How CrowdStreet CEO Jack Chandler grew CrowdStreet to $25M revenue and 200 customers in 2020.

hello everyone my guest today is tor steen he was an industry he was instrumental in the product sales marketing and business development efforts for jan rain taking them from early stage rapid growth phases to becoming the recognized leader in the social identity space of the full user management platform and global enterprise customers today he's leading crowd street an online syndication platform uh for commercial real estate tour you ready to take us to the top yes hi nathan how are you doing i am well all right so um start off first here with the business model then we'll get into the kind of x's and those of what you do so is this a pure play sas model or do you monetize a different way yeah it's actually more of a marketplace model but there is kind of a subscription model associated to it and kind of again back to the origin of crowd street was really to transform investing in commercial real estate right make it different than the way it's been done before so can you pricing models new revenue models i love that um before i move forward can you try and quantify that so if you look at your total revenue past 12 months what percent would you say sas first marketplace or some other form yeah it breaks down about 80 percent marketplace 20 sas okay fair enough all right let's get more the backstory here when the company launch uh 2013 formed and we launched the marketplace in 2014 and we launched the sas in 2015. okay now were you there from day one you're the founder yeah i'm the co-founder darren powderly is my my other founder he's the real estate guy i'm the i'm the internet software guy uh the tech guy i love that okay so i mean how did you guys come across the idea yeah i mean really darren had worked with commercial real estate firms who were trying to raise capital for their projects and they were already always confined to their geographic region and sphere of influence on investors right the kind of high net worth investors called the country club model right um and then on the flip side i kind of saw it from a personal perspective as a technology executive i didn't have access to invest in commercial real estate i didn't know the developers i wasn't hanging out on the golf course right so the two of us kind of came together with the concept of how can we benefit both sides how can we give commercial real estate developers and operators more access to investors across the country and at the same time give great accredited investors more access and transparency to the third largest asset type in our country commercial real estate uh so that was really the idea and you know again you move it online you hopefully reduce friction you open transparency and you and you provide greater distribution and and both sides win give me some snapshots today total capital raised to the platform so yeah total capital raised since inception a little over seven hundred million investors what's that investor distributions on that yeah so investors have uh received over 70 million dollars in distributions okay so what effective ir you're talking like 25-ish yeah yeah exactly that's interesting okay now with these businesses i've interviewed a bunch of folks kind of i'm going to call you fintech but your real estate fintech you know you have cabbage seven billion dollar loan book a lot of companies like this in different sectors and the hardest the hardest part to build is the first 10 million of the loan book right so so in terms of your car your true cost of capital usually people call it like the mafia round how did you guys raise the first 5 million or 10 million for you to then deploy through the platform yeah i did it i think a traditional way friends and family right started there that was the first 250 000 right just you know because they know you well enough they're going to actually invest in you as a person and then i was actually fortunate to meet a uh a fintech focus vc down in the bay area that does only early stage and so that helped us kind of they came in for a little bit more institutional seed round to get us to 1.3 million in seed and that was in october of 14. so we closed that that first round so that kind of helped us you know kind of at least build the initial team start getting the you know some sponsors on the marketplace started building the technology as well the platform and then really the the a round that that remaining kind of sub five million the three and a half million dollar radius that was through a traditional vc down in uh in silicon valley so rally ventures again does kind of traditional a-run they love the fact that we were kind of this up-and-coming marketplace and also had a sas model to it as well what total capital raised to date on the equity side yeah we've raised 13 million for the company so it's very very capital fish in business at this point when you did the 3-5 with rally what was your total outstanding loan book what was the size oh gosh we were in terms of what we've done on the marketplace yeah how much had actually investors put in and you lent out i mean we were probably only 25 million had been done on the marketplace and the reason that number stands out just a fun fact nathan is uh yesterday we celebrated a big success a big raise on the marketplace and i said look what we did uh this week is more than we did in the first two years so you know that's the that's the beauty of that flywheel right of a marketplace once it starts to build trust and and uh between both sides so let me just repeat this back to make sure i get the timing right 25 million dollar loan book in 2016 when you did the 3.5 million dollar equity round with rally okay so you answered my question on how you got your early equity but what i was actually asking is actually getting the the people loaning you the money at cheaper rates and what you're letting it out so you get a spread that's sometimes the hardest part so where did your first dollars not your equity dollars your first kind of debt fund dollars come from oh you mean for the marketplace itself correct yeah so we're unique and that we grew it organically so we didn't actually take balance sheet capital to invest onto the marketplace we actually felt like if we're going to build kind of a trusted marketplace you know we don't want to go buy deals right in essence so what we wanted to do was build go take our time on finding really good deals really good sponsors the supply side of the marketplace and then at the same time kind of try and keep the demand and supply in in kind of an equilibrium no i think that's great so so in 2014 that first 12 months in business do you remember how much you had you had raised on the debt set again from investors saying yeah i want to do a loan through you yeah and really it's more of the investing equity as opposed to the debt side i mean there are some players that do dat nathan but we're always they're investing on the equity course portion of these deals which has nice upside as opposed to debt which is usually a fixed return and so really in that first 12 months we'd only raised about you know kind of 10 million dollars uh on the marketplace keep kee i want to track this growth we already know 2016 was 25 million what did 25 2015 end at oh 2015 it was like you know again 15 16 million dollars it was it was pretty you know between 14 and and 16 it was it was you know i want to say it was negligible but it was at least proving uh that this market could that you could actually take commercial real estate investing and move it online so from 2016 to today you went from 25 million in essentially loans out to 700 million so let's just keep going year by year 2016 was 25 million what was 2017. 2017 was 130 million okay i'd say that's pretty significant growth almost you know 6x saying the 25 million in the prior year did something special happen there did you land one big investor or something well what we had seen was really an inflection point it was interesting middle of it was july of 16 i remember we looked around you know there were probably like 18 of us in the company we're in one big room right a startup and we kind of looked at each other we're like we've hit an inflection point because we'd seen three months of kind of steady new supply coming on the marketplace we'd seen a steady nice growth of our investors coming on the marketplace and repeat investors right investors now that we're putting in their third or fourth or tenth investment into crowd street marketplace deals so i think what had happened is we'd finally by the middle of 16 hit that inflection point where it had been proven and larger sponsors were now coming onto the marketplace and so we started to build more of a demand the investor side the consumer side of the marketplace so really by 17 it was really really ready to take off and and in 18 we did 250 million of equity on the marketplace in in 18. that's great okay um let's jump in let's just shift just the sas portion of the business for a second so who is paying you the the builder the developer or the person lending the money or investing the money yeah the developer because we white label our software and we license it to the to the developer okay so what is the app i'm sure you have a ton of customer cohorts but we don't have time to talk about all of them the average developer is going to pay you what per month or per year to use your platform it's yeah it's an annual subscription it's...