Ep. #1071 - Building a Home Equity Loan Alternative

Matt Watson 0:00
And we’re back with another episode of the Startup Hustle. This is your host today, Matt Watson, very excited to be joined by Eoin Matthews today in his company point, he’s done a lot of other really interesting things in his background. Excited to get into into that. And point sounds like a really fascinating company raised over $100 million in equity, which is crazy to me. So excited to hear what they’re spending all that money on. So just before we get started, today’s episode of Startup Hustle is powered by FullScale.io. Hiring software developers is difficult, Full Scale can help you build a software team quickly and affordably and has the platform to help you manage that team visit FullScale.io to learn more. Eoin, welcome to the show, man.

Eoin Matthews 0:39
Matt, thanks for having me on. Really appreciate it.

Matt Watson 0:42
Yeah. So tell us a little more about your background and point and what you guys do?

Eoin Matthews 0:48
Sure. So I think the critical part of my background is I’m a Irish farmer’s son, and came to the US after college. And most of my career here has been sort of entrepreneurial, like very quickly transition from a corporate world into entrepreneurship. And point found in 2015, is probably the fourth or the fifth startup that I’ve been involved in. And I would say we were in our mid 30s, when we started the business, and it represented that phase of our life, as in housing was important. You think about different things at different phases of life and have different priorities. We were lucky enough for me, and I’ve had some successes. And so we were both looking at starting new businesses we’d worked together before we founded our first business together in 2003. So we really knew each other, and Edie was somebody I really wanted to work with again. And home equity was really important to us in our lives. That was stuff happening personally. And actually was it was an interesting experience, because Edie came and proposed the idea. But what he didn’t know is three weeks prior, I had actually exited my first home equity investment transaction. And he just had no clue in it, he came with a fully formed idea. But doing this new class of product. I actually hadn’t helped my friends make a downpayment on their home and 2011 really close my old roommates from Boston in the early 2000s. Couple he’d been to MIT and Italian wife, and they wanted to buy a home in 2011, in the Boston suburbs, and they had the bright idea of calling me up and saying, hey, oh, and will you make downpayment. And you’ll own a fraction of the home, we didn’t tell the lender, there actually was no contract. And I just wired them the money a couple of months before closing, so that it season that and it looked like their own deposits, and they bought the home. And the deal was I own 16% of it. Okay, I didn’t know when they were gonna sell it. And they’re very close friends. I don’t do this for anybody. Very, very close friends.

Matt Watson 2:54
I was gonna, I was gonna ask if you could do that for me. But

Eoin Matthews 2:59
if you ask nicely, if you ask nicely, at this point, signed a big contract. And, and then in 2014, Johnny and Francesca, they actually moved out to the Bay Area, and sold the home of Boston, and the home had appreciated not a ton, but it done pretty well. And I got the share money back. And I thought this is really fascinating. But I didn’t think of it as a business. I just thought, hey, I would do this scan. And honestly, next time I do it, I’m definitely gonna have a contract because I should and pay taxes on it. And but literally three weeks later, Eddie was like, Hey, I’ve got this idea that we should look at. And it was exactly this. It was exactly home equity investments. And he had thought about that idea a lot more. And so that started, that was September or maybe August 2014. And from there, we started building it. And I would say this is really interesting experiences. And unlike any business I’ve been part of because we’re building an asset class. Yeah, that sounds like a cliche. But I’ve realized now what that means over time, it’s like, it’s not just that it’s a new product for homeowners and asset class means you’re creating the financing for it. Because we went to investors in 2015. I don’t mean equity investors, I don’t mean Sand Hill Road, I mean, going to Wall Street, and they’re like, This is nuts. You guys have no experience in mortgages, you’re not going to give me a monthly payment. And I don’t understand anything about this. This is not like anything we’ve ever seen. And you guys don’t seem like the right people to do it.

Matt Watson 4:24
So yeah, so to kind of recap and rephrase this, make sure I’m on the same page, right? It’s like, I own a house, I have 100,000 and equity, a million in equity, whatever it is, right? Instead of getting a home equity loan, I can use your guys’s platform and get the cash that I need. And ultimately, there’s an investor on the other side that now owns a portion of my house, right like that. That’s the premise of it.

Eoin Matthews 4:51
It’s, that’s a good simplified version. I put it even simpler. So it’s a 30 year term contract. There are a lot of homeowners who want to get a lump sum of equity out of To home but don’t want monthly payments. So this is the product would add a monthly payment. And instead, instead of having an interest rate, what we’re going to get as a share of appreciation on the home. And and this is really unique as in, we share an appreciation, but we also share in depreciation. So if the home value is to decline, you’re gonna be paying us back less than you got originally. And I’ll put Asterix isn’t that like that deserves further examination? Yeah, so there’s, you know, in the loan, usually, if you go back to the lender and say, Hey, I’m gonna pay you back last, the economy hasn’t been good. Life hasn’t been good home home price has depreciated. The lender is going to go you only the same amount of money you always owed me, it doesn’t really matter circumstances don’t matter. This is an alignment product and a flexibility product. So as well as having no monthly payments for 30 years and a completely different form of evaluation. That’s not a credit evaluation. It’s an equity evaluation, and the product shares risk. It’s true risk sharing. So we share and the upside or the downside. And if it’s downside, you’re paying us back and you’re paying us back less than you got originally, we can be wiped out. And that’s not an event of default.

Matt Watson 6:02
So So ultimately, what you have to create as a marketplace, right, you’ve got to, you’ve got to get enough homeowners, homeowners that are willing to do this. But then you’ve got to have all the investors on the other side that are willing to put up the capital, or have you found like big banks, or like a large fund or hedge fund or something that will fund this on the other side? Yeah, that’s

Eoin Matthews 6:19
a fantastic question. So we thought at the start that Wall Street would line up to buy the product, we just thought it was such a no brainer. We’d all the models, we thought we understood it really well. And somebody very early on and institutional investors said, You guys are going to have to do this for two years, at least do a few 100 of them, and show them that all your ideas work, that homeowners want it, that they understand this, that it performs. And we kept on calling other investors. But that person, that investor who actually came into the platform very early was spot on Correct. I mean, literally took us three years to get our first major institutional investor. So we had to figure out pretty early to go both the institutional investors, the big investors, the Walsh, investors won’t buy these assets. How do we get the money. And so we actually started off with a Friends and Family Fund. We raise a little bit of equity capital for the business. And then we went out to everybody we know and everybody who they knew who did refer to us and said, Hey, will you invest in this, and we put it into a fund a little bit like a venture fund, but this one was purely for investing in this type product. Initially, it was 5 million, and we put in a bit of our own money as well. And then we got up to 10 million and 15 million. And that’s what got us through the first few years to demonstrate a track record for Wall Street. And then those investors did well the homeowners were very grateful. And, uh, took that because we were absent the personal track records, it took us three pretty long years to do this at very small volume, to demonstrate that our ideas and our operating practices were top notch like that we were on we were right. And then 2018 We got our first institutional investor. And if somebody we’d known for a few years, who was really strong early FinTech asset classes, and they come in and said, We’ll buy 150 million of these will you keep it originating? That seems like a lot. But in reality, if you’re not getting anything in real estate, it’s nothing. Yeah. Now the product is maturing to the point where it’s billions per year. And we see the demand there for homeowners for originating 10s of billions. And so it’s a really, that’s where it’s an asset class now. And that’s where to your point earlier, that’s where banks will become getting to command and finance the asset, which has happened. That’s where securitizations happen. And liquidity price gets cheaper for homeowners, and it gets organized and efficient. And that took him, you know, we’re sort of at that Crossing the Chasm moment for this as an asset class. But that took eight years for this product.

Matt Watson 8:54
So you’re an overnight success. Yeah. You know that the key part of that story, right is the first three years of this, you had to grind with almost no progress, like very little progress, right? Like just trying to prove the model, right? Like everybody’s just sitting around waiting for this thing for three years to figure out. does this thing work before you can really grow to the next stage? Right, because everybody just wants to wait and see.

Eoin Matthews 9:19
Exactly. And I think the part of that that’s hard to fathom is you don’t know that you’re into three years, you always think, because you can’t you like nobody logically goes, well, I’m going to spend the next three years doing a proof of concept unless, yeah, like, it’s not a it’s not a startup thing to do. And we certainly didn’t think that and we certainly didn’t tell our venture investors, but you realize, I think the smart ones understood it. And some very patient ambassadors that we have on our cap table, were like, this is going to be a long exercise. So yeah, that’s what we’re, that’s where we were, but we were always trying to get the big investors along.

Matt Watson 9:51
Yeah. That’s, I mean, for those that are listening, like that’s the brutal reality of this for some companies that it’s like, sometime it’s It’s just it just takes the time. And you just have to put in the time. And then some people just quit before they get there, right like that you guys put in the time. Yeah, we put

Eoin Matthews 10:07
in the time. And we were fortunate enough to have the backers that we could continue to put into time, the personal resources could have been a different phase of our life. We couldn’t have done that.

Matt Watson 10:15
So let me ask you this, you guys have now raised? You said now you’re originating billions of dollars yours in loans. You’ve raised $169 million. Congrats on that. That’s a lot of money. So was any of that money used for originating the loans or this was all operating capital in the business,

Eoin Matthews 10:32
all operating capital in the business, we do not retain any balance sheet risk on the asset? So we sell these to institutional investors at origination. Okay, so, yeah, so the money, the operating company money is for balance sheet strength, and to make this as seamless and cost effective and painless process for both homeowners and investors as possible.

Matt Watson 10:58
So, I mean, this is a fascinating asset class. So if I’m an investor, I’m like, Hey, I’m gonna go invest a million dollars in this, like, instead of buying stocks, instead of buying rental properties, or multifamily home or all these other things, I’m going to do this. How, what and can can can an individual investor do this at this point? Or is it only these institutions,

Eoin Matthews 11:23
and it’s a mix individual investors would typically be participating through funds, okay, funds, and there are some funds out there specializing in this form an individual investor with a disposable 1 million who wants and the type of yield we offer at this product would be expected to yield, then you’d call us up and we point you to a fund manager who would say this is the right size of person to work with. And I would say that world has gotten very efficient, like the fund managers are that we work with. They’re very, very strong.

Matt Watson 11:54
So there are some funds that that listeners if they wanted to, could track down and get get in on this. So how, what is the rate of return of this look like? Right? Because obviously, there is definitely downside risk. And now that you’ve been doing this for several years, what does that rate of return look like?

Eoin Matthews 12:11
Well, I’ll talk about the historicals. It’s an interesting product in the structure of it, because most people are gonna go right now, home price appreciation, I’ve read the headlines. That doesn’t sound exciting. And so structurally, even from day one of the product, we actually have always been anticipating a downturn in the property markets, right, since 2015. Actually, when we started, I remember lots of investors like, we’ve already seen six years of home price appreciation, property works on seven year cycles, do something around the corner, and lots of investors were waiting, waiting it out. And so we’ve a what we call a risk adjustment, which is really a discount to the appraised value of the home. And so that’s a big feature of our product. And that’s a big part of our risk management framework, because we got to figure at home prices are generally established in our product to appraisal. appraisals are highly imperfect, and timeline processes. And so there’s a lot of volatility on appraisals with, especially in the short term, like within a one to two year framework, timeframe, you can be off. In fact, we have reordered appraisals on many properties, like we go through a labyrinth, very comprehensive quality control. And we’ve seen instances where even within a two week period, three different professional appraisers will have a total variance of like, 30% Wow, that’s, that’s rare. But we’ve seen it and you have to build up the processes to know which of those three if any of them were right, that’s, that’s, that’s the key. But um, so we discount the home value at day one, to take away some of that short term risk. And, and from an investor perspective that locks in some of the gains from a homeowner perspective that can make the product seem expensive. And so on the flip side, we limit the cost of the homeowner. So we go, this is not going to cost you more than a loan at X percent interest rate. And that X percent is going to be set by an algorithm. But we want to make sure the cost is not egregiously expensive. Okay. From this is a long winded way of then getting to answer your question. So hopefully, people are still listening. So what would I expect if I was historically buying points assets, I probably would have realized the gains and other words from homeowners that have exited, that would have been in the mid teens on levered to net and those would be net returns. And we typically advertise this if we’re talking publicly about it. We don’t advertise it because you don’t raise your own funds. But if I were to look at sort of how are investors look at it, some investors would conservatively put this as a net 10 IRR assets net 10 After everything, and some investors would be targeting at 12 to 15 and the current environment

Matt Watson 14:50
Okay, so then how does liquidity work with this so I give you a million dollars am I stuck for 30 years? Like what how does liquidity of this work and yet Sounds like you’ve done this before, Matt. So question. I’ve invested in a lot of startups that have no liquidity, I just pray that I will get anything back like before I die. So.

Eoin Matthews 15:12
So this is a really fascinating part of the product, which is it’s a 30 year term contract. And homeowners get a lot of flexibility with no monthly payments. But a lot of homeowners are motivated to pay this this, this serves short term or relatively short term, and value prop to the homeowner. So we see a lot of homeowners use this and go, Okay, I just want to do that Home Improvement job, I don’t want to get a loan on it, or I don’t want to refi the mortgage right now. Maybe I’m doing a bit of work before I sell it, whatever it is, or it might be a homeowner goes off that the credit card debts and personal loan bills. I don’t want to pay them for a few months. And and so they’ll use it as relatively short duration. So that’s a long winded way of saying we see prepays on this for about 20% per year, I’m going to use that as a rough guesstimate, even in the current rate environment. Okay, so that means there’s a lot of current pay the weighted average life, and we’re getting into sort of mortgage talk here with that I’ll try to avoid but a weighted average life, you might expect the average duration on these products, maybe that’s easier to sort of process, but it’s like forward five years, is gonna be the average across the portfolio. So 50%, your capital would be typically expected to be returned between years three and four. And then everything after that is gravy. And that’s like half of the customer base.

Matt Watson 16:29
So for if I invested one of these funds, though, is there a way to get like immediate liquidity? Or? There’s?

Eoin Matthews 16:35
Well, it depends on the it depends on the fund manager, some of them will offer more typical liquidity if you need to get your money out, I’d imagine if I was running a fund now that there would be punitive costs to releasing it because there’s a longer duration product. What again, getting back to the asset class question, though, because securitizations are beginning to happen. That’s more the strategy at the fund level, which is aggregate season a little bit and then sell the assets. So most fund investors will probably anticipate a whole year of five to three to five years.

Matt Watson 17:05
Well, I have a lot more questions for you. But before that, I do want to remind everybody that finding experts, software developers doesn’t have to be difficult, especially when you visit FullScale.io, where you can build a software team quickly and affordably. Use the Full Scale platform to define your technical needs, and then see what developers are available to join your team visit full scale.io to learn more. So, Mike, my question for you is so what was it like to build a new market, like you’re building something new, nobody has ever done this before, right? Or other people done this before.

Eoin Matthews 17:36
there’d be nothing at scale, you’re gonna have a few examples, which I think is typical for a lot of stuff is there’s this, these products structures have existed in one form or another for a while, but there’s nothing at scale. And so investors and homeowners are largely completely new to them.

Matt Watson 17:51
So it’s, and that makes it really, really difficult, right. So that’s why it took you three years of really proving it out, and then kind of probably slowly growing it. And now it’s probably growing a little more rapidly, right? But it was extremely difficult creating a brand new market, I would imagine.

Eoin Matthews 18:06
Yeah. And if we were to go back in time, it’s actually a discussion I had recently, but um, this is a big part of your selection of co founders is, there are people in the room who you know, well, like that would hopefully be helpful, and you go, I want to go to battle with them. And I think that was the case with me and Eddie. But if you go back and go, who do you want in the room? I would probably now say and I think Eddie would definitely say, Hey, we should have got a capital markets guy who, who had credibility with Wall Street, there are lots of people, but you then need someone who has so much credibility that they can bring in a large investor to accelerate it. Absent that there’s no other path than the one we took, which is to do it slow and steady. So this is a big part of sort of your friend, or it’s decisions that you make early on about who’s in the room. And if that expertise doesn’t exist, you’re gonna have a slow, long process, because you have to prove yourself in this new category. If you hold a lot of credibility, if somebody had been coming from a larger if somebody would be coming from Blackstone with the relationships, could they have done it quicker? Could they have gotten a warehouse line? Perhaps, you know, I’m sure there’s no Portfolio Manager at Blackstone that just issues out 100 million dollar checks willy nilly? What if it’s somebody they know and understand and has credibility in that space, then the path might have been very different.

Matt Watson 19:27
Yeah, it just, I’ve, I kind of went through this by myself, like creating a product that it’s like the market didn’t know what it was like, nobody, nobody buys this thing. Right. So it’s like, that is by far one of the most difficult things as an entrepreneur is to invent something new and a new market new vertical, that just people don’t know what it is. They don’t know what to do with it. That’s not something they buy. So it’s just it’s very difficult

Eoin Matthews 19:49
yet, so we’d want experience earlier in career which sort of shows this dynamic as well, but it shows maybe a way to solve it. And this is the precursor to come But at SendGrid, we were actually the very first version of that business. We were trying to sell concert tickets for concerts that didn’t exist. And so the idea was, What if you get a enough of a concentration people in one area to put money down to say, I will preorder a ticket for XYZ concert, and then you go to promoter and say, Hey, we’ve got a concentration here, this show should definitely happen. It was really hard. exceptionally hard. I mean, the irony is the most valuable thing that happened, that was Isaac was like, figured out, wow, sending an email and getting it delivered is really hard. It was like the most valuable thing we did right then. But we had customers buying tickets. But as a marketplace, that market wasn’t enough scale on the homework on the purchase side, they weren’t like that passionate a constant fans, who would do it in scale and buy a ticket for a concert and go out buy a ticket and not know when it’s got to be scheduled. So we couldn’t form that marketplace. On the point side, it actually in some respects is easier, because you actually only just needed to solve for the capital initially. And we found this in the early stages, as the problem of the marketplace swung from one side to the other, sometimes, we didn’t have enough capital. And sometimes you’re like, I don’t know where the customers are gonna come from, because you had to scale up customer acquisition, you hadn’t done that volume before. But it was actually much more easy with point in many respects, because you could methodically go through and go with capital, and then swings to customers. And then we go okay, with too many customers, we need more capital, and marketplace. Yeah. And it’s graduated to that point now where there’s real scale to it. And it’s not to say those problems go away. But it’s, it feels like less of a pendulum. And something like our early version, our pre SendGrid Company, which was actually called not Paul, for terrible branding. And Isaac can definitely blame me for that one. And, but we could never get that marketplace going to enough like and we had people buying tickets, which in itself was insane. The idea that somebody had no name brand, and they go, I will buy a ticket for Neutral Milk Hotel, I was like one of the bands or I will there was typically we focus on Reunion acts, because we figured that you get the most fashion passionate fans, we could just couldn’t get that threshold. And what I find interesting in hindsight, is nearly every one of the acts that we’ve focused on, within three or four years, and the Coachella promoters golden voice had just booked them, and gotten them to get back together. And they performed at Coachella. And I use that as like that marketplace exists. And the promoters serve a function and that they can bring people on mass together and make the make the financing happen. I’m shows where it was very, very hard for us at that time to do these crowdfunded concerts.

Matt Watson 22:36
So So tell us more about SendGrid. Because so for those who don’t know a lot about SendGrid, that are listening. SendGrid is a tool that was primarily sold, I would say to software developers, to the tech community, I use SendGrid Oh, my God, almost 15 years ago, when it when did you guys start SendGrid

Eoin Matthews 22:55
was an ace, seven ace would really be.

Matt Watson 22:59
So we’re talking, I mean, so I was using it 1415 years ago, about that time at VinSolutions. Because we were sending emails for car dealers, to consumers. And yes, sending the email and trying to do that at scale across you know, we had a couple of 1000 customers sending emails like a CRM system, sending emails, and then you know, a raid go in and want to send a Black Friday sale email or whatever, like there was a total nightmare trying to send email. And so we found SendGrid eventually, and quickly started using that because it was a godsend for us. And so, so for those who aren’t familiar, that’s what SendGrid is. It was a, it’s super popular. It’s definitely one of the top couple things in the industry that people use. It’s very well known across software developers. So it’s super cool that you were part of that. So tell us a little more about being at SendGrid. In the early days, you mentioned like kind of what was the original genesis of it, and then it turned into SendGrid. So yeah, we’re about SendGrid.

Eoin Matthews 23:56
It’s fascinating, because in hindsight, there’s also a question of when you leave businesses, and that was a business I left at exactly the wrong moment. Like, quite honestly, and I’ll get to that in the story, which we were Isaac was somebody who had met, I actually think met through Craigslist, I was looking for developers to help work on this idea that it had been to startup. So this idea, we’re like, I’ll try Craigslist. And that’s where we connected and I love to use phenomenal like, not just when I was a coder, but just as a person, I excelled on it. And we worked on this project for the concert tickets for probably six months. And then we tried even pivoting into other stuff. But in some respects, I think the ideas were more obscure and weirder. But along the way, we figured that delivering email was a hassle. And Isaac had come up with a robust system to get the email delivered. And at that time, TechStars was just getting started. And Isaac was like, Hey, I wanna I want to put our name in the hat for this accelerator, was like cool, and he had had some developers from UC Riverside that he knew from the college and he was really close with. And a pretty awesome team. But the pitch early on was, hey, we’ve email deliverability. And I think it was called SMTP. API. Again, we weren’t good at branding. So SMTP, and API was the original name of it,

Matt Watson 25:19
literally what it is.

Eoin Matthews 25:22
And I think what was my ending, actually, here was getting into TechStars. We met I think, the TechStars. Guys. Lax, I remember meeting, and it was like, Okay, I’m gonna go to Boulder. And I had an opportunity to do something else. And so I was like, you know, what, email deliverability isn’t my thing. That was it. And the reason I said no, in hindsight, was I asked a bunch of people who I knew were an email delivery companies right then, and they were like, This is a crowded space, email delivering sucks. And quite sang grid really works. It’s very revealing about like, really understanding markets. And it’s that the something that TechStars team, at that time, the early Tech Stars team had sold an email business to Google, they really understood email. And so maybe that is, number one recommendation, if you’ve got an investor who’s in that domain, and is excited about your business, you should be excited about your business, check that that’s a really positive signal. And what they realized was there was a possibility for a new class of email, there wasn’t a marketing email that had to get your inbox, it was an order confirmation registration emails, that were just much more valuable. But that, yeah, that these transactional, and people would pay a premium to get that email delivered. And you just would have actually, of all the problems of whitelisting would sort of be eliminated, because the only people who would use it well, all the guys who want to send marketing mail would try. But the people using their service would only be sending transactional emails. So it’s almost like a self fulfilling prophecy is you’re getting the good emails that people want, because they have registered for your sites, because they have placed the order. And so that was big insight. Number one, is there’s a new class of email and separating it out. Related to that was and sort of similar to stripe success, there was a new class of founder, because of mobile more than anything else that was much more a developer founder. There was a little bit of that starting AWS existed. But developers as customers didn’t exist. So when I went and checked with everybody in the industry, whether email delivery, deliverability was the thing. They were all marketing and business executives. They weren’t developers working in the garage on mobile apps. But with the mobile growth, you had this whole class of new products that the need to deliver millions of registration emails, like just new customers registering. Yep. And it was it was brand new businesses getting started, who were like, I don’t want to go to the hoops of getting approved to be whitelisted. I don’t want to I want this to be simple and an API and sort of similar to stripe, they wrote on the back of this new class of customers, customers who if you were to go to your VC and go, they go, okay, segment, the market of email, how are you going to get into WalMart, they send a lot of emails, and your answer would be Walmart isn’t my customer, my customer doesn’t even exist. They’re in a bedroom right now. It would take a rare VC in 2008 to go, Oh, I get it. You’re serving the new wave of businesses, they had to really understand the developer, as founder economy, to know that that was a real customer. And I think the TechStars team really did an SMTP API, which then became SendGrid really capitalize on that. Customers were pure developers. It was developer to developer sales, which means you didn’t have an enterprise sales cost, right? Selling email delivery, right? It sales teams.

Matt Watson 28:35
I never, I never talked to somebody on the phone from SendGrid. And if you

Eoin Matthews 28:39
want to do to get it really well, but you didn’t need to the product just just worked. It was product lead growth. Yeah. And I and that was the first few years of SendGrid. And I, you know, I feel very grateful, like for the time working with Isaac, because I got to stay close to a business then rapidly growing. But I mean, that just blew up so quickly. So

Matt Watson 28:57
you so you left the company, once it got into Tech Stars, or when did

Eoin Matthews 29:01
you Yeah, we got our approval. And then I left and I knew I was going and actually returned to Rachid hand by.com to launch European division of the company had date acquired a company that I founded in 2003. And so I’d been there three or four years left to start this concert ticket business with Isaac. And then a few years into it, I was like, Okay, I’ve burned to a lot of my money. And it’s getting close to that point where I just need stability again. And so I jumped right at that point, and we get into TechStars.

Matt Watson 29:30
So did you did you end up owning partisan grid though and the end of it?

Eoin Matthews 29:34
I can’t talk about it. But I’ll tell you my name isn’t in the IPO docs so you can get a sense there.

Matt Watson 29:40
Dang. Alright, so for those who are listening SendGrid sold the Twilio for $3 billion

Eoin Matthews 29:45
after that IP owed at that IP owed for one, two or one three, and then Twilio bought in a couple of years later.

Matt Watson 29:50
Okay, afterwards. Okay, so you I didn’t realize that SendGrid IPO at first. Yep.

Eoin Matthews 29:55
Okay, great company, great team. They built it. I will say this is a good sort of personal reflection on sand grid, which is it’s sometimes really useful to be close to a business success that succeeds. Because it adds a lot of humility for yourself of your role in it and what your importance can be in different businesses. And, and that was certainly a moment there was like an hindsight, I don’t think I would have added a ton to sand goods business, I might have been, you know, Isaac might have said, Hey, on VCEO, I might have been an impediment to their growth. And so you it’s a useful for reflection to go through, and I’ve been adjacent to a few businesses that have succeeded. And you’re like, I don’t know if I’d have contributed. And then I’ve been involved in some business we’d like it was essential. And I knew my worth and those instances,

Matt Watson 30:38
it’s just, you know, it’s an interesting story, right? It’s like, you were basically one of the founders of a company that went public, eventually sold for $3 billion, but you didn’t end up being part of it. Yeah. It’s a I don’t know, would you call it a near miss? What would you call it?

Eoin Matthews 30:56
Oh, well, it’s a homerun for everybody who stayed involved.

Matt Watson 30:59
But for you, but for you, it was a near miss, here’s the

Eoin Matthews 31:03
flip side to that is and you can take near miss financially. So you can I can, I can qualify exactly what that and financial impact is, wouldn’t have changed my life, it would have changed my life. I don’t know if it changed my life in a positive way, in hindsight, because you just look at the how the cards have crumbled. In my own life, I go, Okay, I’ve been super fortunate. And, and maybe what I’d have to say is, I would have been fortunate either way. But um, I don’t feel unlucky because of where you feel where you should feel unlucky, when any instances if you walk away from the growth experience, because the fast growing company is it strap in figured out, it really demands a lot of you. And that part. And if I if I contrast it with what we were doing in Europe, with the job I went to, there was more stability, like the founder part, the excitement and the final part is not having the parachute not having the safety net. And so that would have been fun to be part of.

Matt Watson 31:54
Well, so let’s go back to the point for a minute. So I’m, I’m curious, how did how did you guys figure out the go to market strategy for people that are doing the home equity side of this? Like, what, how did you crack that side of the market?

Eoin Matthews 32:08
I think that was evident to us very early on. And a simple way of thinking about it is tons of people we knew would go I went to get a HELOC and couldn’t get one. Or I went to refi, my mortgage and my lender told me XYZ. And you’re like, Okay, just a lot of people looking to get equity out of their home and getting turned down for different reasons. And 2014 2015, the proximity, the sense of proximity to the great financial crisis was still strong. And so there was a broad sense of credit is very tight, but home prices had begun to recover. So we just knew a lot of people being declined, and then their data sources, we could empirically measure that to go okay, here’s what the decline rates are at XYZ lender on the customer side, then we just begin to talk put your toe in the water. And the easiest way on the consumer acquisition side was to begin to do some marketing next to adjacent products. So the adjacent products might be in the refi space, reverse mortgage home equity loans. Just see what happens when you talk to customers who come through. And and then we did we tested many different channels, and you build up repetitions very quickly with talking to customers, see who gets engaged at relatively small volume. And then market size out from them to go Are these representative of big enough market to have exciting business? And and the reality is very exciting business. Like it’s a game changer for the initial customer segment. Where I think it’s a fascinating product. And where it goes mainstream is affordability isn’t going to change. Like, I feel like the US it actually has much better affordability than people realize relative to other developed economies. Yes. Like it’s it homes, just if you if you’re sitting on the fence thicken homes are going to get more affordable. In the US, you should just run out and buy a home right now. Because we just buy home shares in home appreciation. I’m saying it because I was born in Ireland and I know how expensive homes are all over Europe because that’s what my siblings are. And all like if you go to Australia, we study this stuff and the company. And what’s interesting is pretty much every other developed economy has Shared Equity structures that are government sponsored. And that means that some third party money provider is helping you become a homeowner by providing you a cash grip to give downpayment and it’s not alone. It’s not a grant, like a typical event takes this form of well, we’re going to share in the appreciation on the whole that’s probably not going to happen in a government format in the US. So the private market is going to come in and do that. And it’ll start off today the product has started off I should say with existing homeowners who really value extracting some money out to do the home improvements to pay off the bills. What you’re going to see in this product class is it being a down payment product and that’ll go mainstream and it’ll will take over and take it huge jump in the market and just normalize the whole class.

Matt Watson 35:03
Well, and I can confirm what you’re saying. So our our business Full Scale is based in the Philippines and we have 300 employees there. And we have two floors of an office building there. And, you know, even though it’s a developing country, and you know, the cost of living is, you know, 20% of what it is in the US or something like, it’s dramatically less, the cost of real estate is not much cheaper. It’s crazy expensive, literally nobody that lives there, on their wages can afford to own a home that resembles what you would normally see as a home here in the US like the cost of housing, there’s crazy expensive, I own a home in the Philippines that, you know, it’s it’s, it’s crazy how much real estate costs there, especially compared to their average, you know, salaries there. So it’s an absolutely insane and I had lunch with a guy yesterday from London, and it’s like, yeah, tiny little 600 square foot two bedroom, more likely one bedroom, you know, condo, you know, apartment is like over a million dollars in London, you know, it’s just like, the cost is insane. And so yeah, it’s Luckily in the US, we have a lot of real estate, we have a lot of land, I should say there’s a lot of land to be developed in the western US if I guess if people want to build houses in Utah, and Nevada, and all these places that that are more underdeveloped. But

Eoin Matthews 36:21
yeah, like I think you’re spot on like this is sort of global phenomenon in terms of the job, jobs are concentrated, I think we’re COVID was interesting is there was a moment in time where people were like, well, there’s a lot of jobs, we might be able to do them anywhere. And I think in that shake up from that, that is true for a certain class of jobs. But what we’re seeing now, certainly in New York and San Francisco is the return of work is very strong. So there’s a lot of big corporate entities are sort of saying, Actually, we want you all in the office. And it’s not just for and for the sake of appearances, or because we own the real estate, is because we think for certain types of jobs, we are getting more value out of it, you are doing better work. And so I think that’s where there is a differentiation, we’re going to be happen, a lot of people can do their job points are pretty much a remote first company. And then they’re going to be employers that continue to pull people into big urban centers. And so if you want to work for those companies, or have those opportunities, you’re going to be in some of the most expensive real estate markets in the world.

Matt Watson 37:19
So where are you guys have employees all over the US? Or do you guys have international customers, international employees do or the US company but

Eoin Matthews 37:27
all over all over the country? Yeah. All over the country?

Matt Watson 37:31
Have? Are you guys able to sell your products internationally, if you guys,

Eoin Matthews 37:36
we haven’t, first of all the US is a huge market. And the other part of it is with real estate, and especially a product structure like this, we effectively are in 50 countries like there are there are 51 regulators in the US. Yeah. And so you have to go state by state. And we have where 200 person company or 220. And we have a regulatory team, engage with regulators, we have a compliance team. And those are not one person teams is a real teams. We’re really good at that stuff. And that sounds crazy for a startup, like eight year old startup to say. But those are those are some of the most high value teams in the organization, they paved the path for us to bring a new product to market. And so getting through those 50 regulators, especially in the big states, big populous states is the most important. We are in 29, almost 30 states at this point. And so it’s a big footprint, but we want to be national. And then if you go to other countries, you really have to look at the details on this, which is actually the mortgage, if you go outside of the developed countries, the mortgage infrastructure isn’t that developed in most other countries. So if I was going to go to a developing market, I might actually want to start off with much more traditional products, and like just get get the debt capital efficient to get the title process efficient. And then equity, equity products would probably make more sense than once that that infrastructure is probably properly established. And yeah, so our main calling right now is certainly to just expand our footprint in the US. And it’s a it’s a very big market

Matt Watson 39:07
for on the on the compliance side, you get, you got to deal with both sides of it. You got to deal with the investor side. And you got to deal with the homeowner side both so you’re like double whammy on compliance.

Eoin Matthews 39:18
Yeah, maybe a simple way everybody ends up actually asking the same questions, which is you want to make sure on a new product, especially one that’s home centric, and it’s secured by people’s homes, because there is a there’s a lien on the property. Yeah, everybody just wants to make sure the homeowner understands it. That’s that’s really and that they’re getting a fair deal. And so that’s the quintessential question that comes up, whether we’re talking to federal regulator or state regulator or somebody on the financial side. So they really want to believe that we have good intentions. They want to examine that and we do we’re very mission driven company. Yeah, I don’t like I’ve been in any org where every Putting in the organization takes pride in every funded customer. And we’re doing a lot of it. But it matters a lot. It matters a lot to our team. And it matters a lot to homeowners. So it feels like an important product.

Matt Watson 40:13
All right, well, if you need to hire software engineers, testers or leaders Full Scale can help we have the people in the platform to help you build and manage a team of experts. When you visit full scale.io. All you need to do is answer a few questions on our platform match you up with our fully vetted, highly experienced team of experts. At Full Scale, we specialize in building a long term team that works only for you can learn more when you visit full scale.io. Well, thank you so much for being on the show today. This, this has been absolutely awesome. And, you know, you have spent years building a totally new market to a totally new investment class, which kudos to you, like seems like a huge challenge and compliance and all these things. So now do you have people that are that are starting to copy you guys and follow in your footsteps for this new asset class?

Eoin Matthews 40:59
Oh, of course, yeah, there’s a there’s a field of competition. And that’s healthy. And I think we’re in might have felt like it was easy to follow us. And now as it gets more institutional, it begins to feel like much more expensive to follow us, when you begin to have real regulation. When the capital markets is evolved, it’s sort of actually pretty difficult to follow. And I think there are a handful of companies that are well funded and well structured. And if I’m a venture investor, it’s difficult to follow the smaller companies at that point in time, as you begin to realize your your companies are going to do multiple rounds of financing, they’re going to need a lot of capital, or the big investor is going to be there. And so I think the field of competition is pretty well established at this point in time. And that’s great. You want you want there’s

Matt Watson 41:44
a lot of barriers to entry with this with all the compliance and everything.

Eoin Matthews 41:47
Yeah, exactly. And then the securitization market will shake out where there are three or four issuers and we intend to be number one and ahead of the field. But that’s that’s going to be where it’s at. And I don’t want to get I don’t make it simple for somebody else to come in afterwards. And it’s just gotten expensive to do that.

Matt Watson 42:03
Yeah, it’s very complex where you guys are doing. Yeah, I couldn’t imagine having like, all the lawyers and stuff that you have to have to deal with all this different caustic. You

Eoin Matthews 42:13
know, it’s an interesting observation I’ve noticed in the past few years, which is that a lot of lawyers make for great coders, when they leave the legal world, something like this has happened, I think increasingly, where law is almost like its own precise language. And I think they’re logical. Yeah, very logical. I think they make great operators are and General Counsel, Matt Brady, is effectively our COO with the business and he makes just a great operator. It’s just somebody who can deconstruct a problem and loves new mental challenges. And just just a fantastic operator. I’m probably unusual here where I’ve had two or three companies have been part of has have had lawyers in either CEO or CFO position. And then when they’re not doing law, they love the other stuff. Is like it liberates them, and they get to be super creative. But they at the same time they know the law.

Matt Watson 43:08
Yeah. All right. Well, as we wrap up the show today, do you have any other final tips, words of wisdom for other entrepreneurs out there?

Eoin Matthews 43:18
And I think the number one thing that I would emphasize is that early team and having worked with a bunch of different co founders along the way is is somebody you have to have a ton of conviction around and be very deliberate about who you’re going to be in the room and don’t Yeah, it’s, it’s your partner, it’s somebody they have to enjoy you and you have to enjoy them. You have to you have to think highly of them. And you have to I think the complementary aspect is very real to if I take Eddie lamb who’s points, CEO and my co founder and myself we are very complementary in many ways we think differently about problems and Isaac and I couldn’t have been more different and so it was pretty effective as a as a partnership. So pick your founders pick your pick your partners in crime.

Matt Watson 44:03
Yeah, I got your job for you today. The the only kind of ship that doesn’t sell as a partnership.

Eoin Matthews 44:09
Oh, nice.

Matt Watson 44:11
Partnerships are hard band really hard. All the business partners I’ve ever had have always been interesting, whatever reason, so yeah. All right. Well, thank you so much for being on the show today. This is own Matthews and his company point, and you can check them out at Point.com and thank you so much for being on the show today.

Eoin Matthews 44:28
Thanks, Matt. I really appreciate this. Thank you for the call. Awesome.

Matt Watson 44:31
Thanks so much.