Two Russians created a service in the USA for which developers are willing to pay hundreds of thousands of dollars
In January, 2018, Yuri Lifshits and Stepan Korshakov have passed in the winter set of American startup accelerator Y Combinator. They created the Statescraft service, with which the city authorities could collect housing statistics. However, potential customers were not interested in the product, and they were forced to change the business model, focusing on sales to developers. Now entrepreneurs are developing a service Openlandwith the help of which construction companies can find out who owns the land, what facilities can be built there, how much real estate tax will be, and other information.
Russians shared their experience of developing a startup in the US with the publication VC.
The most critical moment in And Combinator for us, there was a change of business model in the middle of the program. There was a difficult moment when we realized that our original business model was not working, and there was not enough demand from customers.
We had an analyst on cities, housing, construction and building permits. We sold the service to cities so that they could make the best decisions on issuing building permits, on zoning and altitude.
But it turned out that the cities are not yet ready to pay money and use the data to make more efficient decisions, so we had to change the model.
We had very valuable information, analytics and a tool for working with maps, finding free sites and analyzing where you can build additional housing in cities.
As it turned out, developers are ready to pay for this data. With the idea of changing the business model, we went to our mentor on Y Combinator.
When you have a question, you can book an individual meeting with one of the mentors. These meetings usually last 30-40 minutes. Our lasted about two hours, because it was a critical moment for the fate of the company.
We had an idea how to change the business model, but the program manager And Combinator Michael Sable criticized her in tatters. This saved us, because our first idea of changing the business model was extremely unsuccessful. From the second time we found a much more promising version of the company's reversal.
We had seven weeks to go. During this time, we managed to make a new interface for developers, sell three large contracts, come up with good results on a demo day, and interest investors.
We had more than a hundred meetings with investors in six weeks. Now we are completing the round, that is, the company has received funding that will last for more than two years.
We communicated with dozens of cities at the first stage of the company's development and found out that the city administration feels comfortable without knowing the basic statistics on its own housing system. Even if there are colossal mistakes in their reports, they are ready to put up with them. They are ready to make ineffective laws.
ДFor the private sector, it is natural to care about data and efficiency and measure the results of its activities, and city administrations are not ready to invest in such basic things. They first said that they were interested, and when it came to payment, the interest disappeared.
We won one tender with an American city, but even that took us six months. We started working with them even before entering And Combinator, and finalized the deal during the program. But the number of additional conditions was such that it was easier for us to refuse the won tender.
At the same time, we found one specific root problem with the builders, which our service can solve is the purchase of building plots.
If the builder does not buy the plot, he will not be able to build a lot of houses and get more profit. The process of buying land is very difficult, because officially no land is up for sale, and it is unclear how much it can cost and how to buy it if the developer is based in another city.
To buy one plot, you need to look hundreds. If builders are trying to buy 10-20 of the same plots, then they will need to inspect thousands of plots, study local laws, building codes, altitude, indents from the streets, and take samples of the ground.
Now there is no good software for this process, so it takes a lot of time, effort and resources of employees who are engaged in routine work and read into the documentation of local authorities.
Our service helps to organize and speed up this process - it allows you to simplify information about which sites you can buy.
By the way, after changing the model, we renamed the company: now it is called Openland. After we reoriented to the builders, we realized that Statecraft - inappropriate name.
In addition, we have never had a domain in the zone .comAnd with Openland we were lucky and we bought a domain Openland.com for a very modest amount. Comparable to the monthly salary of one programmer.
With regard to the timing of the purchase of the site, now this process can take up to five years. The developer needs to find a seller, negotiate a deal with him, get a building permit.
In many situations, it is not just the process of buying a plot, but also a zoning change. For example, the land was in the zone of industrial development, and it must be reissued for housing. This is a multi-step process, so in some cases it can take up to ten years.
Software helps expand your search. If earlier two people could buy two plots a year, now two people can buy five plots a year. If earlier they bought land in five cities, then in each city they needed a representative. Now a centralized team with a small number of consultants in other cities can buy plots at the national level.
We have two business models. One of them is for users who buy many sites per year. For them we offer SaaS-a model in which they pay a serious amount per month. These are individual plans, but they are synchronized with the volume of land purchases: the more you buy land, the more expensive your plan.
From those who buy few plots, we will take a percentage of the cost of the purchased plot in the future. Now we are not working with this layer of clients, but are focused on the most aggressive mass purchasers of land.
On average, the cost of land for building a house on 100 apartments is about $ 5 million. Therefore, in the case of a subscription to our service, we are talking about dozens, and in some cases, hundreds of thousands of dollars a year. Our clients have individual tariff plans, because they include some levels of customization.
Now we are giving information on New York and San Francisco, but when dealing with a new client, we can additionally discuss what data and for which cities he would like to receive.
We integrate data from open sources. There is a lot of information related to the acquisition of a plot in New York: who owns it, what size it is, what can be built there, what is the size of the real estate tax, is there a building there, how many floors does it have, and so on. Property tax is used to estimate the value of a plot.
Unfortunately, we cannot integrate data from all states, because everyone has a unique data collection and storage system, sometimes they are not digitized.
We collect information in a semi-manual mode and try to shove it into our system to make it easier to work with in the future. For example, in order to verify a site owner, in many states you need to file a formal request, pay $ 300 and wait a month.
Recently I looked after a plot of 500 m² in New York State. It costs $ 5 thousand and is located on Long Island. I kept thinking how to buy it. I spent several days searching for information on how I could obtain data on zoning of the territory, and the only option was to call the city planning office.
But it would be difficult for me to explain why a Russian guy wants to buy a plot. I cannot make a purchase decision due to the fact that I have no land data.
In the US, land plots are cheaper than housing. I wonder why young people in the United States do not understand this. Even in Los Angeles, I found a land of 500 m² for $ 10 thousands.
But perhaps the problem is that the construction of the house will take at least several years. And it will cost $ 150 thousand.
However, some areas may carry certain risks. We are talking about the future transport, the permitted altitude, the required indents, the allowed percentage of the land that can be occupied by the building, and the contamination of the soil.
For example, in the United States there is a right to air above a building. That is, the developer has a separate plot and separately the right to build a building in height. In some cases, the site owner sells the rights to the air to a neighbor - so that a skyscraper is not built there, and he has more sun. You can buy a plot without the right to air.
Now we already know a lot of nuances and we feel at home in the USA, but when we first moved to Silicon Valley, a lot of things seemed very unusual. For example, smiling people. In Russia, all steamed, especially in St. Petersburg. If you somehow unsuccessfully stand in the subway on the aisle, then everyone looks at you with a squint and thought: “You sassy.”
In the US, everything is easier. First of all, the way you speak English. Due to the fact that no one tried to shame me, I started talking freely in a month - I was constantly talking and I was not afraid that they would laugh at me.
Yuri Livshits admitted that he has a fairly tight schedule.
“It takes me a day to check my email and meet people. At peak times, I had up to 15 meetings a day. During And Combinator I switched from hour-long meetings to half-hour meetings with both clients and investors. There was a case when an investment transaction for $ 100 thousand was closed following a half-hour meeting. One of the things that helped me is a tool. Mixmax... It allows you to automate the work with e-mail: customize templates, send letters according to certain rules. It also collects statistics on how many emails you send every day. I have about a hundred, ”he said.
According to the impressions of entrepreneurs, there is a considerable density of investors, talents and entrepreneurs with similar problems in Silicon Valley. On the East Coast, in particular, in New York, people with technology are dissolved in other industries.
“In Silicon Valley, if we hire high-income professionals, they practically all work in the technology industry. This concentration has negative sides, since it is not a sufficiently diverse world, and positive - it is easier to find talents there, to learn from each other, if you have agreed with an investor, he brings five more friends, ”Livshits explained.
According to him, in the future they intend to develop business in Russia.
“We consider ourselves a global company. Our team is distributed in different countries, including Russia. We want to keep building an international team. We do not believe that we have left Russia - we are present in different places. From a business point of view, we would like to work in Russia in the future. We do not see this interference. As our investors and first clients in the USA, it is easier for us to continue there, but in the future we want to be a global company. We have no negativity towards Russia. We want to work with Russian employees, in the future to sell our technologies to Russian customers. America is a good place to start in terms of investment. We have investors who have Russian roots or invest in Russian companies, ”the businessman said.
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