The Exchanges

Q Six million homes. Really? And, okay, sorry, where are you selling into? Are you bottoms up selling to one homeowner, then you spread or you're top down selling to the logo?

A Yeah, absolutely top down. And, and we even started kind of far up market, large management companies, and we've gone kind of further and further kind of across that, that segment as we go. So our first customers had, you know, 50,000 plus doors or homes that they would manage at a time, but we sell to the community association management company. Those folks, we become the general ledger system of record for them and for all the communities that they manage, as well as the system of work for all the work that gets done within that community, coordinating with vendors, collecting dues, paying invoices, reporting, as well as the system of engagement for them to provide a technology kind of front door for all of the homeowners and residents in the communities that they manage.

AI assessment note: “Yeah, absolutely top down. And, and we even started kind of far up market”

Q with you. You guys hit the ground running really hard and In 2018. Let's, I want to fill in the story between 2018 and 20 25, but I also don't want to lose the audience if they're going, what the heck is an HOA? You know, maybe they're a millennial. They're going, I've never lived in a neighborhood before. Tell us what you sell here while I'm on your website.

A What's the product? So, so the, we call the industry community association management because it's more than just HOAs, but what the heck is an HOA? An HOA is a homeowner association. Even if you haven't lived in one, you've probably heard of a homeowner association or HOA or some kind of meme about it. It's, you know, these are typically, uh, neighborhoods or communities that have some sort of common area property. Think clubhouses, amenities, golf courses, restaurants, pickleball courts, just nice landscaped grass, anything like that. But it also encompasses condominium buildings. So if you live, if you buy a condo, there is a shared common, uh, piece of real estate. It's the elevator, the lobby, the roof, the things like that. And there's a structure, a little kind of almost like a little city that has a little constitution that are the covenants that kind of manage how you have to live in those communities. You can not do certain things like not paint your house pink, which preserves property values, but you also get benefits like the use of these amenities and common area assets. So there's a whole industry of specialty property management that really focuses on serving just these community associations, serving owned real estate instead of things like Multifamily rental. And those are our customers, those professional community association management companies.

AI assessment note: “An HOA is a homeowner association. Even if you haven't lived in one”

Q SAS if you're already ingrained and a guy from the space like Dave knows the space well, and you guys built this great code, why not do payments? Why not do Loan to community centers. Why not do like whatever? How are you thinking about sort of what spaces to go into now that you have a beachhead, a mouse traps already, are already in these 500 community manager relationships?

A Yeah, it's, it's a great question. And so to be clear, we started with, with just a SaaS solution. We started with that beachhead. That was the pure kind of single product for, for multiple years. Over time, it's really expanded everything from payments. We have a payments platform and a payments product that is used across our customer base. That's both inbound payments from homeowners to their HOAs, as well as outbound from HOAs to vendors. We provide a number of different treasury services for community association banks to connect them to the deposits that they are linked to through those associations, which, which is significant. It's, you know, it's a, it's a, it's a place where a lot of relatively low cost deposits are kind of aggregated by community association banks, as well as, uh, other products around kind of The vendor management ecosystem that our folks doing work in these HOAs, whether that's landscapers or electricians or insurance companies, et cetera. So we've over time really stretched into a lot of the different components of this ecosystem. But to your point, the beachhead and the first and most important vital product for us has and will always be that SAS product that is the general ledger system of record.

AI assessment note: “Over time, it's really expanded everything from payments. We have a payments platform”

Q Interesting. Interesting business model, interesting use case, very specific niche, which we love. Tell me more about the Private equity store. Again, you get going in 2018. You guys scale 2019. When did you bootstrap up to? Like, when did you raise your first external capital?

A Yeah. So we didn't raise any, uh, real external capital until 2022. So it was the, the summer of 20 22, um, which was great. I mean, that kind of run. And really 2018, we had had a couple of paying customers late 2017 is where, like, kind of, we got those first folks. 2018 first year in market. So we had had About five years of, of survival under our belt in terms of bootstrapping the business along, and growth was really good. It wasn't, this is, has never been a, uh, a highly capital intensive business, but we saw an opportunity in twenty-twenty-two that we really had gone from just capital efficient to capital constrained and knew we wanted to invest more in product, knew we wanted to invest more in engineering, and really take a big swing at this industry. And so, uh, we partnered with JMI equity and a minority investment in 20, 22, which was great. They've been fantastic partners to us. Um, we've grown the business, um, more than 10 X since then. Um, so that's been a great kind of growth story since 2022. And then based on homes or revenue, uh, revenue, uh, uh, and homes not far off either, but, uh, but, but, but certainly revenue, uh, Um, and then, and then this past year, uh, in terms of, of funding, we did a minority, uh, recap, brought in another minority investor in Cove Hill, um, Cove Hill Partners. That was fantastic. We closed that investment and announced it, uh, …

AI assessment note: “we didn't raise any, uh, real external capital until 2022.”

Q Wait, Ben, you have to connect these dots. How does a nuclear engineer end up running a HOA software company?

A It's, it's a great question. I guess there's, there's no, uh, I don't think there is any normal path to running an HOA software company because no one goes to school to, uh, to kind of work in community association management or HOA management, uh, as it is. But, uh, my, my path, I was, uh, I went to the United States Naval Academy for my undergrad education and ended up as a nuclear engineer and a submarine officer in the Navy. So spent time traveling all over the world, having big adventures, kind of doing that. Um, that was really important to me to, to serve our country and to, to do something, uh, like that. And also to have a big adventure kind of in my twenties, which, which I am glad and grateful to have done. But I, I always had kind of an entrepreneurial itch and knew I wanted to build something and Loved technology. Loved to tinker. I, you know, like to build little projects and do different things. And what, what I saw as an opportunity, not HOA, I didn't know anything about the HOA market, but, but these kind of not sexy vertical, uh, software, uh, kind of markets that, that were sneaky big, um, either had a payments component or a financial services component or had a big ecosystem around it. Um, started looking at things in pest control and otherwise, and just through kind of networking and talking to, People working in these industries. Uh, someone actually intr…

AI assessment note: “someone actually introduced Dave Sawyer, who was working of all things on an HOA management”

Q Interesting. Industry standards in this space are like between 50 cents and a dollar 50 a door. Are you sort of in that range?

A Yeah, I think that's like, that's ballpark the right, the right range to think about for SAS. Obviously this can really change depending on are you managing, uh, single family, low amenity HOAs in Lincoln, Nebraska, where there are, it's very light what your HOA does for you as a homeowner, or are you in South Florida with a highly amenitized condo building where you've got Valets and on-site staff and restaurants and, you know, other amenities. Obviously those, those dynamics change kind of sector by sector in the dynamics of the management company, as well as the range of products that you consume. Are you using other financial services products like payments? Uh, we now have agentic AI kind of throughout the platform that's really changed, uh, how our customers engage with us, but that's kind of the right banner way to think about the metrics.

AI assessment note: “Yeah, I think that's like, that's ballpark the right, the right range”

Q That's obviously a great story. Did, were most of those earlier customers, the reason you could close those enterprise accounts early on was because Dave came from the industry, so he had connections there, or was it you cold calling, knocking on doors, hustling?

A Um, I'd say it's all of, all of those things. You know, it's not, it's not just one thing. I think we, we did have some really good connections in the industry, but that, that certainly wasn't it. We were quickly selling to strangers, but what we were able to do is really show the results of our early customers. Even Dave's management company who is experiencing tremendous growth by utilizing a much newer and best in class technology platform and really do kind of show and tell with all of our customers who, Really all of our early customers were willing to be great advocates for us and open their kind of doors and, uh, and show new prospective customers the success that they were having. And so our customer success is really what fueled us.

AI assessment note: “I'd say it's all of, all of those things.”

Q since 2022, and you said 22 is high single digits. So. Okay. Fair enough. So take me through the, the minority sort of negotiation there for somebody else listening, negotiating their own minority. I mean, what, why did you guys do minority instead of majority? How did you decide on the amount of capital? Was it all primary capital or was some of it secondary? How'd you think about that?

A Yeah. Great, great question. So we, it was a mix of primary and secondary capital. We had some folks, we were solving for two things. Primarily we were solving for cash into business, right? So starting from that chunk and saying, okay, We know we want to capitalize the business, put some, what can we forecast over the next three or four years on kind of an aggressive, uh, front, which was still relatively, uh, relatively capital efficient at the time. And, and then also we had a couple of folks who had been working in the business for several years at that point, who really had the business had grown and exceeded their expectations. We wanted to provide some liquidity to some early kind of members of the company, which we were able to do. And that was great. Um, and so that's kind of, you know, what, like how we thought about the mix in terms of why minority versus majority. I mean, it was clear to us that that was a checkpoint that would accelerate growth. You know, I don't know if we perfectly saw over the next, you know, three or four years, 10 X, you know, over that period of time, but we saw that as a possibility and we saw a minimum of five plus X. So why would we want to sell more of the business at the time than we had to? And so that's been great. And, and really we, we approached this most recent investment similarly. We want to capitalize the business first, provide…

AI assessment note: “it was a mix of primary and secondary capital... why would we want to sell more”

Q Interesting. Okay. On the payments product, is that just a nice value add you do for free, or do you sort of take a traditional two to three percent take rate on GMV going through the platform?

A No, it's, it's, it's less than that. I mean, it's, it's certainly less than, uh, two to three percent, but we also, uh, it is, it is, I'd say it's a value add for our customers, but it's also a way for them to strip out a lot of the friction of Between them and their customers. So if you think about living in an HOA, like, do you, do you mail a check to your, you know, to your clubhouse every month? Do you drop it off or can you set recurring payments? Something like that that sounds so simple. Um, but that's what we're walking into often in, in the way these HOA management companies have to manage, uh, things like their payments processes. So we're stripping out a lot of the, the friction as, as much as we can.

AI assessment note: “No, it's, it's, it's less than that. I mean, it's, it's certainly less than”