how you want to define it specifically focused on one to four family properties with a nationwide aspiration and currently about in 19 States, primarily on the East Coast of the United States. So we provide six to 18 month term loans for people that are flipping houses. We also have a new construction product. So people that are doing ground up construction, people that are buying homes, fixing them up, and then tenanting them to build out the rental portfolio. So we really specialize in providing that bridge financing to get the stabilization.
The other thing that’s somewhat unique about our business is how we capitalize those loans or finance those loans is we’ve built an online platform that allows accredited investors to participate in those loans in $5,000 increments and earn anywhere from an eight to 10% return of secured by those underlying first position mortgages. So we’ve built a “crowdfunding platform” or “peer-to-peer lending platform” specific for these bridge loans. And over time, we’ve also built out an institutional trading platform as well. So we work with publicly traded REIT, we work with an insurance company, we work with some hedge funds. And the reason for that really is for our borrowers through this one point of contact on that flip, you get access to a very diverse and broad array of capital.
So if you paper really well and your deals right down the fairway, we can get you into the REIT money which is going to be the best program for that. If you’ve got what we call a story deal, which maybe is a little bit funny, where the institutions can’t wrap their head around it but fundamentally the deal makes sense, we’ve got capital pools for that. So it’s a way for us to say yes, more to our borrowers and help our customers. They’re really focused on what they do best, which is finding good properties, renovating them, and getting them back into market.

J. Scott:
Wow, okay. So there’s a million things to talk about there and I want to dive in, but first I want to hear just a bit about you. So how did you get started? What is your background? Were you in real estate before this? Or were you in finance before this? What led you down the path to starting this company?

Matt Rodak:
Yeah, so my story goes all the way back to high school actually. So I had a small landscaping business in high school and for whatever reason, I ended up doing a lot of landscaping work for people like you guys, real estate investor. So at a relatively young age, I got this really cool experience. We’d come in and we’d do obviously the landscaping work, but we occasionally also get asked to help with the demos and the clean-outs because we were cheap labor with trucks and trailers. So got to see the inside of these homes and even the outside of the homes and over time watched how they went from this property that was really depressing the neighborhood and bringing down the value of the other homes, turn into one of the nicer homes on the blocks. And I thought, “Man, that’s really cool in terms of how these guys and gals are transforming these neighborhoods.”
The other thing that got me hooked honestly, is they were never shy to tell me how much money they were making. So 30, 40, 50, 60K a pop and I was like, “Oh, that’s cool. They’re doing something with a vision, but also making some money on it.” So at a pretty early age, I decided, “I think that’s what I want to do when I grow up.” So sold the landscaping business, went off to college, studied finance with really the goal to get into some type of real estate development on the back end of graduation. I graduated in 2007, so arguably the worst or the best time maybe to get into real estate development, but there weren’t a lot of people hiring. So I had to get a job. I ended up taking a corporate job with a large fortune 500 company, an insurance company that also insured other fortune 500 companies. So very big properties.
They had a middle market group that was a step down from fortune 500 companies and I got started with them as what was called a production underwriter. So it was one part business development, and one part looking at risk and underwriting risk and pricing risk and structuring relatively complex insurance programs. This company was interesting because they were mostly engineers. So their whole thesis was engineer risk out of loss and help customers save money and help the business save money. But what that resulted in was not a lot of business people in the business. So I was one of the few business people. And because of that, I think I figured out what we had and we had a really good product and I became really good at selling it.
So within, I think, 18 months of starting that job, I was leading the company on a global basis, a new business production enough, so that I got the attention of some of the people that were running the company and they called me up and asked me two questions. One was, what are you doing? And two, do you think you could teach the rest of the company how to do that?
So had an opportunity at a pretty young age to move out to Rhode Island, which is where the company was headquartered and worked very closely with the senior executives of that middle market company and institutionalize the sales and marketing function. So they had grown themselves from $50 million to, I think, $650 million over an eight year period and had never institutionalized their sales and marketing function. So that was my job; built CRM systems, we built training, we built new websites, I got to really get my hands dirty, in the technology world, really as an SME and business expert. And I did that for the better part of three years. And I like to say it was my mini MBA where I learned a ton. I like to say the biggest thing I learned was that I didn’t want to be an insurance executive the rest of my life.
So I started putting a plan in place to exit corporate America. That’s when I learned about BiggerPockets, that’s when I learned about both of you guys and what you were doing and started reading your books and got plugged into the local real estate community up in Providence and partnered on some deals, worked for free for some people to learn the ins and outs, did a couple of deals. And through that experience, I learned of the hard money lending space or the private money lending space. So this is circa 2012, 2013 and credit was still tight bank, certainly weren’t lending to fix and flippers and the market that I was operating and there was this local hard money guy, his name was Gino. And if you wanted to borrow money, you went to Gino, you paid him four points, 14% interest. He had, no joke, an eight page paper application without an email address to send it to only a fax number.
And you’d send this thing in and two days later, he’d call you back and be like, “Yeah, I don’t really like that street address.” And I was like, “Why did I fill out eight pages if all you needed was a street address?” So it’s just super mind numbing and frustrating from a borrower’s perspective. And I’d heard stories about getting stood up at the closing table and it came close a couple of times to me to do that. And I was just like, “This is broken. This whole industry around lending money to people that are investing in real estate is broken.” And as someone who was trying to scale a bit business, I was like, “This is going to be impossible to scale this business unless I can fit you’re out reliable source of capital.”
So that was insight one, there seems to be a need for a reliable capital provider for experienced people that want to grow their real estate businesses. At the same time and separate from all this, I was doing peer-to-peer investing on, again, pretty early to the game of Prosper and Lending Clubs. So these were new ideas, again, credit was tight, consumer credit was tight. These innovative entrepreneurs came up with this idea of, “Well, let’s make credit available to people that need it and then syndicate, fractionize if you will, those consumer loans into small as, I think $50 amounts and let everyday people invest in those consumer loans.
So I was doing some of that on the side, I had a small portfolio and I’m getting a nine or 10% return on unsecured consumer loans that theoretically can go to zero and I’m paying Gino 18% for a first position mortgage with 20% equity. And I’m scratching, my finance degree’s coming back and being like, “Well, that doesn’t make sense. On a risk adjusted basis, this hard money loan is a much better risk in my opinion, than it’s unsecured consumer loan. Why?” And you break it all down. And it’s like, “Well, the reason why is because this hard money lending space is in the shadows, it’s not institutionalized, it’s not standardized, they’re not using big data. It’s relying upon in this case, Gino’s local knowledge of a market to make smart underwriting decisions.
So that, “Well, let’s fix this, let’s create a better experience for borrowers, let’s create this new asset class for investors to invest in. It seems they have an appetite for yield, if they’re willing to buy unsecured consumer loans, I should be able to sell an asset backed loan at comparative rates. And let’s bring technology to bear so you don’t have to fill out an eight page paper application. You can put some simple data points in. We can pull some data from third-party sources and we can decision faster and smarter by leveraging some of the tools that are available to us in 2015,” which is what at the time when I started.

J. Scott:
So you had this idea, basically Gino’s idea of hard money lending and not Gino’s idea, but basically you saw him doing it. You saw the opportunity and then at the same time you saw Prosper and Lending Club which were a couple of platforms that I was actually on at the time as well, funny enough. And you said, “Hey, I can marry these opportunities.” So Lending Club and Prosper are great. They’re providing a service, but the returns are relatively low compared to the risk. And Gino is doing these secured loans where the risk is really low, but getting these ridiculous rates, I can marry the two and actually create a company. Was your thought at the beginning, I’m going to create a big company or was this, “I can be a local hard money lender that arbitrages money with other people that are providing the capital and maybe I’ll just do this in my local city or local town.” What was your original plan?

Matt Rodak:
That’s a really good question. I never actually thought about that. I don’t know that I ever had aspirations to set out to create the next billion dollar company or anything like that. I just really wanted to do this. I was passionate about real estate. I actually didn’t flipping houses having done it. I didn’t like picking paint colors and looking at 100 properties to buy one, but I knew I liked to be around real estate. So this gave me the ability to be around and be in the game, but not have to be in the minutiae. I could partner with people like yourself, that are really good at that stuff and play a different part in the ecosystem, if you will.
So I think it was really more of just like, I really want to do this and I think it’s interesting. I think the more that we started to think about the idea is, it didn’t need to have some national scale for our investor base to fully deliver the value proposition to investors that are investing in our portfolio. We didn’t want to just say, “Hey, we’ve got a bunch of loans in Rhode Island or Cleveland, Ohio, or wherever we were at.” Part of the value proposition to our investors is you can invest in Rhode Island, or Texas, or Arizona, or Florida. And if you’ve got a different perspective around those different markets, or you want to just build a diversified portfolio and get exposure to a broad base of different types of properties, being in multiple markets started to become more important for that reason more than anything else I would say.

Carol Scott:
Yeah. That makes absolute perfect sense. And I love hearing all of this evolution of not only the beginning of the company, but all of the things that you were doing that led up to it. Clearly, you had some significant leadership experience in marketing and sales and finance and technology all put together into one, along with this being in this hard money lending space and wanting to stay in the real estate space. And I want to hear more and more about that evolution. I would like to set the stage even further though, because I think this is a really important thing for anybody who owns a business. So in Fund That Flip, it sounds like you essentially have really two different customer bases that you have this value proposition for, like you mentioned. You have the real estate investors and then you have these entrepreneurial capital investors. So what did you do to structure your business so that you could really effectively meet the needs of those very different two parties?

Matt Rodak:
Yeah. Another great question. This is something that we struggled with and to some extent, we’re a marketplace business, where you got to have supply and demand for the the market to operate efficiently and marketplace businesses are inherently difficult to start. Because of that, you’re serving two different customer bases. I’ll never forget, I had a really good conversation, went through an accelerator program here in New York. I had a conversation with a guy that finally really helped this click for me. And what he said was like, “You don’t have to convince me that you’re going to find people to invest in your deals because of the yield, because of the short duration, because of the asset backed nature of it, as long as you’ve got good deals.”
So in a way, what he was saying was like, the capital was fungible, the capital was the commodity piece and who your customer is and who’s an investor, he’s like, “What you have to do to convince me to invest in your business is that you can acquire borrowers at scale because, I believe you can get the capital, the capital’s not going to be your problem.” And that was a big aha moment for us early on of like, who is our customer? Our customer is the real estate operator, the sponsor, the borrower, whatever name you want to ascribe to them.
That said, in how we think about it internally as our investors on our platform are certainly customers. We have customer service professionals there, we spend a lot of money and time on marketing and everything else. But internally we almost think of them more as suppliers. So you still have to have good relationships with your suppliers, whether it’s your flooring supplier or paint supplier or whatever. And there’s a competitive advantage of having good suppliers. So the capital side of our business is almost thought of the supply side, and our borrowers are thought of as our customer side.
And that’s how we’ve thought about growing the business, is if we originate good loans to good people on good projects, people are going to want to supply us that capital. So where we spend, if you look at our org chart, I’ve got, I don’t know how many salespeople and if you look at our P&L where we spend marketing dollars, it’s 90% borrower and 10% investor realizing there’s still an investment there to attract those suppliers. But it’s how we reconcile those two different things.

J. Scott:
Okay. And this is interesting because in theory, in a marketplace like this, you don’t… Well, you obviously have to find good deals because your lenders are going to want good deals to lend to. But in theory, the volume is more important than good deals because in theory, you put a million deals out there, your lenders find the good ones and they pick and choose, and then they fund those deals. But in reality, it’s not in your best interest to put a whole bunch of bad deals out to the marketplace, because then it’s basically the onus is then fully on the lender to do the underwriting, it’s fully on the lender to make sure that their capital is somewhat secure. So it’s in your best interest to do some upfront underwriting before you put a deal out in the marketplace, I assume. So what is the philosophy of the company? If I submit a deal to you, are you even going to look at that deal before you throw it out to the marketplace or are you just going to pass it through? Are you going to underwrite it? What do you foresee or what do you see as your role as the marketplace owner of ensuring that the deals that go out to lenders in the market are reasonable deals.

Matt Rodak:
Yeah. So a couple of things there and maybe if you allow me, I’ll stick with the analogy of, if you do a bunch of bad deals, you guys as flips and you buy a bunch of paint and a bunch of flooring and your deals are bad and you can’t pay your suppliers, are your suppliers going to sell you paint and flooring anymore?

J. Scott:
No.

Matt Rodak:
Right. So now you’re forced to going and finding new suppliers and hoping the supplier market doesn’t learn about your failures previously of paying your bills. So it’s the same thing, if we don’t treat our suppliers well, we don’t pay them which is how do we pay them? Our loans have to perform. If our loans don’t perform, we can’t pay our suppliers and if we can’t pay our suppliers, our suppliers go away and it’s expensive to sign up new goods suppliers that you want to do business with, and that can help you also grow your company. So sticking with that analogy, we’re aligned to do good deals because we’ve got to pay our suppliers, if we want the suppliers to keep supplying us with capital. The way it actually works in our platform is, there’s some other controls there, if that’s not enough for you, we underwrite every loan. And we only fund about five or 6% of the projects that we see.
So we see a lot of inbound, our marketing is doing a good job of bringing leads into us. We also fund everything before we take it out to the crowd. So we’ve got different balance sheet capital if you will, that is our working line that we originate the loan. So by the time an investor, whether it’s a retail investor or one of the institutional investors we work with sees that loan, the deal’s already done. We’ve already determined it’s a loan that we like and fits our box. And effectively we’re betting that it’s going to also pass the mustard of our investors in their due diligence. Otherwise, it gets stuck and it becomes a product that we can’t sell and that capital can’t be recycled into new loans. So just mechanically, that’s how it works. And we can talk about why it has to work that way, but that’s one thing that controls us and aligns our incentives with our investor base on doing good deals.
The second piece is, not an insignificant amount of our revenue comes from what’s called interest rates spread. So we’ll originate a loan, let’s say at 10%, we’ll sell it through to our investors at 9%. We only earn that 1% interest rate spread if the borrowers paying their interest payments and if the borrower ultimately pays us back. So if we originate a bunch of bad loans, one, we’re not going to generate that interest spread which we count on as part of a big part of our P&L, but we still have to deal with them all. So it’s a loss of revenue and an increase in expense, which isn’t a good equation for business.
So we do think it’s very important that we have an aligned incentive with our investor base, which is one of the reasons why we’re not brokers, we’re an originator; we take some balance sheet risk, we take some revenue risk alongside with our investors to make sure that we’re held to account effectively on doing good loans.

J. Scott:
Okay. So that’s really interesting, basically you’re pre-funding your deals which is good for your operators, your investors, because they don’t necessarily have to wait the two weeks, four weeks, 12 weeks, whatever it is to see if there’s going to be enough interest from marketplace lenders to get their deals funded so they can move a lot faster. But what then is the benefit to the company, if you can go out and borrow money from a hedge fund, or REIT, or someplace else, and you can bring in a lot of capital, what is the benefit to you to then go and replenish that capital from the marketplace lenders? I mean, doesn’t that just add additional complexity and overhead and work when that capital is available from other sources anyway?

Matt Rodak:
Yeah. That’s a great question. And interestingly enough, I think if you went out and surveyed our borrower base, the sponsors, 90% of them won’t even know that we have a crowdfunding platform. It’s not even something that we talked to them about because they don’t care. They just want to know that their loan can get funded and we’re going to show up and do what we say we’re going to do and we’re competitively priced and competitively leveraged. So yeah, it’s a big thing that we, again, when the early learnings was, you can’t create any uncertainty around funding for sponsors because, as you guys know, you’ve got EMD, the earnest money deposits down, you’re trying to run a business. So when we put a term sheet out, that’s 100%, it’s committed, the money gets earmarked in our systems. We’re going to come through to close when we say we’re going to close and we’re going to handle the backend capital markets piece of that later.
And again, customers don’t even know, they don’t know if they’re necessarily, if their loan got placed with a REIT or on the retail platform, which again is that, it is part of the value prop that we do talk to our borrowers about of like, “Hey, you’re going to get the best terms because we’ve built this really efficient way to place paper to ensure that you get the best terms.”
The reason for the retail base and I think COVID has provided us this opportunity to prove this thesis out. One of the things that I learned, at least from the sidelines during the 2007, 2008 credit crisis was that a lot of the institutional capital group thinks. And a lot of these guys are tied into two or three or four big banks that provide them a lot of call it warehouse facility lines of credit. And when one of them goes, they all go. So, what we didn’t want to have was a business that was relying upon one supplier. It’s the same reason why you probably have multiple flooring suppliers or multiple general contractors in your business, is you’ve built in a certain amount of redundancy and a certain amount of resilience into your business for when the market changes.
So I’ve been asked this question more times than I can count of, why not get rid of the crowd? And the reason is, is because that crowd is a super elastic supplier. Even if you go all the way back to 2015, we were originating loans and the market was still pretty hard back then from a lending perspective, we could originate loans in the 12s and 13s and we’d pass 11s, and 12s, and 13s, through to our investor base. And that attracted a certain type of investor who was really yield hungry. And they were okay with the fact that we were a startup. And we say, there’s the real estate risk and there’s the platform risk. So you’re investing in the know, but you’re also betting that Fund That Flip is going to be around long enough to service that know.
So early days, we were passing through high interest rates and we attracted a certain type of investor who was cool with the 12% and also cool with the platform risk. And then as the business evolved and as we got more traction, we saw those 12s come down to 11s and 10s and nines. And right now, we’re in the eights and even in the sevens. And a lot of those 12% investors have matured out of the business if you will, because the yields are no longer interesting. But who we have seen come in is this new type of investor who, when they saw the 12, they were like, “Whoa, that feels risky,” and the platform risk and some of these other things that we’ve worked on mitigating over the years.
So we’ve got a different type of investor now that invest at eights and nines then who’d invested early on. So COVID happens and guess what happens? All of my institutional guys went away, March 17th, all four of them, I got four phone calls and then we’ve got a couple of institutions that invest in the platform, all called and said, “We’re done. Can’t do anything. Our bank shut us off, good luck.” So we had, I don’t know, 15 or $20 million worth of loans on our warehouse facility. And I was like, “We got to clear these off the warehouse facility for the reasons that we have to, based on the covenants that we make in that facility.” And who bailed us out? The retail.
So we had to pull some levers from a pricing perspective and do a lot more on a communication perspective. And we went out and took videos of all of our properties and we did things, but we had this group of 1,000 plus retail investors. And if we price things right and told the right story, we eventually over a couple months able to clear off that warehouse facility. So it proved true in a lot of ways of this resiliency and this elasticity of supply that you can have by having a very broad base of capital providers. So that’s in a worst case scenario, but also even at normal times, I mentioned the story deals, we funded a bridge loan up in Boston, I think it was last month and it was a weird deal.
This guy was buying this warehouse. It was a costume manufacturing facility that had been owned in the family in an up and coming neighborhood. And he was buying it for a sweet deal and was getting it through permitting. And he’s going to make two million bucks on this project. But he needed a lender that could lean into that business plan. None of the institutions are going to buy that loan, but we priced it. And our retail guys filled it up, I think in 48 hours. So it allows us to help our customers in some of these like, it’s a weird deal but it makes sense, as soon as he gets it through permitting and builds his 32 unit apartment building on it, there’s a tremendous amount of value creation in that exercise. So that’s the long story and, it provides a ton of resiliency, but it also provides a lot of flexibility in the things we can say yes to.

Carol Scott:
That’s so fascinating that you’ve grown into all of these different types of deals with different types of investors going after such a wide breadth of different avenues for the business. So I’m curious over the years, how have you just gone about growing the business? How have you found the investors and how are you ensuring you consistently have deal flow? How do you market for the investors? Just what are the big things that you’ve done or that you are currently doing, or a combination of both that are really just continuing to grow the business?

Matt Rodak:
Yeah. So I’ll talk about the borrower side, so we have what we call our air and ground game. So our air game is traditional marketing, we spend not an insignificant amount of money on Google AdWords, on Facebook, finding out the different ways to communicate awareness about who we are, what we do and how we can help people. And the idea there is drive people back to a website and convert them into some type of an action, whether that’s apply for a loan or apply for a… We have preapproval letters that we do for people. So now you have something that you can take with your offer to say, “Hey, I’ve been vetted by this firm that specializes in this type of lending.” And helps our prospective customers bid on properties with more confidence.
And then our ground game is our sales team. So we’ve got in markets that are networking with our current customer base and you guys know this, flippers talk to each other, they know one another. They get together, they compare notes and they collaborate around. That’s one of the things I about this business is people that should be competitors are usually friends. And they try to help each other grow their businesses. So you do a good job for one guy and he tells his friend, “Hey, you should check out Fund That Flip.” And we try to earn our way into that business. And then also finding who are the attorneys that primarily are focused on real estate investors or real estate agents or title companies, and then look for ways to add value to those groups. And the understanding that, if you add enough value to people and show them how you can help their world eventually get the opportunity to understand who their Rolodex is. So that’s how we’ve done it on the borrower side and it’s worked reasonably well for us.
On the investor side, pre-COVID, I want to say we were spending $1,000 a month on investor marketing. So, not a lot on a million dollar plus marketing budget. So that was the same thing. It was like, we have this fantastic asset that people can invest in, and which just make it really easy for them. So one of the reasons that the core thesis of the business was focused on residential, one to four family assets is like, most people can understand that, you don’t have to be a sophisticated real estate investor or read a lot of books. Most people have bought a house, lived in it and seeing that house appreciate, and those people can appreciate others. This guy’s buying the house for X. He’s going to spend Y to fix it up and it’s going to sell it for Z and I can hop on Zillow and see if those numbers more or less make sense. And do I have a perspective on Charlotte or Columbus or Indianapolis or whatever, that I have enough conviction?
So a lot of our investor growth on the retail side has been all organic. That’s the other thing, most rich people know other rich people and they also like to sit around the country club and talk about the cool new thing that they’re investing in. And I’m sure their friends on the phone, the new site and the deals that they’ve invested in. So we’ve tried to build some viralness, I guess, if you will, it’s fun too, I have a decent amount of my personal dollars invested on our platform. I read a blog post once a month called Dogfooding that outlines all the deals that I’ve invested in.
We process interest payments the 15th of every month, so you get paid current on these investments. I look forward to the 15th of every month because it’s this little drip of serotonin of a couple of $1,000 into my bank account and I didn’t do anything. So it’s somewhat addicting, I guess, in terms of you perform enough for people and then they stop thinking about it and they’ve allocated a certain amount of dollars and telling their friends and it grows from there.

J. Scott:
Awesome. So to whatever extent you’re comfortable, can you talk to us a little bit about the growth of the business? I know you guys have raised some money recently and you’ve expanded, you’ve added a second headquarters. Tell us about, again, whatever you’re comfortable sharing in terms of the volume you’re doing and your money raised and your growth and scale.

Matt Rodak:
Yeah. So I’ll give the quick trajectory, I think we did three million of loans our first year and then 20 million our second year and then 60 million and then 120 million and then 180 million. We’ve not been the fastest growing lender in the space by any means, but I think we’ve tried to do it, the word we use internally a lot is responsibly. So it’s not just responsible for our lenders sake, but also responsible for our borrowers sake. I don’t know how many times we’ve told people not to do deals. We could have lent on the deal and been safe from our loan to value and our attachment point, but everything told us, the guy wasn’t going to make money on it. So we’ve tried to be responsible for our borrowers too of like, “Hey man, maybe let’s not do this one and let’s go find another one.”
But yeah, we raised some venture capital money in 2016 and about $2 million. And we came out of that raise with a very specific plan of, one, getting to something that we called meaningful scale. So for us, that was more than 100 million dollars of loan originations in a 12 month period and also do so with positive unit economics or profitability. So what was important to me and maybe this is my finance and my insurance background was not to build a really big money loser, it was to build a really big moneymaker. So I wasn’t totally convinced that that was possible to do at a billion dollars. Maybe Gino can make money at the $20 million book of business, but no one’s really proved that you can make a lot of money in this business at any significant scale.
So that was the goal coming out of the raise in 2016. We accomplished that in 2018, being both profitable and well north of 100 million dollars of originations. And then it was like, well, we can keep this pace of growth which wasn’t slow by any means, but we also saw a huge opportunity to raise some additional capital to go harder into that growth. So we had a really, I think, compelling story to take out to the venture capital private equity world. In the beginning of 2019, we closed an $11 million round of financing in August of ’19. And most of those use of proceeds was into three buckets.
We had a story around, we knew if we spent $1, every dollar we spent on marketing we got some multiple of that in return on revenue. So it was a really easy thing to tell our prospective investors of like, “We’re going to earmark X millions of dollars of this 11 million to go into this channel.” And then the second bucket was capital markets. So how do we invest in new products on the capital market side to, one, create new ways for passive investors to gain exposure to this asset class, and two, can we lower our cost of capital by getting bank relationships and growing out the institutional so again, we can be more competitive with signing up new borrowers?
And the third big bucket was technology. So we haven’t talked a lot about this, but we’ve got a technology team of, I think 10 full-time people that is everything from product, to designers, to engineers. And the thesis here is that originating a loan is not particularly complex, we’ve been doing it for hundreds of years, but there’s so many inefficiencies around everything from putting the paperwork together to ordering appraisals, to running title reports. So a big part of our thesis is that we can make this entire loan origination process work better with technology. And by doing so, we can create a more profitable enterprise which can then be reinvested in either additional products and services for our customers or a more competitive product, or probably more likely some combination of the two. So yeah, that happened in last August. We were foot on the gas, hiring people and had a really good plan in place and had our best quarter ever in Q1 of 2020, and then COVID happened, but we’re now back on track. So, it’s good.

Carol Scott:
That is just an awesome growth story. And wow, it’s amazing to look at these numbers not just only in terms of dollars, but the number of people, the number of locations, the number of deals just growth in so many different metrics over just five years. So we’re wondering, have you really found through these five years that you’ve been at it, Matt, I mean, this clearly didn’t happen overnight. It didn’t just explode naturally without any massive effort. So we’re wondering if you’ve maybe found some significant, if you could say buckets or stages of growth as you’ve started growing, is there anything you can really cement around some significant pieces of that growth and evolution?

Matt Rodak:
Yeah, I think about this a lot and I do some and went through… When I moved to New York city, so I’m in New York city now. I moved down from Rhode Island to start the company, just wanting to get around environment that I thought would be conducive to building out a technology and financial company. So I moved to New York and I got plugged into this group called the Founder Institute which for anybody that’s listening, it’s thinking about starting particularly, I think it’s good for high growth type of companies. They offer a fantastic service around, why don’t you test drive running a business or starting a company before you quit your day job service? And they put you through the paces of what it means to start a company and you get to taste it if you will, before you do it.
And I go back and I mentor this group and I like doing that because I call it probably five different stages that I’ve gone through throughout this journey. And the first one is this aspirational stage, if you will, where J, this was when you and I met when I was at the aspirational stage of Fund That Flip where it’s the business is nothing more than an idea. And it’s probably the most fun part of actually starting a business in my opinion, because there’s absolutely no limitations and you’re not constrained by any realities at this aspirational stage; you can do no wrong, it’s a big idea, you’ve got all these different directions you’re going to be going in and all these fantastic services that you’re going to provide to the world.
And the biggest thing that I think people that get it right do during this aspirational stage is they try to kill their deal or they try to kill their business. So I think the best thing you can do, if you’re at this aspirational stage of a business is you’re going to have enough passion and you’re going to get enough positive reinforcements from everyone you talk to about how great your ideas for the most part that, that will carry you through. But what you really need to be doing is looking for all the reasons why this business is probably going to fail, because just statistically speaking, most businesses do.
Your job as a super early stage entrepreneur in my opinion, that I think this is when it became real to me is when you go out and you talk to customers, and you say, “Hey, I have this thesis of X, Y, and Z, would you buy this? Or would you hire me for this service,” or whatever it is. So I think the first thing that if you’re in this aspirational stage that you need to be doing a lot of is going and talking to people that will give you honest feedback about your business idea, and then as quickly as possible, try and get people to pay you for it. So I think the other thing that people do is like, “”I’ll just give it away for free to my first couple of customers and see if they like it.” That’s, in my opinion, the biggest mistake.
The people that are most likely to buy from you early are probably the ones that have the biggest problem and are most likely to pay you for it and you should find a way to extract that value out as quickly as you possibly can. So if there’s two kinds of things I think people should do in their pursuit of trying to kill their business idea, it’s one, talk to a lot of people and try to get people to pay you for it. And the second one, is actually run a financial model. And this is one that almost no one does, but you could have a great idea that a lot of people are willing to pay you for that can never make money. So a very detailed financial model around unit economics and understanding how many people you’re going to have to hire an office space and marketing budgets.
And the other big one is understanding the actual cashflow on a pro forma basis of the company. For us, we spend money on marketing for borrowers. That money goes out day one, it doesn’t turn into revenue until sometimes day 95 or day 180 or day 360. So you’re out money and you don’t get that money back, hopefully plus a profit for some time. And most businesses actually, not most businesses, all businesses don’t go out of business because they’ve got a bad idea. All businesses go out of business because they run out of money. So most people I think, because, “Oh, I’m not good at math, or I don’t math, or math scares me, or I don’t want to believe that my good idea can’t make money,” shy away from this financial modeling exercise which is super important to do in my opinion, during this aspirational stage.

J. Scott:
Okay. That’s really cool. So stage one is this aspirational stage. And just to sum up, I mean, there’s a lot of great information there, but to sum up two big things to be doing in stage one, one, need to talk to a lot of people, get people to pay you. And I loved your point about this is the part, or this is the timeframe where you should be actively trying to kill your business. You should be looking for reasons why it might not work so that you can dig in and you can determine is this really as good an idea as everybody that’s encouraging me? Because you’re going to have a lot of people that are encouraging you. And then number two, run a financial model. If you can’t do it yourself, go find somebody that understands the math and understands the finance and can help you put together a model. Because without that, it doesn’t matter how good the idea is, it doesn’t matter how good the team is, there are some ideas that just aren’t going to pencil out. So love that. So that’s the aspirational stage. What’s the next stage?

Matt Rodak:
Yeah, so I think the next stage which is a little bit less sunshine and rainbows from the aspirational stage is the stage that I call war mode. So let’s say you come out of this aspirational stage, you decide you’ve got a real idea that can make money, you validate it with some real customers, the next stage, I think, again, we’re talking about the psychological aspects of the business or the personality is, you have to go into what I call war mode. And what I mean by that is, you are now at war. You’re at war with incumbents, you’re at war with new entrance into the market, you’re at war because literally every day it feels like you’re going to be in a fist fight, whether that’s with trying to win new business, with product development, with your finances. And I don’t mean this necessarily where you’re confrontational with people, but it feels like you’re in a war and every day your resources are a bit more depleted.
So if you run out of resources, you lose, like we talked about before. So you have to find a way to win everyday battles while also conserving as many resources as you can, particularly, if you’re not well capitalized like most businesses aren’t when they get started. So the key learnings here, as you come out of this aspirational and I’m going to do this, and I’m going to build a business. I don’t know about you guys, but if I’m going to war, I don’t want to go to war alone. So the next stage that you really want to be focused on, I think as you’re moving out of this idea stage, if you’re doing it by yourself up to this point, it’s starting to build that team that you want to go to war with. So why are we fighting this war? What’s the story? How are you building this excitement and this vision and enrolling people to effectively come work for you, either for free or likely at a discount to their market value? And what are you willing to exchange for getting those types of people along for the ride with you?
The second thing that I think is important during this while you’re in war mode is, you got to have a strategy. You got to have an understanding of like, where are we going? So for us, our strategy and still is, was, we are focused on one to four family houses. We’re not going to chase these shiny objects when an apartment building comes in, or an industrial comes in, or something that isn’t what we care about comes in. We’re going to stay super laser focused on this one thing and doing it really well.
But you also have to realize, and this is one of, I think the advantages of being an early stage business is you have to be willing to change course as the battlefield evolves. So this is the other mistake I see people make is they fall so in love not with just the business idea and what they’re trying to solve, but their strategy. And they’re unwilling to let go of that strategy when they’re presented with new data or new information that is screaming in their face, do something different. So you got to have strategy, you got to be able to give the marching orders to the team that you’re building, but you also have to have somewhat of a decision-making process, that’s objective. That informs how your strategy may change the best that you can, try to game that out, like, “Hey, we’re going to run hard into this strategy and these are the things that we want to see work. And if they don’t work, we’re going to process these data points and make some informed decisions based on these data points to evolve or change or modify our strategy.”
Not too dissimilar to how you are in the aspirational stage, you’ve also got to be willing to kill strategies that don’t work. But you’ve also got to be willing to commit to strategies to know that you gave it your best shot to actually get enough information to know, yeah, that strategy worked or didn’t. And then the third piece, I think in this war mode time of a business is that you’ve got to be committed to executing ruthlessly on a day-to-day basis. So there are no off days when you’re in war mode. It’s not like all of them rest of the universe has taken a Saturday or Sunday to relax. Not that I’m saying, and you shouldn’t find some time for yourself, but you also to be committed to executing ruthlessly against that strategy which sometimes means doing things that are uncomfortable to you. And I’m not talking about ethically, I’m talking about, I used to close our books out. That was my Sunday.
I did all of our journal and our GLs on Sunday, that sucked. I hated that, but someone had to do it in order to close the books out on a monthly basis. And we hadn’t yet added any finance or accounting person to the team. So you got to be willing to do things that you don’t like doing or feel like you shouldn’t have to do because you’re the CEO or the founder because at the end of the day, what you should be committed to is not the strategy or to the idea, but to the problem that you’re solving for society, and you’ve got to be willing to execute whatever that means while you’re in that war period of the business.
And for what it’s worth, war mode could last years. So it’s not something that could be weeks or months, until you figure it out and until you get beyond that day-to-day fight where things start to turn in your favor then you got to be committed to understanding that you could be at war for a while. Ben Horowitz wrote a good book called Hard Thing About Hard Things, I think that’s what it was called. But anyways, I suggest checking out that book because I think it’s a very good practical lesson on the different types of stages of business and war mode being one of them.

Carol Scott:
Cool. So, got to tell you, Matt, number one, they aspirational stage sounds pretty darn fun.

Matt Rodak:
Way more fun.

Carol Scott:
War mode is just intense, that you go from super fun, la la land, dreamy, sunshine, rainbows, and unicorns, to war mode, where it’s getting really tactical, changing your strategies, killing your strategies, just hardcore stuff. Please tell me three, four, and five, have some more of a happy medium baked in there somewhere.

Matt Rodak:
Yeah. So, I mean, I think you come out of war, and what’s in the other side of war assuming you win, you got to win the war first. But assuming you win, you then go into peace mode. And peace mode is back to that point, you can’t have your people in war forever. You can’t be in war forever. At some point, your team needs to start to coalesce around what the business is going to look like, what battles you’re going to win, what fights you’re going to pick going forward, but ultimately getting the business to a stable place. And this is the part of the business that setting things like your culture is super important. So I also like to call this the teenage years, of you’ve figured out product market fit. You’ve got some customers, you’ve got some channels that you’re able to sell through at scale and it’s repeatable that you’re start to figure out like, “I spend a dollar here on marketing, I get $3 back in revenue.”
So you’re starting to figure some of those strategies out and they’re starting to stick. Now it becomes super important as what do we want to be when we grow up? Which is why I call it the teenage years. We all remember when we turned 13 and it was like, “Wow, am I a jock, or am I the emo kid, or am I the nerdy kid? What am I?” Your business goes through somewhat of a similar stage where you either are very intentional around how you define that culture and who you want to be, or it takes its own form. So I think coming out of that war mode and the war mode will define your culture a little bit, I think, how you act and how you react to things during that period. But the peace time is really that opportunity of, think of in the US right after we fought for our freedom. We have this time where we’re like, “Who do we want to be as a country?” And it defined our culture. So it’s same thing at a micro level on your company. What are your values? What are your mission? Now is the time to really codify those and revisit them maybe if you’ve started them earlier, is this right? Is this still who we are?
So for us, we came up with this acronym called HUSTLE, as we started to come out of our first war mode, say first war mode. And HUSTLE is an acronym for hard work, unity, success, transparency learn every day and empathy. So, now how we define who we want to be collectively as an organization is really focused around, one, the word HUSTLE, I think has a meaning of, let’s be scrappy, let’s do what we got to do. We may not be the smartest or fastest or most well-capitalized company, but dammit, we can work hard. And we can be scrappy and that’s how we’re going to define ourselves.
So not only writing it on the wall, but how do you instill those things in your every day interactions with one another and reinforce those things are, I think super important at peace mode. So it’s setting the culture, it’s also setting call it the laws, you got to have a framework by which you start to measure things around, what is performance? What are the KPIs for the company? What are the KPIs for the departments? What are the KPIs for each individual, how we define success, but also how do we as an organization hold people accountable when they either do or don’t achieve those level of successes?
And it’s super important during peace time that everyone’s on the same page of, one, what is the culture of the organization here, and do we all believe in support and live that? But two, what is everyone’s role within this new organization that we’re creating and what happens if someone doesn’t follow the rules? And I think that becomes super important in order to stay in peace mode is that everyone understands there’s this social contract and there’s this agreement that people are going to carry their fair share. And if they don’t, there’s a very clear mechanism for either correcting those behaviors or exiting that person from the organization. Because if you don’t get that right, you start to have infighting and coups in, now you’re back in war mode, but instead of fighting the outside, you’re fighting internally and it’s a quick death to the business.

J. Scott:
This is fantastic. This metaphor is awesome. And peace mode, basically being that part of the process where you’ve established yourself and now it’s time to define yourself. So defining what success looks like. I love how you said defining what your success looks like through various means, including KPIs and knowing what your organization really looks like. In war mode, we’re not necessarily focused on having lots of meetings to talk about the minutiae in the business, we’re focused on creating the business and gaining market share. And now this is the point that in peace mode where we actually focus on defining what this business looks like and who we want to be. And I mean, I’m just repeating what you said, but it’s great. I love the whole, what do we want to be when we grow up? And it’s basically saying, “Let’s create our persona, let’s create our brand, let’s define who we are at this stage for as we get into the next phases.” So what is the next phase? What is stage four?

Matt Rodak:
Yeah. So I think stage four and stage five, they become somewhat of a fork in the road for where the business is going to go. So you’ll get to peace mode, you’ll develop the culture, you’ll have the rules, you have the KPIs, people performing, and eventually what will happen if you don’t do some of the other things we’ll talk about next is you’ll go into complacency mode. So people will forget what war mode was like and they’ll forget about how hard you had to fight to get to this point. And if things aren’t done again, in my opinion, you’ll start to settle into this is easy and things will start to slip. So like, “Oh, that person is into KPI, but I really like them. And they’re a great culture warrior and they’re nice. Oh, well, maybe we’ll let it slide.”
You’re in peace mode for too long and if you’re not intentionally creating some urgency and some excitement around what the company’s doing and what you stand for, and the risk here is if you enter into complacency. And the big challenge that I’ve seen and this has happened to us and I think probably every company that makes its way through is, for the people that have been around long enough they remember war mode and they remember that sucked and they really like peace mode and how happy it is and that slowly starts to edge into this complacency mode. And sometimes you don’t realize you’re in complacency mode until you start losing early high value employees because they’re no longer challenged and fulfilled by the work that they’re doing.
So if you go back to like, you built this awesome team in the beginning to go to war with you and then you’ve succeeded and you’ve got the peace mode. Most of those people, they’re warriors. They like the challenge of tackling big problems and building things and going into unchartered territory and now they’ve been hanging out on their couch, eating potato chips for too long and they’re bored, if you enter into this complacency mode. And a sign of this is you start to feel discontent within your people, maybe it gets hard to attract good talent. So you’re trying to hire that new salesperson or that new CFO or that new COO and they can feel just this like, “This doesn’t feel that challenging to me.” And you’re scratching your head being like, “What happened? We’re not in war mode, this is a great time to be coming to work for fun, flip or whatever. Why wasn’t I able to attract this person?” And the reason being is, if you’re going through an interview process where they get to talk to enough people, they pick up on this vibe of these guys just don’t care, it’s not that exciting.
So complacency mode is one eventuality of the backend of peace mode and if you don’t get ahead of that fast enough, you’ll either find yourself back in war mode really quickly because you start to lose market share and revenue and the profitability starts to slip or worse because the fighting is internal instead of external, you implode from the inside. Complacency, I guess maybe it’s not the inevitable next step but it’s a next step that you should make sure it doesn’t happen after you get things stabilized into peace mode.
So the alternative to complacency, I think is this idea of what I call world domination. And it doesn’t have to be world domination, but it could be market domination or what is your businesses ultimate purpose? Maybe it is a lifestyle company that I can bring someone else into to run and put the thing on autopilot, but you’ve got to have some clear definition around what are we still striving for in this ideal last stage of a business. And to me, it falls around three things.
The first one is, continuous improvement. So, yes, we’re in peace mode, yes, we’re doing a lot of things well but there’s zero businesses in the world that can’t get better. What do we want to do on a quarterly basis or an annual basis or even a weekly basis to create this culture? And it goes back to culture, and now this is the next evolution of culture. How do we build this culture within our organization so that good is never good enough? And so that everyone always believes there’s a way that we can get better, whether it’s better people that we hire for the next sales hire or tweaking this process to take it down from 10 minutes to eight minutes whatever that is, how are we going to continually focus on improving the company? And by virtue of that what you really mean is, you’re setting an expectation for your people to get better every day.
And particularly in today’s world, I think that’s what most people want. They want to be challenged and feel like they’re getting better every day. The thing that I love about companies is, it creates a framework for people to achieve that personal improvement. So the first one is that idea of, how do you start to build this continuous improvement culture into your company so you don’t fall into complacency?
The second one, I think that I get excited about is particularly, I think founders should be getting a lot of excited about is innovation. Now you’ve built this business that’s successful, that has customers, that has good people in it, how do you leverage the assets that you’ve built over the years to almost go back to, Carol, what you think is exciting where I agree with you is, how do you create these small businesses within your business? How do you come up with either new products, or new businesses, or new services, that now put you back into that aspirational stage of the company but not totally? Because you have this other thing that works but you’ve now got these really exciting projects or other businesses to start that really fills the rest of the team that up with, “Oh, we’re starting what? Oh, that’s cool. How do I get part of that?”
And this leads to the third point is, what you’re effectively doing is you’re setting up war games instead of a war. So, you’re going to run that new business and that new idea, through the same process. You’re going to take it through the excitement stage, into war stage, into peace mode stage and then ultimately into world domination. But it creates this sense of like, “Oh, we’re still a startup. We’re still young. We’re still chasing these really big problems. We’re still doing things that are cool and fun and it reminds me of the early days of the company. But also, my paycheck’s going to clear next week because we’ve built this other thing that is working.” Does that make sense?

J. Scott:
Yes.

Carol Scott:
J, I want to take this for a second because I think… I love all of these analogies and I especially love how you wrapped it up with world domination as the alternative to complacency mode and how critically important that is, especially with retaining your employees. I think a lot of us if we think back to when we worked for other people, when we worked in corporations for a long time, the nature of entrepreneurs, that’s where we got our start many of us, and what were the companies that we were excited about and energized about? Those companies that offered lots of new things, new growth, new challenges, exciting, fun things. But then, I know I’ve certainly been in this position, I suspect a lot of us have. Once everything was just rolling and it wasn’t a big, old challenge anymore and upper management was just perfectly happy to keep collecting paychecks and letting stuff just work itself out, we just became bored, and we’re just like, “Get me out of here and into a new challenge.” So I absolutely love how you’ve clearly defined the importance of continuing to improve, continuing to develop challenges so the company can evolve and people can evolve with it.

J. Scott:
And the other thing I want to point out, and I’d love to hear you address this back because I’m guessing you’ve had some experience here, is that not every founder, not every entrepreneur is cut out for all four or five, depending on how you want to look at it for A and for B, stages of this. There are certainly going to be founders who are really good at the aspirational stage and creating and having a vision. They’re going to be founders that are really good at the war mode stage, where they’re basically fighting to grow this company and they’re probably comfortable with chaos and turmoil. And then they’re going to be those CEOs, and I guess we think of them as CEOs, that come in and grow the company through peace mode and really learn to brand the company and to create a cohesive and coherent brand for what you’re trying to build.
And then at some point they’re going to be those entrepreneurs or business owners who are really good at when everything is settled down and it’s now time to either fall back and relax or push forward, they’re going to be those entrepreneurs that are really good at taking the company to the next stage. And it’s important as entrepreneurs that we know what we’re good at and what we enjoy doing and where our strengths lie and also, knowing where our strengths and our interests don’t lie so that we know, “Maybe it’s time to hand this over to somebody that can do this better than I can. Maybe it’s time to bring in a CEO.”
I worked for Microsoft for a long time and I remember when Bill Gates said, “I’m not going to be the CEO of this company, that’s not what I’m good at. I’m a CTO,” and he brought in Steve Ballmer and other people to come in and actually run the company. So I know I’m belaboring this point, but can you talk a little bit about as a founder how important it is to recognize where your strengths lie and what to do if you get into one of these phases and you’re not the right person for that phase?

Matt Rodak:
I think probably most startup founders, and I would include myself in this bucket, are good at the aspirational stage and the war mode stage. Thinking about it, it’s like Darwinism. You have to be good at those stages, to get to the peace mode stage. So the people that make it through in the peace mode, I think generally are wartime CEOs. They just are, because they’re used to the chaos, they’re used to committing hard into running 100 miles into a strategy and then being like, “Oh, just kidding, we’re going to go this way instead.” And the good news is, not a lot of good people are good at that which is I think probably also one of the reasons why so many businesses fail, because they want to spend all this time in peace mode before they go into war mode and define their culture and their mission statement and what are we going to be? And they want to talk about all this stuff, instead of selling and building and getting rejected a thousand times before you get that one success.
So I think naturally a lot of successful CEOs are probably more inclined to be the wartime CEO and the downside of that is, you don’t know when to turn it off. So we started to come out of that wartime mode and I was still wartime CEOing everyone and everyone’s like, “Yeah, that’s great Matt, but we need to figure out who we are now.” So I had to learn how to become a peacetime CEO around like, let’s spend some time on the softer side of the business. It’s not all execution. It’s got to be a little bit of strategy and vision, and I’m still working on this by the way, and culture. Some of, again, the EQ parts of the business, if you will, as opposed to the execution parts of the business. And I think the other piece of that is; I read this the other day that as you start to become that peacetime CEO, less and less and less and less of your time should be spent in the business executing, which is also really, really hard for me.
So I shouldn’t be in meetings talking about workflows because one, I’m not good at that and two, I should be out talking to customers and coming up with new business ideas and communicating the vision of the company and not in product committee meetings around, what are we building on the tech side? So in order for you to do that, as a naturally inclined wartime CEO, you got to bring the right people into the organization that are good at those kinds of things. And this is another super hard realization for a lot of people and myself included, is the people that got you through wartime mode, eventually need to either probably find a more narrowly defined role within the company or leave the company.
And that’s really hard for both you as the founder, because you just went through war with them and now the company needs them to either leave or take a narrower scope role which is going to feel like a demotion to a lot of people but it’s probably what the company is going to need in order to be successful and stay in the peace mode and ultimately world domination mode. So also goes back to the principles of, what are you committed to when you start this thing and it’s building this company and providing the service and that’s probably going to mean you’re going to have to make some very difficult decisions. And the most difficult decisions I’ve ever had to made make is, they’re all people related. They’re, how do we get this person in the right position with the company to be successful for both them and the company or finding a good way for them to move on from the company and go find a startup that needs a warrior and not a peacekeeper, right?

Carol Scott:
Yes. So just like you said, Matt, it is so important to remain cognizant of how not only our roles change throughout this evolutionary process of a business, but how our employees and team members and other associate roles change to become successful and remain successful. So to wrap up, Matt, what is next on the horizon for Fund That Flip? What is next in the pipeline for your world domination?

Matt Rodak:
I was going to say world domination, of course. I think as much as I mentioned that you could be in war mode for a long time, the other thing I learned about this is, starting a company is a little bit of a hurry up and wait game where it feels like you’re constantly running 100 miles an hour but also it takes a long time to do things that are meaningful. So right now, we’re very much in peace mode than we’re in war mode, now we’re working our way a little bit back into peace mode and really just executing against what we know has worked for us over the past four or five years. So we’re super focused on expanding markets right now. So we’re hiring business development reps in Boston and Charlotte and Charleston and eventually other parts of the US to grow our ground game, if you will and we’ve seen a lot of success over the past 12 months in that. So it sounds really easy on the face, but how do you; one, hire the right person? Two, get them trained. Three, get them up to speed on value proposition. Four, help them understand how to structure deals. And five, having them fit into the culture of the company while they’re working remotely and will be for the indefinite future, on an Island? So we’re super dialed into, how do we make that work and work well?
So, that’s one piece. The other piece is we’re looking constantly to develop new products. We’re up to this point, we’ve been super focused on short-duration loans for the bridge and in the bridge space. Most, if not all of our customers are keeping some amount of these properties that need 30-year products to keep as portfolios. So we’re working with our institutional capital partners to put that product together. And one of the things we’ve noticed is, insurance is a huge pain in everyone’s butt particularly, around fix-and-flip loans. So we’re in the process of rolling out an insurance product.
So at point of origination, we can just get you insured with replacement cost coverage, with the right co-insurance and everything else and purchase that at scale effectively so we can hopefully help bring cost down for our borrower. So, again, going back to my fifth point of not falling into complacency, that’s now where I like to spend my time, going back with these… What I think are at least anyway, are cool ideas and validating them and trying to put them in place and getting them to market and then getting out of the way and letting our operational people actually make it work.

J. Scott:
Very cool.

Carol Scott:
That’s so cool. And I think it’s especially cool when you look at all of those things wrapped up in the term, world domination. It just takes on an entirely new meaning, and makes you realize that there are so many amazing huge things that you’re going to keep doing, very cool.

Matt Rodak:
Thank you.

J. Scott:
We’re running a little bit long, so we’re going to skip the four more for today. Well, we’re going to just skip the four, we’re not going to skip the more. But I do want to ask one question from the four that I know our listeners will very much appreciate. If you had to give one tip to our listeners that might be in the process of starting or growing or scaling a business that you haven’t mentioned here today, what’s the best tip that you would give our listeners?

Matt Rodak:
Yeah. I think the bigger one is, don’t worry about what other people are doing. It’s easy to, and I did this early on, look at all these other real estate crowdfunding platforms that were getting started and how much money they were raising and the traction and the growth, and at the end of the day none of that matters. Business is personal, what matters most is that you’ve got a very clear understanding of what you want and what you care about and the business that you want to build and the way that you want to build it. And I think too many people get caught up in looking at the Jones’s, if you will.
And one, it starts to make you feel bad, inadequate. I’ll tell you this much, from the outside looking in and even through this conversation, it may feel like we’re super successful, we got a lot of problems and a lot of crap and it’s hard and it’s not… There’s many bad days as good days even for successful companies and that’s true of your competitors. So I think what gets put out in the media and what companies put out is always the good stuff and never the bad stuff and you as a founder or CEO or business operator, you see both of it from your side probably with more of a focus on the bad stuff. And the more you look at what other people are doing, the worse you’re going to feel and that’s just… One, it’s not right, it’s not accurate, but two, it’s not productive and it’s not healthy and it’s ultimately not… Probably why most people start a business which is, because it’s fun because it’s exciting because you get to control your own destiny so why are you looking at other people? It doesn’t matter.

J. Scott:
Love it. I absolutely love that. Okay. So let’s now jump right to the more part of the four more. So can you tell our listeners where they can find out more about you, where they can find out more about Fund That Flip, maybe where they can connect with you and anything else you want to mention to our listeners?

Matt Rodak:
Yeah. So fundthatflip.com is the website. We’ve got a lot of good information on our blog. We do a couple of podcasts of our own that we’ve got stuff on, so check that out. I’m on LinkedIn, Matt Rodak, one of I think the only or few Matt Rodak so I shouldn’t be too hard to find on there. And I’m in New York, if you do need to find me. I try to respond to LinkedIn messages. And then obviously email, [email protected] is probably the best.

J. Scott:
Awesome. Matt, we really appreciate having you here today. I appreciate you as a friend and colleague. And thank you for sharing so much and being so open with us today.

Matt Rodak:
Thanks for having me. This is great.

J. Scott:
Absolutely. Talk to you soon.

Carol Scott:
Thanks Matt, see you soon.

Matt Rodak:
Thanks J. Talk to you soon.

J. Scott:
Bye.

Carol Scott:
Wow. That was just great, wasn’t it J? I absolutely love how Matt was able to break down the evolution of a business into five distinct stages, used analogies that frankly I haven’t heard before in that type of context. Really made me look through it with a different lens, and loved every little last bit of it.

J. Scott:
Absolutely. I’ve gotten to know Matt over the last few years and it doesn’t surprise me that he is so analytical about building and growing his business but it is, it was amazing to hear. And I love that progression. And like I said in the intro, I’ll never think about growing a business the exact same way again and this will definitely be valuable the next time we start a business. So, yeah, I absolutely love that. Alrighty. Are we good here?

Carol Scott:
Let’s wrap it up.

J. Scott:
Okay. Everybody, thank you so much for tuning in. We’re not going to talk to you again before Halloween, so have an amazing Halloween. And we will talk to you next week here on the BiggerPockets Business Podcast. She’s Carol. I’m J.

Carol Scott:
Now go after world domination today. I had to go there, clearly.

J. Scott:
I love it.

Carol Scott:
Have a great week everyone. Happy Halloween. See you soon.

J. Scott:
Thanks everybody.