How Pinata Reached 600 Property Managers and Raised a $13M Series A in 2022 (Interview with CEO Lily Liu)

Introduction and Lily Liu's Background

Nathan Latka

00:00Hey, folks. My guest today is Lily Liu. She's pioneered using tech to modernize real estate and government. After a tenure in mayor Bloomberg's office and founding GovTech startup Public Stuff, she's now revolutionizing rent with prop tech company Pinata. That's Pinata dot ai. Lily, you ready to take us to the top?

Lily Liu

00:16>> I am. Thanks for having me.

Why Rent Needs to Be Revolutionized

Nathan Latka

00:18So why does rent need to be revolutionized based off what you've learned at the mayor's office?

Lily Liu

00:25>> Rent is a pretty antiquated industry. Renters don't get anything back for their on time and in full rent payments. Unfortunately, with each on time rent payment, you're not building credit, You're not building points. You're not getting anything back for that good renter behavior. And so we're really flipping the model and saying, hey, renters should be building credit. That should be reflected on their credit reports, and they should be getting more back when it comes to

00:53>> everyday savings, cash back, points, etcetera.

Why Property Managers Use Pinata

Nathan Latka

00:57I think you have to convince property managers to be your distribution channel here. Why would property managers want their renters to use Pinata?

Lily Liu

01:05>> For property management companies, it's very much both a transaction every single month, but it's also a service. They're in the industry of essentially hospitality, providing a great living experience for their renters and building that relationship. So come time to renew your lease, you actually have a good reason to point to. Not only have you taken care of maintenance issues, which we think of as kind of baseline, but now you're providing rewards. You're providing a reason for

01:37>> them to renew so they can activate additional points. We call them Pinata cash, and you can get more back when it comes to cash back, perks, rewards, and other things that renters can redeem on in the marketplace. We also have something called custom incentives for property management companies because there's a whole slew of other things that these groups want their renters to do, things like maintaining your unit, referring other friends, reviewing folks in social media, renewing

02:05>> your lease, even things like activating your smart home devices. Groups are making investments into these smart tech gadgets in the home, but it's not very good if the renters aren't activating the accounts and actually triggering it so that the data feed goes back to the property management companies.

Nathan Latka

02:22So is this how you make money you're charging the property managers here?

How Pinata Makes Money: Two Revenue Streams

Lily Liu

02:27>> So we actually have a multisided marketplace. We make money from property management companies that pay us a recurring subscription fee monthly. We also make money from a small amount of money from brands participating on the platform. So these are brands that are providing our renters usually something for free or at a rate that you can't see elsewhere online. And what they're doing is not only giving that to our renters, but we also generate some percentage of

02:53>> that revenue as well.

Nathan Latka

02:54And so what I mean, I see Starbucks, Amazon, Target, TaskRabbit in your UI and on your website. These are examples of brands on the platform?

Lily Liu

03:03>> That's right. Those are some of our popular brands and it comes in all forms and sizes. We have gift cards, we have cashback, we have actual gifts and merchandise. And so many of these are limited edition. So we'll expose ten, twenty, 50 units of a particular device that you can get if you come into the app in time. And and then we have everyday savings. So this is at gas stations, grocery stores that you can actually

03:31>> get discounts.

Nathan Latka

03:33Okay. But I guess so two revenue streams, property managers pay SaaS, brands participate in the platform. You said the brands, that was a small portion of your revenue. Are we talking like under 10 It

Lily Liu

03:43>> really depends on the brand, but yeah, that's right. Usually under 10%.

Nathan Latka

03:47Okay. But of your total revenue under 10% you'd say comes from brands?

Lily Liu

03:52>> A little more than 10%.

Nathan Latka

03:53Little more.

Lily Liu

03:54>> Closer to about 20. Yeah.

Nathan Latka

03:55So is that growing? Is your intent to grow that or are you phasing that out?

Lily Liu

03:59>> No. Our intent is to grow that. We actually we're projecting that in future years, that revenue stream actually increases as we have more renters, as we get more users on the platform, making more transactions. We're gonna generate more revenue and, hopefully, even bigger brands that are giving us a better CPA.

Nathan Latka

04:17I see. Okay. So then the other 80% comes from the property managers.

Lily Liu

04:22>> That's right.

Nathan Latka

04:23Oh, what's going on there, YouTube? Good to see you guys. Now imagine this. You love watching these interviews with SaaS founders, but imagine if we took all of the valuation data out from over 2,807 interviews I've done manually. Saves you a lot of time. Well, we've done this. We've built it into the beautiful interface inside of Founderpath. Check this out. I'll show you how you can access this in a second, but you log in, you connect

04:47your Stripe account, you see your valuation real time. You can see what it changed over the past eighty eight days and even set goals for valuation this year. Now the secret evaluation is there's many different ways to value a SaaS business. So the reason you're gonna see three or four different valuations inside of your Founderpath dashboard, this is all free by the way, is because depending on who's doing the buying of your SaaS company, you're gonna

Pricing: $1 Per Unit Per Month

Nathan Latka

05:11get a different valuation. A VC is gonna pay a different valuation. Private equity firm is different. If you're gonna do a minority sale, that's different. And if you sell the whole business, that's a different valuation. You can see all those when I hover over here, right? So the teal is what a VC would pay. Yellow is what private equity And red is if you sold the whole thing outright. Now what's cool about this is this is

05:33not built off random data. Again, you guys hear these interviews on YouTube. All these datas are built from real time valuation data points founder share with us on the show. So traction 1,200,000 seed round 3.7 raise. They sold 22% of their business. Go in here and filter by the event. Maybe you only wanna see companies that have sold the whole business. Well, here are a bunch that have been acquired the valuation and the multiple. Maybe you're

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06:21if you wanna check this tool out, if you wanna jump in and sign up, you can check it out for free to get your valuation at this link. This link, founderpath.com/products/valuations. Or if you go to founderpath.com and hover over products, click on get your valuation here, and go ahead and sign up to give it a whirl. Again, all that valuation data live right inside the platform. I hope to see you there. Alright. Let's jump back into

06:47the interview. I love this. Okay. Very interesting. So I guess give me a little bit, if there's property managers listening today, right? And they're going, Man, I'd love to use this. Or maybe there's a lot of investors on our show that run maybe twelve, twenty four unit apartment complexes, right? And they're thinking potentially they'd love to use this. What might they pay?

Founding Story and COVID Launch

Lily Liu

07:04>> Great question. So it starts at a dollar per unit per month. Now that price will vary based on the actual product offering that they want to expose to their renters and the unit size. So if you're a mom and pop like myself and you have under 20 units, you're not gonna get a much better rate than that. Although we think it's pretty good based on the value that your renters are getting. If you're a very large

07:29>> group with tens of thousands of units, the price will look different.

Nathan Latka

07:34I see. So the so a group with, you know, 30,000 units on your platform, they could get under a dollar per unit? You you Correct. Discount? I see. Yeah. I see. The most expensive is a dollar per unit per month.

Lily Liu

07:46>> That's right. And that's the many of our groups that fall under around 2,000 units are at that price.

Nathan Latka

07:54I see. Okay. Very cool. Give me the backstory here. You have a interesting history. When did you launch the business?

Lily Liu

08:00>> You know, we actually launched it right as COVID picked up in early twenty twenty. And, you know, one of the one of the things that, I've always been a renter on and off throughout my adult life. And so now that's almost two decades. I'm dating myself. And the first time, I remember the first time I went to apply for a home loan, I realized that I only had one credit card and I had not been building

08:29>> credit. I didn't realize the weight that that would carry under a, you know, home loan application. And and I also realized that nearly a decade of my on time rent payments were not reflected. And so I remember trying to pull information to show that, hey. Look. I'm I'm actually I pay my bills. Right? And this is my biggest bill every month. It didn't account for anything. And so, really, it was born out of the inspiration of really

08:56>> trying to allow folks that are early in building their credit to have that avenue to build credit, but also folks that what we call credit invisible, where they may not even be scored yet. And as a credit repair facility, it's a little bit harder, but really that's one of the big reasons why we started Pinata. It was that and then also building the ability to get something back, right? That brands have things that are valuable for

09:24>> renters in their move in, live in, and move out experiences. So how can we support them on that journey for everyday discounts, rewards, perks? And during COVID, it really helped us to narrow in even tighter on our value prop to renters and property management companies. You know, we had a bunch of other ideas. I remember during that time, and, you know, COVID just made us cut cut that slack and just really focus on what was important.

Nathan Latka

09:55Who's we? How many co founders?

Lily Liu

09:58>> So we have our CTO, we have our chief product officer, our president, and chief creative officer.

Nathan Latka

10:04These are all co founders?

Lily Liu

10:05>> Core four of us.

Nathan Latka

10:06Wow.

Lily Liu

10:07>> Oh, no. That's our executive team. Cofounders, we have one other cofounder who's our president, chief creative officer, and one who is our board member.

Nathan Latka

10:17Okay. So there's three of you total?

Lily Liu

10:19>> Three.

Nathan Latka

10:19Three total. Okay. Got it. And and it's always fascinating to me how folks structure going into a brand new idea. Right? So it sounds like you have got a really a genius creative. You've got maybe someone who's been there, done that on your board, and then that you've got you. Do you split equity sort of evenly amongst the three of you, or do you sort of negotiate that?

Lily Liu

10:37>> You know, certainly in negotiation, and I think a lot of it really depends on what we're bringing to the table. I've seen you know, I've been at other early stage companies as a founder as well and or cofounder rather. And, know, it really just depends on the dynamic. You know, how long have you been ideating on the idea? Did you try something else beforehand? You know, who's bringing what to the table? Is there capital at play?

11:01>> You know, that's obviously an important factor as well.

Nathan Latka

11:03And are you are you the engineering part of the cofounding team? Do get the MVP off the ground?

Lily Liu

11:08>> I wish. No. I was I am the business business sales acumen and, you know, obviously, everything else that a a CEO has to do. So call it kind of the the grunt work early on. So I get the problem. Get that

Nathan Latka

11:24this is a tech platform. There's a beautiful mobile app I see on your website. How'd you get that tech like, mean, usually, that tech person is in the co founding team. It sounds like you didn't have that. I'd love to learn sort of how you structure. You just pay them a lot of money at the beginning or her?

Lily Liu

11:36>> Great question. You know, we actually found a development partner. And so we, you know, we basically iterated on that MVP initially with a development partner that

Nathan Latka

11:47Is that a dev shop? When you say dev partner, that's what you mean?

Lily Liu

11:50>> Yeah. That's right. Oh, okay. That's right.

Nathan Latka

11:52Yep. Where'd you find them? Can you can you share who you used, and were they good?

Lily Liu

11:57>> You know, it was actually a group that I, the individual we worked with had worked with this company many times in the past, so I think three or four times with other companies. And so they were pretty well vetted at that point. We had spoken to a bunch of groups, but, you know, it's a process. And I think if if you can get that that referral from actual experience and you can point to different products and

12:22>> for us, it was mobile mobile and web apps that were important for us to look at.

Nathan Latka

12:26So let's obviously, that's nice because there's so many dev shops. You never know who's good, who's not. So that history is important. Let's fast forward though to today. Right? So you're growing the business. How did you get well, tell me the story of how you got your first property manager on the platform and then how many property managers are on the platform now today?

Lily Liu

12:42>> Great question. Know, in the beginning, we did not charge anything, and that's actually of course, you take away that friction. It's much easier to sell. But even then, you'd be amazed how difficult it is to get a group, professional group, to actually take an MVP product, use it in house. And we're not talking about something they use internally. There's no exposure for them. It was about having them market this to their renters. So they were actually

13:08>> taking on significant work to get our product launched within their portfolio. And it was still a pitch. You know, we still have to go through many processes of selling them, pitching them, showing them the product. And I remember, you know, I remember the the first account that we landed, and it was actually a fairly sizable one.

Nathan Latka

13:27How many units?

Lily Liu

13:28>> It was about a little less than 5,000 units.

Nathan Latka

13:34Yeah.

Lily Liu

13:34>> And they were gonna phase in their portfolio. But, again, for us, that was that was a pretty good group, know, considering we hadn't actually had the product in market. And so I remember that. But, again, even if it's free, it's still a difficult sales process when you're doing a b to b sale.

Nathan Latka

13:53So how many, Lily, today? How many property managers total, unique property managers? That would be one, the 5,000 unit you just told me.

600 Customers and Unit Count Today

Lily Liu

13:59>> Yeah. So we have over 600 property management companies on the platform today. Many of them are small to medium sized groups. In the market right now, about two thirds of rental units are owned by small to medium shops, not the large institutional groups we often think about, the Greystar, the Avalon Bays. They actually don't represent the majority of rental units in The US right now. Yep. So our big focus was on the small to medium sized

14:26>> guys first. We're actually moving upstream right now to also open up the platform to larger groups.

Nathan Latka

14:32And and what does that mean? Obviously, 600 property managers, my audience isn't in real estate, so they might not know. What does that mean in convert to in terms of number of units on the platform across the 600 managers?

Lily Liu

14:42>> I think we're hovering around 270,000 renters. And the these are renters that have been entered into our platform, so that does not account for the full portfolio size of some of our groups. Knowing that our groups, again, will go in pilot. That's right.

Nathan Latka

15:02Yeah. So 270,000 active today. Now, Lily, can I do the math there? A dollar per unit per month times two seventy. You're doing about $270,000 a month in revenue?

Lily Liu

15:10>> Can't speak to the specific revenue, but that's how you would calculate it. That's right.

Nathan Latka

15:15Oh, I was gonna say, I'm not making any numbers up. I'm just multiplying your numbers.

Lily Liu

15:17>> That's right. Right.

Nathan Latka

15:18That math should work. Okay. So and if you're around that today, just so we can understand growth, do you remember where you were at about a year ago?

Revenue Growth from Zero to Today

Lily Liu

15:26>> So about a year ago, early twenty twenty one, we actually were not generating any revenue. And so we were just coming off of that pilot phase where we weren't charging property management companies anything to use our platform. We were really running the the MVP tests.

Nathan Latka

15:44So, Lily, you I mean, this would would be very you've gone from nothing to a $270,000 a month in under twelve months. That would be incredible growth.

Co-Founders and Equity Structure

Lily Liu

15:52>> Yeah. Our revenue is actually not quite at that level, but the calculation's roughly accurate.

Nathan Latka

15:59And that's be and that's because once people are more than 2,000 units, you give group discounts and you have some larger folks under okay. Can you break $200,000 a month this year, you think, by December?

Lily Liu

16:14>> You know, it's hard to say. I think our our intent is to be pretty aggressive on the revenue front.

Nathan Latka

16:20Mhmm. Well, I mean, everyone would say that. Right? Everyone wants more revenue. I'm curious how ambitious you are. Right? Do you think you can break it, or how many how many more property managers would you have to add to break it, you say?

Lily Liu

16:30>> You know, for us, it's unit count. Yep. And so that's the important thing. But, again, as we get more units, as we get more renters in, it's just more revenue for us.

Nathan Latka

16:39Yep. How have you I mean, if you're pre revenue exactly a year ago, that means you had about twelve to eighteen months of building with no money coming in. How'd you fund the business?

Lily Liu

16:48>> We had about one year of building and then MVP. And so it ended up actually being just about seven to eight months building out the product. We actually did an even earlier pilot during that eight months. And then the the end of twenty twenty, we actually spent on that on pulling in those property management companies that we're using and piloting the program. And then early twenty twenty one is when we started shifting our sales process to

17:17>> have a

Nathan Latka

17:18Lily, sorry. I just we're we're we're short on time here. I'm just curious. How did you fund it over the first twelve months? There's no revenue coming in.

Seed Round and Series A Fundraising

Lily Liu

17:25>> Oh, we were seed funded. So we were seed Oh, raised seed? Yep, that's right. We raised seed.

Nathan Latka

17:30How much did you raise? Was it 2020?

Lily Liu

17:33>> That was 2020. I think we raised about we raised a few million in our seed, so it was a pretty good sized seed.

Nathan Latka

17:43You're starting, like, 3,000,000, something like that?

Lily Liu

17:45>> Yeah. That's right.

Nathan Latka

17:46Okay. And why are you have you are you still using that capital today, did you decide to raise more capital?

Lily Liu

17:52>> We've raised our series a since then. Yeah.

Nathan Latka

17:56Okay. And are you comfortable sharing how much that was?

Lily Liu

18:00>> So that was a $13,000,000 round.

Nathan Latka

18:03Okay. And that was this year?

Lily Liu

18:05>> That was this year. Earlier this year. That's right.

Nathan Latka

18:08Very cool. Okay. Okay. So why do you need that's a lot of capital. Where's most of gonna be invested?

Using a Dev Shop to Build the MVP

Lily Liu

18:13>> So a lot of that is about growing our our team, of course. You know, the first investment for us is human capital. After that, we're looking at making a big investment on the product and rewards offers. So renters are getting even better things now on the platform. And finally, the third tier is really focusing on sales and growth. So you're gonna see a lot of new campaigns coming out to not only grow the number of renters

How Series A Capital Will Be Deployed

Lily Liu

18:40>> on the platform, but also the number of property management companies.

Nathan Latka

18:43And, Lily, most folks, series a this year, know, they're selling whatever 10 to 10 to fifteen, ten to 20 sometimes percent of the business. Were you sort of in that same range?

Lily Liu

18:53>> That's right. Yep. That's right.

Nathan Latka

18:55So it felt pretty fair to you. You didn't feel like you you had to go with a low valuation or you didn't feel like on the opposite that you got a really high valuation, you were sort of right in the market?

Lily Liu

19:02>> No. We think it was fair and our investors are great.

Nathan Latka

19:05Yeah. That's awesome. Okay. Cool. So again, if you sold 10%, that'd be somewhere around a 100,000,000, 100 ish valuation, maybe a little less than that. But regardless, you're growing quickly, which is great. Tell me about the team today real quick as we wrap up. How many folks full time?

Team Size and Engineering Headcount

Lily Liu

19:19>> So we have just around 20 folks on the team right now. Great executive team that have been with us since the beginning, since the inception. And, again, looking to grow our team largely on product and tech and then sales and marketing after.

Nathan Latka

19:35How many engineers today?

Lily Liu

19:37>> Right now, have about eight engineers on our team.

Famous Five Rapid Fire

Nathan Latka

19:41Very cool, Lily. Alright, guys. Let's wrap up here quickly with the famous five. Number one, Lily, favorite book that you've read?

Lily Liu

19:48>> Oh, favorite favorite book. You know, I'd have to say,

19:55>> you know, I don't have time to read books recently, and so I'm gonna, unfortunately, have to skip that. But I have a lot of podcasts that I can speak to.

Nathan Latka

20:02That's good. No worries. Number number two, is there a CEO you're following or studying?

Lily Liu

20:08>> You know, I try to read up on

20:12>> a bunch of great CEOs. Obviously, I think it's hard not to follow Elon Musk. You know, he's doing some pretty incredible things. I'm a big fan of, you know, how how visionary he can be, but I think there's also a lot of lessons to be learned and what not to do. And so I think there's you know, he's a great example in both.

Nathan Latka

20:30Number number three, what's your favorite online tool for building Pinata?

Lily Liu

20:35>> Favorite online tool for building Pinata? Oh gosh. That's that's a hard one. You know, I think for us, because we are a remote team, it's hard to really stay plugged in with on a regular basis. So for us, it's been a project management tool that we've been using across the team called ClickUp. Good for process documentation, also building out the product with engineers.

Nathan Latka

20:57Zeb was on the show a couple weeks ago, breaking $80,000,000 in ARR, scaling very fast, 4,000,000,000 valuation. Incredible story there. So good stuff. Number four, Lily, how many hours of sleep are you getting every night?

First Property Manager Customer

Lily Liu

21:09>> Oh, well, you know what? I have a newborn, so not many hours. So Maybe on and off, five.

Nathan Latka

21:16Married and one kid, two kids?

Lily Liu

21:19>> One. Yeah.

Nathan Latka

21:20One kid. First one, congratulations. Lily, do you mind me asking how old you are?

Lily Liu

21:27>> Yes. No.

Nathan Latka

21:29You can lie.

Lily Liu

21:30>> I'm 39.

Nathan Latka

21:31All right, fair enough. Fair enough. Last question, something you wish you knew when you were 20.

Lily Liu

21:40>> That's

21:43>> something I wish I knew when I was 20. It nothing is as it seems. You know? It's always different.

Nathan Latka

21:49Guys, Pinata dot ai, helping property managers incentivize renters to do what they're hoping that they would do, install devices, smart devices, pay rent on time, earn credit, get kickbacks from Target, etcetera. They're scaling nicely. Over 600 property managers use their tool today across 2,000 units. They generally charge a dollar per unit, but obviously there's some group discounts in there. They've grown nicely. No revenue a year ago, somewhere around, call it, 100 to $200,000 a month today

22:14in revenue as they look to continue to scale. They've got a 13,000,000 series A under their belt, twenty on the team, eight engineers now building up the sales and marketing function. We'll see what happens next. Lily, thanks for taking us to the top.

Lily Liu

22:26>> Awesome. Thanks, Nathan.

Nathan Latka

22:29One more thing before you go. We have a brand new show every Thursday at 1PM Central. It's called Shark Tank for SaaS. We call it deal or bust. One founder comes on, three hungry buyers, they try and do a deal live and the founder shares back end dashboards, their expenses, their revenue, ARPU, CAC, LTV, you name it, they share it and the buyers try and make a deal live. It is fun to watch every Thursday 1PM

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