S7E1: Spencer Rascoff, Co-Founder of Zillow, Gives Advice for Entrepreneurs Amidst a Macroeconomic Downturn

The inspiration for Zillow was this desire to turn on the lights in a dark room where prior to Zillow there was an asymmetry in access to information and savvy people had access to county courthouse data around property records, but normal consumers didn't have that type of access. And so we were trying to turn on the lights and democratize access to information.

Welcome back to the 7th season of The Room Podcast. If you've been here for a while, you might remember Claudia and me have been on a journey to navigate our early 20s careers in Silicon Valley. We started this podcast about 2 years ago now, which is pretty wild, in the middle of a pandemic, recording from our bedrooms. Since then, a lot has changed both in the macro economy as well as in our own jobs and careers. So let's get you up to date on what's going on with us. Since 2020, Claudia has left Uber and become a full-time co-CEO and founder of Pryve, a startup unlocking and disrupting recurring revenue for e-commerce brands.

And Madison is now a partner over seed investments at Defy VC, an early-stage venture firm in the Bay Area. Totally crushing it, and I'm so lucky to have her as an investor in Pryve. We're two women navigating our careers and asking the people who inspire us to shed light on their stories. Unlocking Access starts with a conversation and context. We open the door to moments in technology history that traditionally happen behind closed doors. With our guests, we unpack the experiences that lead to their success and look towards the future in their verticals. Mads, can you tell us what to look forward to this season?

Absolutely. This season you can expect a really exciting 8-person roster of founders that you've definitely heard of. First up is Spencer Raskoff and his journey to building Zillow. Second, we have Kelsey Millard and her vision for the future of primary care, which is being empowered by the Sitka platform. We also have a look into the future of the modern data stack with Kashish Gupta, the founder of Highspot, where he's gonna share his belief in the need for or reverse ETL. Whether you know the nitty-gritty of any of these platforms and their businesses, or if it's your first time hearing about them, we're gonna discuss the lessons that these individuals and their teams have learned along the way. And amidst a backdrop of a lot of macroeconomic turmoil, our guests are gonna bring you into the room where they're making important decisions on navigating a downturn in real time. Claudia, where can people find more about our key themes and guests each week?

Great question, Mads. Every week we launch a newsletter and related resources alongside the episode that helps our listeners get tactical. We also post on Twitter, TikTok, Medium, LinkedIn, and more for special content every week. Definitely follow. If you're local to SF, hit us up. We have an exciting schedule of in-person events, fireside chats, and pop-ups where we would love to meet you. Okay, well, sounds like we're ready to open the door to this week's room.

Welcome back to the 7th season of The Room Podcast. On this week's episode, we sit down with multi-time founder Spencer Raskoff. Many of you likely know Spencer as the former CEO and co-founder of Zillow, but did you know he also founded Hotwire, which sold to Expedia for $685 million in the early 2000s? As CEO for over 10 years through their IPO, Spencer grew Zillow to over 4,500 employees, with $3 billion in revenue and a $15 billion market cap. He has a lot to share on the early days of Zillow and relevant insights for first-time founders today. Currently, Spencer is an active angel investor in more than 100 companies and is incubating several more through his startup studio and venture capital firm, 75andSunny. He serves as executive chair of.la, a new site covering the Los Angeles tech scene. He is also co-founder and board chair of Pacaso, the company pioneering a new way to own a second home. Fun fact, Spencer may have been the first person to use the World Wide Web to cite a government paper at Harvard University. And you might find him on CNBC Tech Check every once in a while. In our conversation, we explore insights and themes such as the art of the killer feature, like the Zestimate. Managing team morale and execution amidst a macroeconomic downturn, and why the future of real estate is fractional. Let's open the door. Spencer, thank you so much for joining us today on The Room.

Thank you for having me.

We're really excited to have you here to share your multiple founding journeys with our community, but with all of our guests, we love to start at the beginning. We're curious about where you grew up and how it has shaped your view of the world.

I grew up in New York until I was 12, and then my family moved to Los Angeles. And I grew up as a child of entrepreneurs. So my mom was a teacher and a real estate agent, and my dad was in the music business and started out originally as an accountant and was a partner at an accounting firm. And then through a weird coincidence and happenstance, ended up becoming the tour accountant for the 1972 Rolling Stones European tour, and then became a business manager and eventually tour producer for many bands. U2, the Rolling Stones, David Bowie, Paul Simon, Pink Floyd. He managed the estate of Elvis Presley after Elvis's death, 38 Special, Lynyrd Skynyrd, Shakira, and many others. And the reason I mention that is I grew up watching his entrepreneurial journey from a pretty stable life as an accountant to a much more interesting, fun entrepreneurial journey in the rock and roll industry and through lots of different career pivots over his 40 or so year career. And that was very formative for me.

Wow. So you really were steeped in kind of this jolt of normalcy, career path with probably a little bit less up and downs besides maybe tax season on the accountant side to really the roller coaster that is being in the journey of building. So with that backdrop growing up and then going into the college years, did you think you always wanted to become a founder yourself?

I knew I wanted to do something entrepreneurial. I don't think when I was growing up I even really knew what it meant to be a founder of something. Maybe I did. I guess I started a candy-making company as a little kid and sold like homemade candies and chocolate chip cookies and other baked goods. And I was always doing entrepreneurial things around the house. Employed my brother, my older brother, in a tracing business. So we would take tracing paper and trace art and basically then convinced my family, my parents and our extended family to buy our crappy tracings. Kids today with a similar personality would probably teach themselves to code. This was the '70s and '80s and it wasn't as accessible as it is today. But yes, I was always entrepreneurial, but I don't really think I knew what it meant to be a founder of a startup at the time.

It's always so interesting with our guests to hear about the early lemonade stands and the early candy businesses. I think it's definitely a strong indicator of future entrepreneurial activities. Fast forwarding just a little bit, you attended Harvard for undergrad. Go Crimson! I'm curious, what was the attitude on campus towards the internet in the '90s? Having graduated in 2018, I think it was probably very different when I was there.

It was very different, and there was no attitude really at the time. So I graduated in 1997. When I got to Harvard in 1993, there really was no internet. There was literally no internet in the dorm rooms. And I went once a day or once every other day to the Science Center, where I'm sure you took many classes, to check email. And the basement of the Science Center was the computer lab, and that was the only place on campus that you could check email. And usually you wouldn't even go every day because nobody was on email, so you didn't really have any emails to check. And it wasn't until junior or senior year that we had the internet in all the rooms. Again, just to date myself a little further, I was a government concentrator, and one of my papers, I wanted to use some message boards from the World Wide Web, this new thing, as sources, and I had to get special approval from the head of the government department to use the internet as a source, and nobody knew how to source it in the bibliography because nobody had yet put a URL as a footnote or an endnote to a paper. So it was very different, and when I graduated in '97, all the best people in the class went to investment banking and consulting, and I went to investment banking. There were a handful of people that went into tech, but those were mostly folks that weren't able to get jobs in consulting and investment banking. And of course now, 25 years later, it's mostly the opposite. The most desirable jobs out of a school like that are in tech. And then the other people end up in investment banking and consulting, but it was quite the opposite when I was there.

I'm pleased to say that the Science Center is still a computer lab in the basement, and I would always go there every week because that was the only place I could get things printed reliably. It's still a hub for interesting activity, I suppose.

I just had my 25th reunion. Over the last 25 5 years, I have been on a one-person campaign to try to convince Harvard College to take tech and entrepreneurship more seriously because they're so wedded to the undergraduate liberal arts experience, which I know Madison, you had at Dartmouth and Claudia, you had at Harvard. And liberal arts is very important foundationally, and you learn how to learn and you learn how to ask questions and you learn how to write. But a liberal arts education doesn't have any practical entrepreneurship in its actual education. And I actually, I and others finally convinced Harvard to let me create their first ever course, undergraduate course on entrepreneurship. So last semester I taught a class called Startups from Idea to Exit, which was Harvard's first class on startups at the college level. I taught the students in that semester through the life cycle of a startup from how to brainstorm a startup idea, how to recruit a team, how to launch an MVP, how to find product market fit, how to raise a seed round, how to scale, how to build culture, DEI, and then how to exit through an IPO or a sale. So it's great that in 2022, Harvard's finally doing this. But of course, other schools like Stanford and Wharton and even Brown, even other liberal arts schools have huge curriculum around these important topics. And Harvard's a little bit playing follower in that regard.

I'm optimistic that the same way there was this pivot from everyone going into investment banking, consulting, then to everyone going into tech as engineers, PMs. There is probably going to be more of a tracked path directly into entrepreneurship, and I think that's going to be a super interesting trend to follow. Speaking of startups, today you're most known for co-founding Zillow, yet in 1999, you launched Hotwire.com, which ultimately sold to Interactive Corp for $685 million. This would be considered a large exit today, and frankly, a massive exit at the time. I'm sure your students at Harvard were super fascinated on the topic of how to exit a business. What was a key lesson you learned from this experience, which really has informed your many subsequent entrepreneurial endeavors?

The key lesson from the Hotwire experience was about the importance of resilience, because we started Hotwire in 1999. Things were going well, and then the internet bubble burst in 2000. Things were not going as well, but we survived and persevered. And then 9/11 happened in 2001, and 9/11 was really a disaster for an online travel startup because people tended not to travel after the awful terrorist incidents of 9/11, 2001. And so Hotwire was very much on the ropes and we were able to survive only through a couple of things that we did at the time. Number one, we cut the company from about 200 employees to about 150 in order to extend our runway. Number two, we raised more capital, unfortunately in a down round, but better a down round than no round. It really saved the company. Number three, we pivoted the company towards the hotel product and the hotel business. Because prior to that, Hotwire was mostly in the business of selling airline tickets. And travelers after 9/11 weren't keen on flying, but they still wanted to vacation. And so the hotel business held up pretty well. And it was Hotwire's pivot to hotels that really saved the company. And the common thread through those three responses to the challenges that we faced was the importance of connecting employees to the mission and building a strong company culture through that period of adversity. And that served me very well through 2008 when I faced some similar challenges at Zillow through the financial crisis, the real estate crisis and mortgage meltdown. And it continues to serve me well today through the COVID crisis and then now through this current recession that we're in the early stages of in late 2022. And those lessons I learned at an early age at Hotwire when we started the company at age 23.

I'm excited to double-click on 2022 and what homeownership means and the mission behind Picasso. But before we get there, the year is 2004, 4 years before the financial crisis. What was the aha moment that launched Zillow?

I had sold my company to Expedia. Expedia was part of IAC at the time, and I wanted to do something more entrepreneurial. I wasn't that happy at a big company, and so I left. And a couple other Expedia execs left at around the same time. And we sat in a room and started brainstorming on business ideas. And the inspiration for Zillow was this desire to turn on the lights in a dark room where prior to Zillow, there was an asymmetry in access to information. Real estate professionals, real estate agents, real estate brokers had access to the MLS, which had all this great secret industry data. And savvy people had access to county courthouse data around property records, but normal consumers didn't have that type of access. And so we were trying to turn on the lights and give access to information, democratize access to information for people. But the real inspiration, the real idea, the spark that helped launch the company was the Zestimate. I still remember that moment, late 2005, maybe early 2006, when we came up with that idea and we were in the conference room brainstorming. And we were in a high-rise in downtown Seattle. You, Madison, it was the Washington Federal Building. It was at like 6th and Pike or 7th and Pike right near the convention center. It's probably not called it anymore. But anyway, one of the high-rises downtown and we were looking out the window across Lake Union at the Queen Anne neighborhood, which is a suburban area of Seattle. And we said, gosh, can you imagine if you had like a God's eye view of Queen Anne and you could see information on every single home, a price on every rooftop. You could see with X-ray vision what the square footage was of every home, what everyone paid for their house, and what every home is worth. And there's a great picture you can probably find on the internet somewhere of me standing at the whiteboard at that moment, drawing a stock price graph on the whiteboard. And it says a price on every rooftop and homes increase and decrease in value just like a stock does. And so that was the inspiration. And we then recruited a team of former colleagues from Expedia who were some of the smartest quants that we know that helped build the first version of the Zestimate algorithm. And we ultimately launched the company about 6 months later with Zestimates.

Zestimates are a key part of pretty much any home buyer's journey today as a critical benchmark for understanding the value. How did you think about honing in on a key product feature when sometimes it feels like you're stumbling around in the dark looking for product market fit and really trying to invent something that does not yet exist as a concept in the world.

There are a lot of good lessons actually about that first version of the Zestimate for startup founders looking for product market fit. Two things I can share. Number one, the first version of the Zestimate was not very accurate. It had a median error of about 14%. And we only had Zestimates on 40 million homes, which is about half the country. And you fast forward that to today, and Zestimates have a median error of about 2%. So they're extremely accurate on average. And there's estimates on 100 million homes, basically every home in the country. So that first MVP was really very inadequate as compared with where the product eventually got to. But that's okay. There's a common expression in startups that if you're not somewhat embarrassed by the first version of your startup, then you probably waited too long to ship. And I teach that in my Harvard class. And I show examples of early websites, including the first version of Hotwire, which is just hideous and is terrible and only had airline tickets. It didn't have hotels or rental cars, and it only had round-trip tickets, not one-ways. And it was only in the US, very limited first version of the product. And if you look at the first version of any product from Zillow to Airbnb to Google, they're all pretty terrible in retrospect. The second interesting thing from a product-market fit standpoint was we decided to go with a single dollar value of this estimate instead of a range. We knew that a range would be more accurate. Oh, this home is worth between $400,000 and $420,000. But we also knew that would be much less interesting and less controversial. And putting a single price and saying that home is worth $418,012 was much more interesting, shocking, voyeuristic. It created that kind of viral loop of people Zillow-ing their friend's house and their parents' house and their boss's house and their ex-girlfriend's house. And that was really important to the early growth of Zillow. The third thing I'd add about that first version of the product and finding product market fit was we did delay the shipping of the first version of the site and the launch of the company by about, gosh, at least a month, maybe two months to build what we called MyE, My Estimator, which was really a secondary feature, which allowed you to claim your home. And change certain home facts because we knew that a lot of the time when this estimate would be wrong, it would be because we had inaccurate information about the home. And we hoped we would attract a lot of traffic initially. And so we wanted to give owners something to do, to do something with the website rather than just see the price and be pissed off. And so we did delay the first version to allow you to claim your home, edit your home facts, and then that would impact this estimate and allow you to publish your own version of this estimate. Estimate. And that was a hard decision. Do we wait and delay the ship of V1 in order to add that feature? And I think that was the right decision. But anyway, those are some of the early product decisions that we had.

I'm revealing myself here to say that I'm definitely a Zillow lurker. I have been one of those users who's stalked other information and data on homes. So it has a lot of relevance to today's zeitgeist as well. This was 15 years ago, if not a few more. And honestly, as you were talking about all of the disparate pieces of information you were pulling into this estimate, I was thinking of, was there even really the concept of big data? This had been just before Amazon launched the cloud, AWS. So what was the data stack at the time?

There was no cloud. Everything was in a hosting center in Lynnwood, Washington at the time. There are pictures of that first day on the Zillow blog of the team at the data center actually turning it on. You would never do that today. So there was no AWS. We were one of AWS's first customers just a couple years later and ultimately moved everything to AWS and other clouds. And that's one of the main things that made Zestimate so much more accurate over time. Because every night when Zestimates are now recalculated in the cloud, Zillow is able to do a burst of computation that if we had to buy all those machines, it would be tens of millions of dollars and probably not even practical because Zillow has to do this burst computing to recalculate 100 million Zestimates every night. And that's perfectly suited for a cloud environment. So it's changed a lot and it would be a lot easier and cheaper to build a V1 today. The other thing that didn't really exist back then is all these innovations in machine learning. So for example, another reason that the Zestimate is much more accurate today is Zillow uses computer vision to look at the quality of photos. And the computer vision models will say, okay, the Zestimate on this home was $400,000. When it sold, it sold for $440,000. And the day before, the Zestimate was $400,000. Zillow doesn't know why it was 10% light, but it does know that the Zestimate was off by 10%. And then the models look at the quality of the photos automagically and determine there's something about these photos that made us 10% light. Let's take other homes that have photos that look like those photos and increase their Zestimates. And so those machine learning and computer vision models certainly did not exist in 2006, and today they're the norm at Zillow and many other companies.

That's an incredible peek under the hood of the magic behind this estimate. And don't want to jump too far ahead and kind of ruin the story here, but Zillow did ultimately end up multiple rounds of venture financing and then IPOing in 2011 with you as CEO. We're curious, who is the first external investor to say yes to investing in Zillow?

The Series A was led by Benchmark Capital by Bill Gurley and by Jay Hoag at TCV, Technology Crossover Ventures, and we got a lot of nos. We got a lot of nos. And we were very fortunate that Benchmark and TCV decided to invest. At the time, it was just a deck. I still have it. It was an ugly deck. And we certainly didn't have a product and we certainly didn't have users or product-market fit. But that leap that early-stage VCs take, they get richly rewarded for it when things go right. But it does take a lot of vision. In our case, we were fortunate. We had relationships with both those firms previously. TCV had been an investor in Expedia and my co-founder had a close relationship with Benchmark and had done some time as a venture partner and kind of EIR type role there. So we were grateful to have them as early investors.

Pretty great first yeses as both of those firms are quite legendary. Today I'm seeing a lot in the ecosystem of pushback from entrepreneurs and creating a board at the early stages of building. Just curious, given you now have this perspective of both private and public CEO, like what is the best case board dynamic? And is there such thing as creating a board too early?

I'm smiling because I just started working on a series of blog posts on exactly this topic, how to build it, at what stage, how to work with them, et cetera. So I think boards are very important. And as in my role today at 75andSunny Ventures, I'm an angel investor in about 100 companies. And those that are most imperiled, especially right now during a choppy and unwelcoming capital market, almost all of them underinvested in a board. Either they have no board or the board has no independence. It's almost 100% hit rate on issues and lack of a board. So I absolutely encourage founders to create boards. And I'll talk in a second about what that means. But in fact, now as an angel investor, even at the seed or this, certainly at the Series A stage, but even at the pre-seed seed or seed stage, I'm pretty reluctant to invest. I ask this question now of founders, and I'm reluctant to invest if they exhibit pushback or don't seem to recognize the important role that boards can play. So constructing a board, it happens over time. At the pre-seed stage, I think it's okay to not have a board or just have the co-founders on the board. At the seed stage, I think at that point, adding one independent, maybe a fellow founder or a mentor or some other person as an independent, at that point, maybe you have a 3-person board, perhaps 2 co-founders and independent. And then at the Series A, you're probably going to add 1 or maybe 2 investors. And at that point, I also think it's beneficial to add another independent to get different voices in the room. It's also a very helpful way to add diversity, which is super important, diversity of all kinds. At Picasso, at that Series A and B stage, we added a couple great diverse board members, which have been really valuable to us. And so by the Series C stage, you should have probably a 5, 6, 7-person board, including independents. And founders who worry about that or push back on it, I think they only focus on the downside and the accountability and the communication tax that they might fear of having those directors. But that can be mitigated. And there are a lot of benefits, including just learning from these other people's diverse experiences. And having them in your corner for when you need to raise the next round, it's very beneficial.

It's a really powerful statement coming from you, who's a multi-time successful founder, but also now turned investor. You've seen really both sides of the table. I have found this be a friction point in negotiations with entrepreneurs and have wondered why. I understand that there's been bad actors in the ecosystem, and I do understand that board members sometimes don't deserve this power they get, but at the same time, from the inside, I know how important it is for us to really just think about that as a true partnership and feel like there is a space that you can collaboratively give feedback and encourage and bolster and support. And the board has just historically been that structure. So, it's interesting and really helpful to get your perspective there. With that as the backdrop, board members or just investors and teams often go through good times, bad times, everything in between. You alluded a little bit to the turmoil that happened in Hotwire during the crash in the year 2001. But at the leadership level, there's oftentimes these strategy and direction moments around how to expand the core product specifically, right? You have this thing, it's working so well. Where should we go next? What's going to help us grow versus what's going to potentially distract us? And so just wanted to zero in on one example that was in the public conversation that you experienced at Zillow, which was around direct home buying with offers. Curious about what strategy side you were on in this discussion, and then how did you balance this internal and external stakeholder management as you went through this journey?

I was CEO when Opendoor and Offerpad started growing and started raising venture capital and started having a lot of momentum. And I was very reluctant initially to move Zillow into the iBuying space because I was concerned that it was capital intensive and risky. But we saw them continue to grow and then we started doing consumer research on the seller experience. And we learned from a huge amount of seller research that selling your home is painful. And it is difficult to keep a home show ready, meaning clean. It's very difficult and stressful on a family to keep taking the dogs and the kids out of the house every time there's a showing. And the uncertainty around the timing of selling your home is very difficult. Not knowing, is your home going to sell in a week, in which case, oh my gosh, where do I go? Or is it going to sell in a year, in which case, oh gosh, I can't buy my next house. And so iBuying solves all those problems. It allows the seller to pick the move-out date. It allows you to— it obviates the need for showings, etc. So based on that, I ultimately led Zillow into the iBuying sphere. We hired about 2,000 people. I got us to about 20 markets, and we were doing it profitably or nearly profitably when I decided to retire as CEO. This was about 3, 3 and a half years ago, and at the time we were charging about a 10% fee for sellers. So we'd say to a seller, hey, we think your house is worth $400,000. We're going to charge you 10% fee. So you'll keep $360,000. And with that $40,000, that would pay for the renovation costs and the interest expense and the commissions. And then we would refurbish the home and quickly resell it. And things were good. What happened, unfortunately, over the next couple of years was that Zillow reduced the fee from about 10% to about 1%. And they did that to try to gain market share on Opendoor and Offerpad. And unfortunately, that decision increased the acceptance rate of the offers dramatically. And so all of a sudden, the models went haywire and a lot more sellers started accepting Zillow's offer at a 1% fee. Sure, I'll take $396,000 instead of $360,000. And so Zillow bought way too many homes. And this was after— long after I was gone, 3 years after I was gone. And then Zillow decided to abandon the strategy, lay off 2,000 people, and retreat and retrench to its original business of just selling leads to real estate agents. And I, and by the way, there's a great case study back to the Harvard conversation. There's an HBS case study on all of this, which has this discussion in more detail. Unfortunately, it needs to be updated because the case study ends with Spencer retiring in victory because it's working and it was successful, but it needs to be updated with what's happened over the last 3 years. So I am still a believer in iBuying. I believe that a lot of homes are going to be sold in this way. And you can see Offerpad and Opendoor's results continue to be excellent. I think this was a case of an error, a judgment error in the implementation of a wise strategy. And I think it's regrettable and no involvement in Zillow anymore other than still being a large shareholder. And it's been frustrating to see a stock price react the way it has and a lot of shareholder wealth be destroyed through this, through this period.

Absolutely. Thank you for sharing that instance. I think it's super helpful to hear, especially I, the scale that Zillow is when you really take a big bet on something and where there can be a lot of upside. And then there's natural downside, especially at that stage. So that's a really helpful example. Just stopping there for a second. There's a lot of macro uncertainty at the moment. You alluded to earlier having been through two prior downturns with two different startups, and you gave some really great tactical examples of how you mitigated that in Hotwire. But at a high level, what would be your biggest piece of advice to entrepreneurs today? Navigating through what is, as you said, the early stages of a recession?

We're recording this in mid-September 2022, and I think unfortunately the funding environment is going to get worse before it gets better. It's going to be a very difficult environment for startups to raise venture capital in for at least 6 months. So taking founders into late Q1 or Q2 of 2023. And so what founders and executive teams need to do is to manage cash carefully, extend runway. Reduce burn any way you can, be very judicious on headcount growth and marketing expense and other expense additions because it's going to stay really hard. Now, the good news of all this is great companies get built during these periods of time. And if you're a founder listening to this and you're saying, gosh, having such a hard time closing my Series B, well, be glad because if it's hard for you to close that Series B, think of all the other seed stage companies that are not going to get funded. And if you already have your seed round, be glad for all the other would-be competitor founders that aren't going to be able to get that pre-seed round done. The doors kind of slam shut behind you to some extent. And depending upon where you are on that assembly line of company creation, that can be a good thing. And that was absolutely the case in 2008. Zillow and Trulia, both of which were venture funded in 2006, the door was slammed shut behind them in 2008 because of the real estate crisis. And there was very little competition funded from that period of '08 to 2011. And that's one of the main reasons that Zillow and Trulia succeeded the way they did. But it certainly didn't feel good at the time back in '08. It felt terrible. And I was wishing for a better economy and a better funding market, but it was a blessing in disguise in retrospect.

Claudia is navigating a lot of consumer strife as she's building an e-commerce enablement company, but navigating it very well as a proud investor. Just shifting our gears to a look-forward motion, Spencer, as we think about what you're doing next and how the ecosystem is ever-changing in all of the right ways. You recently, or I should say over the past few years, started Picasso. Which is unlocking fractional ownership for second homes in hot markets like Napa, Palm Springs. Can you tell I've been stalking Pacaso's website? And just curious about this fractional motion as what you have previously called a next wave in real estate.

It's a very exciting development. For the last 15 or so years in prop tech, a lot of the innovation has been around democratizing access to information. And as we discussed already, helping consumers be on the same level playing field as practitioners. Where we are today is quite different. There are two main vectors of innovation in PropTech. One is around reducing friction in the transaction. So bringing more technology into the transaction so that it can happen more seamlessly. We talked about iBuying, which makes it a lot easier to sell your home. PowerBuying makes it a lot easier to buy a home. There are great companies that are trying to create digital mortgages and digital appraisals and other things that will reduce friction in the transaction. The other main vector of innovation in proptech is around democratizing access to real estate as an asset class, where you've got companies like Roofstock, RealtyMogul, Share.Land, Landa, and Arrived Homes. And I'm an investor in Arrived Homes, a great Seattle company. All of those companies are helping people invest in real estate through some form of fractionalization so that for as little as a couple hundred dollars, you can own a piece of a rental property. And Pacaso is helping people own— have access to second homeownership by fractionalizing homes in eighths and letting them co-own those homes with other families. And so I think fractionalization and democratization to the real estate as an asset class is a really exciting trend. And this is a huge part of our economy. It's around 18% of GDP. And yet it's pretty inaccessible for most people without some form or flavor of fractionalization.

For our listeners that are not super familiar with Pacaso, and by the way, just as a little side, I recently on a flight watched a Million Dollar Listing LA episode that goes into the purchasing of homes that ended up being Pacaso homes. So listeners, we'll add the link to that episode. Um, very interesting. But for those that are maybe less familiar, would love for you to share what is the user journey? Of purchasing a Pacaso home?

You go onto the Pacaso website and you'll see listings of homes for sale, and those homes are sliced up in eighths. I'm recording this right now. You maybe hear the waves crashing. I'm sitting in my Malibu Pacaso, and this Malibu Pacaso is on the ocean, on the beach in Malibu, and it's got an extraordinary view of the Pacific Ocean, and it's about a $6 million house. But $6 million is a lot to pay for a house, especially if it's a second home that you're not going to use all the time. And so Picasso fractionalized this house and I bought an eighth of it for about $650,000 at the time. And so owning an eighth of a house, which you do through Picasso, means that you own it and you have access to it about 6 weeks a year. That's about one eighth. And you share in the real property appreciation. You actually own it. You own it in an LLC with 7 other folks. I have no idea who the other 7 people are that own this house, and I don't care.

In addition to your many successful entrepreneurial endeavors, you also invest through 75andSunny Ventures. Hot take, what is one sector you personally believe is out of favor today that you're really bullish on?

Creator economy. This is the way media and entertainment is being consumed and it's out of favor and I think it has huge potential.

Interesting to see maybe there's an intersection between that and PropTech. Okay, this is a hero question for our podcast. Who is a woman in your life professionally that has had a profound impact on you?

I'm going to answer my wife, and you're going to say that I'm not allowed to answer my wife, but let me explain. So my wife is a doctor. We've been together since we were 17. And for every major professional decision in my life, she has been the critical mentor to help me decide, should I leave my job at Goldman Sachs to go to private equity? Should I leave private equity to start to do a startup? Should we sell Hotwire? Should I leave Expedia to start Zillow? Should I leave Zillow? Should I start Pacaso? Et cetera, every single one of those decisions was made with her and in many cases at her urging. So by far, she's the most important mentor and partner to me.

Well, thank you so much for sharing that. And thank you so much, Spencer, for taking the time to be in the room with us today. This was so much fun and such a pleasure to have you.

Thank you for having me.

Thank you so much for joining us at The Room Podcast. If you want more from The Room every week, subscribe to our newsletter. At theroompodcast.com/newsletter. We'll be back next week with a new episode, Tuesday, 10 AM Eastern, 7 AM Pacific. See you in the room.

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