The Exchanges

Q to kind of switch lenses, so to speak, And really focus a little bit on your leadership before we move into the quickfire round. And in terms of leadership styles, micromanagement's always kind of denigrated this terrible thing. But when we chatted before, you said micromanaging can be beneficial in the early days. So why do you think this, and what are the pros of micromanagement in the early days?

A Yeah, this is going to be super controversial, I think. But my view is, look, I know the best way to manage a team is to give them a lot of rope and let them fall on their face, and then they learn, and the next time they're able to Execute that much better, and it makes us a stronger org. However, with a startup, you're living year to year. I mean, this isn't a, I have 10 years to build a company, because maybe if you're cash flow positive as a startup, you do, but today with Divi, you know, we're a capital intensive business. We are kind of managing in shorter term periods, but you don't have that time to fall on your face, and then get back up and learn from it, because you only have, if you're raising almost every year, which is what Divi has done historically, you've got 12 data points, which is the 12 months In between each capital race that you have to prove things out. I was really nervous about this and actually went to my investors, and I said, I feel terrible because I know the right way to manage, and I know that we just don't have that luxury right now, and I need to be more involved. How should I think about it? And Alex Rampell actually gave me this really good advice where he said, Adina, you are not a Series E cash flowing business. There's nothing to worry about. You're Series B still, and it's super early, and so you are responsible for getting involved, and …

AI assessment note: “you don't have that time to fall on your face, and then get back up”

Q Oh, that is very kind of you, but I would love to kick off today with a little bit on you. So, so tell me, how did you make your way into the world of startups and really come to change the way that we think about home ownership today with Divi?

A Yeah, so I probably, I don't even know at this point, maybe 10 years ago, I was working in private equity, and I In working private equity, they typically want you to go off to business school right afterwards. And I just thought, you know, it's been really hard to be an investor and telling all these operators how to do their job when I hadn't done it before. And so I actually did this, what was a very weird path at the time, but ended up going to around a 300 person startup at the time called Square, which now is a really big public company. But I went to Square and while I was there, I was fortunate enough to have the experience of working on Square Capital. So a group of us together, a Kind of started Square Capital, which is their lending platform within Square's broader business, and I had what I'd probably call like a magical experience. The people I worked with were insanely smart and talented and just really dedicated to the mission and the goal, and we were extremely successful at first go, which is not the typical path when you're starting something new, and we had tremendous internal support from Square Brawl. Today, Square Capital is probably a multi-billion dollar business within Square itself. And so it was this really great first entry point. And so when I started thinking about what was the next thing I wanted to work on and build a company, it was a couple of …

AI assessment note: “ended up going to around a 300 person startup at the time called Square”

Q important in terms of keeping core to you and your thinking as a founder, but you're in the heart of Silicon Valley, and so you see a lot of early stage founders building their businesses, and there are some common addictions for early stage founders. If you were to say, choose three that you feel you see most commonly, what are they, and how do you think about each one?

A Yeah, so there's actually three Three addictions that I've noticed as a founder of a company that have at least presented themselves in my experience. And I think they're consistent amongst most of the other founders I talked to. First one, kind of just touching on what we said is paid marketing. It is really easy to just say, you know, this month I need to drive another X number of customers. So I'm going to spend Y amount on Facebook this month to hit those growth numbers versus saying I'm truly actually going to do on the ground grassroots efforts to try to get an increase in my user base. And so Paid marketing is like one of the core addictions, I think, of most companies because it's so easy to dial up and dial back down and to see the direct correlation between who clicks on your ad and then ultimately ends up signing up. Second addiction is overhiring. And so most employees, when they come and they join your company, they're really excited and they really want to hire right away and build out a team. And it's actually so challenging to have to look at an employee and say, actually, we're not going to hire just yet. We're going to be thoughtful about coming up with a Playbook that between, you know, you and I, we feel like is actually successful, and we've measured it, and it's replicable, and then we'll go out and we'll hire and add to your team in order to really scale …

AI assessment note: “First one, kind of just touching on what we said is paid marketing.”

Q Can I ask, what would your advice be? Given your experience on how to fundraise as a female founder or as a minority in the fundraising market today, what would your advice be to others kind of progressing in the same manner?

A Yeah, my advice would be don't do it on your own. None of this fundraising or anything else is new. Everyone's been doing it for a long time. And before you go out there and you're going to do a fundraise, sit down with either your current investors or mentors and build a community of folks who know how to do this and get their support and have them practice your pitch with you and spend time mentoring you to get you prepared. A perfect example is before I go out for any fundraise, I'll sit down with other founders in the industry, and I'll just be like, here's what my pitch is. Tear me apart. Tell me how I should be doing this better. And not only do we work through that, then the other founders have my back as I'm going out and fundraising. And what I mean is that it's not just Adina going out and going on random pitches and coffee chats. It's, for example, Eric Wu at Opendoor pinging his investors and being like, I just heard the Divi pitch. It is amazing. Adina is awesome. Let me put you in touch because you guys should make sure you get in on this round. And that's the level of community and support that I think is most helpful. And this is kind of like an open invitation. It's kind of founder's code. I view it, and at least that's what most of the other founder friends that I have hold ourselves to, which is any other founder comes to you and asks for help, you help suppo…

AI assessment note: “my advice would be don't do it on your own.”

Q want to ask you, because we mentioned those three elements, and really the three require funding to back the business itself, and so I do want to talk about the fundraise a little bit here, and bluntly, you're a female founder, and female founders get a tiny portion of the total VC dollars invested today. I hope it's okay for me to ask, but how was the fundraise for you?

A Yeah, and don't worry, it's not being blunt. I know I'm a female founder, so we're all good. For me, I've been really fortunate where we've had a pretty easy fundraise process in the past, and I feel really fortunate for that. I have Amazing support from my investors. I call them my cheerleading squad, and Max and Nelly Lovechin, Ray Tonsing, Alex Rampell, the folks at GIC, Sovinet, and Jeremy Krantz. And so I have awesome support that have prepared me really well, and I feel really fortunate, and in some ways, I feel overly lucky in that I've surrounded myself with the right people who have invested to make me successful, and I feel unusually lucky because of that.

AI assessment note: “we've had a pretty easy fundraise process in the past, and I feel really fortunate”

Q that's fascinating to hear. But I do want to touch on one element there, because you mentioned your time investing as well. And it's a pretty unique vantage point to have both the investing and the operating experience. So Spike actually at Newfront asked, what are your main takeaways having been both an operator and an investor? And maybe how did your time investing impact your mindset with Divi today?

A Yeah. So I would actually say, I don't think that investing impacted me as much being an operator, more so now being an operator would in the future impact how I think about investing. So I think overall operating has led me and specifically starting a company has led me to realize just how little I knew as an investor. To me, perspective is everything. It's a pretty powerful tool. My time at Square really let me see what it's like to be an employee in a A company that was growing super fast and was going to be many billions of dollars in valuation. My time as an investor let me see kind of the forest and the picture of the entire landscape. But my time being a founder now has really given me just tremendous perspective on the persistence, the hustle, the hunger that's needed to actually scale up a company. And in fact, I think today I'd be a much better investor having started Divi and been an operator than I would have otherwise.

AI assessment note: “I don't think that investing impacted me as much being an operator”

Q Listen, as an investor today, I can't not take advantage of this moment. In terms of kind of how your investing would be different, how do you think your investing would be different given your time with Divi now and having had that experience?

A Yeah, it's almost like being a cook but never have tasted the food, you know, so you'd be a much better chef if you actually tasted the food, and so being an operator right now, I understand when someone says growth is challenging that, you know, it might be the case that they need to think about distribution channels and what does actually developing a distribution channel mean, or when someone says we're having a hard time prioritizing what product builds Well, that sounds simple, and you're like, I get it. To truly understand the level of depth, you had to have been there and prioritizing between these different items, and then worked out a solution to be able to say, hey, here is how I thought about it when I was going through this, and this is the approach that worked for me. Here are the five other ways that I thought about different prioritizations, and this is what led me to go down the path of one. It's just a level of understanding what it takes to build a company, and what can go right, and what sometimes are the bumps in the road.

AI assessment note: “being an operator right now, I understand when someone says growth is challenging”

Q unpack from that. At first, it's like, you know, the relationship between growth and unit economics, and do you think today they're almost in contrast and actually, essentially, they're levers, and if you pull back on growth, the unit econ will improve, but if you push forward on unit econ, the growth will slow. How do you think about the relationship between the two, and are they in contrast today?

A I don't think it's a perfect one-for-one relationship, but they definitely are slightly in contrast. Look, anyone who's starting a company, in order to be able to grow, you need to let People know that you exist, right? That's like marketing, right? Let people know that your product exists in the world. And in order to do that, it takes spending money and getting your name out. And in some ways that can seem reckless because there's diminishing returns to how much you spend on marketing, where if you're deploying a ton of money really rapidly, you can actually find yourself at skyrocketing CACs, where you actually need to deploy and grow in a more thoughtful and measured manner. If you look back also, I think that we forget that there have been Really large companies that have been built slowly and steadily. If you look at Amazon during the 2000, they grew by 20 to 30% a year, right? Which in today's world, we'd all be like, that's not enough growth for an early stage tech company. They were just able to do it consistently. And when that compounds over 20 years, that creates a tremendous business. So I think that my approach has always been be more measured, grow thoughtfully, but it seems like that's maybe coming in vogue Today, a little bit more than it was at least two years ago, but when we started two years ago, all these companies were kind of a, let's spend a couple mill…

AI assessment note: “I don't think it's a perfect one-for-one relationship, but they definitely are slightly in contrast.”

Q a huge amount about building that trusting relationship, and you know, it takes time to build the trusting relationship, but in the kind of funding market that we have today, things move much faster than they ever have done before. Do you think founders should always be raising and always be building those relationships, or are you more in favor in terms of the kind of efficient fundraising compressed timeline?

A Yeah, I think it's challenging for a lot of people to commit a large sum of money to you if they don't know you at all. So I think, look, if you're fortunate enough that you can just go out, do a really compressed timeline, raise in two weeks, and not have to have a relationship with an investor, good for you. That is awesome, less distracting, but I think the more realistic path is that you've got to build out relationships with people over time. It's just a large investment, and truthfully, it's good for you and them, which is while it might be helpful for the actual fundraising portion, it's also, this person is kind of like another spouse, right? They're going to be sitting on your board. You have to see them constantly. You're working in and out, day in, day out with them, You want to make sure you like them. And so even if it's just for that reason, I personally am a big proponent of building our relationships with investors early on.

AI assessment note: “I personally am a big proponent of building our relationships with investors early on.”

Q one thing that the investing world seems to have maybe slightly forgotten us as of late is the element of unit economics. But when we chatted before, you said, I can't believe this is contrarian, but starting a unit economic positive business and kind of that being central to your thinking. Talk to me, why did you say this, and how do you think about unit economics today with Divi?

A Yeah, so I started out my career earlier on in finance and private equity, and I worked at a firm called TPG, which is run by Jim Coulter. Jim Coulter is a fundamental value investor, and he taught me everything that I think kind of laid the foundation for how I think about what makes a good company. And ultimately, what kind of defined that were two parts. One, the company's ability to cash flow, so generate cash, and two, the actual unit economics Of whatever product they're putting out. And it's a pretty simple formula. You need to make more than you spend on each customer or user on your product, right? Make more money in, you know, is greater than money going out. And I think that that was just drilled so deeply in my head that I always actually found venture kind of uncomfortable in some ways. There's a recklessness about a lot of founders that I find I don't have, which is for me, I fundamentally would never want to create a product That I ultimately didn't think was super long-term sustainable and producing positive unit economics. It's quite hard to stay grounded in those perspectives when you're in an environment where massive growth is heavily rewarded in terms of valuations and where that's kind of the norm for the industry. And so I think I've stayed very rooted in making sure that at Debbie, we build a really scalable model with positive unit economics for every h…

AI assessment note: “at Debbie, we build a really scalable model with positive unit economics for every home”

Q with small five to twenty-five million vehicles from family offices, which are always kind of painful to raise, and they don't have the chance to kind of build out that book of business for the large institutions. Is that fair of me to have that cynicism and pessimistic mindset towards kind of the multiple kind of small vehicles from Family offices. Why am I wrong, and am I being short-sighted?

A Yeah, so I would say when we started about two and a half, three years ago, I went out to raise an initial debt vehicle, and we were so fortunate that we had great investors who supported us, because when we went out initially to the investment banks, they were basically, they laughed at us, right? They were like, I don't know if you know this, but we just had, like, a housing lever session. We're not investing in anything real estate, and especially not a funky tech company that's, like, trying to do things in a really different way, like, basically get out, right? And we went to our board, and our board was like, hey, if they don't believe in you, we'll put together a debt facility for you. And so we raised a small debt facility that was actually basically high net worth individuals and put it together. And once we actually put that debt facility together, we were able to prove out our business model enough that after that, we were able to raise a first facility that was quite a bit larger. And then we kind of scaled up that facility and went on. And today, our last facility that we closed a couple months back was with Goldman Sachs and more capital, so pretty major institutions. I would say that the market was not there three years ago, and today, as the market has become more comfortable with the asset class, that having a discussion around what the value proposition is, an…

AI assessment note: “once we actually put that debt facility together, we were able to prove out our business model”

Q of startups, I always say and think, so I think that the execution and focus is key. Kind of aligned to that though, I spoke to Spike, a friend of yours before the show at Newfront, and he said you have this incredible ability to push people really, really hard. So I mean, what do you think you do specifically that pushes them so hard, and how does that look?

A Yeah, so we have a culture at Divi where we say we're not yes, Like we're, we're just not the people who you're going to walk into a meeting and be like, here's a proposal and here's how I thought about it. And everyone in the room is going to say like, yes, that's awesome. Instead we say, okay, have you thought about, or how have you thought about X, Y, and Z? And what makes you so comfortable with this point versus something else? When you looked back at historically how we've done this, does this stay in line and jive with what we've done in the past or how does this deviate? And so the way I think that you push people is by really getting to the root of how they thought through a problem and pushing them to question their assumptions. Again, this goes back to things I've learned in my past, which is at TPG, when we would go to investment committee, we always had a red team. It's kind of like goes back to journalism when you had someone who said, if you were to take the exact opposite perspective of the argument that's being made by the investment committee teams, they're saying, oh, we should invest in this company because of X, Y, and Z. They said, okay, well, what if we were to turn those on their head? How can we look at it from the opposite perspective? And so I think the way I always push the team is to really be thinking at the forefront. I always question their assum…

AI assessment note: “the way I think that you push people is by really getting to the root”

Q mentioned CACs there. CACs and kind of the changing of CACs over time and how they evolve is one of my passion points. We're recording on Valentine's Day, so this is probably one of the reasons I'm single, but I do have your question. How, how have you seen your CACs change over time? Has there been anything surprising for you from kind of watching the evolution of your CACs?

A So I think that there is a level of, you can deploy too much capital at one point in time, and thinking about what is the optimal level of To get the maximum number of users or customers out there. And I think where companies tend to go wrong is where they say, wow, it's going to cost me an incremental X dollars to acquire the next customer. And when that starts to go up pretty significantly, that's where they run into channels. Now, ultimately we're talking about paid CAC here versus blended CAC, where blended CAC would take into account other distribution channels. There's two ways that you can get your CAC to come down. And what Divi has specifically focused on Is really building out these other channels of distribution. And so today we get almost half of our customers who close on a home, we get them through real estate agent referrals. So that's a completely organic distribution channel. And that is what is so core towards ultimately bringing down what our blended tech ends up being. So I'd say paid is hard because I think that there's definitely diminishing returns. And the way you adjust that is by finding a proprietary distribution channel that really lets you scale up with lower costs.

AI assessment note: “today we get almost half of our customers who close on a home”